Bionexus Gene Lab Corp. — Form 10-Q Summary
Business Context and Reporting Period
Unaudited results cover the three and six months ended June 30, 2023, compared with the same periods in 2022. The company operates through Malaysian subsidiaries Bionexus Gene Lab Sdn. Bhd., focused on molecular and RNA-based disease screening, and Chemrex Corporation Sdn. Bhd., an industrial chemicals wholesaler. Chemrex generated approximately 99.8% of first-half revenue.
Financial Highlights
| Metric | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 |
|---|---|---|---|---|
| Revenue | $2.567 million | $2.485 million | $4.944 million | $5.514 million |
| Gross profit | $339,714 | $263,971 | $708,611 | $620,304 |
| Gross margin | 13.2% | 10.6% | 14.3% | 11.3% |
| Loss from operations | $(272,199) | $(137,964) | $(322,830) | $(103,273) |
| Net loss | $(259,251) | $(138,662) | $(328,317) | $(121,596) |
| Comprehensive loss | $(593,142) | $(456,422) | $(701,247) | $(508,132) |
- Second-quarter revenue increased 3.3%, while first-half revenue declined 10.3% year over year.
- Gross profit increased 28.7% in the quarter and 14.2% for the first half, primarily reflecting improved Chemrex margins and lower purchase prices.
- General and administrative expense increased 77.5% in the quarter and 63.3% for the first half. Costs included Nasdaq uplisting, SEC, professional, advisory, marketing, travel, compensation and other public-company expenses.
- Other income increased to $195,164 in the quarter and $312,508 for the first half, driven primarily by foreign-exchange gains, investment fair-value gains, interest and dividend income.
- Foreign-currency translation losses were $333,891 for the quarter and $372,930 for the first half, materially reducing comprehensive results.
- Basic and diluted loss per share was $(0.003) for the quarter and $(0.004) for the first half, based on 173,718,152 weighted-average shares before the subsequent reverse split.
Cash Flow, Liquidity and Capital Structure
- Net cash used in operating activities was $140,341 for the six months ended June 30, 2023, compared with $233,808 used in the prior-year period.
- Net cash used in investing activities was $8,114, primarily for investments and property, plant and equipment, compared with $418,955 in 2022.
- Net cash used in financing activities was $4,212, compared with $112,177 generated in 2022 from share subscriptions net of lease-related payments.
- Cash and cash equivalents, including fixed deposits, were $1.759 million at June 30, 2023, versus $2.119 million at December 31, 2022. Cash and bank balances alone were $297,084, and fixed deposits were $1.462 million.
- Working capital was $3.350 million at June 30, 2023, down from $4.018 million at December 31, 2022.
- Total liabilities were $1.935 million, consisting principally of $1.823 million in trade payables. The filing does not report conventional bank debt; operating lease liabilities totaled $45,756.
- Trade receivables were $2.196 million net of a $291,940 expected-credit-loss allowance. Inventories were $1.166 million.
- Management stated that operating cash flow is expected to support the current level of operations for at least the next 12 months, although the company identifies growth, marketing, website, personnel and public-company costs as potential liquidity pressures.
Material Changes, Outlook and Risks
- Chemrex revenue declined 10.0% in the first half as lower resin and fiberglass-mat costs led to lower selling prices and a shift toward selected manufacturers, logistics efficiencies and away from some smaller retail customers.
- Bionexus Malaysia revenue declined 64.3% in the first half. Management attributed the weakness to reduced diagnostic-center and clinic referrals following the COVID-19 pandemic and its variants; second-quarter revenue was also affected by six public-holiday long weekends.
- Management has proposed a $28 million annual nationwide RNA-screening project to Malaysia’s Health Ministry. The federal government was studying the proposal, while Sabah planned a potential $2.5 million laboratory allocation. The company also stated that it was advised to apply for a potential $2 million technology grant. These initiatives are proposals and are not presented as committed awards or revenue.
- On July 24, 2023, after the reporting date, the company completed an underwritten offering of 1,437,500 shares at $4.00 per share, generating $5.75 million of gross proceeds and $5.29 million of proceeds before offering expenses. The underwriter received warrants to purchase 115,000 shares at $4.40 per share.
- A 1-for-12 reverse stock split became effective in July 2023. The company reported 17,698,549 shares outstanding as of August 14, 2023.
- Management reported that disclosure controls were effective, but also acknowledged material weaknesses in internal control over financial reporting, including inadequate segregation of duties. Remediation was described as ongoing and dependent partly on additional personnel and outside professionals.
- The company reported no pending or threatened material legal proceedings, no defaults on senior securities and no unregistered equity sales during the period.
- Key risks include dependence on Chemrex, foreign-exchange volatility, customer receivable collectability, supplier concentration, weak RNA-screening demand, regulatory and reimbursement uncertainty, the need to fund ongoing losses, public-company costs and control deficiencies.
Important Facts for Investors to Verify
- Confirm the final net cash proceeds and use of proceeds from the July 2023 offering, including offering expenses and the impact of underwriter warrants.
- Assess whether the proposed Malaysian government screening project, Sabah laboratory allocation and technology grant have received binding approvals or funding.
- Review the aging and collectability of the $2.488 million gross trade-receivables balance and the adequacy of the $291,940 allowance.
- Verify the company’s plans and timetable for remediating the reported material weaknesses in internal controls.
- Monitor Chemrex revenue, gross margins, supplier concentration and customer demand following the first-half revenue decline.
- Reconcile post-split share counts, per-share data and potential dilution from the 115,000 underwriter warrants.