Form 8-K/A BIMI International Medic For: Oct 08

December 6, 2021 9:45 AM EST

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Exhibit 99.1

 

THE FINANCIAL STATEMENTS OF CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

 

TABLE OF FINANCIAL STATEMENTS

 

Report of Independent Registered Public Accounting Firm F-1
   
Financial Statements:  
Balance Sheets F-2
Statements of Operations and Comprehensive Income F-3
Statements of Changes in Stockholders’ Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 to F-16

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and

Shareholders of CHONGQING ZHUODA PHARMACEUTICAL CO., LTD.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of CHONGQING ZHUODA PHARMACEUTICAL CO., LTD. (the Company) as of June 30, 2021, December 31, 2020 and 2019 and the related statements of operations, comprehensive income, stockholders’ Equity and cash flows for the first half fiscal year ended June 30, 2021 and the years ended December 31, 2020 and 2019, and related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the company at June 30, 2021, December 31, 2020 and 2019, and the results of its operations and its cash flows for the period ended June 30, 2021 and years ended December 31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Audit Alliance LLP.

Singapore

December 3, 2021

 

We have served as the Company’s auditor since 2021

  

F-1

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD.

BALANCE SHEETS

 

   June 30,   December 31,   December 31, 
   2021   2020   2019 
   Audited 
ASSETS            
             
CURRENT ASSETS            
Cash  $110,473   $10,812   $31,102 
Accounts receivable, net   803,778    772,485    1,280,797 
Amount due from related parties   151,355    596,579    78,374 
Amount due from shareholders   100    -    - 
Inventories   140,591    207,881    157,225 
Prepayments and other receivables   229,820    255,893    209,224 
Total current assets   1,436,117    1,843,650    1,756,722 
                
NON-CURRENT ASSETS               
Property, plant and equipment, net   8,230    8,656    15,561 
Right-of-use asset   19,440    22,031    25,689 
Total non-current assets   27,670    30,687    41,250 
                
TOTAL ASSETS  $1,463,787   $1,874,337   $1,797,972 
                
LIABILITIES AND EQUITY               
CURRENT LIABILITIES               
Short-term loans  $554,171   $571,656   $305,324 
Accounts payable, trade   30,762    136,076    135,839 
Advances from customers   1,612    27,559    35,064 
Amount due to shareholders   112,127    142,951    242,505 
Taxes payable   16,686    (1,122)   5,944 
Other payables and accrued liabilities   202,911    497,825    599,216 
Lease liability-current   5,635    4,051    3,506 
Total current liabilities   923,904    1,378,996    1,327,398 
                
NON-CURRENT LIABILITIES               
Lease liability-non current   16,095    19,403    21,937 
                
TOTAL LIABILITIES   939,999    1,398,399    1,349,335 
                
STOCKHOLDERS’ EQUITY               
Paid-in capital   293,251    293,251    293,251 
Statutory reserves   6,629    2,174    2,174 
Retained earnings   202,669    164,112    167,640 
Accumulated other comprehensive income (loss)   21,239    16,401    (14,428)
Total stockholders’ equity   523,788    475,938    448,637 
                
Total liabilities and stockholders’ equity  $1,463,787   $1,874,337   $1,797,972 

 

The accompanying notes are an integral part of the financial statements

 

F-2

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

STATEMENTS OF OPERATIONS AND COMPREHENSIVE GAIN/LOSS

 

   For the Six Months
Ended June 30,
   For the Year Ended
December 31,
 
   2021   2020   2020   2019 
   Audited   Unaudited   Audited 
REVENUES  $495,168   $433,784   $940,438   $1,629,483 
                     
COST OF REVENUES   377,325    347,256    759,062    1,382,406 
                     
GROSS PROFIT   117,843    86,528    181,376    247,077 
                     
OPERATING EXPENSES:                    
Sales and marketing   54,929    48,143    79,833    121,832 
General and administrative   42,665    81,445    95,826    94,259 
Total operating expenses   97,594    129,588    175,659    216,091 
                     
INCOME(LOSS) FROM OPERATIONS   20,249    (43,060)   5,717    30,986 
                     
OTHER INCOME (EXPENSE)                    
Interest expense   (10,250)   (5,721)   (9,899)   (3,297)
Other income (expense)   50,806    3,268    654    (139)
Total other income (expense), net   40,556    (2,453)   (9,245)   (3,436)
                     
INCOME (LOSS) BEFORE INCOME TAXES   60,805    (45,513)   (3,528)   27,550 
                     
PROVISION FOR INCOME TAXES   17,793    6,940    -    6,010 
                     
NET INCOME (LOSS)   43,012    (52,453)   (3,528)   21,540 
OTHER COMPREHENSIVE INCOME(LOSS)                    
Foreign currency translation adjustment   4,838    (6,174)   30,829    (7,276)
TOTAL COMPREHENSIVE INCOME(LOSS)  $47,850   $(58,627)  $27,301   $14,264 

 

The accompanying notes are an integral part of the financial statements

 

F-3

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

   Paid-in   Statutory   Retained   Accumulated
Other
Comprehensive
   Total
Stockholders’
 
   Capital   Reserves   Earnings   Income   Equity 
Balance as of January 1, 2019   $293,251   $19   $148,255   $(7,152)  $434,373 
Net income (loss)    -         21,540    -    21,540 
Appropriated statutory surplus reserve   -    2,155    (2,155)   -    - 
Foreign currency translation adjustment    -    -    -    (7,276)   (7,276)
Balance as of December 31, 2019    293,251    2,174   $167,640   $(14,428)  $448,637 
Net income (loss)    -    -    (3,528)   -    (3,528)
Foreign currency translation adjustment    -    -    -    30,829    30,829 
Balance as of December 31, 2020   293,251    2,174    164,112    16,401    475,938 
Net income (loss)   -         43,012    -    43,012 
Appropriated statutory surplus reserve   -    4,455    (4,455)   -    - 
Foreign currency translation adjustment   -    -    -    4,838    4,838 
Balance as of June 30, 2021  $293,251   $6,629   $202,669   $21,239   $523,788 

 

The accompanying notes are an integral part of the financial statements

 

F-4

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

STATEMENTS OF CASH FLOWS

 

   For the Six Months Ended
June 30,
  For the Year Ended
December 31,
 
   2021   2020   2020   2019 
  Audited   Unaudited   Audited 
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net income (loss)  $43,012   $(52,453)  $(3,528)  $21,540 
Adjustments to reconcile net income/(loss) to cash used in operating activities:                    
Depreciation and amortization   1,287    296    5,152    5,979 
Allowance for doubtful accounts   (12,734)   -    12,734    - 
Allowance for inventory provision   12,317    (11)   10,283    777 
Accounts receivable   (18,559)   689,677    495,579    (36,967)
Operating lease-right of use assets   2,591    375    3,659    (25,689)
Inventories   54,971    (106,137)   (60,938)   27,219 
Prepayments and other receivables   26,073    19,591    (46,668)   41,942 
Accounts payable, trade   (105,314)   (330,869)   237    (163,520)
Advances from customers   (25,945)   (35,064)   (7,507)   3,131 
Taxes payable   17,808    (36,532)   (7,066)   5,944 
Lease liability   (1,725)   (371)   (1,989)   25,443 
Other payables and accrued liabilities   (294,914)   261,358    (101,391)   235,988 
Net cash used in/(provided by) operating activities   (301,132)   409,860    298,557    141,787 
                     
CASH FLOWS FROM INVESTING ACTIVITIES:                    
Purchase of equipment   -    -    -    (307)
Net cash provided by investing activities   -    -    -    (307)
                     
CASH FLOWS FROM FINANCING ACTIVITIES:                    
Proceeds from short-term loan   154,796    509,923    1,380,864    511,740 
Repayment of short-term loans   (255,414)   (826,330)   (1,135,650)   (206,416)
Amount financed from (to) related parties   414,301    (164,131)   (617,760)   (521,970)
Net cash provided by (used in) financing activities   313,683    (480,538)   (372,546)   (216,646)
                     
EFFECT OF EXCHANGE RATE ON CASH   87,110    54,553    53,699    (6,503)
                     
INCREASE (DECREASE) IN CASH   99,661    (16,125)   (20,290)   (81,669)
                     
CASH AND CASH EQUIVALENTS, beginning of period   10,812    31,102    31,102    112,771 
                     
CASH AND CASH EQUIVALENTS, end of period  $110,473   $14,977   $10,812   $31,102 
    -    -    -    - 
SUPPLEMENTAL CASH FLOW INFORMATION:                    
Cash paid for income tax  $-   $6,993   $6,993   $  
Cash paid for interest expense, net of capitalized interest  $10,250   $5,721   $9,899   $3,297 

 

The accompanying notes are an integral part of the financial statements

 

F-5

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

NOTES TO FINANCIAL STATEMENTS

 

1. ORGANIZATION AND BUSINESS BACKGROUND

 

Chongqing Zhuoda Pharmaceutical Co., LTD (“Zhuoda” or “the Company”) was incorporated under the laws of the People’s Republic of China the “PRC”) on May 5, 2009 in Chongqing City. Zhuoda is a distributor of pharmaceuticals and biologicals in the PRC.

 

Zhuoda was initially owned by two Chinese citizens, Meilin Yuan and Yanlin Yuan, who owned 100% equity of Zhuoda from incorporation, of which Meilin Yuan owned 80% and Yanlin Yuan owned 20%. On August 31, 2013, Ms. Yuan transferred 70% of the equity in Zhouda and Mr. Yuan transferred all 20% of the equity in Zhuoda to Mr. Hongyu Chen, Mr. Lilin Jiang and Mr. Xiaoyong Li, resulting in Mr. Chen owning 35%, Mr. Jiang owning 35%, Mr. Li owning 20% and Ms. Yuan owning 10%. On April 30, 2014, Ms. Yuan transferred her 10% equity interest to Mr. Chen and Mr. Jiang. After the transfer, Mr. Chen owned 40%, Mr. Jiang owned 40% and Mr. Li owned 20% of the equity interests in Zhouda. On May 11, 2015, Mr. Chen, Mr. Jiang and Mr. Li transferred all of their equity in Zhuoda to five Chinese citizens, resulting in Mr. Bo Wu owning 30%, Mr. Qixiang Wu owning 32%, Mr. Qiugui Huang owning 17%, Mr. Aimin Wu owning 13% and Mr. Jiahong Zhu owning 8%. On April 20, 2017, Mr. Wu, Mr. Wu, Mr. Huang, Mr. Wu and Mr. Zhu transferred 16.32%,15.3%, 8.67%, 6.63% and 4.08% equity interests in Zhuoda to Chongqing Wanzhou District Pharmaceutical (Group) Co., LTD., respectively. Chongqing Wanzhou District Pharmaceutical (Group) Co., LTD became the controlling shareholder owning a 51% interest. On March 25, 2019, Mr. Wu transferred his 14.7% equity interest in Zhuoda to Ms. Yuan. Chongqing Wanzhou District Pharmaceutical (Group) Co., LTD transferred its 51% equity interest in Zhuoda to Ms. Yuan, Mr. Wu, Mr. Huang, Mr. Wu and Mr. Zhu, resulting in Ms. Yuan owning 30%, Mr. Wu owning 32.5%, Mr. Huang owning 17%, Mr. Wu owning 12.5% and Mr. Zhu owning 8%. On June 5, 2019, the shareholders of Zhouda transferred all of their equity interests to three new shareholders. Ms. Xiaolin Liu acquired a 60% interest, Mr. Xusen He acquired a 20% interest and M. Kangtao Xiong acquired a 20% interest. On June 27, 2019, Mr. Xiong transferred a 5% equity interest in Zhuoda to Mr. Xi Huang. On January 6, 2020, Mr. Xiong transferred a 15% equity interest in Zhuoda to Ms. Liu resulting in, Ms. Liu owning a 75% interest. On January 15, 2020, Mr. Huang transferred a 5% equity interest in Zhuoda to Mr. Dong Zhang, Ms. Liu transferred a 15% equity interest in Zhuoda to Mr. Zhang and a 5% equity interest in Zhuoda to Mr. Xusen He. At such time, Mr. Zhang became the legal representative of Zhuoda. After these equity changes, Ms. Liu, Mr. He and Mr. Zhang owned 55%, 25% and 20%, respectively, of the equity interests in Zhouda.

 

On September 1, 2021, Zhouda acquired all of the equity interest in Chongqing Qianmei Medical Devices Co., Ltd (“Qianmei”), which is engaged in distribution of medical devices and medical supplies.

 

On September 10, 2021, Zhuoda and its shareholders, Ms. Xiaolin Liu, Mr. Xusen He and Mr. Dong Zhang, entered into a stock purchase agreement (the “Acquisition Agreement”) with BIMI International Medical Inc., a NASDAQ listed company (“BIMI”), and its wholly-owned subsidiary Chongqing Guanzan Technology Co., Ltd. (“Guanzan”), a company organized under the laws of the PRC. Pursuant to the Acquisition Agreement, BIMI agreed to purchase all of the issued and outstanding equity interests in Zhuoda in consideration of US$11,617,500 (RMB 75,000,000). Pursuant to the Acquisition Agreement the entire purchase consideration is payable in shares of BIMI common stock. At the closing, 2,200,000 shares of common stock of BIMI valued by the parties at RMB 43,560,000, or $3.00 per share (approximately US$6,600,000) were issued as partial consideration for the purchase of Zhuoda and the remainder of the purchase price of approximately US$5,017,500 (RMB 31,440,000), is subject to post-closing adjustments based on the performance of Zhuoda in 2022 and 2023.

 

F-6

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

NOTES TO FINANCIAL STATEMENTS

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation

 

The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The combined financial statements include the financial statements of the Company.

 

Use of estimates

 

The preparation of the combined financial statements in conformity with US GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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, advance to suppliers allowance for doubtful accounts and reserve of inventory. While the Company believes that the estimates and assumptions used in the preparation of the 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 financial statements in the period they are determined to be necessary.

 

Cash

 

Cash consist primarily of cash on hand and cash in banks. The Company maintains cash in accounts with various financial institutions in the PRC. Under PRC regulations, each bank account is insured by People’s Bank of China in the maximum amount of RMB 500,000 (approximately US$77,398). The Company has not experienced any losses with respect to its bank accounts and believes it is not exposed to any risk on its cash held in its bank accounts.

 

Accounts receivable, net

 

Accounts receivable mainly represents the amount due from the Company’s customers that sales of pharmaceuticals, medical devices and supplies. Accounts receivable are reported on net realizable value consisting of carrying amount, which represent the invoiced amount, less allowance for doubtful amounts, if necessary. At the end of each period, the Company evaluates individual customers financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For those receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of June 30, 2021 and December 31, 2020 and 2019, the allowance for doubtful accounts were negative $12,734,$12,734 and $0 respectively.

 

F-7

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

NOTES TO FINANCIAL STATEMENTS

 

Advances to suppliers

 

Advances to suppliers consist of prepayments to our vendors, such as pharmaceutical manufacturers, medical device manufactures and other upper stream distributors. Such advances depend on the situation, such as the nature of the goods, the supplier-demand relationship, the negotiation with the vendors and delivery time to receive products from vendors after making prepayments. We continuously monitor delivery from, and payments to, our 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 we have difficulty receiving products from a vendor, we take the following steps: cease purchasing products from such vendor, ask for return of our prepayment promptly, and if necessary, take legal action. No legal actions were initiated during the reporting periods. If all of these steps are unsuccessful, management then determines whether the prepayments should be reserved or written off. The balance of allowance for doubtful accounts relating to advances to suppliers was $0 as of June 30, 2021 and December 31, 2020 and 2019.

 

Inventories

 

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. The Company reviews historical sales activity quarterly to determine excess, slow moving items, potentially obsolete items or expired items. The Company provides an 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, potential obsolescence of inventories determined principally by customer demand and the expiration dates of the items. Any expired medicines are written off immediately. As of June 30, 2021 and December 31, 2020 and 2019, the allowance for inventory provision was $12,317, $10,283 and $777, respectively.

 

Property, plant and equipment

 

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

 

   Expected useful lives  Residual
value
 
Office equipment  3 years       5%
Transportation equipment  5 years   5%

 

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

 

F-8

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

NOTES TO FINANCIAL STATEMENTS

 

Lease

 

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 we will 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.

 

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.

 

Impairment of long-lived assets

 

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

 

The Company 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 transfer of the promised goods to the customers, at a point in time or over time as appropriate.

 

F-9

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

NOTES TO FINANCIAL STATEMENTS

 

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 combined statement of stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

 

Income taxes

 

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

 

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

 

The Company conducts all of its businesses in the PRC and is subject to tax in this jurisdiction.

 

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 maintains its books and records in the local currency, the Renminbi Yuan (“RMB”), which is the functional currency as being the primary currency of the economic environment in which the Company operates.

 

In general, for consolidation purposes, assets and liabilities of the Company 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 year:

 

   June 30,
2021
   December 31,
2020
   December 31,
2019
 
Year-end RMB:US$1 exchange rate   6.4601    6.5249    6.9762 
Annual average RMB:US$1 exchange rate   6.4698    6.8976    6.8985 

 

F-10

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

NOTES TO FINANCIAL STATEMENTS

 

Related parties

 

Parties, which can be a corporation or individuals, 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 geographical areas, business segments and major customers in financial statements. For the six months ended June 30,2021 and the years ended December 31, 2020 and 2019, the Company operated in one reportable operating segment in the PRC.

 

Fair value of financial instruments

 

The Company 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.

 

The carrying value of the Company’s financial instruments: cash, accounts receivable, prepayments and other receivables, accounts payable, tax payable, amount due to a related party, other payables and accrued liabilities approximate at their fair values because of the short-term nature of these financial instruments (Level 1).

 

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.

 

Recent accounting pronouncements

 

In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU provides an exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. This update also (1) requires an entity to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, (2) requires an entity to evaluate when a step-up in the tax basis of goodwill should be considered part of the business combination in which goodwill was originally recognized for accounting purposes and when it should be considered a separate transaction, and (3) requires that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

 

A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, we have not determined whether implementation of such proposed standards would be material to our consolidated financial statements.

 

F-11

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

NOTES TO FINANCIAL STATEMENTS

 

3. ACCOUNTS RECEIVABLE, NET

 

Accounts receivable, consist of the following:

 

   June 30,
2021
   December 31,
2020
   December 31,
2019
 
Accounts receivable, cost  $791,044   $785,219   $1,280,797 
Less: (allowance)/reversal for doubtful accounts   12,734    (12,734)   - 
Accounts receivable, net  $803,778   $772,485   $1,280,797 

 

During the first half fiscal year ended June 30,2021 and the years ended December 31, 2020 and 2019, negative $12,734, $12,734 and $0 of allowance for doubtful accounts was accrued for accounts receivable respectively.

 

4. INVENTORIES

 

Inventories present merchandise that the Company purchased from its suppliers and holds for sale. Inventories consist of the following:

 

   June 30,
2021
   December 31,
2020
   December 31,
2019
 
Medicine  $163,969   $218,940   $158,001 
Less: impairment   (23,377)   (11,060)   (777)
Inventories, net  $140,592   $207,880   $157,224 

 

The Company accrued the impairment expense for slow moving, obsolete or expired inventory items were $12,317, $10,283 and $777 for the six months ended June 30,2021 and the years ended December 31, 2020 and 2019, respectively.

 

5. PREPAYMENTS AND OTHER RECEIVABLES

 

Prepayments and other receivables present the prepayment to suppliers, deposits for rental and others. The table below set forth the balances as of June 30,2021, December 31, 2020 and 2019.

 

   June 30,
2021
   December 31,
2020
   December 31,
2019
 
Input tax to be deducted  $193,812   $179,725   $129,112 
Advances to suppliers   36,008    76,126    78,178 
Others   -    42    1,934 
    229,820    255,893    209,224 
Less: allowance for doubtful accounts   -    -    - 
Prepayments and other receivables, net  $229,820   $255,893   $209,224 

 

Management evaluates the recoverable value of these balances periodically according to the Company’s policy of credit and allowance for doubtful accounts. During the six months ended June 30, 2021 and the years ended December 31, 2020 and 2019, no allowance for doubtful accounts was accrued for prepayments and other receivable.

 

6. PROPERTY, PLANT AND EQUIPMENT, NET

 

The Company’s property, plant and equipment consisted of the following:

 

   June 30,
2021
   December 31,
2020
   December 31,
2019
 
Office equipment  $21,476   $20,497   $31,931 
Transportation equipment   13,435    13,301    52,595 
    34,911    33,798    84,526 
Less: accumulated depreciation   (26,681)   (25,142)   (68,965)
Property, plant and equipment, net  $8,230   $8,656   $15,561 

 

The Company’s accrued depreciation expense for the six months ended June 30, 2021 and the years ended December 31, 2020 and 2019 were $1,287, $5,152 and $5,979, respectively.

 

F-12

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

NOTES TO FINANCIAL STATEMENTS

7. Lease

 

As of June 30, 2021, the Company had one lease that expires in August 2024. For the six months ended June 30, 2021 and the years ended December 31, 2020 and 2019, the lease expenses were $3,348, $6,281 and $2,094, respectively. Balance sheet information related to the Company’s operating leases as of June 30, 2021, December 31, 2020 and 2019 was as follows:

 

   June 30,
2021
   December 31,
2020
   December 31,
2019
 
Operating Lease Assets:               
Operating Lease  $19,440   $22,031   $25,689 
Total operating lease assets  $19,440   $22,031   $25,689 
Operating lease obligations:               
Current operating lease liabilities  $5,635   $4,051   $3,506 
Non-current operating lease liabilities   16,095    19,403    21,937 
Total Lease liabilities  $21,730   $23,454   $25,443 

 

Lease liability maturities as of June 30,2021,December 31, 2020 and 2019, are as follows:

 

   June 30,
2021
   December 31,
2020
   December 31,
2019
 
Operating Lease               
2020   -   $-   $4,633 
2021   2,627    5,077    4,749 
2022   8,077    7,996    7,479 
2023   8,481    8,396    7,853 
2024 and After   4,343    4,301    4,023 
Total minimum lease payments   23,528    25,770    28,737 
Less: Amount representing interest   (1,798)   (2,316)   (3,294)
Total Lease liabilities   21,730   $23,454   $25,443 

 

8. ACCOUNT PAYABLE

 

Account payables consisted of the following:

 

   June 30,
2021
   December 31,
2020
   December 31,
2019
 
Pharmaceuticals, medical devices and supplies suppliers  $30,762   $136,076   $135,839 
   $30,762   $136,076   $135,839 

 

9. ADVANCE FROM CUSTOMERS

 

Advance from customers consisted of the following:

 

   June 30,
2021
   December 31,
2020
   December 31,
2019
 
Advance payment of health centers and hospitals  $615   $22,241   $14,043 
Others   997    5,318    21,021 
   $1,612   $27,559   $35,064 

 

F-13

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

NOTES TO FINANCIAL STATEMENTS

 

10. RELATED PARTIES AND RELATED PARTIES TRANSACTIONS

 

Amount due from related parties

 

As of June 30, 2021, December 31, 2020 and 2019, $151,355, $596,579 and $78,374 was due from Chongqing Qianmei Medical Devices Co., Ltd (“Qianmei”), a company which was directly controlled by Ms. Xiaolin Liu, the controlling shareholder of Zhuoda. The amount due from Qianmei is free of interest and due on demand.

 

Amount due to shareholders

 

As of June 30, 2021 and December 31, 2020 and 2019, the total amounts payable to shareholders was $112,127, $142,951 and $242,505, respectively. Amount due to shareholders consisted of the following

 

      For six months
ended
June 30,
   For the years ended
December 31,
 
Item  Relationship  2021   2020   2019 
Mr. Xusen He  shareholder  $51,715   $5,132   $2,965 
Mr. Dong Zhang  shareholder   60,412    285    - 
Ms. Xiaolin Liu  shareholder   -    137,534    99,863 
Mr. Kangtao Xiong  shareholder   -    -    131,472 
Mr. Xi Huang  shareholder   -    -    8,205 
       112,127    142,951    242,505 

 

The amount due to shareholders consisted of shareholder loans from Mr. Xusen He and four other shareholders. The loans bear no interest and have no maturity date.

 

11. OTHER PAYABLES AND ACCRUED LIABILITIES

 

Other payables and accrued liabilities consisted of the following:

 

   June 30,
2021
   December 31,
2020
   December 31,
2019
 
Salary payable  $7,636   $11,467   $6,842 
Accrued operating expenses   12,365    332,402    491,522 
VAT payable   182,749    153,625    100,633 
Other tax payable   160    331    219 
   $202,910   $497,825   $599,216 

 

12. TAXES

 

PRC Income Taxes

 

The Company operates in the PRC and is subject to the Corporate Income Tax Law of the PRC at a unified income tax rate of 25%

 

The reconciliation of income tax rate to the effective income tax rate for the six months ended June 30, 2021 and the years ended December 31, 2020 and 2019, is as follows:

 

   For six months ended
June 30,
   For the years ended
December 31,
 
   2021   2020   2020   2019 
Income (loss) from PRC operations before income taxes  $60,805   $(45,513)  $(3,528)  $27,551 
Statutory income tax rate   25%   25%   25%   25%
Income tax expense at the statutory rate   15,201    (11,378)   (882)   6,888 
Tax effect of loss not recognized   -    11,378    (294)   (1,755)
Tax effect of non-deductible items   2,592    6,940    1,176    877 
Income tax expense  $17,793   $6,940   $-   $6,010 

 

F-14

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

NOTES TO FINANCIAL STATEMENTS

 

13. STOCKHOLDERS’ EQUITY

 

Zhuoda was incorporated under the laws of the PRC on May 5, 2009 in Chongqing City, with registered capital of RMB 2,000,000 (or approximately US$293,251). The paid in capital of Zhouda is RMB 2,000,000 (or approximately US$ 293,251).

 

14. CONCENTRATIONS OF RISK

 

The following is a discussion of concentrations ricks to which the Company might be exposed:

 

(a) Major customers

 

For the six months ended June 30, 2021, three customers who accounted for 10% or more of the Company’s revenues and their outstanding balances as at balance sheet date, are presented as follows:

 

   For the six months ended
June 30,
2021
   As of
June 30,
2021
 
Customers  Revenues   Percentage of
total revenues
   Account
receivable
 
Customer A  $86,884    17.55%  $4,916 
Customer B   52,823    10.67%   55,939 
Customer C   49,498    10.00%   27,523 

 

For the year ended December 31, 2020, two customers who accounted for 10% or more of the Company’s revenues and their outstanding balances as at balance sheet date, are presented as follows:

 

   For the year ended
December 31,
2020
   As of
December 31,
2020
 
Customers  Revenues   Percentage of
total revenues
   Account
receivable
 
Customer A  $126,326    13.43%  $123,570 
Customer B   111,253    11.83%   55,384 

 

For the year ended December 31, 2019, no customer accounted for 10% or more of the Company’s revenues.

 

(b) Major vendors

 

For the first half fiscal year ended June 30, 2021, three vendors who accounted for 10% or more of the Company’s purchases and their outstanding balances as at balance sheet date, are presented as follows:

 

   For the six months ended
June 30,
2021
   As of
June 30,
2021
 
Vendors  Purchases   Percentage of
total purchases
   Account
payable
 
Vendor A  $36,614    12.09%  $- 
Vendor B   35,129    11.60%   7,461 
Vendor C   30,712    10.14%   - 

 

For the year ended December 31, 2020, one vendor who accounted for 10% or more of the Company’s purchases and their outstanding balances as at balance sheet date, are presented as follows:

 

   For the year ended
December 31,
2020
   As of
December 31,
2020
 
Vendors  Purchases   Percentage of
total purchases
   Account
payable
 
Vendor A  $112,660    13.91%  $       - 

 

For the year ended December 31, 2019, no customer accounted for 10% or more of the Company’s purchases.

 

F-15

 

 

CHONGQING ZHUODA PHARMACEUTICAL CO., LTD

NOTES TO FINANCIAL STATEMENTS

 

(c) 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 collateral 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.

 

(d) Interest rate risk

 

The Company has loans with fixed interest during the term of loans. Expense and cash flows related to those loans are substantially independent of the market interest rates within its contractual loan term. However, as current loans expire and renew or, additional loans are necessary, new loans may potentially be subject to interest rate risk. The Company mitigated the concentration of the interest risk through fixed interest rates and holding a right of prepayment of the loans subject to renewal if the Company can obtain lower fixed interest rates. No interest rate swaps were entered into to manage the interest rate risk. The Company has no significant interest-bearing assets and the Company’s income and operating cash flows related to its assets are substantially independent of changes in market interest rates.

 

(e) Exchange rate risk

 

The reporting currency of the Company is the US$, the majority of the Company’s revenues and costs are denominated in RMB and all of the Company’s assets and liabilities are denominated in RMB. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$ and RMB. If RMB depreciates against 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.

 

(f) Economic and political risks

 

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

 

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.

 

16. SUBSEQUENT EVENTS

 

On September 10, 2021,Zhuoda and its shareholders entered into the Acquisition Agreement with BIMI and Guanzan to purchase all of the issued and outstanding equity interests in Zhuoda in consideration of US$11,617,500 (RMB 75,000,000). Pursuant to the Acquisition Agreement the entire purchase consideration is payable in shares of BIMI common stock. On September 22, 2021, BIMI issued 2,200,000 shares of its common stock as partial consideration for the purchase of Zhuoda. The remainder of the purchase price of approximately US$4,800,000 (RMB 31,680,000) is subject to post-closing adjustments based on the performance of Zhuoda in 2022 and 2023. The acquisition closed on October 8, 2021.

 

 

F-16

 

 

 

Exhibit 99.2

 

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

 

The acquisition by BIMI International Medical Inc (“BIMI”or “the Company”) of Chongqing Zhuoda Pharmaceutical Co., LTD (“Zhuoda”), a company organized under the laws of the People’s Republic of China (“the “PRC”), closed on October 8,2021.

 

On September 10, 2021, the Company entered into a stock purchase agreement to acquire Zhuoda (the“Zhuoda SPA”), a distributor of pharmaceuticals and biologicals located in Chongqing, a southwest city of the PRC and Zhuoda’s wholly-owned subsidiary, Chongqing Qianmei Medical Devices Co., Ltd (“Qianmei”), a distributor of medical devices and medical supplies in the PRC. Pursuant to the Zhuoda SPA, BIMI agreed to purchase all the issued and outstanding equity interests in Zhuoda in consideration of US$11,617,500 (RMB 75,000,000). The entire purchase consideration is to be paid in shares of BIMI’s common stock. At the closing, 2,200,000 shares of common stock of BIMI valued by the two parties at RMB 43,560,000, or $3.00 per share (approximately US$6,600,000) were issued as partial consideration for the purchase of Zhuoda. The remainder of the purchase price of approximately US$4,800,000 (RMB 31,680,000), is subject to post-closing adjustments based on the performance of Zhuoda in 2022 and 2023..

 

The unaudited pro forma condensed combined balance sheet combines the balance sheets of the Company and Zhuoda as of June 30, 2021 and December 31, 2020, giving pro forma effect to the above transaction as if it had occurred on June 30, 2021 and December 31, 2020. The unaudited pro forma condensed combined statement of operations combines the Company’s and Zhuoda’s operations for the six months ended June 30, 2021 and the year ended December 31, 2020, giving effect to the transaction as described on a pro forma basis as if the transaction had been completed on January 1, 2020.

 

The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X. These pro forma financial statements should be read in conjunction with the audited historical financial statements of the Company and the related financial statements for Zhuoda, which are included elsewhere in this current report on Form 8-K.

 

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred had the acquisition of Zhuoda by the Company occurred on the indicated date, or during the operational periods presented, nor is it necessarily indicative of the future financial position or operating results.

 

A preliminary allocation of the purchase price has been made to major categories of assets and liabilities in the accompanying pro forma financial statements based on available information. The actual allocation of the purchase price and the resulting effect on income from operations may differ significantly from the pro forma amounts included herein. These pro forma adjustments represent the Company’s preliminary determination of purchase accounting adjustments and are based upon available information and certain assumptions that the Company believes to be reasonable. Consequently, the amounts reflected in the pro forma financial statements are subject to change, and the final amounts may differ substantially.

 

 

 

 

BIMI INTERNATIONAL MEDICAL, INC.

PRO FORMA CONDENSED COMBINED BALANCE SHEETS

AS OF JUNE 30, 2021

(UNAUDITED)

 

   BIMI              
   International   Zhuoda        Combined 
   Medical, Inc   Pharmaceutical   Adjustments    Pro Forma 
ASSETS                 
CURRENT ASSETS                 
Cash  $626,554   $110,473   $-    $737,027 
Restricted cash   4,660               4,660 
Accounts receivable, net   9,281,572    803,778    -     10,085,350 
Advances to suppliers   4,501,686    -          4,501,686 
Amount due from related parties   41,642    151,455    -     193,097 
Inventories   5,116,715    140,591    -     5,257,306 
Prepayments and other receivables   6,013,025    229,820          6,242,845 
Operating lease-right of use assets   40,489    -          40,489 
                      
Total current assets   25,626,343    1,436,117    -     27,062,460 
                      
NON-CURRENT ASSETS                     
Deferred tax assets   184,243    -          184,243 
Property, plant and equipment, net   2,677,733    8,230    -     2,685,963 
Intangible assets, net   15,035    -    -     15,035 
Operating lease-right of use assets   3,666,334    19,440    -     3,685,774 
Goodwill   30,442,737    -    5,728,212  (c)  36,170,949 
                      
Total non-current assets   36,986,082    27,670    5,728,212     42,741,964 
                      
TOTAL ASSETS  $62,612,425   $1,463,787   $5,728,212    $69,804,424 
                      
LIABILITIES AND EQUITY                     
CURRENT LIABILITIES                     
Short-term bank borrowings  $915,876   $554,171   $-    $1,470,047 
Convertible promissory notes, net   5,132,530    -    -     5,132,530 
Accounts payable, trade   10,859,165    30,762    -     10,889,927 
Advances from customers   3,417,049    1,612    -     3,418,661 
Amount due to related parties   792,398    112,127    -     904,525 
Taxes payable   720,914    16,686    -     737,600 
Other payables and accrued liabilities   5,060,442    202,911    4,800,000  (a)  10,063,353 
Lease liabilities-current   758,568    5,635    -     764,203 
                      
Total current liabilities   27,656,942    923,904    4,800,000     33,380,846 
                      
Long-term loans non current portion   924,071    -    -     924,071 
Lease liabilities-non current   3,392,857    16,095    -     3,408,952 
                      
TOTAL LIABILITIES   31,973,870    939,999    4,800,000     37,713,869 
                      
EQUITY                     
Common stock, $0.001 par value, 50,000,000 shares authorized, 26,993,988 shares issued and outstanding as of June 30, 2021   24,794    -    2,200  (b)  26,994 
Paid-in capital   -    293,251    (293,251) (c)  - 
Additional paid-in capital   43,618,216    -    1,449,800  (b)(c)  45,068,016 
Statutory reserves   2,263,857    6,629    (6,629) (c)  2,263,857 
Retained earnings (loss)   (16,524,199)   202,669    (202,669)    (16,524,199)
Accumulated other comprehensive income (loss)   1,004,504    21,239    (21,239) (c)  1,004,504 
Total BIMI International Medical, Inc. equity   30,387,172    523,788    928,212     31,839,172 
                      
NONCONTROLING INTERESTS   251,383    -    -     251,383 
                      
Total equity   30,638,555    523,788    928,212     32,090,555 
                      
Total liabilities and equity  $62,612,425   $1,463,787   $5,728,212    $69,804,424 

 

See accompanying notes to the unaudited pro forma condensed combined financial statements

 

2

 

 

BIMI INTERNATIONAL MEDICAL, INC.

PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR SIX MONTHS ENDED JUNE 30, 2021

(UNAUDITED)

 

   BIMI             
   International   ZHUODA       Combined 
   Medical, Inc   Pharmaceutical   Adjustments   Pro Forma 
                 
REVENUES  $11,424,991   $940,438   $-   $12,365,429 
                   - 
COST OF REVENUES   8,867,894    759,062    -    9,626,956 
                   - 
GROSS PROFIT   2,557,097    181,376    -    2,738,473 
                   - 
OPERATING EXPENSES:                  - 
Sales and marketing   1,227,014    79,833    -    1,306,847 
General and administrative   4,720,915    95,826    -    4,816,741 
Total operating expenses   5,947,929    175,659    -    6,123,588 
                   - 
INCOME (LOSS) FROM OPERATIONS   (3,390,832)   5,717    -    (3,385,115)
                   - 
OTHER INCOME (EXPENSE)                  - 
Interest expense   (138,237)   (9,899)   -    (148,136)
Other income (expense)   (5,293)   654    -    (4,639)
Total other income (expense), net   (143,530)   (9,245)        (152,775)
                     
LOSS BEFORE INCOME TAXES   (3,534,362)   (3,528)   -    (3,537,890)
                     
PROVISION FOR INCOME TAXES   32,003    -    -    32,003 
                     
NET INCOME (LOSS) FROM CONTINUING OPERATIONS   (3,566,365)   (3,528)   -    (3,569,893)
                     
DISCONTINUED OPERATIONS                    
Loss from discontinued operations   -    -    -    - 
                     
NET LOSS   (3,566,365)   (3,528)   -    (3,569,893)
Less: net income (loss) attributable to non-controlling interest   42,861    -    -    42,861 
NET LOSS ATTRIBITABLE TO BIMI INTERNATIONAL MEDICAL, INC.  $(3,609,226)  $(3,528)  $-   $(3,612,754)
                     
COMPREHENSIVE INCOME (LOSS)                    
NET LOSS  $(3,566,365)  $(3,528)  $-   $(3,569,893)
OTHER COMPREHENSIVE INCOME (LOSS)        -         - 
Foreign currency translation adjustment   1,112    30,829         31,941 
TOTAL COMPREHENSIVE INCOME (LOSS)  $(3,565,253)  $27,301   $-   $(3,537,952)
Less: comprehensive income (loss) attributable to non-controlling interest   56    -    -    56 
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO BIMI INTERNATIONAL MEDICAL INC.  $(3,565,309)  $27,301   $-   $(3,538,008)
                     
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK Outstanding                    
Basic and diluted   20,859,159    -    2,200,000(b)   23,059,159 
                     
LOSS PER SHARE                    
Continuing operations – basic and diluted  $(0.17)  $-   $-   $(0.15)
Discontinued operations – basic and diluted  $   $-   $-   $- 
Net loss – basic and diluted  $(0.17)  $-   $-   $(0.15)

 

See accompanying notes to the unaudited pro forma condensed combined financial statements

 

3

 

 

BIMI INTERNATIONAL MEDICAL, INC.

PRO FORMA CONDENSED COMBINED BALANCE SHEETS

AS OF DECEMBER 31, 2020

(UNAUDITED)

 

   BIMI              
   International   Zhuoda        Combined 
   Medical, Inc   Pharmaceutical   Adjustments    Pro Forma 
ASSETS                 
CURRENT ASSETS                 
Cash  $135,309   $10,812   $-    $146,121 
Accounts receivable, net   6,686,552    772,485    -     7,459,037 
Advances to suppliers   2,693,325    -    -     2,693,325 
Amount due from related parties   -    596,579    -     596,579 
Inventories   735,351    207,881    -     943,232 
Prepayments and other receivables   14,880,526    255,893    -     15,136,419 
Operating lease-right of use assets   53,425    -    -     53,425 
                      
Total current assets   25,184,488    1,843,650    -     27,028,138 
                      
NON-CURRENT ASSETS                     
Property, plant and equipment, net   910,208    8,656    -     918,864 
Operating lease-right of use assets   -    22,031    -     22,031 
Goodwill   6,914,232    -    5,776,062  (c)  12,690,294 
Deferred tax assets   193,211    -    -     193,211 
                      
Total non-current assets   8,017,651    30,687    5,776,062     13,824,400 
                      
TOTAL ASSETS  $33,202,139   $1,874,337   $5,776,062    $40,852,538 
                      
LIABILITIES AND EQUITY                     
CURRENT LIABILITIES                     
Short-term bank borrowings  $904,228   $571,656   $-    $1,475,885 
Long-term loans due within one year   34,201    -    -     34,201 
Convertible promissory notes, net   3,328,447    -    -     3,328,447 
Accounts payable, trade   5,852,050    136,076    -     5,988,126 
Advances from customers   194,086    27,559    -     221,645 
Amount due to related parties   226,514    142,951    -     369,464 
Taxes payable   773,649    (1,122)   -     772,527 
Other payables and accrued liabilities   4,228,976    497,825    4,800,000  (a)  9,526,801 
Lease liabilities-current   23,063    4,051    -     27,114 
                      
Total current liabilities   15,565,214    1,378,996    4,800,000     21,744,210 
                      
Long-term loans – non-current portion   720,997    -    -     720,997 
Lease liabilities- non-current   22,457    19,403    -     41,860 
                      
TOTAL LIABILITIES   16,308,668    1,398,399    4,800,000     22,507,067 
                      
EQUITY                     
Common stock, $0.001 par value, 50,000,000 shares authorized, 15,254,587 shares issued and outstanding as of December 31, 2020   13,254    -    2,200  (b)  15,454 
Paid-in capital   -    293,251    (293,251) (c)  - 
Additional paid-in capital   26,344,920    -    1,449,800  (b)(c)  27,794,720 
Statutory reserves   2,263,857    2,174    (2,174) (c)  2,263,857 
Accumulated deficit   (12,914,973)   164,112    (164,112)    (12,914,973)
Accumulated other comprehensive income   1,003,392    16,401    (16,401) (c)  1,003,392 
Total BIMI International Medical, Inc. equity   16,710,450    475,938    976,062     18,162,450 
                      
NON CONTROLING INTERESTS   183,021    -    -     183,021 
                      
Total equity   16,893,471    475,938    976,062     18,345,471 
                      
Total liabilities and equity  $33,202,139   $1,874,337   $5,776,062    $40,852,538 

 

See accompanying notes to the unaudited pro forma condensed combined financial statements

 

4

 

 

BIMI INTERNATIONAL MEDICAL, INC. 

PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE YEAR ENDED DECEMBER 31, 2020

(UNAUDITED)

 

   BIMI             
   International   ZHUODA       Combined 
   Medical, Inc   Pharmaceutical   Adjustments   Pro Forma 
                 
REVENUES  $12,844,902   $940,438   $ -   $13,785,340 
                   - 
COST OF REVENUES   10,402,085    759,062    -    11,161,147 
                   - 
GROSS PROFIT   2,442,817    181,376    -    2,624,193 
                     
OPERATING EXPENSES:                    
Sales and marketing   783,134    79,833    -    862,967 
General and administrative   5,471,964    95,826    -    5,567,790 
Total operating expenses   6,255,098    175,659    -    6,430,757 
                     
INCOME (LOSS) FROM OPERATIONS   (3,812,281)   5,717    -    (3,806,564)
                     
OTHER INCOME (EXPENSE)                    
Interest income   304              304 
Interest expense   (84,913)   (9,899)   -    (94,812)
Exchange gains   547,114    -         547,114 
Other income (expense)   (1,953)   654    -    (1,299)
Total other income (expense), net   460,552    (9,245)   -    451,307 
                     
LOSS BEFORE INCOME TAXES   (3,351,729)   (3,528)   -    (3,355,257)
                     
PROVISION FOR INCOME TAXES   434,306    -    -    434,306 
                     
NET LOSS FROM CONTINUING OPERATIONS   (3,786,035)   (3,528)   -    (3,789,563)
                     
DISCONTINUED OPERATIONS                    
Income from operations of discontinued operations   1,908,110    -    -    1,908,110 
                     
NET LOSS   (1,877,925)   (3,528)   -    (1,881,453)
Less: net income (loss) attributable to non-controlling interest   119,158    -    -    119,158 
NET LOSS ATTRIBITABLE TO BIMI INTERNATIONAL MEDICAL, INC.  $(1,997,083)  $(3,528)  $-   $(2,000,611)
                     
COMPREHENSIVE INCOME (LOSS)                    
NET LOSS  $(1,877,925)  $(3,528)  $-   $(1,881,453)
OTHER COMPREHENSIVE INCOME (LOSS)                    
Foreign currency translation adjustment   (941,957)   30,829    -    (911,128)
TOTAL COMPREHENSIVE INCOME (LOSS)  $(2,819,882)  $27,301   $-   $(2,792,581)
Less: comprehensive income (loss) attributable to non-controlling interest   (17,113)   -    -    (17,113)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO BIMI INTERNATIONAL MEDICAL INC.  $(2,802,769)  $27,301   $-   $(2,775,468)
                     
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING                    
Basic and diluted   10,672,814    -    2,200,000(b)   12,872,814 
                     
LOSS PER SHARE                    
Continuing operations - basic and diluted  $(0.35)  $N/A   $-   $(0.30)
Discontinued operations - basic and diluted  $0.18   $N/A   $-   $0.15 
Net loss - basic and diluted  $(0.18)  $N/A   $-   $(0.15)

 

See accompanying notes to the unaudited pro forma condensed combined financial statements

 

5

 

 

BIMI International Medical, Inc. and Subsidiaries

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 

1. Basis of Presentation

 

The unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting under the provision of ASC 805 on the basis of BIMI International Medical Inc. and subsidiaries (“the Company”) as the accounting acquirer of Chongqing Zhuoda Pharmaceutical Co., LTD (“Zhuoda”). Under the acquisition method, the acquisition date fair value of the gross consideration paid by the Company to close the acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair value. Management has made significant estimates and assumptions in determining the preliminary allocation of the gross consideration transferred in the unaudited pro forma condensed combined financial information. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amount recorded may differ materially from the information presented.

 

The pro forma adjustments reflecting the consummation of the acquisition are based on certain currently available information and certain assumptions and methodologies that the Company believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments may be revised as additional information becomes available and alternative valuation methodologies are evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the differences may be material. The Company believes that its assumptions and methodologies provided a reasonable basis for presenting all the significant effects of the acquisition contemplated based on information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

 

The unaudited pro forma condensed combined balance sheet combines the Company’s and Zhuoda’s balance sheets as of June 30, 2021 and December 31, 2020 as if the acquisition had occurred on June 30, 2021 and December 31, 2020. The unaudited pro forma condensed combined statement of operations combines the Company’s and Zhuoda’s operations for the six months ended June 30, 2021 and the year ended December 31, 2020, presented as if the acquisition had been completed on January 1, 2020. These unaudited pro forma combined condensed financial statements are based upon the historical financial statements of the Company and Zhuoda after considering the effect of the adjustments described in these footnotes.

 

The accompanying unaudited pro forma combined financial statements do not give effect to any cost savings, revenue synergies or restructuring costs which may result from the integration of the Company and Zhuoda operations. Further, actual results may be different from these unaudited pro forma combined financial statements. They should be read in conjunction with the historical financial statements and notes thereto of the Company and Zhuoda.

 

2. Estimated Preliminary Purchase Price Allocation

 

The preliminary consideration and allocation of the purchase price to the fair value of Zhuoda’s assets acquired and liabilities assumed as if the acquisition date was June 30, 2021 and December 31, 2020 is presented below:

 

   June 30,
2021
   December 31,
2020
 
Calculation of consideration per the Zhouda SPA        
Common shares issuance  $1,452,000   $1,452,000 
Remaining consideration - Estimated fair value   4,800,000    4,800,000 
Total consideration  $6,252,000   $6,252,000 
           
Recognized amounts of identifiable assets acquired and liabilities assumed          
Cash   110,473   $10,812 
Accounts receivable   803,778    772,485 
Amount due from related parties   151,455    596,579 
Inventories   140,591    207,881 
Prepayments and other receivables   229,820    255,893 
Property, plant and equipment, net   8,230    8,656 
Operating lease-right of use assets   19,440    22,031 
Short-term bank borrowings   554,171    571,656 
Accounts payable   30,762    136,076 
Advances from customers   1,612    27,559 
Amount due to shareholders   112,127    142,951 
Taxes payable   16,686    (1,122)
Other payables and accrued liabilities   202,911    497,825 
Lease liabilities-current   5,635    4,051 
lease liabilities-non current   16,095    19,403 
Total identifiable net assets   523,788    475,938 
Goodwill   5,728,212    5,776,062 
Net assets acquired  $6,252,000   $6,252,000 

 

6

 

 

Goodwill represents the excess of the purchase price over the amounts assigned to the fair value of the assets acquired and the assumed liabilities of Zhuoda.

 

The Company has not completed the detailed valuation necessary to estimate the fair value of the assets acquired and the liabilities assumed and, accordingly, the adjustments to record the assets acquired and liabilities assumed at fair value reflect the best estimate of the Company based on the information currently available and are subject to change once additional analyses are completed. Furthermore, the cash portion of purchase price has not been paid in full yet and the final purchase price may be subject to the certain closing adjustment items pursuant to the Zhouda SPA.

 

As the goodwill calculation above assumed full payment of the purchase price, the final amount recorded may differ materially from the information presented.

 

3. Proforma Adjustments

 

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the acquisition and has been prepared for informational purposed only.

 

The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give pro forma effect to events that are directly attributable to the acquisition, factually supportable, and with respect to the statements of operations, expected to have a continuing impact on the results of the Company.

 

The pro forma adjustments are comprised of the following elements:

 

(a)Represents the unpaid  consideration that is payable to the former Zhuoda shareholders;

 

(b)Reclassify the share consideration that has been issued to the former Zhuoda shareholders, 2,200,000 shares issued on September 22, 2021 valued at $1,452,000 (based on the closing market price as reported by NASDAQ) for the shares issued; and

 

(c)Represents acquisition consideration allocated to assets acquired and liabilities assumed in the acquisition, and the allocation to goodwill, which was the amount that the purchase price exceeded the fair value of the identifiable net assets, and the elimination of the equity of Zhuoda that the Company acquired.

 

 

7

 

 



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