Bionexus Gene Lab Corp. 2022 Form 10-K Summary
Business context and reporting period
BioNexus Gene Lab Corp. is a Wyoming corporation with Malaysian operating subsidiaries BioNexus Gene Lab Sdn. Bhd. and Chemrex Corporation Sdn. Bhd. The filing covers the fiscal year ended December 31, 2022, with audited comparisons to December 31, 2021. The company operates two businesses: Chemrex distributes chemical raw materials, primarily fiberglass-reinforced plastic materials, in Southeast Asia; BioNexus Malaysia develops and provides RNA-based, non-invasive disease-risk screening services.
Chemrex generated 99.1% of consolidated 2022 revenue, while BioNexus Malaysia generated 0.9%. The filing states that Chemrex was acquired on December 31, 2020, although portions of the MD&A use inconsistent acquisition wording; investors should reconcile the presentation of the comparative results with the audited financial statements.
Key financial metrics
| US$ in thousands, except percentages | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | 10,928.7 | 13,362.6 | -18.2% |
| Cost of revenue | 9,669.7 | 11,095.6 | -12.9% |
| Gross profit | 1,259.0 | 2,266.9 | -44.4% |
| Gross margin | 11.5% | 17.0% | -5.5 percentage points |
| Operating expenses | 1,729.5 | 1,277.6 | +35.4% |
| Operating income/(loss) | (291.2) | 1,055.8 | Turned to loss |
| Net income/(loss) | (356.0) | 751.6 | Turned to loss |
| Net margin | -3.3% | 5.6% | -8.9 percentage points |
| Comprehensive income/(loss) | (664.8) | 517.6 | Turned to loss |
| Operating cash flow | 544.0 | 9.2 | Improved |
| Capital and investment cash flow | (450.5) | (490.6) | Lower outflow |
| Cash flow from financing | 116.0 | (28.2) | Improved |
Other income increased to $179,283 from $66,491, primarily from dividend income and bank interest. Finance costs were $12,479, compared with $12,973 in 2021. Basic and diluted loss per share was $0.002, versus earnings per share of $0.004 in 2021.
At December 31, 2022, cash and bank balances were $611,849 and fixed deposits were $1,507,015, for total cash and cash equivalents of $2,118,864. Working capital was $4,017,749, compared with $4,821,100 in 2021. Total assets were $8,740,162, total liabilities were $2,075,149, and stockholders’ equity was $6,665,013.
Finance lease obligations were fully repaid during 2022. Remaining operating lease liabilities totaled $56,775, including $16,569 due within one year. The filing does not disclose material conventional bank debt.
Material changes versus the prior comparable period
- Revenue declined $2.4 million, primarily because the prior-year period included $1.5 million from a Ministry of Health COVID-19 screening contract that ended in December 2021.
- Chemrex revenue decreased 8.6% to $10.8 million, which management attributed principally to lower selling prices resulting from competitive inventory clearing.
- BioNexus Malaysia revenue fell 93.7% to $95,816 after the COVID-19 testing contract ended.
- Gross margin contracted from 17.0% to 11.5%, reflecting lower revenue and pricing pressure.
- Operating expenses increased $451,884, driven by depreciation and maintenance, employee compensation, professional and directors’ fees, marketing and travel, foreign-exchange adjustments, laboratory staffing and training, research activities, expired COVID-19 test kits and an investment write-off.
- Foreign currency translation loss increased to $308,800 from $233,946, primarily reflecting the weakening Malaysian ringgit against the U.S. dollar.
- Operating cash flow increased to $544,028, aided by reductions in inventory and receivables, despite the reported net loss.
- The company issued 2.5 million common shares for $150,000, increasing shares outstanding to 173,718,152 at year-end.
Guidance, outlook, commentary, risks and unusual items
Management projects approximately 40% revenue growth from 2023 to 2024, principally from expected orders for raw materials used by electric-vehicle charging-station manufacturers, followed by projected annual growth of 15% from 2025. These projections are forward-looking and are not assured. Chemrex expects conditions in manufacturing, construction, oil and gas, tourism and public transportation to improve as economic activity normalizes.
BioNexus presented its mRNA screening service to Malaysia’s Health Ministry in August 2022 and held a follow-up meeting in January 2023. The filing describes potential nationwide implementation and estimated treatment-cost savings, but no government contract or implementation commitment is disclosed. BioNexus plans additional marketing, corporate screening arrangements, geographic expansion and an updated algorithm that management expected to patent around the third quarter of 2023.
- The company states that cash flow from operations should support its current operations for at least the next 12 months, but identifies future needs for marketing, personnel, algorithm development, patenting and public-company costs. Additional financing may be required.
- Management reported material weaknesses in internal control over financial reporting and concluded that internal controls were ineffective as of December 31, 2022. The filing cites insufficient segregation of duties and ineffective oversight, although the company also describes planned or ongoing remediation.
- The independent auditor expressed an unqualified opinion on the financial statements but did not provide an opinion on internal control effectiveness.
- BioNexus has no product or service liability insurance for its diagnostic business, and Chemrex also lacks insurance for potential chemical product liability claims.
- BioNexus’s biomarkers have not undergone clinical trials meeting U.S. or European regulatory standards, and the company acknowledges uncertainty regarding sensitivity, specificity, regulatory approval, reimbursement and market acceptance.
- Chemrex faces cyclical demand, raw-material price volatility, supplier concentration, non-written and generally terminable customer and supplier arrangements, inventory risk and competition.
- Four suppliers represented approximately 57.1% of 2022 purchases. Chemrex’s five largest customers represented approximately 30.9% of its 2022 revenue.
- Foreign-exchange movements, Malaysian regulatory changes, data privacy and cybersecurity incidents, intellectual-property protection, uninsured claims and dependence on key personnel could materially affect results.
- The company reported no material pending litigation and no material subsequent events through March 30, 2023.
Most important facts for investors to verify
- Reconcile the inconsistent acquisition and comparative-period descriptions in the MD&A with the audited consolidation and common-control accounting disclosures.
- Verify whether the projected 2023–2024 growth is supported by binding customer orders, particularly from electric-vehicle charging-station manufacturers.
- Assess the sustainability of revenue after the loss of the COVID-19 testing contract and the company’s ability to scale recurring diagnostic revenue.
- Review cash availability, working-capital trends, investment cash outflows and the likelihood and dilution impact of future financing.
- Track remediation of the material weaknesses in internal control and the company’s governance and audit-committee structure.
- Evaluate the regulatory, clinical-validation, reimbursement and liability exposure associated with RNA-based screening services.
- Monitor Chemrex’s customer and supplier concentration, pricing pressure, raw-material costs and inventory levels.
- Confirm share-count changes, potential dilution, OTC market liquidity and the absence of any expected cash dividend.