Bionexus Gene Lab Corp. — Form 10-Q Summary
Business Context and Reporting Period
Unaudited quarterly report for the three and nine months ended September 30, 2022, filed November 14, 2022. The company is a Wyoming-based life-sciences and biochemical company with Malaysian subsidiaries: BioNexus Gene Lab, which develops genomic and disease-screening services, and Chemrex, a wholesaler of industrial chemicals. Chemrex generated nearly all consolidated revenue during the period.
Financial Performance and Position
| Metric | Three Months Ended September 30 | Change | Nine Months Ended September 30 | Change |
|---|---|---|---|---|
| Revenue | $2.575 million | Down 28.0% | $8.089 million | Down 20.0% |
| Gross profit | $299,499 | Down 57.8% | $919,803 | Down 48.6% |
| Gross margin | 11.6% | Versus 19.8% | 11.4% | Versus 17.7% |
| Operating income/(loss) | $(65,215) | Versus $372,641 income | $(168,488) | Versus $854,764 income |
| Net income/(loss) | $(77,401) | Versus $295,322 income | $(198,997) | Versus $662,328 income |
| Comprehensive income/(loss) | $(397,993) | Versus $238,382 income | $(906,125) | Versus $389,452 income |
General and administrative expense increased 9.2% in the quarter and 13.4% for the nine months, reflecting personnel, professional, travel, marketing, director, consulting and SEC-compliance costs. Finance costs remained low at $2,072 for the quarter and $7,717 year to date.
At September 30, 2022, total assets were $7.798 million, compared with $9.574 million at December 31, 2021. Current assets were $5.409 million and current liabilities were $1.335 million, producing reported working capital of $4.074 million. Cash and fixed deposits totaled $1.462 million, compared with $2.124 million at the beginning of the year. Trade receivables were $2.725 million, inventories were $1.096 million, and other investments were $923,983.
Total liabilities were $1.375 million, down from $2.395 million at December 31, 2021. Liabilities principally comprised trade payables of $1.279 million and operating lease liabilities of $25,900. The finance lease was fully repaid during the nine months.
Cash generated from operating activities was $69,562, compared with cash used of $473,846 in the prior-year period. Investing activities used $400,595, primarily for $397,974 of share investments. Financing activities generated $115,962, including $150,000 from issuing 2.5 million common shares, partly offset by $34,038 of finance-lease repayments. Foreign-currency translation reduced cash by $446,579.
Material Changes Versus Prior Comparable Period
- BioNexus Malaysia revenue fell 99.4% in the quarter and 97.4% year to date, to $5,942 and $39,409, respectively. Management attributed the decline to the end of the Ministry of Health COVID-19 PCR outsourcing contract, reduced testing requirements for travelers, and resources being directed to cardiovascular research with Institut Jantung Negara.
- Chemrex represented 99.8% of quarterly revenue and 99.5% of nine-month revenue. Its nine-month revenue declined 6.5%, while gross profit declined 33%, reflecting lower selling prices, higher material and international freight costs, and foreign-exchange effects.
- Foreign-currency translation losses increased to $320,592 in the quarter and $707,128 for the nine months, compared with $56,940 and $272,876, respectively, in the prior-year periods.
- Other investments increased from $749,027 to $923,983 after acquisitions, despite a $128,683 fair-value loss and $92,537 of foreign-exchange translation losses.
- Common shares outstanding increased from 171,218,152 at December 31, 2021 to 173,718,152 at September 30, 2022. Basic and diluted earnings per share were reported as $0.00 for both periods.
Guidance, Outlook, Risks and Unusual Items
The filing provides no formal revenue or earnings guidance. Management states that operating cash flow, together with existing resources, is expected to support the current level of operations for at least the next 12 months. Anticipated liquidity pressures include hiring administrative and marketing personnel, website development, increased advertising and marketing, and the costs of being a public company.
Key risks include dependence on Chemrex for consolidated revenue, the sharp decline in COVID-19 testing demand, uncertain adoption of the company’s genomic screening products, regulatory requirements, foreign-exchange volatility, industry and economic conditions, the need for qualified personnel, potential future financing, and limited trading-market depth.
Management identified a material weakness in internal control over financial reporting, citing inadequate monitoring and segregation of duties. The company states that no audit adjustments resulted from the weakness, but a material misstatement could have occurred. Remediation includes expanding the board, separating executive and finance responsibilities, hiring additional personnel, and using outside professionals. Disclosure controls and procedures were nevertheless assessed as effective, and no material change in internal controls was reported during the period.
The company reported no pending or threatened material legal proceedings, no defaults on senior securities, and no unregistered securities sales during the reported period. The filing also includes an $8,000 monthly, 18-month consultancy agreement with Keith Wong beginning April 1, 2022.
Investor Verification Checklist
- Verify the sustainability and margins of Chemrex, which supplied virtually all consolidated revenue during the period.
- Assess whether BioNexus Malaysia can replace lost COVID-19 testing revenue with RNA screening, cardiovascular research, or other diagnostic services.
- Review receivable aging and collection performance, given trade receivables of $2.725 million and no recorded doubtful-debt allowance.
- Evaluate the liquidity impact of continued investment purchases, operating losses, foreign-exchange losses, and potential need for additional financing.
- Monitor the $923,983 investment portfolio for further fair-value or currency losses.
- Confirm progress in remediating the disclosed material weakness in internal control over financial reporting.
- Reconcile the stated cash runway assumption with actual operating cash flow and planned administrative, marketing, research, and public-company expenditures.