The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those financial statements appearing elsewhere in this Report.





Certain statements in this Report constitute forward-looking statements. These
forward-looking statements include statements, which involve risks and
uncertainties, regarding, among other things, (a) our projected sales,
profitability, and cash flows, (b) our growth strategy, (c) anticipated trends
in our industry, (d) our future financing plans, and (e) our anticipated needs
for, and use of, working capital. They are generally identifiable by use of the
words "may," "will," "should," "anticipate," "estimate," "plan," "potential,"
"project," "continuing," "ongoing," "expects," "management believes," "we
believe," "we intend," or the negative of these words or other variations on
these words or comparable terminology. In light of these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained in this filing will in fact occur. You should not place undue reliance
on these forward-looking statements.



The forward-looking statements speak only as of the date on which they are made,
and, except to the extent required by federal securities laws, we undertake no
obligation to update any forward-looking statements to reflect events or
circumstances after the date on which the statements are made or to reflect the
occurrence of unanticipated events.

As used herein the terms "we", "us", "our," "BIMI" and the "Company" mean, BIMI International Medical, Inc., a Delaware corporation and its subsidiaries.





OVERVIEW



We are Delaware holding company with operations conducted by our subsidiaries in
the People's Republic of China ("PRC" or "China") and the Hong Kong Special
Administrative Region of the PRC. Due to our operations in China, our business,
results of operations, financial condition and prospects may be influenced to a
significant degree by economic, political, legal and social conditions in the
PRC or changes in government relations between China and the United States or
other governments. There is significant uncertainty about the future
relationship between the United States and China with respect to trade policies,
treaties, government regulations and tariffs. China's economy differs from the
economies of other countries in many respects, including with respect to the
level of development, growth rate, amount of government involvement, control of
foreign exchange and allocation of resources. While China's economy has
experienced significant growth over the past four decades, growth has been
uneven across different regions and among various economic sectors. The Chinese
government has implemented various measures to encourage economic development
and guide the allocation of resources. Some of these measures may benefit the
overall Chinese economy, but may have a negative effect on us. In addition, in
the past the Chinese government implemented certain measures, including interest
rate increases, to manage the pace of economic growth and prevent the economy
from overheating. These measures may cause decreased economic activity in China,
which may adversely affect our business and results of operations.



Additionally, the Chinese government has published new policies that
significantly affect certain industries such as the education and internet
industries, and we cannot rule out the possibility that it will in the future
release regulations or policies regarding our industry that could require us to
obtain additional permission from Chinese authorities to continue to operate our
business in China, which may adversely affect our business, financial condition
and results of operations. Furthermore, statements made by the Chinese
government have indicated an intent to increase the government's oversight and
control over offerings of companies with significant operations in China that
are to be conducted in foreign markets.



                                       34





In light of such developments, the SEC has imposed enhanced disclosure
requirements on China-based companies seeking to register securities with the
SEC. Any future PRC, U.S. or other rules and regulations that place restrictions
on capital raising or other activities by companies with extensive operations in
China could adversely affect our business and results of operations. Any such
action, once taken by the Chinese government, could significantly limit or
completely hinder our ability to offer or continue to offer our securities to
investors, and could cause the value of our Common Stock to significantly
decline or become worthless. If the business environment in China deteriorates
from the perspective of domestic or international investment, or if relations
between China and the United States or other governments deteriorate, our
business in China and United States may also be adversely affected.



The PRC government's significant authority in regulating our operations and its
oversight could significantly limit or completely hinder our ability to conduct
our business. Implementation of industry-wide regulations, including data
security or anti-monopoly related regulations, may cause the value of our
securities to significantly decline or be of little or no value.



History




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 June 30, 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 in
the PRC. This was the first step of our shift of focus from the energy sector to
the healthcare business. Boqi Zhengji, however, suffered significant setbacks
during 2020. The COVID-19 pandemic caused the pharmacy stores to record almost
no sales for several months due to the national shutdown order and other
government orders specifically targeting OTC drugs. To avoid exposing our other
business to further risks and potential joint liabilities, we decided to divest
the pharmacy chain. On December 11, 2020, we entered into an agreement to sell
Boqi Zhengji for $1,700,000 in cash. On December 18, 2020, we received the full
consideration from the buyer and the control of the Boqi Zhengji business was
transferred. Due to the Chinese government's alternative working schedule and
other delays caused by COVID-19, the government record reflecting the transfer
of ownership was not updated until February 2, 2021.



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 were reclassified as assets and liabilities of a
discontinued operation in the statement of position as of December 31, 2020, and
2019 and the results of the operation are presented under the line-item net loss
from discontinued operations for the years ended December 31, 2020 and 2019. All
of the assets and liabilities of 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 year ended December 31,

2020.



                                       35





On March 18, 2020, we completed the acquisition of Chongqing Guanzan Technology
Co., Ltd. ("Guanzan"), a distributor of medical devices. The rationale for the
acquisition was for us to further expand our healthcare operation by acquiring a
medical devices and pharmaceuticals distribution business. We believed that
Guanzan has strong sales capabilities and procurement resources in the local
area of Chongqing, the largest city in Southwest region of the PRC. The
acquisition was 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 Chongqing Guoyitang Hospital ("Guoyitang"), a
private general hospital in Chongqing with 50 hospital beds and 98 employees.
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 Chaohu Zhongshan Minimally Invasive Hospital
("Zhongshan"), a private hospital in the southeast region of China with 160
hospital beds (of which 110 beds were then in use) and 95 employees. 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 efforts to establish a nationwide hospital chain specializing in
obstetrics and gynecology.



On May 6, 2021, we acquired three private hospitals, Wuzhou Qiangsheng Hospital
Co.,Ltd.("Qiangsheng") in the southeast region of the PRC, Suzhou Eurasia
Hospital Co.,Ltd. ("Eurasia") in the central region of the PRC and Yunan Yuxi
Minkang Hospital Co.,Ltd.("Minkang") in the southwest region of the PRC.
Qiangsheng, Eurasia and Minkang were owned by the same owners. Qiangsheng has 20
hospital beds and is a general hospital locally known for its OB/GYN and Chinese
traditional medicine specialties. Eurasia has 30 hospital beds. Minkang has 120
hospital beds and is a general hospital locally known for its OB/GYN and Chinese
traditional medicine specialties.



On October 8, 2021, we acquired Chongqing Zhuoda Pharmaceutical Co., Ltd.
("Zhuoda"), a company engaged in the distribution of medical devices and
pharmaceuticals, based in Chongqing, the largest city in Southwest region of the
PRC. Zhuoda primarily distributes pharmaceuticals. The majority of its customers
are private pharmaceutical manufacturers and pharmaceutical wholesale companies
in the PRC.




On December 20, 2021, we entered into a stock purchase agreement to acquire
Bengbu Mali OB-GYN Hospital Co., Ltd. ("Mali Hospital"), a private OB-GYN
specialty hospital with 199 beds located in Bengbu city in the southeast region
of the People's Republic of China. Mali Hospital has 148 employees, including 26
doctors, 52 nurses, 11 other medical staff members and 59 nonmedical staff
members. The acquisition of Mali Hospital has not closed as of the date of this
report due to delays caused by COVID-19 and other logistical issues.



BUSINESS SEGMENTS



The Company currently operates in four reportable segments: retail pharmacy,
wholesale pharmaceuticals, wholesale medical devices and medical services. The
wholesale pharmaceuticals segment includes supplying prescription and OTC
medicines, TCM, healthcare supplies and sundry items to clinics, third party
pharmacies, hospitals, and other drug wholesalers. There were no inter-segment
revenues between our retail pharmacy and wholesale pharmaceuticals segments. The
wholesale medical device segment distributes medical devices, including medical
consumables to private clinics, hospitals, third party pharmacies and other
medical device dealers. Medical services include private comprehensive hospitals
operating in China. The retail pharmacy segment sells prescription and OTC
medicines, TCM, healthcare supplies and sundry items to retail customers through
its directly-owned pharmacies and authorized retail stores.



The Company's reportable business segments are strategic business units that
offer different products and services. Each segment is managed independently
because they require different operations and markets to distinct classes of
customers. The segments' accounting policies are the same as those described in
the summary of significant accounting policies. The Company's chief operating
decision maker ("CODM"), who is the CEO of the Company, evaluates performance of
each segment based on profit or loss from continuing operations net of income
tax.



                                       36





GOING CONCERN




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



As reflected in the accompanying unaudited condensed consolidated financial
statements, the Company incurred net losses of $10,533,868 and $5,276,241 for
the nine months ended September 30, 2022, and 2021, respectively. As of
September 30, 2022, the Company had an accumulated deficit of $58.4 million. In
addition, the Company continues to generate operating losses and has limited
cash flow from its continuing operations. Management believes these factors
raise substantial doubt about the Company's ability to continue as a going
concern for the next twelve months.



The continuation of the Company as a going concern through the next twelve
months is dependent upon (1) the continued financial support from its
stockholders or external financing, and (2) further implement management's
business plan to extend its operations and generate sufficient revenues and cash
flow to meet its obligations. While the Company believes in the viability of its
strategy to increase sales volume and in its ability to raise additional funds,
there can be no assurance that the Company will succeed in either respect.



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



COVID-19




During late 2019, a virus now known as the novel coronavirus or "COVID-19"
appeared in Wuhan, PRC. By March 11, 2020, the World Health Organization ("WHO")
labeled COVID-19 as a pandemic and many countries around the world began closing
borders and making efforts to either shelter-in-place or quarantine its
population. During the first quarter of 2020, the PRC placed a mandatory
quarantine on certain areas, specifically in Wuhan located in Hubei Province,
which lasted for more than two months.



Our company and all of its operations are located in the PRC. Since the pandemic
broke out, our operations have been materially impacted. At the beginning of
February 2020, the PRC government issued a quarantine order, which lasted for
more than two months in many parts of the country, where everyone had to stay at
home. During February and March, all of our administrative functions had to be
performed remotely. Not until the beginning of April did we start to have a
small skeleton crew working in our office and were able to perform those
functions that could not be handled remotely.



                                       37





We have incurred additional costs to ensure we meet the needs of our customers,
including providing additional cleaning materials for our stores and other
facilities. COVID-19 has also caused supply chain disruption which has resulted
in higher supply chain costs to replenish inventory in our stores and
distribution centers. Furthermore, we have experienced restricted stock
availability in a number of key categories which negatively impacted us. Certain
popular and high profit margin products could not be sold due to governmental
restrictive orders, which also resulted in the expiration of a large quantify of
our medicines that are otherwise in high demand in the winter season. The
customer traffic in our retail pharmacy stores in Dalian dropped greatly due to
the pandemic. Because of the lockdown order that lasted for more than two
months, we suffered reduced sales and an operating loss in the first three
quarters in 2020. Although some of the businesses in China have resumed their
daily activities while the pandemic is under control, there have been relapses
in certain regions of the country which caused temporary lockdowns. If similar
lockdown orders or sales restrictions are implemented by the government, they
may have greater impact on our business.



We are closely monitoring the impact of the COVID-19 pandemic on all aspects of
our business, including how it will impact our customers, employees, suppliers,
vendors, business partners and distribution channels. The COVID-19 pandemic has
created significant volatility, uncertainty and economic disruption, which will
adversely affect our business operations and may materially and adversely affect
our results of operations, cash flows and financial position. In addition to
volatility in consumer demand and buying habits, we may restrict the operations
of our stores or distribution facilities if we deem it necessary or if
recommended or mandated by governmental authorities which would have a further
adverse impact on us. For the nine months ended September 30, 2022, our revenue
decreased by approximately $8 million compared to the same period in 2021, which
decrease was attributable in part to the impact of COVID-19 as the PRC
government's strict control measures have continued in 2022 based on each city's
situation.



The extent to which the COVID-19 pandemic impacts us will depend on numerous
evolving factors and future developments that we are not able to predict,
including: the severity of the virus; the duration of the outbreak;
governmental, business and other actions (which could include limitations on our
operations or mandates to provide products or services); the promotion of social
distancing and the adoption of shelter-in-place orders affecting foot traffic in
stores; the impacts on our supply chain; the impact of the pandemic on economic
activity; the extent and duration of the effect on consumer confidence and
spending, customer demand and buying patterns including spend on discretionary
categories; the health of and the effect on our workforce and our ability to
meet staffing needs in our stores, hospitals, wholesale operations and other
critical functions, particularly if members of our work force are quarantined as
a result of exposure; any impairment in value of our tangible or intangible
assets which could be recorded as a result of a weaker economic conditions; and
the potential effects on our internal controls including those over financial
reporting as a result of changes in working environments such as
shelter-in-place and similar orders that are applicable to our team members and
business partners, among others. In addition, if the pandemic continues to
create disruptions or turmoil in the credit or financial markets, it could
adversely affect our ability to access capital on favorable terms and continue
to meet our liquidity needs, all of which are highly uncertain and cannot be
predicted. We cannot make any assurances that COVID-19 will not reappear with
new infections and to the extent that COVID-19, or another virus appears, we may
encounter prolonged operational lockdown measures which would disrupt our
business operations.



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 the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.





                                       38

? Accounts receivable and allowance for doubtful accounts






Accounts receivable are recorded at the invoiced amount and do not bear
interest, which are due within contractual payment terms, generally 30 to 90
days from delivery. Credit is extended based on evaluation of a customer's
financial condition, the customer credit-worthiness and their payment history.
Accounts receivable outstanding longer than the contractual payment terms are
considered past due. Past due balances over 90 days and over a specified amount
are reviewed individually for collectability. At the end of each period, the
Company specifically evaluates individual customer's financial condition, credit
history, and the current economic conditions to monitor the progress of the
collection of accounts receivables. For the receivables that are past due or not
being paid according to payment terms, the appropriate actions are taken to
exhaust all means of collection, including seeking legal resolution in a court
of law. Account balances are charged off against the allowance after all means
of collection have been exhausted and the potential for recovery is considered
remote. The Company does not have any off-balance-sheet credit exposure related
to its customers. As of September 30, 2022, and December 31, 2021, the allowance
for doubtful accounts was $288,767 and $322,145, respectively.



 ? Advances to suppliers





Advances to suppliers consist of prepayments to the Company's vendors, such as
pharmaceutical manufacturers and medicine suppliers. The Company typically
prepays for the purchase of our merchandise, especially for those salable,
scarce, personalized medicine or medical devices. The Company typically receive
products from vendors within three to nine months after making prepayments. The
Company continuously monitor delivery from, and payments to, the vendors while
maintaining a provision for estimated credit losses based upon historical
experience and any specific supplier issues, such as discontinuing of inventory
supply, that have been identified. If the Company has difficulty receiving
products from a vendor, the Company will cease purchasing products from such
vendor, request return of our prepayment promptly, and if necessary, take legal
action. The Company has not taken such type of legal action during the reporting
periods. If none of these steps are successful, management will then determine
whether the prepayments should be reserved or written off. As of September 30,
2022 and December 31, 2021, the allowance for doubtful accounts were $Nil.




 ? Inventories




Inventories are stated at the lower of cost or market value. Cost is determined
using the weighted average method, and market value is the middle (the second
highest) value among an inventory item's replacement cost, market celling and
market floor. The Company carries out physical inventory counts on a monthly
basis at each store and warehouse location. The Company reviews historical sales
activity quarterly to determine excess, slow-moving items and potentially
obsolete items. The Company provides inventory reserve based on the excess
quantities on hand equal to the difference, if any, between the cost of the
inventory and its estimated market value, or obsolescence of inventories
determined principally by customer demand. As of September 30, 2022, and
December 31, 2021, the Company recorded an allowance for obsolete inventories,
which mainly consists of expired medicine, of $92,655 and $103,178,
respectively.



                                       39

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




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



? Intangible assets




Intangible assets consist primarily of management system software. Intangible
assets are stated at cost less accumulated amortization and impairment, if any.
Intangible assets are amortized using the straight-line method with the
following estimated useful lives:



             Expected
           useful lives
Software     10 years




? Goodwill




Goodwill represents the excess of the purchase price over the amounts assigned
to the fair value of the assets acquired and the liabilities assumed of an
acquired business. In accordance with ASC 350, Goodwill, and Other Intangible
Assets, recorded goodwill amounts are not amortized, but rather are tested for
impairment annually or more frequently if there are indicators of impairment
present.



Goodwill is tested for impairment at the reporting unit level on at least an
annual basis or when an event occurs, or circumstances change that would
more-likely-than-not reduce the fair value of a reporting unit below its
carrying value. These events or circumstances include a significant change in
stock prices, business environment, legal factors, financial performances,
competition, or events affecting the reporting unit. Application of the goodwill
impairment test requires judgment, including the identification of reporting
units, assignment of assets and liabilities to reporting units, assignment of
goodwill to reporting units, and determination of the fair value of each
reporting unit. The estimation of fair value of a reporting unit using a
discounted cash flow methodology also requires significant judgments, including
estimation of future cash flows, which is dependent on internal forecasts,
estimation of the long-term rate of growth for the Company's business,
estimation of the useful life over which cash flows will occur, and
determination of the Company's weighted average cost of capital. The estimates
used to calculate the fair value of a reporting unit change from year to year
based on operating results and market conditions. Changes in these estimates and
assumptions could materially affect the determination of fair value and goodwill
impairment for the reporting unit.



The Company identified reporting units at the lowest level within the entity at
which goodwill is monitored for internal management purposes. Management
evaluated the recoverability of goodwill by performing a qualitative assessment
before using a two-step impairment test approach at the reporting unit level. If
the Company reorganizes its reporting structure in a manner that will changes
the composition of one or more of its reporting units, goodwill is reassigned
based on the relative fair value of each of the affected reporting units.



? Revenue recognition




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

the
following steps:

? Identify the contract with a customer;

? Identify the performance obligations in the contract;

? Determine the transaction price;

? Allocate the transaction price to the performance obligations in the contract;

and

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






                                       40





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

The primary sources of the Group's revenues are as follows:





 (1) Pharmacy retail sales




The physical pharmacies sell prescription drugs, over-the-counter ("OTC") drugs,
nutritional supplements, health foods, sundry products and medical devices.
Revenue from sales of prescription medicine at drugstores is recognized when the
prescription is filled, and the customer picks up and pays for the prescription.
Revenue from sales of other merchandise at drugstores is recognized at the point
of sale, which is when a customer pays for and receives the merchandise. Usually
the majority merchandise, such as prescription and OTC drugs, are not refundable
after the customers leave the counter. Returns of other products, such as sundry
products, are minimal. Sales of drugs reimbursed by the local government medical
insurance agency and receivables from the agency are recognized when a customer
pays for the drugs at a store. The Company based on historical experience, a
reserve for potential losses from denial of reimbursement on certain unqualified
drugs is made to the receivables from the government agency.



 (2) Wholesale medical device




The Group sales of wholesale medical device mainly through Guanzan, The medical
device business primarily involves purchasing wholesale medical device from the
suppliers and then selling to customers. Upon obtaining purchase orders, the
Company instructs warehouse agent to transfer ownership of products to
customers. The transaction is normally completed within a short period of time,
ranging from a few days to a month. The Company recognizes revenue from product
sales when obligations under the terms of a contract with the customer are
satisfied; generally, this occurs with the transfer of control of the goods

to
customers.

(3) Wholesale pharmaceuticals


The Group sales of wholesale pharmaceuticals mainly through Shude, Pusheng and
Zhuoda. The wholesale pharmaceuticals business primarily involves purchasing
wholesale pharmaceuticals from the suppliers and then selling to customers. Upon
obtaining purchase orders, the Company instructs warehouse agent to transfer
ownership of products to customers. The transaction is normally completed within
a short period of time, ranging from a few days to a month. The Company
recognizes revenue from product sales when obligations under the terms of a
contract with the customer are satisfied; generally, this occurs with the
transfer of control of the goods to customers.



 (4) Medical services





The Company provides medical services through Guoyitang hospital, Zhongshan
hospital, Qiangsheng hospital, Eurasia hospital and Mingkang hospital. Revenue
from ancillary medical services is recognized when the related services have
been rendered and includes outpatient and inpatient services.



For outpatient services, the patient normally receives outpatient treatment
which contains various treatment components. Outpatient services contain more
than one performance obligations, including (i) provision of consultation
services and (ii) sale of pharmaceutical products. The Group allocates the
transaction price to each performance obligation on relative stand-alone selling
price basis. Both (i) provision of consultation services and (ii) sale of
pharmaceutical products for which the control of services or pharmaceutical
products is transferred at a point in time, revenue is recognized when the
customer obtains the control of the completed services or pharmaceutical
products, and the Group has satisfied its performance obligations with present
right to payment and the collection of the consideration is probable.



For inpatient services, the customers normally receive inpatient treatment which
contains various treatment components. Inpatient services contain more than one
performance obligations, including (i) sale of pharmaceutical products and (ii)
provision of inpatient healthcare services. The Group allocates the transaction
price to each performance obligation on a relative stand-alone selling price
basis.



For revenue from (i) sale of pharmaceutical products for which control of
services or pharmaceutical products is transferred at a point in time, revenue
is recognized when the customer obtains the control of the completed services or
pharmaceutical products, and the Group has satisfied its performance obligations
with present right to payment and the collection of the consideration is
probable.

For revenue from (ii) provision of inpatient healthcare services, the corresponding revenue is recognized over the service period when customers simultaneously receive the services and consumes the benefits provided by the Group's performance as the Group performs.

? 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.



                                       41





? Derivative instruments




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



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

? Foreign currencies translation






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



In general, for consolidation purposes, assets and liabilities of the Company's
subsidiaries whose functional currency is not the US$ are translated into US$,
in accordance with ASC Topic 830-30, "Translation of Financial Statement", using
the exchange rate on the balance sheet date. Revenues and expenses are
translated at average rates prevailing during the period. The gains and losses
resulting from translation of financial statements of foreign subsidiaries are
recorded as a separate component of accumulated other comprehensive income
within the statement of stockholders' equity.



? Segment reporting




ASC Topic 280, "Segment Reporting" establishes standards for reporting
information about operating segments on a basis consistent with the Company's
internal organization structure as well as information about the type of
products and services, geographical areas, business strategies and major
customers in business components. For the nine months ended September 30, 2022
the Company operated in four reportable segments: retail pharmacy, wholesale
medical devices, wholesale pharmaceuticals and medical services in the PRC.

? Recent accounting pronouncements






In June 2016, the FASB issued ASU No. 2016-13, "Measurement of Credit Losses on
Financial Instruments (Topic 326)", which significantly changes the way entities
recognize impairment of many financial assets by requiring immediate recognition
of estimated credit losses expected to occur over their remaining life, instead
of when incurred. In November 2018, the FASB issued ASU No. 2018-19,
"Codification Improvements to Topic 326, Financial Instruments-Credit Losses",
which amends Subtopic 326-20 (created by ASU No.2016-13) to explicitly state
that operating lease receivables are not in the scope of Subtopic 326-20.
Additionally, in April 2019, the FASB issued ASU No.2019-04, "Codification
Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815,
Derivatives and Hedging, and Topic 825, Financial Instruments", in May 2019, the
FASB issued ASU No. 2019-05, "Financial Instruments-Credit Losses (Topic 326):
Targeted Transition Relief", and in November 2019, the FASB issued ASU No.
2019-10, "Financial Instruments-Credit Losses (Topic 326), Derivatives and
Hedging (Topic 815), and Leases (Topic 842): Effective Dates", and ASU No.
2019-11, "Codification Improvements to Topic 326, Financial Instruments-Credit
Losses", to provide further clarifications on certain aspects of ASU No. 2016-13
and to extend the nonpublic entity effective date of ASU No. 2016-13. The
changes (as amended) are effective for the Company for annual and interim
periods in fiscal years beginning after December 15, 2022, and the Company is in
the process of evaluating the potential effect on its consolidated financial
statements.



In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other
(Topic 350): Simplifying the Test for Goodwill Impairment," which simplifies how
an entity is required to test goodwill for impairment by eliminating step two
from the goodwill impairment test. Step two of the goodwill impairment test
measures a goodwill impairment loss by comparing the implied fair value of a
reporting unit's goodwill with its carrying amount. As amended by ASU 2019-10,
annual or interim goodwill impairment tests are performed in fiscal years
beginning after December 15, 2022. We do not expect that the adoption of this
guidance will have a material impact on our financial position, results of
operations and cash flows.



In August 2020, the FASB issued ASU No. 2020-06 ("ASU 2020-06") "Debt-Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for
Convertible Instruments and Contracts in an Entity's Own Equity." ASU 2020-06
will simplify the accounting for convertible instruments by reducing the number
of accounting models for convertible debt instruments and convertible preferred
stock. For public business entities, the amendments in ASU 2020-06 are effective
for public entities which meet the definition of a smaller reporting company are
effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2023. The Company will adopt ASU 2020-06 effective
January 1, 2024. Management is currently evaluating the effect of the adoption
of ASU 2020-06 on the consolidated financial statements. The effect will largely
depend on the composition and terms of the financial instruments at the time of
adoption.



                                       42

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company's consolidated financial statements upon adoption.





2022 Developments

On January 7, 2022, we issued 600,000 shares of Common Stock as the initial consideration for the acquisition of Mali.

On January 24, 2022, we issued 1,000,000 shares of Common Stock as the salary for Mr. Tiewei Song.





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, 2022, we issued 50,000 shares of our Common Stock to a consultant as payment for legal consulting 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 (approximately
$5,618,135 ) to us in cash.



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.



 On June 9, 2022, we entered into a stock purchase agreement with the Chairman
of the Board of the Company, Mr. Fnu Oudom, whereby Mr. Oudom agreed to purchase
12,500,000 shares of Common Stock for $5 million, or $0.40 per share (the
"Chairman's Shares"), subject to the approval of the stockholders of the
Company. The purchase price per share reflects a 9% discount to the five-day
average closing price of the Common Stock on NASDAQ before signing the SPA (the
closing price of the Common Stock on Nasdaq on such date was $0.52). On June 9,
2022, Mr. Oudom provided the Company with $5 million as interim financing in
consideration for the issuance of a $5 million subordinated promissory note (the
"Chairman's Note"), bearing no interest, which will become due and payable
immediately if the sale of the Chairman's Shares is not approved by the
Company's stockholders. The Company expects to seek stockholder approval of the
sale at the upcoming annual meeting of stockholders. If approved and the
Chairman's Shares are issued, all obligations under the Chairman's Note will
have been performed and discharged in full without any payment of interest. The
Company has no obligation to file a registration statement with the SEC for the
resale of the Chairman's Shares.



On July 5, 2022, the Company entered into a stock purchase agreement to acquire
Phenix Bio Inc. ("Phenix"), a California based corporation that will distribute
healthcare products, from Mr. Fnu Oudom, Chairman of the board of directors of
the Company. Phenix is currently in the process of securing exclusive
distribution rights for nine healthcare products to be developed by a third
party that will target general recovery, cardiovascular and cerebrovascular
disease prevention, male health care, female health care, and memory enhancement
for the elderly. The products are to be sold by sub-distributors in various
territories.



The Company agreed to purchase all the issued and outstanding equity interests
in Phenix from Mr. Oudom in consideration of $1,800,000. At the closing, the
Company paid $180,000 as a down payment, that was accounted for as a security
deposit for the purchase of Phenix. The balance of the purchase price in the
amount of $1,620,000 will be paid by the Company in the form of 2,700,000 shares
of the Company's Common Stock (, the value of which the parties agreed to be
$1,620,000, or $0.60 per share, as a deferred payment', fifteen (15) days after
approval of the issuance of the shares by the stockholders of the Company. If
the stockholders' approval has not been received by December 31, 2022, the
Company will pay outstanding $1,620,000 in cash by January 15, 2023, or such
earlier or later date as the parties may agree. The per share price of the
shares of Common Stock to be issued reflects a 8% discount to the five-day
average closing price of the Common Stock on NASDAQ before the agreement was
entered into. The audit committee and the board of directors of the Company
unanimously approved the Company's entry into the SPA. The closing of the
transaction is expected to take place in the fourth quarter of 2022.



On October 19, 2022, the Company entered into a Sale and Purchase Agreement to
sell its wholly-owned subsidiary, Chongqing Zhuoda Pharmaceutical Co., Ltd., a
distributor of pharmaceuticals and biologicals located in the PRC to the three
citizens of the PRC who previously sold Zhuoda to the Company.



Pursuant to the agreement, the Company will sell 100% of the equity interests in
Zhuoda that Guanzan previously purchased for 440,000 shares of the Company's
common stock, which purchase price was subject to post-closing payments based on
performance in 2022 and 2023. The 440,000 shares will be returned to the Company
as the full consideration of the sale of Zhouda. In connection with the
execution of the agreement, the parties also agreed to terminate the original
agreement and that none of the parties will have any debt, obligation or
liability to the original sellers in connection with or resulting from the
earnout payment under the original agreement.



                                       43





RESULTS OF OPERATIONS



Comparison of the nine months ended September 30, 2022 and 2021 of consolidated
results of operations:



                                            For the Nine Months Ended
                                                  September 30,                                Comparison
                                                                                         Amount         Percentage
                                                       % of                             increase         increase
                                      2022           Revenues           2021           (decrease)       (decrease)

Revenues                          $  17,261,951            100 %    $ 25,202,485     $   (7,940,534 )           (32 )%
Cost of revenues                     12,993,304             75 %      20,616,279         (7,622,975 )           (37 )%
Gross profit                          4,268,647             25 %       4,586,206           (317,559 )            (7 )%
Operating expenses                   12,196,369             70 %       9,522,372          2,673,997              28 %
Other expenses, net                  (2,643,119 )          (15 )%       (302,142 )       (2,340,977 )           775 %
Loss before income tax              (10,570,841 )          (60 )%     (5,238,308 )       (5,332,533 )           102 %
Income tax expense                       30,216              0 %          37,933             (7,717 )           (20 )%
Net loss                            (10,601,057 )          (60 )%     (5,276,241 )       (5,324,816 )           101 %
Less: non-controlling interest           (3,948 )            0 %          36,417            (40,365 )          (111 )%

Net Loss attributable to BIMI International Medical Inc. $ (10,597,109 ) (60 )% $ (5,312,658 ) $ (5,284,451 )

            99 %




Revenues



Revenues for the nine months ended September 30, 2022 and 2021 were $17,261,951
and $25,202,485, respectively. The revenues for the nine months ended September
30, 2022 were primarily attributable to the revenues from the wholesale sales of
pharmaceuticals and medical devices and from medical services provided by
hospitals purchased during the first three quarters in 2022. Compared with the
same period in 2021, revenue decreased $7,940,534, mainly due to the $5,866,363
decrease in sales of pharmaceuticals, the $2,411,815 decline in medical services
revenues, offset in part by the $879,775 increase in medical devices revenues
and the $243,537 increase in pharmacy retail revenues.



Revenues from retail pharmacy segment for the nine months ended September 30,
2022 were $618,582, generated from four retail pharmacy stores in Chongqing.
Revenues from retail pharmacy segment for the nine months ended September 30,
2021 were $ 375,045 which were generated from five retail pharmacy stores in
Chongqing. The growth in the retail pharmacy segment in nine month ended
September 30, 2022 was from the sales of Covid-19 related pharmacy products.
With the loosened local Covid-19 restrictions, customers purchase Covid-19
related products for at home use, which resulted in the increase in sales.




                                       44





Revenues from the wholesale medical devices segment for the nine months ended
September 30, 2022 and 2021 were $3,404,533 and $ 2,524,777, respectively. The
increase is mainly due to the high demand for medical devices during the first
three quarter.



Revenues from the wholesale pharmaceuticals segment for the nine months ended
September 30, 2022 and 2021 were $8,956,141 and $14,978,955 respectively. The
main reason for the decrease in sales in the 2022 period was the change in our
customer base, as we started to develop business relationships with larger
wholesale pharmaceutical companies and terminated our business with some
customers who had a poor payment history. Covid-19 and the local lockdown policy
also had an adverse effect on our wholesale pharmaceutical business during

the
second quarter of 2022.



Revenues from the medical services segment for the nine months ended September
30, 2022 and 2021 were $4,282,695 and $6,694,510, respectively. These revenues
reflect the revenues generated by the Guoyitang and Zhongshan hospitals acquired
in February 2021 and the Minkang, Eurasia and Qiangsheng hospitals acquired in
May 2021. The decrease in revenues in the nine months ended September 30, 2022
was due to fewer patient visits during the period resulting from the continued
impact of Covid-19 and the reduced availability of doctors and nurses in our
hospitals.



Cost of revenues

Cost of revenues for the nine months ended September 30, 2022 and 2021 were $12,993,304 and $20,616,279, respectively. The decrease reflected the impact of the reduced sales of our wholesale pharmaceuticals segment and reduced operations of our medical services segment.





Cost of revenues of our retail pharmacy segment consists primarily of the cost
of the pharmaceuticals, medical devices and other products that we sell to
customers. For the nine months ended September 30, 2022 and 2021, cost of
revenues of our retail pharmacy segment were $72,834 and $295,059, respectively.
The decrease in the cost of revenues was a result of the decrease in sales of
medical devices and the receipt of significant discounts  on Covid-19 related
pharmaceuticals  in the nine months ended September 30, 2022.



Cost of revenues of our wholesale medical devices segment consists primarily of
cost of medical devices, medical consumables and costs related directly to
contracts with customers. For the nine months ended September 30, 2022 and 2021,
the cost of revenues of our wholesale medical devices segment was $2,923,017 and
$ 1,831,089. The increase is mainly attributable to the increase in sales in the
nine months ended September 30, 2022.



Cost of revenues of our wholesale pharmaceuticals segment consists primarily of
the cost of medicines and costs related directly to contracts with customers.
For the nine months ended September 30, 2022 and 2021, the cost of revenues of
our wholesale pharmaceuticals segment were $8,035,938 and $ 14,598,512,
respectively. The decrease is mainly due to the decrease in sales in the nine
months ended September 30, 2022.



Cost of revenues of our medical services consists primarily of the cost of
medicine, doctor and nurses' salaries and rental expenses. For the nine months
ended September 30, 2022 and 2021, the cost of revenues of the medical services
segment were $ 1,950,611 and $ 3,334,306, respectively. The majority of the
decrease was attributable to a decrease in doctor and nurses' salaries in the
nine months ended September 30, 2022. In addition, there was a reduction in
over-time payments and use of seasonal part time employees, which contributed to
the decrease in the overall cost of revenues in the medical services segment.



                                       45





Gross profit



For the nine months ended September 30, 2022 and 2021, we had a gross margin of
25% and 18%, respectively. For the nine months ended September 30, 2022 and
2021, the gross profit margins of our: (i) retail pharmacy segment were 88.2%
and 21.3%, respectively; (ii) wholesale medical devices segment were 14.1% and
27.5%, respectively; (iii) wholesale pharmaceuticals segment were 11.4% and
2.5%; respectively, and (iv) medical services segment were 54.5% and 50.2%,

respectively.



Operating expenses

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


Operating expenses from continuing operations were $12,196,369 for the nine
months ended September 30, 2022 as compared to $9,522,372 for the same period in
2021, an increase of $2,673,997 or 28%. The $2.7 million increase was due to the
payments to our CEO and COO in shares of our Common Stock during the nine months
ended September 30, 2022. No such stock payments were made in the same period in
2021.




Operating expenses of the retail pharmacy segment for the nine months ended
September 30, 2022 and 2021 were $373,744 and $547,159, respectively. The
decrease in operating expense was primarily attributable to a decrease in
salaries, which resulted from reduced over-time payments and use of seasonal
part time employees and the reduced number of stores in the nine months ended
September 30, 2022.



Operating expenses of the wholesale medical devices segment for the nine months
ended September 30, 2022 and 2021 were $436,227 and $469,644, respectively. The
decrease in operating expenses was primarily attributable to a decrease in
promotion expenses, as there was a higher demand for medical devices.



Operating expenses of the wholesale pharmaceuticals segment for the nine months
ended September 30, 2022 and 2021 were $1,278,165 and $750,023, respectively.
The increase in operating expense was primarily attributable to an increase in
salaries, as new business development teams were hired to develop relationships
with larger wholesale pharmaceutical companies.



Operating expenses of medical services segment for the nine months ended
September 30, 2022 and 2021 were $2,281,159 and $1,136,316, respectively. The
increase in operating expenses was attributable to the increase in advertising
and business development expense for $0.8 million- and third-party consulting
fees  of $0.2 million in the nine months ended September 30, 2022.



Other expenses



For the nine months ended September 30, 2022 and 2021, we reported other
expenses of $2,643,119 and $302,142, respectively. For the nine months ended
September 30, 2022, such expenses primarily consisted of amortization of
convertible notes of $2,270,792 and $79,595 of interest expenses relating to the
bank debt incurred by our operating subsidiaries in the PRC.



For the nine months ended September 30, 2021, we had $302,142 of other expenses,
net that included $79,595 of other expenses and $222,547 of interest expenses
from the bank debt of the Guanzan Group and the Guoyitang and Zhongshan
hospitals.



Net loss

As a result of the foregoing, our net loss increased by $5,324,816 to $10,601,057 for the nine months ended September 30, 2022 from $5,276,241 for the nine months ended September 30, 2021.

LIQUIDITY AND CAPITAL RESOURCES





At September 30, 2022, we had cash of $1,046,876 and negative working capital of
$1,515,001 as compared to cash of $4,797,849 and negative working capital of
$932,493 at December 31, 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 (each an "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 Warrants, 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 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.



                                       46





The May SPA, the 2020 Notes and the 2020 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."



The 2020 Notes, which matured on the eighteen-month anniversary of the issuance
date, were 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 (each an "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 Warrants, 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.



                                       47






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. The outstanding balance
for the convertible promissory notes as of September 30, 2022 is $6,320,075.



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. 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 (approximately
$5,627,224) to us in cash.

Our PRC operating subsidiaries have individually incurred debt in connection with their operations.





Short-term loans



Zhongshan borrowed $211,274 from Chaohu Yangzi Rural Commercial Bank on July 27,
2022. The loan is due on July 27, 2023 with an interest rate of 5.80%. Chongqing
Guanzan Technology loan $690,160 from Postal Savings Bank of China from November
29,2021 to November 28,2022 at an interest rate of 5.4%. Shude borrowed $112,679
from China Minsheng Banking Corp. Ltd. on March 17, 2022, which was due on March
17, 2023 with interest of 6.2%. Zhuoda borrowed $42,255 from the Industrial and
Commercial Bank of China on September 11, 2022, which is payable on December 30,
2022 at an interest rate of 3.7%. Zhuoda borrowed $281,698 from the Construction
Bank of China on July 8,2022, which is payable on November 30,2022 at an
interest rate of 3.70%. Qianmei borrowed $44,564 from China Construction Bank on
November 23, 2021, which is payable on November 23, 2022 at an interest rate of
3.85% rate.



                                       48





Long-term loans




For the nine months ended September 30, 2022, and 2021, interest expense on
long-term loans amounted to $59,003 and $60,953 respectively. Chongqing Guanzan
Technology borrowed $84,509 from We Bank on April 26, 2022 which is due March
26,2024 with an interest rate of 9.45%. Guanzan borrowed $36,071 from Webank on
December 26, 2020, which is due on December 26, 2022 with interest of 10.06%.
Guanzan borrowed $59,496 from Webank on July 24, 2021, which is due on July 26,
2023 with interest of 13.68%. Guanzan borrowed $41,852 from Huaneng Guicheng
Trust Co., LTD on October 7, 2021, which is due on September 26, 2023 with
interest of 12.96%. Chongqing Guanzan Technology borrowed $70,695 from Chongwing
Nan'an Zhongyin Fuden Village Bank Co. Ltd. on February 25,2021 which is due
February 24,2024 with an interest rate of 8.00%. Chongqing Shude borrowed
$21,127 from Webank on December 10, 2020 which is due December 10, 2022 with an
interest rate of 10.80%. Chongqing Shude borrowed $939 from Webank on December
10, 2020 which is due December 2, 2022 at an interest rate of 8.64%. Chongqing
Shude borrowed $11,796 from Webank on January 5, 2021 which is due January 2,
2023 with an interest rate of 12.24%. Chongqing Shude borrowed $11,921 from
Standard Chartered Bank on December 3, 2020 which is due on December 3, 2022
with an interest rate of 12.35%. Chongqing Zhuoda borrowed $117,374 from
Webank_on May 10, 2022 which is due on December 10, 2022 with an interest rate
of 14.58%.



The following is a summary of cash provided by or used in each of the indicated
types of activities during the nine months ended September 30, 2022 and 2021,
respectively.



                                                         For the nine months ended
                                                               September 30,
                                                           2022              2021

Net cash used in operating activities                  $  (7,330,007 )   $ (2,547,926 )
Net cash used in investing activities                       (180,000 )     (1,804,536 )
Net cash provided by (used in)  financing activities       4,358,181       

4,514,952
Exchange rate effect on cash                                (599,147 )        (83,355 )
Net cash inflow                                        $  (3,750,973 )   $     79,135




Operating Activities



Our net loss from our operation (before non-cash adjustments) was $10.6 million
for the nine months ended September 30, 2022, an increase of $5.32 million,
compared to the net loss of $5.28 million incurred in the same period in 2021.
We used $7,330,007 in our continuing operations during the nine months ended
September 30, 2022, as compared to $2,547,926 used in continuing operating
activities for the nine months ended September 30, 2021. During pandemic, the
Company focused on cash flow efficiency and cut extra operations expense.



Investing Activities

Cash used in investing activities was $180,000 for the nine months ended September 30, 2022, as compared to $1,804,536 for the same period ended September 30, 2021. The $180,000 was used for a down payment deposit for the acquisition of Phenix in July 2022.





Financing Activities



Cash used in our financing activities was $4,358,181 for the nine months ended
September 30, 2022, as compared to $4,514,952 provided by financing activities
for the nine months ended September 30, 2021. For the nine months ended
September 30, 2022, we repaid $665,705 from bank loans and received $23,886 from
related party loans. For the nine months ended September 30, 2021, cash provided
by our financing activities included $4,065,500 of net proceeds from the
issuance of the notes, $73,541 from bank loans, $171,657 from related party
loans, offset by the repayment of $34,201 of short -term loans.



Contractual Obligations



On July 5, 2022, BIMI International Medical Inc. (the "Company") entered into a
stock purchase agreement to acquire Phenix, a California based corporation that
will distribute healthcare products, from Mr. Fnu Oudom, Chairman of the board
of directors of the Company. Phenix is currently in the process of securing
exclusive distribution rights for nine healthcare products to be developed by a
third party that will target general recovery, cardiovascular and
cerebrovascular disease prevention, male health care, female health care, and
memory enhancement for the elderly. The products are to be sold by
sub-distributors in various territories.



Pursuant to the agreement, the Company agreed to purchase all the issued and
outstanding equity interests in Phenix from Mr. Oudom in consideration of
$1,800,000. At the closing, the Company paid $180,000 in cash as partial
consideration for the purchase of Phenix. The balance of the purchase price in
the amount of $1,620,000 will be paid by the Company in the form of 2,700,000
shares of the Company's Common Stock, the value of which the parties agreed to
be $1,620,000, or $0.60 per share, such shares are to be issued within (15) days
after the issuance of such shares has been approved by the stockholders of the
Company. If stockholder approval is not obtained by December 31, 2022, the
Company will pay the outstanding balance in cash to Mr. Oudom by January 15,
2023, or such earlier or later date as the parties may agree. The per share
price of the shares to be issued reflects an 8% discount to the five-day average
closing price of the Common Stock on NASDAQ before the signing of the agreement.
The audit committee and the board of directors of the Company unanimously
approved the Company's entry into the SPA. The closing of the transaction is
expected to take place in the fourth quarter of 2022.



                                       49





Inflation and Seasonality




We do not believe that our operating results have been materially affected by
inflation during 2022. There can be no assurance, however, that our operating
results will not be affected by inflation in the future. At present we can
increase our product sale prices due to the rising prices charged by our
suppliers. At present we are able to increase our product sale prices to offset
the rising prices charged by our suppliers.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any material off-balance sheet arrangements.

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