Bionexus Gene Lab Corp. — Q1 2020 Form 10-Q Summary
Business context and reporting period
Bionexus Gene Lab Corp. is a Wyoming corporation with operations conducted primarily through its Malaysian subsidiary. The company develops and markets non-invasive blood-based genomic tests intended to support early disease detection and personalized health management. The filing covers the three months ended March 31, 2020; financial statements are unaudited and presented in U.S. dollars.
Financial performance and position
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenue | $0 | $28,088 |
| Cost of revenue | $12,992 | $18,822 |
| Gross profit/(loss) | $(12,992) | $9,266 |
| Other income | $4,745 | $7,020 |
| General and administrative expense | $38,846 | $76,489 |
| Net loss | $(47,953) | $(61,467) |
| Comprehensive loss | $(89,630) | $(44,322) |
| Basic and diluted loss per share | $0 | $0 |
With no revenue, the company reported a negative gross margin and a $47,093 operating loss. General and administrative expense declined approximately 49%, primarily because of lower travel and marketing expenses. A foreign-currency translation loss of $41,677 materially increased comprehensive loss.
At March 31, 2020, total assets were $1.127 million, including $314,144 of cash and bank balances and $469,752 of fixed deposits. Total liabilities were $94,181, including $57,386 of finance-lease obligations and $20,203 of operating-lease liabilities. Working capital was $760,719, compared with $830,997 at December 31, 2019. Stockholders’ equity was $1.033 million. The company had 102,730,891 common shares outstanding as of March 31, 2020 and April 24, 2020.
Cash used in operating activities was $40,592, compared with $48,561 in Q1 2019. There was no investing cash outflow in Q1 2020, versus $14,631 used for equipment purchases in Q1 2019. Financing cash used was $8,269, primarily for finance-lease repayments. The financial statements report a $75,180 net decrease in cash and cash equivalents, including a $26,319 foreign-currency translation adjustment; the MD&A table reports a $48,861 decrease before that adjustment.
Material changes versus the prior comparable period
- Revenue fell from $28,088 to zero, and gross profit of $9,266 became a gross loss of $12,992.
- Net loss improved by $13,514 because lower operating expenses more than offset the loss of revenue.
- Operating cash outflow improved by $7,969, while lease-related financing outflows increased by $4,663.
- Cash and fixed deposits declined from $859,076 at December 31, 2019 to $783,896 at March 31, 2020.
- Finance-lease obligations declined from $65,287 to $57,386, and total liabilities declined from $108,872 to $94,181.
- Accumulated losses increased from $333,311 to $381,264, and accumulated other comprehensive expense increased from $17,103 to $58,780, principally because of currency translation.
Guidance, outlook, risks and unusual items
Management attributed the absence of revenue to COVID-19 disruptions in Malaysia, including reduced hospital and clinic visits and the Movement Control Order that began March 18, 2020. The company stated that it could not predict when regular non-invasive blood testing would resume; gradual relaxation of restrictions was expected to begin May 4, 2020.
The company incurred $12,992 of costs related to COVID-19 rRT-PCR screening kits imported from China and Singapore and submitted to Malaysia’s Ministry of Health for approval. As of the filing, approval had not been granted, and the company had no indication whether prospective insurance and small- and medium-sized enterprise customers would purchase the kits.
Management believes available cash flow and resources will sustain the current level of operations for at least the next 12 months. Planned or potential liquidity uses include additional administrative and marketing personnel, website development, increased advertising and marketing, and public-company costs. No formal revenue or earnings guidance was provided.
Key disclosed risks include limited operating history and growth, uncertainty regarding the efficacy of the blood-screening process, potential uninsured product-liability claims, and risks of operating in Malaysia, including enforcement of judgments. The company reported no material legal proceedings, contractual obligations, or material off-balance-sheet arrangements.
Disclosure controls and internal control over financial reporting were deemed ineffective. Management identified material weaknesses arising from inadequate segregation of duties due to reliance on a single individual as sole officer and director, and the absence of a functioning audit committee with sufficient independent members. Remediation may be delayed by limited financial resources.
Important facts for investors to verify
- Whether Malaysian authorities approved the company’s COVID-19 rRT-PCR kits and whether any commercial sales resulted.
- When regular blood-testing operations resumed after Malaysia’s Movement Control Order and whether revenue recovered.
- The company’s ability to fund operations if revenue remains zero or materially below prior levels.
- The apparent difference between the financial statement and MD&A presentations of the quarterly cash decrease.
- Progress in remediating the disclosed material weaknesses in internal controls and establishing independent board and audit-committee oversight.
- The scientific, regulatory, insurance, and commercial validation of the company’s blood-screening tests.