Part I [Business](index=5&type=section&id=Item%201.%20Business) The company is shifting from energy-saving equipment to the healthcare sector via the acquisition of Boqi Pharmacy - In 2019, the company decided to shift its business focus to the sale of medicines and other health-related commodities, aiming to transform into a technology-driven health service platform[18](index=18&type=chunk) - The company entered into a stock purchase agreement in April 2019 to acquire Boqi Pharmacy, a key part of its expansion into the pharmacy business, with a purchase price including **RMB 40,000,000 in cash** and up to **1,500,000 shares of common stock**[15](index=15&type=chunk) - The company's traditional business involves manufacturing large diameter energy-efficient intelligent flow control systems and providing energy-saving technology consulting services for various industries in China[16](index=16&type=chunk) - The company holds **four invention patents** and **fourteen utility model patents** in the PRC for its flow control devices, which it claims can reduce energy consumption by 20% compared to traditional valves[24](index=24&type=chunk)[27](index=27&type=chunk) - As of December 31, 2018, the company had **81 employees**, including 52 technical staff located in China[50](index=50&type=chunk) [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant going concern risks, operational challenges in its new healthcare venture, and financial vulnerabilities - There is substantial doubt about the company's ability to continue as a going concern, highlighted by an **accumulated deficit of $6.4 million** and a **working capital deficit of $10.5 million** as of December 31, 2018[54](index=54&type=chunk) - The company has a history of losses, with a **net loss of approximately $17 million** for the year ended December 31, 2018[56](index=56&type=chunk) - Significant risks are associated with the expansion into the healthcare industry through the acquisition of Boqi Pharmacy, an area where the company has limited operational and management experience[58](index=58&type=chunk)[59](index=59&type=chunk) - The company faces a high accounts receivable balance and accrued a significant **allowance of $14.7 million** for doubtful accounts as of December 31, 2018, due to customers requesting extended payment terms[100](index=100&type=chunk) - The company is at **risk of being delisted** from the Nasdaq Capital Market for failing to timely file its periodic reports, including the Form 10-K and subsequent Form 10-Qs[125](index=125&type=chunk)[127](index=127&type=chunk) - A small group of existing stockholders, including the Chairman and CEO Mr. Yongquan Bi, **controls approximately 51%** of the outstanding common stock, giving them significant influence over corporate actions[116](index=116&type=chunk) - All business operations are conducted in the PRC, making the company susceptible to adverse changes in China's economic and political policies, including the impact of US-China trade tariffs[136](index=136&type=chunk)[137](index=137&type=chunk) [Unresolved Staff Comments](index=23&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[149](index=149&type=chunk) [Properties](index=23&type=section&id=Item%202.%20Properties) The company owns an 81,561 square meter manufacturing facility in Tieling City, Liaoning Province, PRC - The company constructed a manufacturing facility in Yinzhou District Industrial Park, Tieling City, Liaoning Province, PRC, covering **81,561 sq. meters**[150](index=150&type=chunk) - Construction was completed in two phases, with the second phase finished in 2013, and the property ownership certificate was approved at the end of November 2016[151](index=151&type=chunk) [Legal Proceedings](index=23&type=section&id=Item%203.%20Legal%20Proceedings) The company settled a lawsuit with a supplier for an unpaid payable of RMB 1.26 million in May 2019 - On April 22, 2019, a supplier sued NF Energy for an unpaid payable of **RMB 1,278,181.8**, and the company settled the lawsuit for **RMB 1.26 million** on May 24, 2019[152](index=152&type=chunk) [Mine Safety Disclosure](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This section is not applicable to the company's operations - Not applicable[152](index=152&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=24&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under "BIMI", and no dividends have been paid or are anticipated - The company's common stock trades on the Nasdaq Capital Market under the ticker symbol **"BIMI"**[154](index=154&type=chunk) - No dividends have been declared or paid on the common stock, and none are anticipated in the foreseeable future[155](index=155&type=chunk) [Selected Financial Data](index=24&type=section&id=Item%206.%20Selected%20Financial%20Data) This section is not applicable - Not Applicable[156](index=156&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Financial performance deteriorated significantly in 2018, with a 23% revenue decline and a 977% increase in net loss **Financial Performance Comparison (FY 2018 vs. FY 2017)** | Metric | 2018 | 2017 | Change (%) | | :--- | :--- | :--- | :--- | | **Total Revenues** | **$6,542,232** | **$8,508,173** | **-23%** | | Cost of Revenues | $6,082,878 | $7,591,659 | -20% | | **Gross Profit** | **$459,354** | **$916,514** | **-50%** | | Gross Margin | 7.0% | 10.8% | -3.8 p.p. | | Operating Expenses | $16,253,087 | $2,111,585 | +670% | | **Loss from Operations** | **($15,793,733)** | **($1,195,071)** | **+1,222%** | | **Net Loss** | **($16,999,794)** | **($1,578,415)** | **+977%** | - The primary reason for the **670% increase in operating expenses** was a **$14.7 million provision for bad debt allowances**, reflecting higher credit risks and challenges in collecting outstanding receivables from customers in China[182](index=182&type=chunk)[183](index=183&type=chunk) - **Net cash used in operating activities was $343,970** in 2018, an improvement from $908,229 used in 2017, mainly impacted by the large non-cash bad debt expense offsetting the net loss[192](index=192&type=chunk)[194](index=194&type=chunk) - **Net cash provided by financing activities was $211,264** in 2018, resulting from $500,000 in common stock sales and related party funding, offset by net repayments of bank borrowings[200](index=200&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable - Not applicable[204](index=204&type=chunk) [Financial Statements and Supplementary Data](index=30&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The consolidated financial statements for 2018 and 2017 highlight a significant net loss and working capital deficit **Consolidated Balance Sheet Highlights (As of Dec 31)** | Metric | 2018 | 2017 | | :--- | :--- | :--- | | **Total Current Assets** | **$2,607,273** | **$18,755,767** | | Accounts Receivable, net | $1,340,509 | $12,217,790 | | **Total Assets** | **$23,050,799** | **$41,433,065** | | **Total Current Liabilities** | **$13,065,378** | **$14,136,253** | | **Total Liabilities** | **$13,065,378** | **$14,136,253** | | **Total Equity** | **$9,985,421** | **$27,296,812** | **Consolidated Statement of Operations Highlights (Year Ended Dec 31)** | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Total Revenues, net | $6,542,232 | $8,508,173 | | Gross Profit | $459,354 | $916,514 | | Loss from Operations | ($15,793,733) | ($1,195,071) | | **Net Loss** | **($16,999,794)** | **($1,578,415)** | | Net Loss per Share | ($2.27) | ($0.22) | - The financial statements were prepared assuming the company will continue as a going concern, but management notes that the significant net loss, accumulated deficit, and negative working capital **raise substantial doubt** about this ability[227](index=227&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=55&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company changed its independent accounting firm multiple times in 2018 and 2019 but reported no disagreements - On December 24, 2018, HKCM CPA & Co. resigned as the company's principal independent accountant[302](index=302&type=chunk) - Centurion ZD CPA & Co was engaged on December 26, 2018, and subsequently dismissed on April 16, 2019[306](index=306&type=chunk)[307](index=307&type=chunk) - On April 16, 2019, the company engaged HHC as its new independent registered public accounting firm[310](index=310&type=chunk) - The company stated there were no disagreements with any of its independent registered public accounting firms during the fiscal years ended December 31, 2017 and 2018[303](index=303&type=chunk)[312](index=312&type=chunk) [Controls and Procedures](index=56&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective as of year-end 2018 due to a material weakness in accounting expertise - Management concluded that as of December 31, 2018, the company's disclosure controls and procedures were **not effective**[313](index=313&type=chunk) - A **material weakness** was identified: the company lacks accounting personnel with extensive experience in maintaining books and preparing financial statements in accordance with US GAAP[317](index=317&type=chunk) - Management's remediation plan includes seeking an outside consultant to provide more training to employees on US GAAP and public company reporting[318](index=318&type=chunk) [Other Information](index=57&type=section&id=Item%209B.%20Other%20Information) There is no other information to report in this section - None[320](index=320&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=58&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company's leadership and board structure are outlined, noting a failure by some to file required SEC ownership forms - Yongquan Bi has served as Chairman, CEO, and President since February 2019, and Zhang Tingting was appointed CFO in March 2019[323](index=323&type=chunk)[324](index=324&type=chunk)[325](index=325&type=chunk) - The Audit Committee is chaired by Mia Kuang Ching, who is considered an audit committee financial expert[332](index=332&type=chunk) - The company has adopted a code of ethics for its principal executive and financial officers[333](index=333&type=chunk) - Several directors and the CFO have not filed their initial beneficial ownership reports (Form 3) with the SEC as required by Section 16(a)[335](index=335&type=chunk) [Executive Compensation](index=60&type=section&id=Item%2011.%20Executive%20Compensation) No compensation was provided to executive officers in 2017 or 2018, and only one non-employee director was compensated - **No compensation** was provided to executive officers for the years ended December 31, 2018 or 2017[336](index=336&type=chunk) - Director Mia Kuang Ching was the only non-employee director to receive compensation, amounting to **$24,000 in 2018**[337](index=337&type=chunk) - The company has not implemented a stock option plan and has not issued any equity awards to executive officers[338](index=338&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=60&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Stock ownership is highly concentrated, with directors and officers collectively owning approximately 48% of outstanding shares **Beneficial Ownership as of August 29, 2019** | Beneficial Owner | Shares Owned | Percentage of Ownership | | :--- | :--- | :--- | | Gang Li, Director | 1,899,409 | 23.52% | | Pelaria International Ltd. | 1,540,119 | 19.08% | | Yongquan Bi, Chairman & CEO | 1,500,000 | 18.58% | | Cloverbay International Limited | 834,142 | 10.33% | | All officers & directors as a group (8 persons) | 3,874,261 | 47.99% | - Shares held by Pelaria International Ltd. and Cloverbay International Limited are effectively controlled by Gang Li (80%) and Lihua Wang (20%)[343](index=343&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=61&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company engaged in several unsecured, interest-free transactions with related parties connected to management - As of December 31, 2018, the company had a trade payable of **$416,547** and other payables of **$174,256** to Bainianye New Energy, an entity controlled by former executives Ms. Li Hua Wang and Mr. Gang Li[344](index=344&type=chunk)[345](index=345&type=chunk) - As of December 31, 2018, the company also reported payables of **$606,194** to former CFO Ms. Li Hua Wang and **$162,463** to executive director Mr. Haibo Gong[345](index=345&type=chunk) - The Board of Directors has determined that Mia Kuang Ching, Ju Li, Fengsheng Tan, and Changqing Yan are independent directors according to NASDAQ standards[345](index=345&type=chunk) [Principal Accountant Fees and Services](index=62&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Total accounting fees were $139,500 in 2018 and $74,500 in 2017, exclusively for audit and review services **Accountant Fees and Services** | Fee Type | 2018 | 2017 | | :--- | :--- | :--- | | Audit Fees | $139,500 | $74,500 | | Audit-Related Fees | $0 | $0 | | Tax Fees | $0 | $0 | | All Other Fees | $0 | $0 | | **Total** | **$139,500** | **$74,500** | - The 2018 audit fees included $120,000 to HHC for the annual audit and $19,500 to HKCMCPA for quarterly reviews; the 2017 fees of $74,500 were all to HKCMCPA[346](index=346&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=63&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements and exhibits filed with the Form 10-K, omitting inapplicable schedules - This section contains a list of the financial statements and exhibits filed as part of the Form 10-K[348](index=348&type=chunk)[349](index=349&type=chunk) - All financial statement schedules are omitted as they are not applicable or the information is included elsewhere[348](index=348&type=chunk)