Description of Business
As used herein, unless the context otherwise indicates, references to the
"Company," "we," "our," "us," "BioNexus" refer to BioNexus Gene Lab Corp., a
Wyoming company (BGLC), and its wholly owned subsidiaries, Bionexus Gene Lab
Sdn. Bhd. ("Bionexus Malaysia"), and Chemrex Sdn. Bhd. ("Chemrex"), both
Malaysian companies.
BGLC is an emerging molecular diagnostics company focused on the application of
functional genomics to enable early diagnosis and personalized health
management. On August 23, 2017, we acquired all of the outstanding capital stock
of BioNexus Malaysia, which was incorporated in Malaysia on April 7, 2015.
BioNexus Malaysia owns algorithm software, technology and know-how related to
the detection of common diseases through blood analysis which we use in our
business. Our non-invasive blood screening tests analyze changes in ribonucleic
acid (or RNA) to detect the risk potentiality of 11 different diseases. These
diseases include eight cancers (nasopharyngeal, lung, liver, stomach, breast,
cervical, prostate and colon), two bowel diseases (colitis and Crohn) and
osteoarthritis. This unique blood based genomic biomarker approach is based on
the scientific observation that circulating blood reflects, in a detectable way,
what is occurring throughout the body currently.
The corporate and principal office address of the Company and BioNexus Malaysia
is Unit 02, Level 10, Tower B, Avenue 3, The Vertical Business Suite II, Bangsar
South, No. 8 Jalan Kerinchi, Kuala Lumpur, Malaysia., our lab is located at Lab
353, Chemical Science Centre, University Science Malaysia, George Town, Penang,
Malaysia. We also have a blood collection center located at 1st floor, Lifecare
Medical Centre, Kuala Lumpur, Malaysia. Our telephone number is (+60) 1221-26512
and our web-site is www.bionexusgenelab.com.
Chemrex is a wholesaler of industrial chemicals for the manufacture of
industrial, medical, appliance, aero, automotive, mechanical and electronic
industries in Asia Pacific region. On December 31, 2020, we acquired all of the
outstanding capital stock of Chemrex, which was incorporated in Malaysia on
September 29, 2004.
Chemrex's corporate offices and distribution and storage center is located at 4
Jalan CJ 1/6 Kawasan Perusahaan Cheras Jaya, Selangor, Malaysia. Its phone
number is (+60) 1922-23815 and web-site is www.chemrex.com.my.
Forward-Looking Statements
Certain statements made in this quarterly report on Form 10-Q are
"forward-looking statements" (within the meaning of the Private Securities
Litigation Reform Act of 1995) in regard to the plans and objectives of
management for future operations. Such statements involve known and unknown
risks, uncertainties and other factors that may cause actual results,
performance or achievements of the registrant to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. The forward-looking statements included herein are
based on current expectations that involve numerous risks and uncertainties. The
Company's plans and objectives are based, in part, on assumptions involving the
continued expansion of business. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic, competitive and
market conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance the forward-looking
statements included in this quarterly report will prove to be accurate. In light
of the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as a
representation by the registrant or any other person that the objectives and
plans of the registrant will be achieved.
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Substantial risks exist with respect to an investment in the Company. These
risks include but are not limited to, those factors discussed in our Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March
30, 2021. More broadly, these factors include, but are not limited to:
• We have limited operating history and limited business growth;
• The efficacy of our blood screening process;
• We may face product liability claims and we have no insurance to cover
such claims; and
• There are risks associated with our business operations in Malaysia,
including enforcing judgements against our operating subsidiary and
management.
The results of operations of our subsidiary, BioNexus-Malaysia, with respect to
its RNA screening process have been adversely impacted by the onset of the
Covid-19 pandemic, which commenced in late December 2019 in Malaysia. We believe
that most people have been and will continue to be reluctant to visit hospitals
and clinics during the Covid-19 pandemic for fear of transmission from other
patients or medical staff. Since our RNA screening is administered at hospitals
and clinics, our business has been adversely affected as a result. Furthermore,
on March 18, 2020, the Malaysian government first imposed its Movement Control
Order (MCO) which lasted through June 9, 2020 to control the spread of COVID-19.
The MCO restricted movement of all people except for those who were working for
essential services. The MCOs were enhanced and relaxed at different phases in
2020 and 2021, including the Enhanced Movement Control Order (EMCO), Conditional
Movement Control Order (CMCO) and Recovery Movement Control Order (RMCO). This
Enhanced Movement Control Orders were implemented whenever there was a surge of
Covid-19 cases. During these EMCOs, only companies classified under essential
service were allowed to operate. This EMCO ended on July 16, 2021 and the
government allowed more companies and factories to operate with strict Standard
Operation Procedures. However, as discussed below, during fiscal 2021,
BioNexus-Malaysia implemented the sale of its Covid19 qPCR test procedure
through the Malaysian government. Our Covid testing generates substantially
lower per ticket charges at $30-38 per test compared with $900 per customer for
our RNA testing. Our Covid tests also generate lower margins than our RNA tests.
The results of operations for Chremrex were adversely impacted during the May to
July 2020 period due to the MCO's and Covid-19. However, since that time, the
operations of Chemrex have not been materially impacted as a result of the MCO's
or Covid-19.
Recent Developments. As previously reported, we submitted to the Malaysian
Ministry of Health (MOH) our Reverse Transcription Polymerase Chain Reaction (RT
PCR) Covid-19 screening for approval, which occurred in June 2020. On April 30,
2021, BioNexus entered into an Agreement with MOH to outsource our Covid19 qPCR
test for public hospitals and clinics within Malaysia. The use of our testing
protocol began on May 6, 2021. We expect that our testing protocol would be
continued to be used by the MOH' public hospitals and clinics through August
2021, when the pandemic curve is expected to flatten. As of June 30, 2021, we
completed roughly 13,635 tests at an average charge per test of $30.
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Translation of amounts from MYR into US$1.00 has been made at the following
exchange rates for the respective period and year:
June 30, December 31,
2021 2020
Period ended June 30, 2021 /Year-ended December 31,
2020 US$1: MYR exchange rate 4.1520 4.0170
June 30, June 30,
2021 2020
6 months average US$1: MYR exchange rate 4.0981 4.2619
Results of Operations
Three Months Ended June 30, 2021 Compared with the Three Months Ended June 30,
2020.
The following table sets forth key selected financial data for the three months
ended June 30, 2021 and 2020.
Consolidated
Three months ended
June 30,
2021 2020
REVENUE $ 3,092,171 $ 1,103,516
COST OF REVENUE (2,624,564 ) (944,226 )
GROSS PROFIT 467,607 159,290
OTHER INCOME 50,429 23,729
OPERATING EXPENSES
General and administrative (378,046 ) (216,993 )
PROFIT/(LOSS) FROM OPERATIONS 139,990 (33,974 )
FINANCE COSTS (3,448 ) (1,380 )
PROFIT/(LOSS) BEFORE TAX 136,542 (35,354 )
Tax expense (108,280 ) (487 )
NET PROFIT $ 28,262 $ (35,841 )
Other comprehensive income:
Foreign currency (loss)/gain (7,468 ) 43,558
COMPREHENSIVE INCOME $ 20,794 $ 7,717
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BioNexus-Malaysia and Chemrex
BioNexus BioNexus
Malaysia Chemrex Malaysia Chemrex
Three months ended June 30, 2021 Three months ended June 30, 2020
REVENUE $ 368,107 $ 2,724,064 $ 6,541 $ 1,096,975
COST OF
REVENUE (290,821 ) (2,333,743 ) (17,315 ) (926,911 )
GROSS PROFIT 77,286 390,321 (10,774 ) 170,064
OTHER INCOME 2,986 47,443 2,893 20,821
OPERATING
EXPENSES
General and
administrative (21,518 ) (323,497 ) (17,217 ) (182,135 )
FINANCE COSTS (1,095 ) (2,353 ) (298 ) (1,082 )
PROFIT/(LOSS)
BEFORE TAX 57,659 111,914 (25,396 ) 7,668
Tax expense: (654 ) (107,626 ) (487 ) 0
NET
PROFIT/(LOSS) $ 57,005 $ 4,288 $ (25,883 ) $ 7,668
Revenue. For the quarterly period ended June 30, 2021, we had total revenue of
$3,092,171 as compared to total revenue of $1,103,516 for the same period in
2020, an increase of approximately 180.2% from the prior period.
Chemrex contributed $2,724,064 (88.1%) of the total revenue for the current
quarterly period as compared to $1,096,975 (99.4%) of the total revenue for the
same quarter last year. Chemrex's revenues had increased to $2,724,064 from
prior quarter of $1,096,975, an increase of 148.3%. The revenue decrease in 2020
was due to the changing from Movement Control Order (MCO) to Recovery Movement
Control Order (RMCO) and then Enhanced Movement Control Order (EMCO) based on
the number of Covid-19 cases during each period In view of the movement
restriction especially during May to July 2020, many Chemrex customers had
temporary suspended their operations and resulted no business transaction during
this period.
BioNexus-Malaysia contributed $368,108 (11.9%) of the total revenue for the
current quarter as compared to revenue of $6,541 (0.6%) of the total revenue
from the same quarter last year. The substantial increase for the current period
is due to the MOH's approval of our Covid19 qPCR test which was outsourced to
public hospitals and clinics beginning May 2021. During this three-month period,
we had no revenues from our RNA testing.
Cost of Revenue. For the quarterly period ended June 30, 2021, we incurred
$2,624,564 in cost of revenues, as compared to $944,226 for the same quarter in
2020, an increase of approximately 178%. Due to the reasons stated above.
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Chemrex had incurred $2,333,743 (88.9%) of the total cost of revenue during the
current quarter as compared to the same period last year wherein Chemrex had
incurred $926,911 (98.2% of the total) in cost of revenue. The increased in
Chemrex's cost of revenues for the current period was due to its increased
revenues for the current period and reasons as stated above.
BioNexus had incurred $290,821(11.1 %) of the total cost of revenues during the
current quarter as compared to $17,315 (1.8 %) for the same period in 2020. The
increase in cost of revenue for the current period reflects the costs associated
with the outsource of our Covid19 PCR test to the MOH which began in May 2021.
Gross Profit. For the quarterly period ended June 30, 2021, we had total gross
profit of $467,607 as compared to gross profit of $159,290 for the same period
in 2020, an increase of approximately 193.6% from the prior period. Chemrex
contributed $390,321 (83.5%) of the total gross profit for the current quarterly
period as compared to $170,064 (106.8%) of the total gross profit for the same
quarter last year. Chemrex's gross profit increased to $390,321 from prior
quarter of $170,064, an increase of 129.5%. The gross profit increase for
Chemrex in current quarter was due to higher revenues although its margins were
lower for the current quarter.
BioNexus-Malaysia contributed $77,286 (16.5%) of the total gross profit of
$467,607 for the current quarter as compared to gross loss of $10,774 (-6.8%) of
the total gross profit from the same quarter last year. The substantial increase
for the current period is due to the MOH's approval and sale of our Covid19 qPCR
test which was outsourced to its public hospitals and clinics beginning May
2021. However, during the current three-month period, we had no revenues from
our RNA testing.
Other Income. For the quarterly period ended June 30, 2021, we had of $50,429,
as compared to of $23,729 for the same quarter in 2020, an increase of
approximately 53%. Chemrex contributed $47,433 (94%) of other income for the
current quarterly period as compared to $20,821 (88%) of the other income for
the same quarter last year. Chemrex's other income increased 56% due to
dividends of $11,061 received from blue chip public companies listed on
Malaysian Stock Exchange (KLSE), which increased by 86% form the prior period,
in addition to gains on fair value of investment and bank interest and
unrealized forex gain for this current quarterly.
Operating Expenses. For the quarterly period ended June 30, 2021, we had total
operating expense of $378,046 as compared to total operating expenses of
$216,993 for the same quarter in 2020, an increase of approximately 42.60%.
Operating expenses consists of general and administrative expenses which
includes depreciation of fixed assets, employee compensation and benefits,
professional fees and marketing and travel expenses.
Chemrex had incurred $323,497 (86%) of the total operating expenses for the
current quarter as compared to $182,135 (83.9%) of the total operating expenses
for the same quarter last year. This current quarter incurred loss on fair value
of investment of $38,238 and loss on unrealized forex $61,292. The slight
increase in operating expenses was due to increased logistics, port charges and
travel associated with the increased revenue for the period.
BioNexus-Malaysia had incurred $21,518 (18.1%) of the total operating expenses
for the current quarter as compared to $17,217 (16.1%) of the total operating
expenses for the same quarter last year. The slight increase in operating costs
of the current quarter was due to logistic costs and staff over time associated
with the outsource of our Covid 19 tests.
Profit/Loss from Operations. We had a profit from operations of $139,990
quarterly period ended June 30, 2021 as compared to a loss of $33,974 for the
same period in 2020 for the reasons discussed above.
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Income tax expense. For the three-month period ended June 30, 2021, we had
$108,280 income tax which is an estimated expense ($107,626 for Chemrex and $654
for Bionexus) as compared to Bionexus estimated income tax expenses of $487 for
the same quarter last year ($0 for Chemrex and $487 for Bio-Nexus).
Foreign currency exchange gain/(loss). We are exposed to fluctuations in foreign
exchange rates on the revaluation of monetary assets and liabilities denominated
in currencies other than the US Dollar. Therefore, any change in the relevant
exchange rate would require us to recognize a transaction gain or loss on
revaluation. For the three-month period ended June 30, 2021, we experienced a
foreign currency loss of $7,468 as compared with a foreign currency gain of
$43,558 for the same period in 2020.
Six Months Ended June 30, 2021 Compared with the Six Months Ended June 30, 2020.
The following table sets forth key selected financial data for the six months
ended June 30, 2021 and 2020.
Consolidated
Six months ended
June 30,
2021 2020
REVENUE $ 6,541,330 $ 4,173,542
COST OF REVENUE (5,491,158 ) (3,358,945 )
GROSS PROFIT 1,050,172 814,597
OTHER INCOME 112,916 770,370
OPERATING EXPENSES
General and administrative (680,965 ) (545,411 )
PROFIT FROM OPERATIONS 482,123 1,039,556
FINANCE COSTS (6,837 ) (4,406 )
PROFIT BEFORE TAX 475,286 1,035,150
Tax expense (108,280 ) (1,347 )
NET PROFIT $ 367,006 $ 1,033,803
Other comprehensive income:
Foreign currency loss (215,936 ) (251,138 )
COMPREHENSIVE INCOME $ 151,070 $ 782,665
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BioNexus-Malaysia and Chemrex
BioNexus BioNexus
Malaysia Chemrex Malaysia Chemrex
Six months ended June 30, 2021 Six months ended June 30, 2020
REVENUE $ 465,470 $ 6,075,860 $ 6,541 $ 4,167,001
COST OF
REVENUE (358,528 ) (5,132,630 ) (30,308 ) (3,328,637 )
GROSS PROFIT 106,942 943,230 (23,767 ) 838,364
OTHER
INCOME/(LOSS) 3,848 109,068 7,645 762,718
OPERATING
EXPENSES
General and
administrative (44,128 ) (556,619 ) (47,254 ) (449,744 )
FINANCE COSTS (2,303 ) (4,534 ) (1,361 ) (3,045 )
PROFIT/(LOSS)
BEFORE TAX 64,359 491,145 (64,737 ) 1,148,293
Tax expense: (654 ) (107,626 ) (1,347 ) 0
NET
PROFIT/(LOSS) $ 63,705 $ 383,519 $ (66,084 ) $ 1,148,293Revenue. For the six-month period ended June 30, 2021, we had total revenues of
$6,541,330 as compared to total revenue of $4,173,542 for the quarterly period
ended June 30, 2020, an increase of approximately 56.7% from the prior period.
For the current quarterly period, Chemrex contributed $6,075,860 (92.9%) of
total revenues compared to its contribution of $4,167,001 (99.8%) of total
revenues for the same period last year, an increase of 45.8%. The increase was
due to Covid impact on revenues from the prior year's six-month period. Covid
did not significantly impact Chemrex's operations and revenues of during the
current six-month period.
BioNexus had a revenue of $465,470 for the current six-month period compared to
revenues of $6,541 from the same quarterly period last year, an increase of
7,016%. BioNexus revenues for the current quarter resulted from the outsource of
Covid19 PCR test to MOH which began on May 2021. The revenues for the same
period last year were due entirely to our RNA screening tests.
Cost of revenues. For the six-month period ended June 30, 2021, we incurred
$5,491,158 in the cost of revenues, as compared to $3,358,945 for the same
period 2020, an increase of approximately 63.5% due to reasons as stated above.
Chemrex had incurred $5,132,630 (93.5%) of the total cost of revenue of
$5,491,158 for the current six-month period as compared to the same period last
year wherein Chemrex had incurred $3,328,637 (99.1%) of the total cost of
revenue of $3,358,945. The increased in Chemrex's cost of revenues for the
current period was due to its increased revenues for the current period and
reasons as stated above.
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BioNexus had incurred $358,528 on cost of revenues for the current six-month
period as compared to $30,308 for the same period last year. The increase in
cost of revenue for the current period reflects the costs associated with the
outsource of our Covid19 PCR test to the MOH which began in May 2021.
Other Income. For the six-month period ended June 30, 2021, we had other income
of $112,916 as compared to $770,370 for the same period in 2020. A reduction of
582% from the prior quarterly period is due principally to a net income of
$707,618 from disposal of a property which occurred during the six month period
last year. We did not have a similar gain during the current six month period.
Operating Expenses. For the six-month period ended June 30, 2021, we had an
operating expense of $680,965 as compared to operating expenses of $545,411 for
the same period ended June 30, 2020, an increase of approximately 35.9%.
Operating expenses consists of general and administrative expenses which
includes depreciation of fixed assets, employee compensation and benefits,
professional fees and marketing and travel expenses. The increase for the
current quarterly period due to annual fee of OTCQB and additional four part
time laboratory technician to assist in the outsourced Covid-19 samples from
MOH.
Chemrex had incurred $556,619 (82%) of the total operating expenses of $680,965
during the current six-month period in 2021 as compared to $449,744 for the same
period last year. In addition, Chemrex incurred a loss of $38,238 from fair
value investments and a loss of $111,945 from unrealized and realized forex
transactions during the current period. The increase in Chemrex operating
expenses for the current period due to was due to increase logistics, port
charges and travel associated with the increased revenue for the period.
BioNexus had incurred $44,128 on operating expenses during for the current
six-month period in 2021 as compared to $47,254 for the same period last year.
The higher operating expenses for the last period was due to the $9,890
write-off of an investment in Genenews Diagnostics Sdn. Bhd., a local screening
company. The write off should have occurred in 2018. The $3,126 decrease in
operating expenses during the current period was off-set by higher logistic
expenses and staff' over time associated with the outsource of our Covid 19
tests.
Profit from Operations. We had a profit from operations of $482,123 during the
six-month period ended June 30, 2021 compared to $1,039,556 for the same period
in 2020, a reduction of 115.6% for the reasons discussed above. In addition,
during 2020 period, we had one-time property disposal gain of $742,487.
Income tax expense. For the quarterly period ended June 30, 2021, we had
$108,280 for the period as compared with $1,347 for the six-month period ended
June 30, 2020. The provision is for the estimated tax on net income.
Foreign currency exchange gain/(loss). We are exposed to fluctuations in foreign
exchange rates on the revaluation of monetary assets and liabilities denominated
in currencies other than the US Dollar. Therefore, any change in the relevant
exchange rate will require us to recognize a transaction gain or loss on
revaluation. For the six-month period ended June 30, 2021, we experienced a
foreign currency loss of $215,936 compared with a foreign currency loss of
$251,138 for the six-month period ended June 30, 2020.
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LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2021, we had working capital of $4,522,777 compared with working
capital of $4,611,896 as of December 31, 2020. The decrease in working capital
as of June 30, 2021 from December 31, 2020 was due principally to the increase
in cash used in our operations.
Our primary uses of cash have been for operations. The main sources of cash have
been from operational revenues and the private placement of our common stock.
The following trends are reasonably likely to result in a material decrease in
our liquidity over the near to long term:
· Addition of administrative and marketing personnel as the business grows,
· Development of a Company website,
· Increases in advertising and marketing in order to attempt to generate
more revenues, and
· The cost of being a public company.
The Company believes that cash flow from operations together will be sufficient
to sustain its current level of operations for at least the next 12 months of
operations.
The following is a summary of the Company's cash flows provided by (used in) /
generated from operating, investing, and financing activities for the six months
ended June 30, 2021 and 2020:
Six months ended
June 30,
2021 2020
Net Cash Used in Operating Activities $ (819,892 ) $ (1,134,546 )
Net cash (used in) /generated from investing
activities (325,528 ) 1,732,109
Net cash used in generated from financing activities (17,182 ) (9,389 )
Foreign currency translation adjustment
(142,385 ) (160,139 )
Net Change in Cash and Cash Equivalents $ (1,304,987 ) $ 428,035
Operating Activities
During the six months ended June 30, 2021, the Company incurred a net profit of
$367,006 which, after adjusting for amortization, depreciation, dividend income,
fair value on investment, an increase in inventories, a reduction in trade
receivables and deposits, a substantial reduction in trade payables, operating
lease liabilities, resulted in net cash of $819,892 being used in operating
activities during the period. By comparison, during the six months ended June
30, 2020, the Company had a net profit of $1,033,803 which, after adjusting for
amortization, depreciation, dividend income, gain on disposal of property, plant
and equipment, a decrease in inventories, an increase in receivables and
deposits, a substantial reduction in trade payables, operating lease
liabilities, resulted in net cash of $1,134,546 being used in operating
activities during the period.
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Investing Activities
During the six months ended June 30, 2021, the Company had net cash of $325,528
used in investment activities. During the six months ended June 30, 2020, the
Company had net cash from acquisition of business under common control and
disposed of property, plant and equipment of $1,467,865, resulting in net cash
generated from investment activities of $1,732,109
Financing Activities
During the six months ended June 30, 2021, Company continued the repayment of a
finance lease resulting in net cash used in financing activities of $17,182. By
comparison, during the six months ended June 30, 2020, we had financing
activities of $9,389 due to 6 months moratorium on leasing and loan instalments
as initiated by the Malaysian Prime Minister in order to lessen the hardship
faced by individual borrowers and Small and Medium Enterprises to enjoy an
automatic monthly loan instalments moratorium for six months, starting from
April 1, 2020 till September 30, 2020
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