BIMI MEDICAL INTERNATIONAL INC. – 10-K/A OF OPERATIONS

The following discussion should be read in conjunction with our consolidated
financial statements and the notes thereto included elsewhere in this Report on
Form 10-K. The discussion in this section of this Report on Form 10-K contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those discussed herein. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in this section, those discussed in "Risk Factors" and those discussed
elsewhere in this Report on Form 10-K.

Insight

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

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

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


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

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

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

On April 9, 2021, we acquired Qiangsheng, Eurasia and Minkang hospitals, three
private hospitals in the south, northern and southwest region of China,
respectively. Qiangsheng has 20 hospital beds and 63 employees, including 18
doctors, 17 nurses, 8 other medical staff and 20 non-medical staff. Eurasia has
12 hospital beds and 52 employees, including 12 doctors, 15 nurses, 7 other
medical staff and 18 non-medical staff. Minkang has 126 hospital beds and 116
employees, including 24 doctors, 58 nurses, 12 other medical staff and 22
non-medical staff. The three hospitals acquisition marks the third step in our
effort to establish a nationwide hospital chain specializing in obstetrics and
gynecology.

On September 10,2021, we acquired Zhuoda, a company engaged in the distribution
of medical devices and pharmaceuticals, based in Chongqing, the largest city in
Southwest region of the PRC. The Zhuoda acquisition marked the second step in
our effort to further penetrate the healthcare market in southwest China.

On December 20, 2021, we entered into a stock purchase agreement to acquire Mali
Hospital, a private OB-GYN specialty hospital with 199 beds located in Bengbu
city in the southeast region of the PRC. The closing of the Mali Hospital
acquisition is expected to take place in April 2022, subject to necessary
regulatory approvals.

Going concern uncertainties

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

As reflected in the accompanying consolidated financial statements, for the
years ended December 31, 2021 and 2020, we incurred net losses of approximately
$34.92 million and $1.88 million, respectively. In addition, we reported
continuing cash out flow of $1.28 million and $4.36 million from our operating
activities for the years ended December 31, 2021 and 2020, respectively. As of
December 31, 2021, we had an accumulated deficit of $47.90 million. Management
believes these factors raise substantial doubt about our ability to continue as
a going concern for the next twelve months.

The continuation of our company as a going concern through the next twelve
months is dependent upon (1) the continued financial support from our
stockholders or external financing. Management believes that our existing
stockholders will provide the additional cash to meet our obligations as they
become due, and (2) that it will be able to implement its business plan to
expand our company's operations and generate sufficient revenues to meet its
obligations. While we believe in the viability of our strategy to increase sales
volume and in our ability to raise additional funds, there can be no assurance
to that effect, nor that the Company will be successful in securing sufficient
funds to sustain the operations.

These conditions raise substantial doubt about our company's ability to continue
as a going concern. These 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 our company to continue as a going concern.


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Critical accounting policies

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

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

Revenue Recognition

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

  ? Identify the contract with a customer;



  ? Identify the performance obligations in the contract;



  ? Determine the transaction price;


? Attribute the transaction price to the performance obligations of the contract;

    and


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



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

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

Accounts receivable and allowance for doubtful accounts

Accounts receivable are recorded at the invoiced amount and do not bear
interest, which are due within contractual payment terms, generally 30 to 90
days from delivery. Credit is extended based on evaluation of a customer's
financial condition, the customer credit-worthiness and their payment history.
Accounts receivable outstanding longer than the contractual payment terms are
considered past due. Past due balances over 90 days and over a specified amount
are reviewed individually for collectability. At the end of each period, we
specifically evaluate individual customer's financial condition, credit history,
and the current economic conditions to monitor the progress of the collection of
accounts receivables. We will consider the allowance for doubtful accounts for
any estimated losses resulting from the inability of its customers to make
required payments. For the receivables that are past due or not being paid
according to payment terms, the appropriate actions are taken to exhaust all
means of collection, including seeking legal resolution in a court of law.
Account balances are charged off against the allowance after all means of
collection have been exhausted and the potential for recovery is considered
remote. We do not have any off-balance-sheet credit exposure related to its
customers.


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Inventories

Inventories are recorded at the lower of cost or market value (net realizable value), cost being determined using the weighted average method. Costs include materials, labor and manufacturing overhead. We review historical sales activity quarterly to determine overstock, slow moving and potentially obsolete items and also assess the impact of any anticipated changes in future demand. We provide stock allocations based on excess and obsolete inventory determined primarily by customer demand.

Fixed assets

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

Items                   Expected useful lives   Residual value
Building                      20 years                        5 %
Electronic equipment           3 years                        5 %
Office equipment               3 years                        5 %
Furniture                      5 years                        5 %
Medical equipment             10 years                        5 %
Vehicle                        4 years                        5 %
Leasehold Improvement     Shorter of lease                    5 %
                         term or useful life



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

Leases
On January 1, 2020,we adopted Accounting Standards Update ("ASU") 2016-02. For
all leases that were entered into prior to the effective date of ASC 842, we
elected to apply the package of practical expedients. Based on this guidance, we
did not reassess the following: (1) whether any expired or existing contracts
are or contain leases; (2) the lease classification for any expired or existing
leases; and (3) initial direct costs for any existing leases.

We determine if an arrangement is a lease at inception. Operating leases are
included in operating lease right-of-use ("ROU") assets, current portion of
obligations under operating leases, and obligations under operating leases,
non-current on our consolidated balance sheets. Finance leases are included in
property and equipment, net, current portion of obligations under capital
leases, and obligations under capital leases, non-current on our consolidated
balance sheets.

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

Goodwill
Goodwill represents the excess of the consideration paid of an acquisition over
the fair value of the net identifiable assets of the acquired subsidiary at the
date of acquisition. Goodwill is not amortized and is tested for impairment at
least annually, more often when circumstances indicate impairment may have
occurred. Goodwill is carried at cost less accumulated impairment losses. If
impairment exists, goodwill is immediately written off to its fair value and the
loss is recognized in the consolidated statements of operations and
comprehensive loss. Impairment losses on goodwill are not reversed.

The Company reviews the carrying value of intangible assets not subject to
amortization, including goodwill, to determine whether impairment may exist
annually or more frequently if events and circumstances indicate that it is more
likely than not that an impairment has occurred. The Company has the opinion to
assess qualitative factors to determine whether it is necessary to perform the
two-step in accordance with ASC 350-20. If the Company believes, as a result of
the qualitative carrying amount, the two-step quantities impairment test
described below is required.

The first step compares the fair values of each reporting unit to its carrying
amount, including goodwill. If the fair value of each reporting unit exceeds its
carrying amount, goodwill is not considered to be impaired and the second step
will not be required.

If the carrying amount of a reporting unit exceeds its fair value, the second
step compares the implied fair value of goodwill to the carrying value of a
reporting unit's goodwill. The implied fair value of goodwill is determined in a
manner similar to accounting for a business acquisition with the allocation of
the assessed fair value determined in the first step to the assets and
liabilities of the reporting unit. The excess of the fair value of the reporting
unit over the amounts assigned to the assets and liabilities is the implied fair
value of goodwill. Estimating fair value is performed by utilizing various
valuation techniques, with the primary technique being a discounted cash flow.
The fair value of discounted cash flow was determined using management's
estimates and assumptions.


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Management evaluated the recoverability of goodwill by performing a qualitative
assessment before using a two-step impairment test approach at the reporting
unit level. If the Company reorganizes its reporting structure in a manner that
changes the composition of one or more of its reporting units, goodwill will be
reassigned based on the relative fair value of each of the affected reporting
units. As of December 31, 2021 and 2020, the Company recorded impairments for
goodwill of $26,128,171 and $Nil, respectively.


At the date of the most recent annual goodwill impairment test, all the
reporting units' fair value were either equal to or slightly higher than the
their carrying values. None of the reporting units' fair values were
substantially in excess of their carrying values. The fair value of the goodwill
associated with each of the Guanzan Group (which covers the wholesale
pharmaceutical, wholesale medical devices and the Lijiantang Pharmacies
segments) and the medical services segment (consisting of Guoyitang, Zhongshan
and the Qiangsheng, Eurasia and Minkang hospitals), were equal to their carrying
value after their last impairment test and the fair value of the goodwill for
Zhuoda only exceeded its carrying value by approximately 5.62%. Accordingly, the
goodwill associated with Zhuoda, Guanzan Group, Guoyitang, Zhongshan and
Qiangsheng, Eurasia and Minkang are considered at risk for impairment in future
periods.


The fair value of a reporting unit is based on the discounted estimated future income statement. Assumptions used to estimate fair value include management’s estimates of future growth rates, revenue and discount rates. We disclose the method used to determine the fair values ​​of our reporting units for purposes of our annual impairment review as using the income-based approach.

All of our reporting units share similar characteristics due to the nature of
their businesses and operating model. As a result, the methodology used to
determine fair value and the key estimates and assumptions used in our annual
goodwill review are consistent for all of our reporting units.



Our key assumptions used include revenue growth, profit margins, terminal value growth rates, capital expenditure projections, assumed tax rates, discount rates, other assumptions deemed reasonable by management and relevant comparable to a similar industry.

We believe that the estimates and assumptions made are reasonable, but they are
susceptible to change from period to period. Actual results of operations, cash
flows and other factors will likely differ from the estimates used in our
valuation, and it is possible that differences and changes could be material. A
deterioration in profitability, adverse market conditions, changes in regulatory
developments, changes in category growth rates as a result of changing consumer
preferences, loss of key personnel, the disposition of a significant portion of
a reporting unit and competitive activity or a slower or weaker economic
recovery than currently estimated by management could have a significant impact
on the assumption and estimation in calculating the fair value of our reporting
units and could result in an impairment charge in the future.



Potential events and changes in circumstances that could reasonably be expected to adversely affect the key assumptions are general economic conditions, regulatory developments, changes in category growth rates due to consumer preferences, loss of key personnel, divestiture of a significant portion of a reporting unit and competitive business.

Convertible promissory notes

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

Beneficial conversion feature

We evaluate the conversion feature of the convertible debt that we issue to
determine whether it was beneficial as described in ASC 470-20. The intrinsic
value of a beneficial conversion feature inherent to a convertible note payable,
which is not bifurcated and accounted for separately from the convertible notes
payable and may not be settled in cash upon conversion, is treated as a discount
to the convertible notes payable. This discount is amortized over the period
from the date of issuance to the date the notes is due using the effective
interest method. If the notes payable are retired prior to the end of their
contractual term, the unamortized discount is expensed in the period of
retirement to interest expense. In general, the beneficial conversion feature is
measured by comparing the effective conversion price, after considering the
relative fair value of detachable instruments included in the financing
transaction, if any, to the fair value of the shares of common stock at the
commitment date to be received upon conversion.

Derivatives

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


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

Foreign Currency Translation

Transactions denominated in currencies other than the functional currency are
translated into the functional currency at the exchange rates prevailing at the
dates of the transaction. Monetary assets and liabilities denominated in
currencies other than the functional currency are translated into the functional
currency using the applicable exchange rates at the balance sheet dates. The
resulting exchange differences are recorded in the statement of operations. The
reporting currency of our company is the United States Dollar ("$"). Our
subsidiaries in the PRC maintain their books and records in their local
currency, the Renminbi Yuan ("RMB"), which is the functional currency as it is
the primary currency of the economic environment in which these entities
operate.

In general, for consolidation purposes, assets and liabilities of its
subsidiaries whose functional currency is not the $ are translated into $, 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.

RECENT DEVELOPMENTS

On January 7, 2022we issued 600,000 common shares as initial consideration for the acquisition of mali.

On January 24, 2022we issued 1,000,000 common shares as compensation for Mr. Song Tiewei.



On January 27, 2022, we entered into an employment agreement with Mr. Xiaping
Wang for a term of one (1) year, effective January 1, 2022. Under the agreement,
Mr. Wang's compensation will consist of an annual salary of $500,000 in cash and
stock compensation of 500,000 shares of our Common Stock. We issued 500,000
shares of our Common Stock to Mr. Wang on February 1, 2022.


On February 1, 2022we issued 50,000 common shares to a consultant for payment of legal advisory services.

On February 1, 2022, we entered into an Amendment and Settlement Agreement to
amend the Stock Purchase Agreement relating to the acquisition of the Zhongshan
hospital. The amendment reduced post-closing performance targets and payments
and settled certain payments as a result of such amendment. Pursuant to the
amendment, the purchase price was retroactively reduced by 50% from RMB
120,000,000 (currently approximately $18,864,957) to RMB 60,000,000 (currently
approximately $9,432,479), the closing cash payment was retroactively reduced
from RMB 40,000,000 to nil and the deferred closing stock payment was
retroactively reduced from 400,000 shares of our Common Stock to 200,000 shares
of Common Stock. The 2021 revenue target was also reduced by 50% from RMB
30,000,000 to RMB 15,000,000, the 2021 profit target was reduced from RMB
5,000,000 to RMB 2,500,000, the 2022 revenue target was reduced from RMB
33,000,000 to RMB 16,500,000 and the 2022 profit target was reduced from RMB
5,500,000 to RMB 2,750,000. The parties agreed that immediately after the
signing of the amendment, the seller of Zhongshan hospital will execute and
deliver all documents as requested by us in order to cause the return of 200,000
shares of our Common Stock on a post reverse split basis and that prior to
December 31, 2022, the seller will return RMB 40,000,000 to us in cash, which
amount was previously paid by us.


On February 2, 2022, we announced a 1-for-5 reverse split of our Common Stock,
which began to trade on Nasdaq Capital Market on February 3, 2022, on a split
adjusted basis.


Segment Reporting

In 2021, we were engaged in four business segments, wholesale pharmaceuticals,
wholesale medical devices, medical services and retail pharmacies. In 2020, we
were engaged in three business segments, wholesale pharmaceuticals, wholesale
medical devices and retail pharmacies.


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RESULTS OF OPERATIONS

Comparison of the years ended December 31, 2021 and 2020

                                                                                                                   Percentage
                                                                                            Amount increase         increase
                                       2021           % of Revenues           2020            (decrease)           (decrease)
Revenues                           $  27,079,795                 100 %    $ 12,844,902     $      14,234,893                111 %
Cost of revenues                      22,483,404                  83 %      10,402,085            12,081,319                116 %
Gross profit                           4,596,391                  17 %       2,442,817             2,153,574                 88 %
Operating expenses                    12,703,345                  47 %       6,255,098             6,448,247                103 %
Other income (expense)               (26,795,423 )               (99 )%        460,552           (27,255,975 )            (5918 )%
Loss before income tax               (34,902,377 )              (129 )%     (3,351,729 )         (31,550,648 )              941 %
Income tax expense                        19,368                   0 %         434,306              (414,938 )              (96 )%
Net loss from continuing
operations                           (34,921,745 )              (129 )%     (3,786,035 )         (31,135,710 )              822 %
Income from operations of
discontinued operations                        -                   0 %       1,908,110            (1,908,110 )             (100 )%
Less: non-controlling interest            64,211                   0 %         119,158               (54,947 )              (46 )%
Net loss attributable to BIMI
International Medical Inc.         $ (34,985,956 )              (129 )%   $
(1,997,083 )   $     (32,988,873 )             1652 %



Revenues

Revenues for the years ended December 31, 2021 and 2020 were $27,079,795 and
$12,844,902, respectively. The increase of $14,234,893 is mainly due to the full
year of revenues of the Guanzan Group, which was acquired in March 2020 and
acquisitions of the Guoyitang, Qiangsheng, Eurasia and Minkang hospitals in
2021.

For the year ended December 31, 2021,the revenues of the retail pharmacies,
wholesale medical devices, wholesale pharmaceuticals and medical services were
$316,647, $3,445,107, $16,905,498 and $6,398,379, respectively. For the year
ended December 31, 2020,the revenues of the retail pharmacies, wholesale medical
devices and wholesale pharmaceuticals were $84,087, $3,059,462 and $ 9,701,353,
respectively.

Cost of revenues
Cost of revenues consists of primarily of the cost of the medical devices,
pharmaceuticals and other products sold to customers. Cost of revenues for the
year ended December 31, 2021 was $22,483,404 compared with $10,402,085 for the
year ended December 31, 2020. The increase reflected the costs associated with
operations of the Guanzan Group, Guoyitang, Qiangsheng, Eurasia and Minkang
hospitals.

Cost of revenue of the retail pharmacies, wholesale medical devices, wholesale
pharmaceuticals and medical services for the year ended December 31, 2021 were
$200,162, $3,033,702, $16,450,014 and $2,733,792, respectively.

Cost of revenue for wholesale medical devices, wholesale pharmaceuticals and retail pharmacies for the year ended December 31, 2020 were $2,481,616,
$7,850,315 and $70,154respectively.

Gross profit

For the year ended December 31, 2021 we had a gross profit margin of 17%
compared with gross profit margin of 19% for the year ended December 31, 2020.
The decrease in the gross profit margin in 2021 was mainly due to the decrease
in the wholesale pharmaceuticals segment from 19.1% in 2020 to 2.7% in 2021
caused by a change in the product mix to products with a lower gross profit
margin.

The gross profit margin of our retail pharmacy, wholesale medical device, wholesale pharmaceutical and medical services segments for the year ended
December 31, 2021 were 36.8%, 12.0%, 2.7% and 57.3%, respectively.

The gross profit margin of our retail pharmacies, wholesale medical devices and
wholesale pharmaceuticals segments for the year ended December 31, 2020 were
16.6%,18.9% and 19.1%, respectively.


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Operating expenses

Operating expenses consist primarily of amortization of convertible notes, audit fees and legal services, other professional service fees and promotional expenses.


Operating expenses were $12,703,345 for the year ended December 31, 2021
compared to $6,255,098 for the year ended December 31, 2020, an increase of
$6,207,182, or 99%. The reason is the increase in salary and selling expenses
for the year ended December 31,2021. The increase of selling expenses is mainly
due to the acquisitions of the Guoyitang, Qiangsheng, Eurasia and Minkang
hospitals in 2021.Operating expenses for the year ended December 31, 2021
consisted mainly of salary and employee benefits in the amount of $2,273,313,
amortization of the convertible notes in the amount of $1,977,401, selling
expenses in the amount of $3,180,252, depreciation and amortization expense of
$244,116, audit fees of $543,299, and other professional service fees in the
amount of $906,852.



Operating expenses for the year ended December 31, 2020 consist mainly of
amortization of the convertible notes in the amount of $2,091,927, meeting and
promotional expenses in the amount of $938,086, depreciation and amortization
expense of $56,041, audit fee of $329,693, convertible notes issuance-related
costs in the amount of $211,425, legal fees of $172,575 and other professional
service fees in the amount of $880,505.


For the year ended December 31, 2021, operating expenses of $4,425,022 were
allocated to the parent company, which include amortization of convertible notes
of $1,977,401 and professional service fees of $2,787,874. For the year ended
December 31, 2020, operating expenses of $4,365,751 were allocated to the parent
company, which include amortization of convertible notes of $2,091,927 and
professional service fees of $903,573.

Operating expenses of the wholesale medical devices segment for the years ended
December 31, 2021 and 2020 were $633,241 and $88,932,respectively,with the
increase in 2021 attributable to the expansion of this business. Operating
expenses of the wholesale pharmaceuticals segment for the years ended December
31, 2021 and 2020 were $3,387,536 and $842,421, respectively. Operating expenses
of the retail pharmacies segment for the years ended December 31, 2021 and 2020
were $ 681,140 and $376,415, respectively.

Other income (expenses)

For the year ended December 31, 2021, we reported other expense of $26,795,423
relating to the impairment of goodwill compared to other income of $460,552 for
the year ended December 31, 2020.

For the year ended December 31, 2021, the Guanzan Group incurred an impairment
charge of $ 1,923,071. Such impairment charge was recorded after the completion
of an earn-out period. Guoyitang incurred an impairment charge of $7,154,393,
primarily because the 2021 performance targets set forth in Guoyitang's
acquisition agreement were not met as a result of the pandemic and lockdowns.
Zhongshan hospital incurred an impairment charge of $9,134,277, primarily
because its 2021 performance targets were not met as a result of the pandemic
and lockdowns. The Qiangsheng, Eurasia and Minkang hospitals incurred an
impairment charge of $7,916,431, primarily because their 2021 performance
targets were not met as a result of the pandemic and lockdowns.

In 2021, the exchange rate of Chinese RMB to US dollars increased from $1 =
¥6.4515 to $1 = ¥ 6.3757. Since substantially all of our assets and revenues are
denominated in RMB, we reported exchange gains of $24,967 for the year ended
December 31, 2021, taking into consideration of such exchange rate change and
exchange gains/losses related to non-currency assets and liabilities, compared
to exchange gains of $547,114 for the year ended December 31, 2020.

Net loss from continuing operations

Net loss from continuing operations was $34,921,745 for the year ended December
31, 2021 compared to a net loss of $3,786,035 for the year ended December 31,
2020, an increase $31,135,710, which was primarily due to the impairment of
goodwill and a result of the significant increase in operating expenses of our
consolidated company.

Operating profit/(loss) from discontinued operations

As a result of the plans to dispose of the NF Group and Boqi Zhengji and the
actions taken to fulfill the plans, the businesses of the NF Group and Boqi
Zhengji are recorded as discontinued operations in accordance with ASC
205-20 Presentation of Financial Statements - Discontinued Operation and the
results of the operations of the NF Group and Boqi Zhengji are presented under
the line item net loss from discontinued operations for the years ended December
31, 2020.

Income from the discontinued operation was $Nil for the year ended December 31,
2021 compared to income of $1,908,110 for the year ended December 31, 2020,
which was primarily due to the investment income recognized from the disposal of
NF Group and Boqi Zhengji for the year ended December 31, 2020.


                                       62




Net Loss

We recorded a net loss of $34,921,745 for the year ended December 31, 2021
compared to a net loss of $1,877,925 for the year ended December 31, 2020an augmentation of $33,043,820.

CASH AND CAPITAL RESOURCES

Liquidity is the ability of a company to generate funds to support its current
and future operations, satisfy its obligations and otherwise operate on an
ongoing basis. As of December 31, 2021, we had cash of $4,797,849 and negative
working capital of $932,493 as compared to cash of $135,309 and working capital
of $9,619,274 on December 31, 2020.

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

On February 1, 2020, we entered into a stock purchase agreement to acquire
Guanzan. Pursuant to the agreement, we agreed to purchase all the issued and
outstanding equity interests in Guanzan and its subsidiary, Shude, for RMB
100,000,000 (approximately $14,285,714) to be paid by the issuance of 190,000
shares of Common Stock and the cash payment of RMB 80,000,000 (approximately
$11,428,571.) On March 18, 2020, we closed the Guanzan acquisition by delivering
190,000 shares of Common Stock. In addition, we assumed bank indebtedness of
$1,135,884 in connection with the acquisition.

On June 23, 2020we have completed the layout of the NF Groupdate we received $10 million of the buyer.

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

On December 14, 2020, we entered into a stock purchase agreement (the "Cogmer
SPA") to acquire Chongqing Cogmer Biology Technology Co., Ltd. ("Cogmer"), a
distributor of medical devices including in vitro diagnostic devices, focused on
sales to hospitals and sub-distributors in the southwest region of the PRC.
Pursuant to the Cogmer SPA, the Company agreed to purchase all the issued and
outstanding equity interests in Cogmer for RMB 116,000,000 (approximately
$17,737,000), to be paid by the issuance of 400,000 shares of our common stock
and the payment of RMB 76,000,000 in cash. In December, 2020, we paid a deposit
of $3,065,181 to the shareholders of Cogmer. On March 15, 2021, we terminated
the Cogmer SPA upon mutual agreement with the Cogmer shareholders without
incurring any penalties as a result of the termination. We recovered the deposit
of $3,065,181 from the shareholders of Cogmer on November 29, 2021.

On May 18, 2020, we entered into a securities purchase agreement (the "May SPA")
with two institutional investors (the "Institutional Investors") to sell
convertible notes having a face amount of $6,550,000 at an aggregate original
issue discount of 19.85% (the "2020 Notes") and ranking senior to all
outstanding and future indebtedness of the Company. The 2020 Notes do not bear
interest except upon the occurrence of an event of default. Each Institutional
Investor also received a warrant (the "Institutional Investor 2020 Warrant") to
purchase 325,000 shares of Common Stock at an initial exercise price of $14.225
per share (post-Split price (as defined below) and subject to the Event Market
Price Adjustment). The placement agent for the private placement received a
warrant (the "Placement Agent 2020 Warrant", together with the Institutional
Investor 2020 Warrant, the "2020 Warrants") to purchase up to 10% of the
aggregate number of shares of Common Stock at an initial exercise price of
$14.225 per share (post-Split price and subject to the Event Market Price
Adjustment), subject to increase based on the number of shares Common Stock
issued pursuant to the 2020 Notes.

Pursuant to the May SPA, two 2020 Notes each in the face amount of $2,225,000
were issued to the Institutional Investors in consideration of the payment of
$1,750,000 in cash for each 2020 Note.

The May SPA, the 2020 Notes and the warrants provide that each and every
reference to share prices, shares of Common Stock and any other numbers therein
that relate to the Common Stock will be automatically adjusted for any stock
splits, stock dividends, stock combinations, recapitalizations or other similar
transactions that occur with respect to the Common Stock (each, a "Stock
Combination Event", and such date thereof, the "Stock Combination Event Date")
thereafter. The May SPA, the 2020 Notes and the 2020 Warrants further provide if
after a Stock Combination Event, the Event Market Price is less than the
conversion price (in the case of the Convertible Notes) or the exercise price
(in the case of the warrants) then in effect (after giving effect to the above
adjustments), then on the sixteenth (16th) trading day immediately following
such Stock Combination Event Date, the conversion price or exercise then in
effect on such sixteenth (16th) trading day (after giving effect to the above
adjustments) will be reduced (but in no event increased) to the Event Market
Price. "Event Market Price" means, with respect to any Stock Combination Event
Date, the quotient determined by dividing (x) the sum of the dollar
volume-weighted average price of the Common Stock for each of the five (5)
trading days with the lowest dollar volume-weighted average price of the Common
Stock during the fifteen (15) consecutive trading day period ending and
including the trading day immediately preceding the sixteenth (16th) trading day
after such Stock Combination Event Date, divided by (y) five (5). The price
adjustment described in this paragraph is hereinafter referred to as the "Event
Market Price Adjustment."


                                       63




The 2020 Notes, which matured on the eighteen-month anniversary of the issuance
date, are payable in installments and are convertible at the election of the
investors at the conversion price of $12.95 per share (post-Split Price and
subject to the Event Market Price Adjustment), subject to adjustment in the
event of default. Each investor also received a warrant to purchase 130,000
shares of Common Stock at an initial exercise price of $14.23 per share
(post-Split Price and subject to the Event Market Price Adjustment). The
placement agent for the private placement received a warrant to purchase up to
34,369 shares of Common Stock at an initial exercise price of $14.23 per share
(post-Split Price and subject to the Event Market Price Adjustment), subject to
increase based on the number of shares of Common Stock issued pursuant to the
2020 Notes. Pursuant to the May SPA, additional convertible notes in an
aggregate original face amount not to exceed $2,100,000 (the "Additional Notes")
could also be issued to the Institutional Investors under certain circumstances.

On February 24, 2021, we entered into an amendment to the May SPA with the
Institutional Investors to increase the amount of the Additional Notes by
$3,300,000 to $5,400,000. On February 26, 2021, Additional Notes in an aggregate
original principal amount of $5,400,000 were issued to the Institutional
Investors, together with the issuance of warrants to acquire an aggregate of
152,000 shares of Common Stock at an initial exercise price of $14.23 per share
(post-Split Price and subject to the Event Market Price Adjustment). The
placement agent for the private placement received a warrant to purchase up to
34,749 shares of our Common Stock at an initial exercise price of $14.23 per
share post-Split Price and (subject to the Event Market Price Adjustment),
subject to increase based on the number of shares of Common Stock issued
pursuant to the Additional Notes.

On November 18, 2021, we entered into a securities purchase agreement (the
"November SPA") with the same two Institutional Investors to sell them a series
of senior convertible notes (the "2021 Notes") with an original issue discount
of 20% and ranking senior to all outstanding and future indebtedness of the
Company in a private placement. Each Institutional Investor paid $3,250,000 in
cash for a 2021 Note in the face amount of $3,900,000. The November SPA also
provided for the issuance of additional 2021 Notes in an aggregate original
principal amount not to exceed $3,900,000 under certain circumstances. The
November SPA also contains provisions about the Market Event Price. The 2021
Notes, which were issued on November 22, 2021, mature on the eighteen-month
anniversary of the issuance date, are payable by the Company in installments and
are convertible at the election of the Institutional Investors at the conversion
price of $3.25 (post-Split Price and subject to the Event Market Price
Adjustment), which is subject to adjustment in the event of default. Each
Institutional Investor also received a warrant (the "Institutional Investor 2021
Warrant") to purchase 180,000 shares of Common Stock at an initial exercise
price of $3.55 per share (subject to the Event Market Price Adjustment). The
placement agent for the private placement received a warrant (the "Placement
Agent 2021 Warrant", together with the Institutional Investor 2021 Warrant, the
"2021 Warrants") to purchase up to 8% of the aggregate number of shares of
Common Stock at an initial exercise price of $3.55 per share (post-Split Price
and subject to the Event Market Price Adjustment), subject to increase based on
the number of shares Common Stock issued pursuant to the 2021 Notes.

The Company implemented a reverse stock split (the "Split") on February 2, 2022
at the ratio of 5 to 1. The 2020 Notes were fully converted before the Split,
and therefore no price adjustment was actually implemented at the conversion,
although the price information provided above about the 2020 Notes was
post-split price. The conversion price of the 2021 Notes and the exercise price
of the 2020 Warrants and the 2021 Warrants will be adjusted pursuant to the
Event Market Price formula upon conversion or exercise. There has been no
conversion of the 2021 Notes or exercise of the 2020 Warrants or the 2021
Warrants as of the date of this report.


Our operating subsidiaries in the PRC have individually incurred debt in the course of their activities.


Short-term loans



Zhongshan borrowed $223,500 from Chaohu Yangzi Rural Commercial Bank on July 27,
2021. The loan is due on July 27, 2022 with an interest rate of 5.80%. Shude
borrowed $119,200 from China Minsheng Banking Corp. Ltd. on March 17, 2022,
which is due on March 17, 2023, with an interest rate of 6.2%. Zhuoda borrowed
$89,400 from the Industrial and Commercial Bank of China on March 15, 2022,
which is due on September 11, 2022, with an interest rate of 3.7%. Zhuoda
borrowed $149,000 from the Agricultural Bank of China on November 30, 2021,
which is due on November 30, 2022, with an interest rate of 3.85%. Zhuoda
borrowed $298,000 from the Construction Bank of China on July 8, 2021 for one
year, with an interest rate of 3.70%. Qianmei borrowed $47,441 from China
Construction Bank on November 23, 2021, which is due on November 2, 2022, with
an interest rate of 3.85%.. Guanzan borrowed $730,102 from Postal Savings Bank
of China on November 29, 2021, which is due on November 28, 2022, with an
interest rate of 5.4%.



long-term loans



Guanzan borrowed $76,317 from We Bank on December 26, 2020, for a term of two
years, with an interest rate of 13.68%. Guanzan borrowed $81,941 from We Bank on
July 24,2021, for a term of two years, with an interest rate of 13.68Guanzan
borrowed $55,343 from Huaneng Guicheng Trust Co., LTD on October 7, 2021, which
is due on September 26,2023, with an interest rate of 12.96%. Guanzan borrowed
$87,143 from Chongwing Nan'an Zhongyin Fuden Village Bank Co. Ltd. on February
25, 2021, which is due on February 24, 2024, with an interest rate of 8.00%.
Shude borrowed $37,250 and $7,450 from We Bank on December 10, 2020, which are
due on December 10, 2022, with an interest rate of 10.80%. Shude borrowed $2,483
from We Bank on December 10, 2020, which is due on December 2, 2022, with an
interest rate of 8.64%. Shude borrowed $24,958 from We Bank on January 5, 2021,
which is due on January 2, 2023, with an interest rate of 12.24%. Shude borrowed
$30,893 on December 3, 2020 from Standard Chartered Bank, for a term of two
years, with an interest rate of 12.35%. Zhuoda borrowed $142,792 from Minsheng
Bank on May 10, 2022, which is due on May 9, 2024, for a term of two years, with
an interest rate of 14.58%.



                                       64



From December 31, 2021the total short and long-term debt of our operating subsidiaries in the PRC was $1,799,394 and $538,006respectively.

On February 1, 2022, the Company entered into an Amendment and Settlement
Agreement to amend the Stock Purchase Agreement relating to the acquisition of
the Zhongshan hospital. The amendment reduced post-closing performance targets
and payments and settled certain payments as a result of such amendment.
Pursuant to the amendment, the purchase price was retroactively reduced by 50%
from RMB 120,000,000 (currently approximately $18,864,957) to RMB 60,000,000
(currently approximately $9,432,479), the closing cash payment was retroactively
reduced from RMB 40,000,000 to nil and the deferred closing stock payment was
retroactively reduced from 400,000 shares of our Common Stock to 200,000 shares
of Common Stock. The 2021 revenue target was also reduced by 50% from RMB
30,000,000 to RMB 15,000,000, the 2021 profit target was reduced from RMB
5,000,000 to RMB 2,500,000, the 2022 revenue target was reduced from RMB
33,000,000 to RMB 16,500,000 and the 2022 profit target was reduced from RMB
5,500,000 to RMB 2,750,000.As a result of the amendments, the parties agreed
that immediately after the signing of the amendment, the seller of Zhongshan
hospital will execute and deliver all documents as requested by us in order to
cause the return of 200,000 shares of our Common Stock and that prior to
December 31, 2022, the seller will return RMB 40,000,000 to us in cash.

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

                                                 For the years ended
                                                    December 31,
                                                2021             2020

Net cash used in operating activities $(1,275,725) ($3,517,733)
Net cash used by investing activities (696,517 ) (724,465 ) Net cash provided by financing activities 6,140,539 3,989,066 Effect of exchange rate on cash

                     494,243          386,840
Net cash inflow                             $  4,662,540     $    133,708



Operating Activities

We used $1,275,725 in our operations during the year ended December 2021, as
compared to $3,517,733 used in our operations in the year ended December 31,
2020, which included cash used in the discontinued operations of $843,382.

The decrease in the amount of cash used in operating activities was primarily
attributable to the change in prepayments and other receivables and operating
lease-right of use assets. During the year ended December 31, 2021, adjustments
for non-cash items primarily included the gains recorded on the amortization of
convertible notes of $554 thousand.

Investing activities

Cash used in investing activities was $696,517 for the year ended December 31,
2021 compared to $724,465 used in investing activities for the year ended
December 31, 2020. Cash used in investing activities for the year ended December
31, 2021 was due to the payment for the acquisition of Qiangsheng, Eurasia and
Mingkang Hospitals, purchase of property, plant and equipment and the return of
the funds paid in the year of 2020 as a deposit for the purchase of Cogmer,
which acquisition was not completed and was cancelled in 2021.

Fundraising activities

Cash from our financing activities was $6,140,539 for the year ended
December 31, 2021 compared to $3,989,066 for the year ended December 31, 2020. During the year ended December 31, 2021we raised $6.5 million through the issuance of convertible promissory notes and $1.05 million loans.

Potential contractual obligations

From December 31, 2021we had a $4.8 million of contractual obligation, which is the maximum cash amount payable for Zhuoda acquisition, which is subject to post-closing adjustments based on their operation in 2022 and 2023.

                                       65




Inflation and Seasonality

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

OFF-BALANCE SHEET ARRANGEMENTS

We have no significant off-balance sheet arrangements.

IMPACT OF RECENTLY ISSUED NEW ACCOUNTING STANDARDS

We do not expect the adoption of recently issued accounting pronouncements to
have a significant impact on our results of operations, financial position or
cash flow.

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