BioNexus Gene Lab Corp 8-K/A, filed Mar 11, 2021
BioNexus Gene Lab Corp (BGLC)
About this 8-K/A
BioNexus Gene Lab Corp filed this 8-K/A on March 11, 2021, reporting on events of December 31, 2020.
Items reported
- Item 1.01: Entered into a material agreement
- Item 2.01: Completed an acquisition or sale of assets
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 31, 2020
| BIONEXUS GENE LAB CORP. |
| (Exact name of registrant as specified in its charter) |
| Wyoming |
| 333-229399 |
| 35-2604830 |
| (State or other jurisdiction of incorporation or organization) |
| Commission file number |
| (IRS Employer Identification No.) |
Unit 2, Level 10, Tower B, Avenue 3,
The Vertical Business Suite II
Bangsar South
No. 8, Jalan Kerinchi
59200, Kuala Lumpur
(Address of principal executive offices)
+60 1221-26512
(Registrant’s telephone number)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to anticipated future events, future results of operations or future financial performance. These forward-looking statements include, but are not limited to, statements related to our ability to raise sufficient capital to finance our planned operations. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology.
These forward-looking statements are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties and other factors which may cause our (or our industry’s) actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. The “Risk Factors” section of this Current Report on Form 8-K sets forth detailed risks, uncertainties and cautionary statements regarding our business and these forward-looking statements.
We cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these forward-looking statements, which speak only as of the date that they were made. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to reflect actual results, later events or circumstances or to reflect the occurrence of unanticipated events.
Preliminary Statements:
Unless the context requires otherwise, all references to “us,” “we,” “our,” “Company,” or “BioNexus” means BioNexus Gene Lab Corp. This Current Report on Form 8-K responds to the following items of Form 8-K:
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| Item 1.01 | Entry into a Material Definitive Agreement. |
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| Item 2.01 | Completion of Acquisition or Disposition of Assets. |
| 2 |
Explanatory Note
This Amendment No. 1 on Form 8-K/A (the “Form 8-K/A”) amends and supplements the Current Report on Form 8-K of BioNexus filed with the Securities and Exchange Commission (the “SEC”) on December 31, 2020 (the “Initial Form 8-K”). The Initial Form 8-K reported under Item 1.0, among other Items, that the Company had completed the acquisition (the “Acquisition”) of Chemrex Corporation Sdn. Bhd., a Malaysian company ("Chemrex"), on December 31, 2020.
The Acquisition was completed pursuant to a Share Exchange Agreement entered into on December 24, 2020, by and among the Company, Chemrex and the shareholders of Chemrex (filed as Exhibit 10.5 to the Company’s Form 8-K filed on December 30, 2020).
This Form 8-K/A provides the financial statements and unaudited pro forma financial information as required by Item 9.01 of Form 8- K. It also adds Item 2.01 Completion of Acquisition or Disposition of Assets to the disclosure, which was inadvertently omitted in the Initial Filing.
Apart from the above, no other modification to the Initial Form 8-K is being made by this Form 8-K/A. The information previously reported in or filed with the Initial Form 8-K is hereby incorporated by reference into this Form 8-K/A.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of business acquired.
The financial statements required by this Item are attached hereto as Exhibits 99.1 and 99.2 and incorporated herein by reference.
(b) Pro forma financial information.
The pro forma financial information required by this Item is attached hereto as Exhibit 99.3 and incorporated herein by reference.
(c) Exhibits
| Exhibit No. |
| DESCRIPTION |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| BIONEXUS GENE LAB CORP. |
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| Date: March 11, 2021 | By: | /s/ Chan Chong Wong |
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| Chan Chong Wong |
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| Chief Executive Officer |
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EXHIBIT 99.1
CHEMREX CORPORATION SDN. BHD.
INDEX TO THE AUDITED FINANCIAL STATEMENTS
Years Ended December 31, 2019 and 2018
TABLE OF CONTENTS
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| Report of Independent Registered Public Accounting Firm |
| 2 |
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| Balance Sheets |
| 3 |
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| Statements of Operations and Other Comprehensive Income (Loss) |
| 4 |
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| Statements of Stockholders’ Equity |
| 5 |
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| Statements of Cash Flows |
| 6 |
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| Notes to the Financial Statements |
| 7- 13 |
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| 1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Chemrex Corporation Sdn. Bhd.
No. 4, Jalan CJ 1/6
Kawasan Perusahaan Cheras Jaya
43200 Cheras
Selangor Darul Ehsan
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Chemrex Corporation Sdn. Bhd. (the ‘Company’) as of December 31, 2019 and 2018, and the related statements of operations and other comprehensive income/(loss), stockholders’ equity, and cash flows for each of two years in years ended of December 31, 2019 and 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of two years in the year ended December 31, 2019 and 2018, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.
We have served as the Company’s auditor since 2020.
| /s/ JP Centurion & Partners PLT JP Centurion & Partners PLT |
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| Kuala Lumpur, Malaysia |
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| March 31, 2021 |
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Chemrex Corporation Sdn. Bhd.
Balance Sheets
December 31, 2019 and 2018
Expressed in United States Dollars
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| December 31, |
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| December 31, |
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| 2019 |
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| 2018 |
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| ASSETS |
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| Current Assets |
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| Inventories |
| $ | 1,315,627 |
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| $ | 1,293,943 |
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| Trade receivables |
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| 4,346,817 |
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| 4,050,135 |
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| Other receivables, deposits and prepayments |
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| 73,295 |
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| 20,841 |
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| Tax assets |
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| - |
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| 8,348 |
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| Cash and bank balances |
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| 346,008 |
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| 21,215 |
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| Total Current Assets |
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| 6,081,747 |
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| 5,394,482 |
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| Property, plant and equipment, net |
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| 1,878,073 |
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| 1,917,151 |
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| Other investments |
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| 147,882 |
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| 67,157 |
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| Total Non-Current Assets |
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| 2,025,955 |
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| 1,984,308 |
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| TOTAL ASSETS |
| $ | 8,107,702 |
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| $ | 7,378,790 |
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| LIABILITIES AND STOCKHOLDERS' EQUITY |
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| Current Liabilities |
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| Trade payables |
| $ | 3,163,122 |
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| $ | 1,725,190 |
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| Accrued liabilities and other payables |
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| 608,216 |
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| 112,142 |
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| Amount owing to Directors |
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| - |
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| 914,482 |
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| Borrowings |
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| 3,258 |
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| 659,008 |
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| Tax payable |
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| 31,182 |
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| - |
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| Total Current Liabilities |
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| 3,805,778 |
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| 3,410,822 |
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| Deferred tax liabilities |
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| 3,107 |
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| 3,698 |
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| Borrowings |
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| 3,912 |
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| 255,231 |
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| Total Non-Current Liabilities |
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| 7,019 |
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| 258,929 |
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| TOTAL LIABILITIES |
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| 3,812,797 |
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| 3,669,751 |
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| Stockholders' Equity |
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| Share capital |
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| 395,306 |
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| 395,306 |
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| Accumulated other comprehensive loss |
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| (36,913 | ) |
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| (82,420 | ) |
| Accumulated surplus |
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| 3,936,512 |
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| 3,396,153 |
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| Total Stockholders’ Equity |
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| 4,294,905 |
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| 3,709,039 |
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| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ | 8,107,702 |
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| $ | 7,378,790 |
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The notes are an integral part of these financial statements.
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Chemrex Corporation Sdn. Bhd.
Statements of Operations and Other Comprehensive Income (Loss)
For the Years Ended December 31, 2019 and 2018
Expressed in United States Dollars
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| For the Year Ended |
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| December 31, |
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| 2019 |
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| 2018 |
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| Revenue |
| $ | 15,417,992 |
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| $ | 11,904,853 |
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| Cost of revenue |
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| (13,487,421 | ) |
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| (10,381,987 | ) |
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| Gross profit |
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| 1,930,571 |
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| 1,522,866 |
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| Other income |
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| 89,504 |
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| 115,387 |
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| Operating expenses - general and administrative |
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| (1,277,055 | ) |
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| (994,449 | ) |
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| Profit from operations |
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| 743,020 |
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| 643,804 |
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| Finance costs |
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| (26,571 | ) |
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| (62,254 | ) |
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| Profit before provision for income taxes |
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| 716,449 |
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| 581,550 |
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| Provision for income taxes |
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| (176,090 | ) |
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| (145,189 | ) |
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| Net income |
| $ | 540,359 |
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| $ | 436,361 |
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| Other comprehensive income/(loss) |
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| 45,507 |
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| (82,420 | ) |
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| Total comprehensive income |
| $ | 585,866 |
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| $ | 353,941 |
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| Basic and diluted income per share of common stock |
| $ | 0.34 |
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| $ | 0.27 |
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| Weighted average number of shares of common stock outstanding |
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| 1,600,000 |
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| 1,600,000 |
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The notes are an integral part of these financial statements.
| 4 |
Chemrex Corporation Sdn. Bhd.
Statements of Stockholders’ Equity
For the Years Ended December 31, 2019 and 2018
Expressed in United States Dollars
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| Share Capital |
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| Accumulated Other |
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| Total |
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| Number of Shares |
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| Amount |
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| Accumulated Surplus |
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| Comprehensive Income/(Loss) |
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| Stockholders' Equity |
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| Balance - December 31, 2017 |
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| 1,600,000 |
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| $ | 395,306 |
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| $ | 2,959,792 |
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| $ | - |
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| $ | 3,355,098 |
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| Net income |
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| - |
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| - |
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| 436,361 |
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| - |
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| 436,361 |
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| Other comprehensive loss |
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| - |
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| - |
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| - |
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| (82,420 | ) |
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| (82,420 | ) |
| Balance - December 31, 2018 |
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| 1,600,000 |
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| $ | 395,306 |
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| $ | 3,396,153 |
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| $ | (82,420 | ) |
| $ | 3,709,039 |
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| Net income |
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| - |
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| - |
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| 540,359 |
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| - |
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| 540,359 |
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| Other comprehensive income |
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| - |
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| - |
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| - |
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| 45,507 |
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| 45,507 |
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| Balance - December 31, 2019 |
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| 1,600,000 |
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| $ | 395,306 |
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| $ | 3,936,512 |
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| $ | (36,913 | ) |
| $ | 4,294,905 |
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The notes are an integral part of these financial statements
| 5 |
Chemrex Corporation Sdn. Bhd.
Statements of Cash Flows
For the Years Ended December 31, 2019 and 2018
Expressed in United States Dollars
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| For the Year Ended |
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| December 31, |
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| 2019 |
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| 2018 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net income |
| $ | 540,359 |
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| $ | 436,361 |
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| Adjustment to reconcile profit to net cash from/(used in) operating activities: |
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| Bad debts written off |
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| 7,224 |
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| 3,593 |
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| Depreciation of property, plant and equipment |
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| 59,452 |
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| 86,574 |
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| Dividend income |
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| (2,574 | ) |
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| (294 | ) |
| Fair value (gain)/loss of other investments |
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| (17,459 | ) |
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| 15,832 |
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| Gain on disposal of property, plant and equipment |
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| - |
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| (3,469 | ) |
| Finance costs |
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| 26,571 |
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| 62,254 |
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| Unrealized foreign exchange loss/(gain) |
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| 4,708 |
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| (35,876 | ) |
| Operating profit before changes in working capital |
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| 618,281 |
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| 564,975 |
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| Changes in operating assets and liabilities: |
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| Inventories |
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| (8,090 | ) |
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| 37,196 |
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| Trade receivables |
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| (266,120 | ) |
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| (405,702 | ) |
| Other receivables, deposits and prepayments |
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| (52,235 | ) |
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| 3,767 |
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| Trade payables |
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| 1,419,863 |
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| (224,491 | ) |
| Accrued liabilities and other payables |
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| 494,896 |
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| 24,000 |
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| Amount owing to Directors |
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| (924,089 | ) |
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| 145,068 |
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| Tax payable |
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| 38,988 |
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| (38,342 | ) |
| Net Cash Provided by Operating Activities |
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| 1,321,494 |
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| 106,471 |
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| CASH FLOWS FROM INVESTING ACTIVITIES: |
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| Addition in other investments |
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| (62,348 | ) |
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| (68,628 | ) |
| Dividend received |
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| 2,574 |
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| 294 |
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| Proceeds from disposal of property, plant and equipment |
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| - |
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| 3,385 |
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| Purchase of property, plant and equipment |
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| (953 | ) |
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| (40,245 | ) |
| Net Cash Used in Investing Activities |
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| (60,727 | ) |
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| (105,194 | ) |
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| CASH FLOWS FROM FINANCING ACTIVITIES: |
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| Interests paid |
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| (26,571 | ) |
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| (62,254 | ) |
| Repayment of term loans |
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| (264,174 | ) |
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| (12,368 | ) |
| (Repayment)/ Withdrawal of short-term borrowings |
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| (510,829 | ) |
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| 125,740 |
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| Repayment of obligation under finance lease |
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| (6,242 | ) |
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| (10,781 | ) |
| Net Cash (Used in) / Provided by Financing Activities |
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| (807,816 | ) |
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| 40,337 |
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| Effect of Exchange Rate Changes |
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| 5,862 |
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| 944 |
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| Net increase in cash and cash equivalents |
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| 458,813 |
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| 42,558 |
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| Cash and cash equivalents, beginning of the year |
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| (112,805 | ) |
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| (155,363 | ) |
| Cash and cash equivalents, end of the year |
| $ | 346,008 |
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| $ | (112,805 | ) |
The notes are an integral part of these financial statements.
| 6 |
Chemrex Corporation Sdn. Bhd.
Notes to the Financial Statements
December 31, 2019 and 2018
Expressed in United States Dollars
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Chemrex Corporation Sdn. Bhd. (“we,” “us,” “our,” the “Company,” or “CCSB”) is a private limited liability company, incorporated in Malaysia.
The registered office of business of the Company is located at 87-2, Jalan Pudu Ulu, 56100, Kuala Lumpur.
Chemrex wholesales chemicals and resins for the manufacturers in industrial, medical components and equipment industries with customers located across South East Asia, Middle East and South India.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States and presented in United States dollars.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.
Foreign Currency Translation and Re-measurement
The Company translates its foreign operations to U.S. dollar in accordance with ASC 830, “Foreign Currency Matters”.
Translation of amounts from the local currency of the Company into US$1.00 has been made at the following exchange rates for the respective years:
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| December 31, 2019 |
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| December 31, 2018 |
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| Year-end USD : MYR exchange rate |
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| 4.093 |
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| 4.136 |
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| January 1, 2019 to December 31, 2019 |
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| January 1, 2018 to December 31, 2018 |
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| Yearly average USD : MYR exchange rate |
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| 4.135 |
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| 4.035 |
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The Company’s functional currency is Malaysian Ringgit (“MYR”) and reporting currency is the U.S. dollar.
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The Company translates its records into U.S. dollar as follows:
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| · | Assets and liabilities at the rate of exchange in effect at the balance sheet date |
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| · | Equities at historical rate |
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| · | Revenue and expense items at the average rate of exchange prevailing during the period |
Financial Instruments
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities and other payable, deferred revenue and due to related parties. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.
Property, plant and equipment
Property, plant and equipment are recorded at cost. Depreciation is calculated using straight line method over the estimated useful lives of the assets. The useful lives are as follows:
| Buildings |
| 50 years |
|
| Equipment |
| 5 years |
|
| Furniture and fittings |
| 10 years |
|
| Motor vehicle |
| 5 years |
|
| Office equipment |
| 5 years |
|
| Renovation |
| 10 years |
|
| Signboard |
| 10 years |
|
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use.
Maintenance and repairs are charged to operations as incurred. Expenditures which substantially increase the useful lives of the related assets are capitalized. When properties are disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is reported in the period the transaction takes place.
Accounting for the impairment of long-lived assets
The long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assets to be held and used is by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the year ended December 31, 2019 and 2018, the Company did not impair any long-lived assets.
Inventories
Inventories consisting of products available for sell, are stated at the lower of cost or market value. Cost of inventory is determined using the weighted average method. Inventory reserve is recorded to write down the cost of inventory to the estimated market value due to slow-moving merchandise and damaged goods, which is dependent upon factors such as historical and forecasted consumer demand, and promotional environment. The Company takes ownership, risks and rewards of the products purchased. Write downs are recorded in cost of revenues in the Condensed Statements of Operations and Comprehensive Income.
| 8 |
Leases
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases, which was subsequently amended in 2018 by ASU 2018-10, ASU 2018-11 and ASU 2018-20 (collectively, Topic 842). Topic 842 will require the recognition of a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments, for all leases with terms longer than 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income and the repayment of the principal portion of the lease liability will be classified as a financing activity while the interest component will be included in the operating section of the statement of cash flows. Topic 842 is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. Topic 842 allows for a cumulative-effect adjustment in the period the new lease standard is adopted and will not require restatement of prior periods.
Prior to January 1, 2019, the Company accounted for leases under ASC 840, Accounting for Leases. Effective July 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods.
Revenue Recognition
Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services.
The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
|
| · | identify the contract with a customer; |
|
| · | identify the performance obligations in the contract; |
|
| · | determine the transaction price; |
|
| · | allocate the transaction price to performance obligations in the contract; and |
|
| · | recognize revenue as the performance obligation is satisfied. |
The Company records revenue at point in time which is recognized upon goods delivered or services rendered.
Income Taxes and Deferred Taxes
Tax expense in profit or loss comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination or items recognized directly in equity or other comprehensive income.
Deferred tax is recognized using the liability method for all temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognized for the temporary differences arising from the initial recognition of goodwill, the initial recognition of assets and liabilities in a transaction which is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.
Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
| 9 |
NOTE 3 – TRADE RECEIVABLES
The Company has performed an analysis on all its trade receivables and determined that all amounts are collectible by the Company. As such, trade receivables are reflected as a current asset and no allowance for expected credit loss has been recorded as of December 31, 2019 and 2018. A total of $7,224 and $3,593 of bad debts were written off for the year ended December 31, 2019 and 2018, respectively. The Company’s trade receivables consist of receivable from customers which are unrelated to the Company. The account receivables are non-interest bearing and is generally on 30 days to 90 days term. As at December 31, 2019 and 2018, the Company recorded $4,346,817 and $4,050,135 trade receivables, respectively.
NOTE 4 – OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS
Other receivables, deposits and prepayments at December 31, 2019 and 2018 consist of the following:
|
|
| December 31, |
|
| December 31, |
| ||
|
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
|
| ||
| Other receivables, deposits and prepayments |
| $ | 73,295 |
|
| $ | 20,841 |
|
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 2019 and 2018 consist of the following:
|
|
| December 31, |
|
| December 31, |
| ||
|
|
| 2019 |
|
| 2018 |
| ||
| Cost: |
|
|
|
|
|
| ||
| Equipment |
| $ | 43,357 |
|
| $ | 43,357 |
|
| Furniture and fittings |
|
| 83,373 |
|
|
| 82,528 |
|
| Land and buildings |
|
| 1,926,794 |
|
|
| 1,926,794 |
|
| Motor vehicle |
|
| 24,593 |
|
|
| 24,593 |
|
| Office equipment |
|
| 30,208 |
|
|
| 30,111 |
|
| Renovation |
|
| 105,448 |
|
|
| 105,448 |
|
| Signboard |
|
| 712 |
|
|
| 712 |
|
|
|
|
| 2,214,485 |
|
|
| 2,213,543 |
|
| Less: accumulated depreciation |
|
| (290,287 | ) |
|
| (230,835 | ) |
| Foreign exchange translation |
|
| (46,125 | ) |
|
| (65,557 | ) |
| Property, plant and equipment, net |
| $ | 1,878,073 |
|
| $ | 1,917,151 |
|
During the year ended December 31, 2019 and 2018, the Company recorded depreciation of $59,452 and $86,574, respectively.
| 10 |
NOTE 6 – OTHER INVESTMENTS
|
|
| December 31, |
|
| December 31, |
| ||
|
|
| 2019 |
|
| 2018 |
| ||
| As of beginning of the year |
| $ | 67,157 |
|
| $ | 14,280 |
|
| Addition during the year |
|
| 62,348 |
|
|
| 68,628 |
|
| Fair value gain/(loss) |
|
| 17,459 |
|
|
| (15,832 | ) |
| Foreign exchange translation |
|
| 918 |
|
|
| 81 |
|
| As of end of the year |
| $ | 147,882 |
|
| $ | 67,157 |
|
The other investments consist of investment in quoted shares in Malaysia.
NOTE 7 – CASH AND CASH EQUIVALENTS
For the purpose of presentation in the statement of cash flows, cash and cash equivalents consist of cash on hand, bank balances and deposits with licensed banks, with original maturities of three months or less that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value, net of bank overdrafts.
|
|
| December 31, |
|
| December 31, |
| ||
|
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
|
| ||
| Cash and bank balances |
| $ | 346,008 |
|
| $ | 21,215 |
|
| Less: Bank overdraft |
|
| - |
|
|
| (134,020 | ) |
| Presented in statement of cash flows |
| $ | 346,008 |
|
| $ | (112,805 | ) |
NOTE 8 – TRADE PAYABLES
Trade payables at December 31, 2019 and 2018 were $3,163,122 and $1,725,190, respectively. Trade payables are amounts billed to the Company by suppliers for goods and services in the ordinary course of business. All amounts have short-term repayment terms and vary by supplier.
NOTE 9 - ACCRUED LIABILITIES AND OTHER PAYABLES
Accrued liabilities and other payables at December 31, 2019 and 2018 consist of the following:
|
|
| December 31, |
|
| December 31, |
| ||
|
|
| 2019 |
|
| 2018 |
| ||
| Accrued liabilities and other payables |
| $ | 608,216 |
|
| $ | 112,142 |
|
Included in the accrued liabilities and other payables is an amount of $518,148 representing the deposits received for a disposal of property which completed in financial year December 31, 2020.
NOTE 10 – AMOUNT OWING TO DIRECTORS
The amount owing to Directors as at December 31, 2018 was unsecured, interest-free and repayable on demand. The amount was repaid in 2019.
| 11 |
NOTE 11 – BORROWINGS
The Company’s borrowings as at December 31, 2019 and 2018 are as follows:
|
|
| December 31, |
|
| December 31, |
| ||
|
|
| 2019 |
|
| 2018 |
| ||
| Non-current |
|
|
|
|
|
| ||
| Finance lease liabilities |
| $ | 3,912 |
|
| $ | 7,096 |
|
| Term loan - secured |
|
| - |
|
|
| 248,135 |
|
|
|
|
| 3,912 |
|
|
| 255,231 |
|
| Current |
|
|
|
|
|
|
|
|
| Term loan - secured |
|
| - |
|
|
| 13,293 |
|
| Overdrafts |
|
| - |
|
|
| 134,020 |
|
| Short-term borrowings |
|
| - |
|
|
| 505,518 |
|
| Finance lease liabilities |
|
| 3,258 |
|
|
| 6,177 |
|
|
|
|
| 3,258 |
|
|
| 659,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 7,170 |
|
| $ | 914,239 |
|
The Company purchased motor vehicles under a finance lease agreement with principal and interest payable monthly.
The Company’s term loan is secured by pledging over the Company’s property and guaranteed by Directors and this loan was fully settled in 2019.
NOTE 12 - STOCKHOLDERS’ EQUITY
Ordinary shares
The Company has authorized share capital of MYR1,600,000. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
The Company has no stock option plan, warrants or other dilutive securities.
| 12 |
NOTE 13 – INCOME TAXES
The Company provides for income taxes under ASC 740, “Income Taxes. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. It also requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company is operating in Malaysia and is subject to the Malaysia Corporate Tax which is charged at the statutory income tax rate range is 24% on its assessable income. Under the amendment of Income Tax Act 1967 by the Finance Act 2019 and with effect from year of assessment 2019 (2018: year of assessment 2018), companies with paid-up capital of MYR2.5 million or less, and with annual business income of not more than RM50 million are subject to Small and Medium Enterprise Corporate Tax at 17% (2018: 18%) on chargeable income up to MYR500,000 (2018: MYR500,000) except for companies with investment holding nature or companies does not have gross income from business sources are subject to corporate tax at 24% on chargeable income.
During the year ended December 31, 2019 and 2018, the Company recorded income taxes of $176,090 and $145,189, respectively.
NOTE 14 – SIGNIFICANT EVENTS
On 11 March 2020, the World Health Organization declared the Coronavirus (“Covid-19”) outbreak to be a pandemic, which has caused severe global social and economic disruptions and uncertainties, including markets where the Company operates or intends to operate. The Company is actively monitoring and managing its operations to respond to these changes, the Company does not consider it practicable to provide any quantitative estimate on the potential impact it may have on the Company as the outbreak continue to evolve as of the date of this report.
NOTE 15 - SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date these financial statements were available to be issued. Based on our evaluation no material events have occurred that require disclosure.
| 13 |
EXHIBIT 99.2
CHEMREX CORPORATION SDN. BHD.
INDEX TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS
9 MONTHS ENDED SEPTEMBER 30, 2020
TABLE OF CONTENTS
|
|
| Page |
| |
|
|
|
|
| |
| Balance Sheets |
|
| 2 |
|
|
|
|
|
|
|
| Statements of Operations and Other Comprehensive Income/(Loss) |
|
| 3 |
|
|
|
|
|
|
|
| Statements of Stockholders’ Equity |
|
| 4 |
|
|
|
|
|
|
|
| Statements of Cash Flows |
|
| 5 |
|
|
|
|
|
|
|
| Notes to the Unaudited Financial Statements |
|
| 6-12 |
|
| 1 |
Chemrex Corporation Sdn. Bhd.
Balance Sheets
September 30, 2020 and December 31, 2019
Expressed in United States Dollars
(unaudited)
|
|
| September 30, |
|
| December 31, |
| ||
|
|
| 2020 |
|
| 2019 |
| ||
| ASSETS |
|
|
|
|
|
| ||
| Current Assets |
|
|
|
|
|
| ||
| Inventories |
| $ | 1,178,775 |
|
| $ | 1,315,627 |
|
| Trade receivables |
|
| 3,568,699 |
|
|
| 4,346,817 |
|
| Other receivables, deposits and prepayments |
|
| 7,154 |
|
|
| 73,295 |
|
| Cash and bank balances |
|
| 1,502,869 |
|
|
| 346,008 |
|
| Total Current Assets |
|
| 6,257,497 |
|
|
| 6,081,747 |
|
|
|
|
|
|
|
|
|
|
|
| Property, plant and equipment, net |
|
| 1,075,877 |
|
|
| 1,878,073 |
|
| Other investments |
|
| 229,129 |
|
|
| 147,882 |
|
| Total Non-Current Assets |
|
| 1,305,006 |
|
|
| 2,025,955 |
|
|
|
|
|
|
|
|
|
|
|
| TOTAL ASSETS |
| $ | 7,562,503 |
|
| $ | 8,107,702 |
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current Liabilities |
|
|
|
|
|
|
|
|
| Trade payables |
| $ | 1,924,495 |
|
| $ | 3,163,122 |
|
| Accrued liabilities and other payables |
|
| 17,905 |
|
|
| 608,216 |
|
| Borrowings |
|
| 5,940 |
|
|
| 3,258 |
|
| Tax payable |
|
| 304,091 |
|
|
| 31,182 |
|
| Total Current Liabilities |
|
| 2,252,431 |
|
|
| 3,805,778 |
|
|
|
|
|
|
|
|
|
|
|
| Deferred tax liabilities |
|
| 3,061 |
|
|
| 3,107 |
|
| Borrowings |
|
| - |
|
|
| 3,912 |
|
| Total Non-Current Liabilities |
|
| 3,061 |
|
|
| 7,019 |
|
|
|
|
|
|
|
|
|
|
|
| TOTAL LIABILITIES |
|
| 2,255,492 |
|
|
| 3,812,797 |
|
|
|
|
|
|
|
|
|
|
|
| Stockholders' Equity |
|
|
|
|
|
|
|
|
| Share capital |
|
| 395,306 |
|
|
| 395,306 |
|
| Accumulated other comprehensive loss |
|
| (82,246 | ) |
|
| (36,913 | ) |
| Accumulated surplus |
|
| 4,993,951 |
|
|
| 3,936,512 |
|
| Total Stockholders’ Equity |
|
| 5,307,011 |
|
|
| 4,294,905 |
|
|
|
|
|
|
|
|
|
|
|
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ | 7,562,503 |
|
| $ | 8,107,702 |
|
The notes are an integral part of these unaudited financial statements.
| 2 |
Chemrex Corporation Sdn. Bhd.
Statements of Operations and Other Comprehensive Income/(Loss)
Expressed in United States Dollars
(Unaudited)
|
|
| For the Nine Months Period Ended |
| |||||
|
|
| September 30, |
| |||||
|
|
| 2020 |
|
| 2019 |
| ||
| Revenue |
| $ | 7,234,543 |
|
| $ | 11,424,657 |
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenue |
|
| (5,882,174 | ) |
|
| (9,837,243 | ) |
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
| 1,352,369 |
|
|
| 1,587,414 |
|
|
|
|
|
|
|
|
|
|
|
| Other income |
|
| 759,437 |
|
|
| 58,990 |
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses - general and administrative |
|
| (694,475 | ) |
|
| (850,879 | ) |
|
|
|
|
|
|
|
|
|
|
| Profit from operations |
|
| 1,417,331 |
|
|
| 795,525 |
|
|
|
|
|
|
|
|
|
|
|
| Finance costs |
|
| (5,282 | ) |
|
| (18,465 | ) |
|
|
|
|
|
|
|
|
|
|
| Profit before provision for income taxes |
|
| 1,412,049 |
|
|
| 777,060 |
|
|
|
|
|
|
|
|
|
|
|
| Provision for income taxes |
|
| (354,610 | ) |
|
| (202,021 | ) |
|
|
|
|
|
|
|
|
|
|
| Net income |
| $ | 1,057,439 |
|
| $ | 575,039 |
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income / (loss) |
|
| (45,333 | ) |
|
| (65,361 | ) |
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income |
| $ | 1,012,106 |
|
| $ | 509,678 |
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted income per share of common stock |
| $ | 0.66 |
|
| $ | 0.36 |
|
| Weighted average number of shares of common stock outstanding |
|
| 1,600,000 |
|
|
| 1,600,000 |
|
The notes are an integral part of these unaudited financial statements.
| 3 |
Chemrex Corporation Sdn. Bhd.
Statements of Stockholders’ Equity
For the Period Ended September 30, 2020 and 2019
Expressed in United States Dollars
(Unaudited)
|
|
| Share Capital |
|
|
|
|
| Accumulated Other |
|
| Total |
| ||||||||
|
|
| Number of Shares |
|
| Amount |
|
| Accumulated Surplus |
|
| Comprehensive Income/(Loss) |
|
| Stockholders' Equity |
| |||||
| Balance - December 31, 2018/ January 1, 2019 |
|
| 1,600,000 |
|
| $ | 395,306 |
|
| $ | 3,396,153 |
|
| $ | (82,420 | ) |
| $ | 3,709,039 |
|
| Net income |
|
| - |
|
|
| - |
|
|
| 575,039 |
|
|
| - |
|
|
| 575,039 |
|
| Other comprehensive loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (65,361 | ) |
|
| (65,361 | ) |
| Balance - September 30, 2019 |
|
| 1,600,000 |
|
| $ | 395,306 |
|
| $ | 3,971,192 |
|
| $ | (147,781 | ) |
| $ | 4,218,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance - December 31, 2019/ January 1, 2020 |
|
| 1,600,000 |
|
| $ | 395,306 |
|
| $ | 3,936,512 |
|
| $ | (36,913 | ) |
| $ | 4,294,905 |
|
| Net income |
|
| - |
|
|
| - |
|
|
| 1,057,439 |
|
|
| - |
|
|
| 1,057,439 |
|
| Other comprehensive expenses |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (45,333 | ) |
|
| (45,333 | ) |
| Balance - September 30, 2020 |
|
| 1,600,000 |
|
| $ | 395,306 |
|
| $ | 4,993,951 |
|
| $ | (82,246 | ) |
| $ | 5,307,011 |
|
The notes are an integral part of these unaudited financial statements.
| 4 |
Chemrex Corporation Sdn. Bhd.
Statements of Cash Flows
Expressed in United States Dollars
(Unaudited)
|
|
| For the Nine Months Period Ended |
| |||||
|
|
| September 30, |
| |||||
|
|
| 2020 |
|
| 2019 |
| ||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
| Net income |
| $ | 1,057,439 |
|
| $ | 575,039 |
|
| Adjustment to reconcile profit to net cash from/(used in) operating activities: |
|
|
|
|
|
|
|
|
| Bad debts written off |
|
| - |
|
|
| 1,324 |
|
| Depreciation of property, plant and equipment |
|
| 30,736 |
|
|
| 44,893 |
|
| Dividend income |
|
| (4,850 | ) |
|
| (1,824 | ) |
| Gain on disposal of property, plant and equipment |
|
| (701,447 | ) |
|
| - |
|
| Finance costs |
|
| 5,282 |
|
|
| 18,465 |
|
| Operating profit before changes in working capital |
|
| 387,160 |
|
|
| 637,897 |
|
|
|
|
|
|
|
|
|
|
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Inventories |
|
| 117,065 |
|
|
| (416,045 | ) |
| Trade receivables |
|
| 717,805 |
|
|
| (490,255 | ) |
| Other receivables, deposits and prepayments |
|
| 65,040 |
|
|
| (5,959 | ) |
| Trade payables |
|
| (1,226,262 | ) |
|
| 1,721,560 |
|
| Accrued liabilities and other payables |
|
| (581,176 | ) |
|
| 274,652 |
|
| Amount owing to Directors |
|
| - |
|
|
| (186,706 | ) |
| Tax payable |
|
| 273,378 |
|
|
| 71,593 |
|
| Net Cash (Used in)/Provided by Operating Activities |
|
| (246,990 | ) |
|
| 1,606,737 |
|
|
|
|
|
|
|
|
|
|
|
| CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
| Addition in other investments |
|
| (109,822 | ) |
|
| - |
|
| Dividend received |
|
| 4,850 |
|
|
| 1,824 |
|
| Proceeds from disposal of other investments |
|
| 26,350 |
|
|
| - |
|
| Proceeds from disposal of property, plant and equipment |
|
| 1,467,865 |
|
|
| - |
|
| Purchase of property, plant and equipment |
|
| (1,062 | ) |
|
| (931 | ) |
| Net Cash Provided by Investing Activities |
|
| 1,388,181 |
|
|
| 893 |
|
|
|
|
|
|
|
|
|
|
|
| CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
| Interests paid |
|
| (5,282 | ) |
|
| (18,465 | ) |
| Repayment of term loans |
|
| - |
|
|
| (258,059 | ) |
| Repayment of short-term borrowings |
|
| - |
|
|
| (499,004 | ) |
| Repayment of obligation under finance lease |
|
| (1,122 | ) |
|
| (5,009 | ) |
| Net Cash Used in Financing Activities |
|
| (6,404 | ) |
|
| (780,537 | ) |
|
|
|
|
|
|
|
|
|
|
| Effect of Exchange Rate Changes |
|
| 22,074 |
|
|
| (9,278 | ) |
|
|
|
|
|
|
|
|
|
|
| Net increase in cash and cash equivalents |
|
| 1,156,861 |
|
|
| 817,815 |
|
| Cash and cash equivalents, beginning of the year |
|
| 346,008 |
|
|
| (112,805 | ) |
| Cash and cash equivalents, end of the year |
| $ | 1,502,869 |
|
| $ | 705,010 |
|
The notes are an integral part of these unaudited financial statements.
| 5 |
Chemrex Corporation Sdn. Bhd.
Notes to the Unaudited Financial Statements
September 30, 2020 and 2019
Expressed in United States Dollars
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Chemrex Corporation Sdn. Bhd. (“we,” “us,” “our,” the “Company,” or “CCSB”) is a private limited liability company, incorporated in Malaysia.
The registered office of business of the Company is located at 87-2, Jalan Pudu Ulu, 56100 Kuala Lumpur.
Chemrex wholesales chemicals and resins for the manufacturers in industrial, medical components and equipment industries with customers located across South East Asia, Middle East and South India.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States and presented in United States dollars.
In the opinion of management, the consolidated balance sheet as of December 31, 2019 which has been derived from audited financial statements and these unaudited consolidated financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2020 or for any future period.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.
Foreign Currency Translation and Re-measurement
The Company translates its foreign operations to U.S. dollar in accordance with ASC 830, “Foreign Currency Matters”.
Translation of amounts from the local currency of the Company into US$1.00 has been made at the following exchange rates for the respective years:
|
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||
| Year-end USD : MYR exchange rate |
|
| 4.156 |
|
|
| 4.093 |
|
|
|
| January 1, 2020 to September 30, 2020 |
|
| January 1, 2019 to September 30, 2019 |
| ||
|
|
|
| ||||||
| Period-end average USD : MYR exchange rate |
|
| 4.234 |
|
|
| 4.135 |
|
| 6 |
The Company’s functional currency is Malaysian Ringgit (“MYR”) and reporting currency is the U.S. dollar.
The Company translates its records into U.S. dollar as follows:
|
| · | Assets and liabilities at the rate of exchange in effect at the balance sheet date |
|
| · | Equities at historical rate |
|
| · | Revenue and expense items at the average rate of exchange prevailing during the period |
Financial Instruments
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities and other payable, deferred revenue and due to related parties. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.
Property, plant and equipment
Property, plant and equipment are recorded at cost. Depreciation is calculated using straight line method over the estimated useful lives of the assets. The useful lives are as follows:
| Buildings |
| 50 years |
|
| Equipment |
| 5 years |
|
| Furniture and fittings |
| 10 years |
|
| Motor vehicle |
| 5 years |
|
| Office equipment |
| 5 years |
|
| Renovation |
| 10 years |
|
| Signboard |
| 10 years |
|
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use
Maintenance and repairs are charged to operations as incurred. Expenditures which substantially increase the useful lives of the related assets are capitalized. When properties are disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is reported in the period the transaction takes place.
Accounting for the impairment of long-lived assets
The long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assets to be held and used is by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the year ended September 30, 2020 and 2019, the Company did not impair any long-lived assets.
| 7 |
Inventories
Inventories consisting of products available for sell, are stated at the lower of cost or market value. Cost of inventory is determined using the weighted average method. Inventory reserve is recorded to write down the cost of inventory to the estimated market value due to slow-moving merchandise and damaged goods, which is dependent upon factors such as historical and forecasted consumer demand, and promotional environment. The Company takes ownership, risks and rewards of the products purchased. Write downs are recorded in cost of revenues in the Condensed Statements of Operations and Comprehensive Income.
Leases
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases, which was subsequently amended in 2018 by ASU 2018-10, ASU 2018-11 and ASU 2018-20 (collectively, Topic 842). Topic 842 will require the recognition of a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments, for all leases with terms longer than 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income and the repayment of the principal portion of the lease liability will be classified as a financing activity while the interest component will be included in the operating section of the statement of cash flows. Topic 842 is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. Topic 842 allows for a cumulative-effect adjustment in the period the new lease standard is adopted and will not require restatement of prior periods.
Prior to January 1, 2019, the Company accounted for leases under ASC 840, Accounting for Leases. Effective July 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods.
Revenue Recognition
Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services.
The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
|
| · | identify the contract with a customer; |
|
| · | identify the performance obligations in the contract; |
|
| · | determine the transaction price; |
|
| · | allocate the transaction price to performance obligations in the contract; and |
|
| · | recognize revenue as the performance obligation is satisfied. |
The Company records revenue at point in time which is recognized upon goods delivered or services rendered.
| 8 |
Income Taxes and Deferred Taxes
Tax expense in profit or loss comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination or items recognized directly in equity or other comprehensive income.
Deferred tax is recognized using the liability method for all temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognized for the temporary differences arising from the initial recognition of goodwill, the initial recognition of assets and liabilities in a transaction which is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.
Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
NOTE 3 – TRADE RECEIVABLES
The Company has performed an analysis on all its trade receivables and determined that all amounts are collectible by the Company. As such, trade receivables are reflected as a current asset and no allowance for expected credit loss has been recorded as of September 30, 2020 and December 31, 2019. Total of $Nil and $1,324 of bad debts were written off for the period ended September 30, 2020 and September 30, 2019, respectively. The Company’s trade receivables consist of receivable from customers which are unrelated to the Company. The account receivables are non-interest bearing and is generally on 30 days to 90 days term. As of September 30, 2020 and December 31, 2019, the Company recorded $3,568,699 and $4,346,817 trade receivables, respectively.
NOTE 4 – OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS
Other receivables, deposits and prepayments at September 30, 2020 and December 31, 2019 consist of the following:
|
|
| September 30, |
|
| December 31, |
| ||
|
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Other receivables, deposits and prepayments |
| $ | 7,154 |
|
| $ | 73,295 |
|
| 9 |
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at September 30, 2020 and December 31, 2019 consist of the following:
|
|
| September 30, |
|
| December 31, |
| ||
|
|
| 2020 |
|
| 2019 |
| ||
| Cost: |
|
|
|
|
|
| ||
| Equipment |
| $ | 43,357 |
|
| $ | 43,357 |
|
| Furniture and fittings |
|
| 83,373 |
|
|
| 83,373 |
|
| Land and buildings |
|
| 1,117,606 |
|
|
| 1,926,794 |
|
| Motor vehicle |
|
| 24,593 |
|
|
| 24,593 |
|
| Office equipment |
|
| 30,955 |
|
|
| 30,208 |
|
| Renovation |
|
| 105,743 |
|
|
| 105,448 |
|
| Signboard |
|
| 712 |
|
|
| 712 |
|
|
|
|
| 1,406,339 |
|
|
| 2,214,485 |
|
| Less: accumulated depreciation |
|
| (264,338 | ) |
|
| (290,287 | ) |
| Foreign exchange translation |
|
| (66,124 | ) |
|
| (46,125 | ) |
| Property, plant and equipment, net |
| $ | 1,075,877 |
|
| $ | 1,878,073 |
|
During the period ended September 30, 2020 and September 30, 2019, the Company recorded depreciation of $30,736 and $44,893, respectively.
During the period ended September 30, 2020, the Company disposed of a property at a consideration of $1,467,865 with a gain of disposal of $701,447.
NOTE 6 – OTHER INVESTMENTS
|
|
| September 30, |
|
| December 31, |
| ||
|
|
| 2020 |
|
| 2019 |
| ||
| As of beginning of the year |
| $ | 147,882 |
|
| $ | 67,157 |
|
| Addition during the year |
|
| 109,822 |
|
|
| 62,348 |
|
| Disposal during the year |
|
| (26,350 | ) |
|
| - |
|
| Fair value gain |
|
| - |
|
|
| 17,459 |
|
| Foreign exchange translation |
|
| (2,225 | ) |
|
| 918 |
|
| As of end of the year |
| $ | 229,129 |
|
| $ | 147,882 |
|
The other investments consist of investment in quoted shares in Malaysia.
NOTE 7 – TRADE PAYABLES
Trade payables at September 30, 2020 and December 31, 2019 were $1,924,495 and $3,163,122, respectively. Trade payables are amounts billed to the Company by suppliers for goods and services in the ordinary course of business. All amounts have short-term repayment terms and vary by supplier.
| 10 |
NOTE 8 - ACCRUED LIABILITIES AND OTHER PAYABLES
Accrued liabilities and other payables at September 30, 2020 and December 31, 2019 consist of the following:
|
|
| September 30, |
|
| December 31, |
| ||
|
|
| 2020 |
|
| 2019 |
| ||
| Accrued liabilities and other payables |
| $ | 17,905 |
|
| $ | 608,216 |
|
NOTE 9 – BORROWINGS
The Company’s borrowings as at September 30, 2020 and December 31, 2019 are as follows:
|
|
| September 30, |
|
| December 31, |
| ||
|
|
| 2020 |
|
| 2019 |
| ||
| Finance lease liabilities - current |
|
| 5,940 |
|
|
| 3,258 |
|
| Finance lease liabilities – non-current |
|
| - |
|
|
| 3,912 |
|
|
|
| $ | 5,940 |
|
| $ | 7,170 |
|
The Company purchased motor vehicles under a finance lease agreement with principal and interest payable monthly.
NOTE 10 - STOCKHOLDERS’ EQUITY
Ordinary shares
The Company has authorized share capital of MYR1,600,000. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
The Company has no stock option plan, warrants or other dilutive securities.
| 11 |
NOTE 11 – INCOME TAXES
The Company provides for income taxes under ASC 740, “Income Taxes. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. It also requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company is operating in Malaysia and is subject to the Malaysia Corporate Tax which is charged at the statutory income tax rate range is 24% on its assessable income. Under the amendment of Income Tax Act 1967 by the Finance Act 2019 and with effect from year of assessment 2020, companies with paid-up capital of MYR2.5 million or less, and with annual business income of not more than RM50 million are subject to Small and Medium Enterprise Corporate Tax at 17% on chargeable income up to MYR600,000 (2019: MYR500,000) except for companies with investment holding nature or companies does not have gross income from business sources are subject to corporate tax at 24% on chargeable income.
NOTE 12 – SIGNIFICANT EVENTS
On 11 March 2020, the World Health Organization declared the Coronavirus (“Covid-19”) outbreak to be a pandemic, which has caused severe global social and economic disruptions and uncertainties, including markets where the Company operates or intends to operate. The Company is actively monitoring and managing its operations to respond to these changes, the Company does not consider it practicable to provide any quantitative estimate on the potential impact it may have on the Company as the outbreak continue to evolve as of the date of this report.
NOTE 13 - SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date these financial statements were available to be issued. Based on our evaluation no material events have occurred that require disclosure.
| 12 |
EXHIBIT 99.3
BIONEXUS GENE LAB CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2020
|
|
| Historical |
|
| Pro Forma |
|
| Pro Forma |
| |||||||
|
|
| BGLC |
|
| CCSB |
|
| (Note 3) |
|
| Combined |
| ||||
| Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Current assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Cash and cash equivalents |
| $ | 687,203 |
|
| $ | 1,502,869 |
|
| $ | - |
|
| $ | 2,190,072 |
|
| Other receivables and deposits |
|
| 13,847 |
|
|
| 7,154 |
|
|
| - |
|
|
| 21,001 |
|
| Trade receivables |
|
| - |
|
|
| 3,568,699 |
|
|
| - |
|
|
| 3,568,699 |
|
| Inventories |
|
| 19,165 |
|
|
| 1,178,775 |
|
|
| - |
|
|
| 1,197,940 |
|
| Total current assets |
|
| 720,215 |
|
|
| 6,257,497 |
|
|
| - |
|
|
| 6,977,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating lease right-of-use assets, net |
|
| 14,258 |
|
|
| - |
|
|
| - |
|
|
| 14,258 |
|
| Property, plant and equipment, net |
|
| 276,866 |
|
|
| 1,075,877 |
|
|
| - |
|
|
| 1,352,743 |
|
| Other investments |
|
| 1,880 |
|
|
| 229,129 |
|
|
| - |
|
|
| 231,009 |
|
| Total non-current assets |
|
| 293,004 |
|
|
| 1,305,006 |
|
|
| - |
|
|
| 1,598,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets |
| $ | 1,013,219 |
|
| $ | 7,562,503 |
|
| $ | - |
|
| $ | 8,575,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Trade payables |
| $ | - |
|
| $ | 1,924,495 |
|
| $ | - |
|
| $ | 1,924,495 |
|
| Other payables and accrued liabilities |
|
| 6,452 |
|
|
| 17,905 |
|
|
| - |
|
|
| 24,357 |
|
| Current portion of obligation under finance lease |
|
| 19,886 |
|
|
| 5,940 |
|
|
| - |
|
|
| 25,826 |
|
| Current portion of obligation under operating liabilities |
|
| 11,152 |
|
|
| - |
|
|
| - |
|
|
| 11,152 |
|
| Tax payables |
|
| 673 |
|
|
| 304,091 |
|
|
| - |
|
|
| 304,764 |
|
| Total current liabilities |
|
| 38,163 |
|
|
| 2,252,431 |
|
|
| - |
|
|
| 2,290,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current portion of obligation under finance lease |
|
| 39,500 |
|
|
| - |
|
|
| - |
|
|
| 39,500 |
|
| Non-current portion of obligation under operating liabilities |
|
| 3,966 |
|
|
| - |
|
|
| - |
|
|
| 3,966 |
|
| Deferred tax liabilities |
|
| - |
|
|
| 3,061 |
|
|
| - |
|
|
| 3,061 |
|
| Total non-current liabilities |
|
| 43,466 |
|
|
| 3,061 |
|
|
| - |
|
|
| 46,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
| 81,629 |
|
|
| 2,255,492 |
|
|
| - |
|
|
| 2,337,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock |
|
| 6,484,669 |
|
|
| 395,306 |
|
|
| 4,911,705 |
|
|
| 11,791,680 |
|
| Additional paid in capital |
|
| (5,011,891 | ) |
|
| - |
|
|
| - |
|
|
| (5,011,891 | ) |
| Accumulated (deficit)/surplus |
|
| (507,836 | ) |
|
| 4,993,951 |
|
|
| (4,993,951 | ) |
|
| (507,836 | ) |
| Accumulated other comprehensive (loss)/income |
|
| (33,352 | ) |
|
| (82,246 | ) |
|
| 82,246 |
|
|
| (33,352 | ) |
| Total stockholders’ equity |
|
| 931,590 |
|
|
| 5,307,011 |
|
|
| - |
|
|
| 6,238,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities and stockholders’ equity |
| $ | 1,013,219 |
|
| $ | 7,562,503 |
|
| $ | - |
|
| $ | 8,575,722 |
|
See accompanying notes to unaudited pro forma condensed combined financial statements.
| 1 |
BIONEXUS GENE LAB CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2020
|
|
| Historical |
|
| Pro Forma |
|
| Pro Forma |
| |||||||
|
|
| BGLC |
|
| CCSB |
|
| Adjustments |
|
| Combined |
| ||||
| Revenue |
| $ | 30,012 |
|
| $ | 7,234,543 |
|
| $ | - |
|
| $ | 7,264,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Costs of revenue |
|
| (45,561 | ) |
|
| (5,882,174 | ) |
|
| - |
|
|
| (5,927,735 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross (loss)/profit |
|
| (15,549 | ) |
|
| 1,352,369 |
|
|
| - |
|
|
| 1,336,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other income |
|
| 10,548 |
|
|
| 759,437 |
|
|
| - |
|
|
| 769,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other expenses – general administrative |
|
| (167,685 | ) |
|
| (694,475 | ) |
|
| - |
|
|
| (862,160 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Loss)/Profit from operations |
|
| (172,686 | ) |
|
| 1,417,331 |
|
|
| - |
|
|
| 1,244,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Finance costs |
|
| - |
|
|
| (5,282 | ) |
|
| - |
|
|
| (5,282 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (loss)/profit before taxation |
|
| (172,686 | ) |
|
| 1,412,049 |
|
|
| - |
|
|
| 1,239,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income tax expense |
|
| (1,839 | ) |
|
| (354,610 |
|
|
| - |
|
|
| (356,449 | ) |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| Net (loss)/income attributable to common shareholders |
| $ | (174,525 | ) |
| $ | 1,057,439 |
|
| $ | - |
|
| $ | 882,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency translation (loss)/gain |
|
| (16,249 | ) |
|
| (45,333 | ) |
|
| - |
|
|
| (61,582 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive (loss)/income per share attributable to common shareholders — basic and diluted |
| $ | (190,774 | ) |
| $ | 1,012,106 |
|
| $ | - |
|
| $ | 821,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted income per share of common stock |
| $ | - |
|
| $ | 0.66 |
|
| $ | - |
|
| $ | 0.005 |
|
| Weighted average number of shares of common stock outstanding * |
|
| 102,730,891 |
|
|
| 1,600,000 |
|
|
| 66,887,261 |
|
|
| 171,218,152 |
|
* Proforma as adjusted shares are not weighted average and are actual shares issued and outstanding
See accompanying notes to unaudited pro forma condensed combined financial statements.
| 2 |
BIONEXUS GENE LAB CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2019
|
|
| Historical |
|
| Pro Forma |
|
| Pro Forma |
| |||||||
|
|
| BGLC |
|
| CCSB |
|
| Adjustments |
|
| Combined |
| ||||
| Revenue |
| $ | 126,955 |
|
| $ | 15,417,992 |
|
| $ | - |
|
| $ | 15,544,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Costs of revenue |
|
| (71,067 | ) |
|
| (13,487,421 | ) |
|
| - |
|
|
| (13,558,489 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
| 55,888 |
|
|
| 1,930,571 |
|
|
| - |
|
|
| 1,986,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other income |
|
| 25,048 |
|
|
| 89,504 |
|
|
| - |
|
|
| 114,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other expenses – general administrative |
|
| (356,641 | ) |
|
| (1,277,055 | ) |
|
| - |
|
|
| (1,633,696 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Loss)/Profit from operations |
|
| (275,705 | ) |
|
| 743,020 |
|
|
| - |
|
|
| 467,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Finance costs |
|
| - |
|
|
| (26,571 | ) |
|
| - |
|
|
| (26,571 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (loss)/profit before taxation |
|
| (275,705 | ) |
|
| 716,449 |
|
|
| - |
|
|
| 440,744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income tax expense |
|
| 29,236 |
|
|
| (176,090 | ) |
|
| - |
|
|
| (146,854 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (loss)/income attributable to common shareholders |
| $ | (246,469 | ) |
| $ | 540,359 |
|
| $ | - |
|
| $ | 293,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income: |
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| Foreign currency translation gain |
|
| 9,874 |
|
|
| 45,507 |
|
|
|
|
|
|
| 55,381 |
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| Total comprehensive (loss)/income per share attributable to common shareholders — basic and diluted |
| $ | (236,595 | ) |
| $ | 585,866 |
|
| $ |
|
| $ | 349,271 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted income per share of common stock |
| $ | - |
|
| $ | 0.34 |
|
| $ | - |
|
| $ | 0.002 |
|
| Weighted average number of shares of common stock outstanding * |
|
| 102,730,891 |
|
|
| 1,600,000 |
|
|
| 66,887,261 |
|
|
| 171,218,152 |
|
* Proforma as adjusted shares are not weighted average and are actual shares issued and outstanding
See accompanying notes to unaudited pro forma condensed combined financial statements.
| 3 |
BIONEXUS GENE LAB CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements are based on the historical financial statements of Bionexus Gene Lab Corp. (“BGLC”) and Chemrex Corporation Sdn. Bhd. (“CCSB”) after giving effect to BGLC’s acquisition of CCSB (“the Acquisition”) and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The effective date of the Acquisition was December 31, 2020.
Note 1. Basis of Pro Forma Presentation
The unaudited pro forma condensed combined financial statements are not intended to represent or be indicative of the results of operations or financial position of BGLC that would have been reported had the Acquisition been completed as of the dates presented, and should not be taken as representative of the future results of operations or financial position of BGLC. The unaudited pro forma financial statements, including the notes thereto, do not reflect any potential operating efficiencies and cost savings that BGLC may achieve with respect to the combined companies. The unaudited pro forma condensed combined financial statements and notes thereto should be read in conjunction with the historical financial statements of BGLC included in the annual report on Form 10-K for the year ended December 31, 2019 had been filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2020 and the subsequent quarterly report on Form 10-Q for the nine months ended September 30, 2020 filed with the SEC on November 9, 2020, and in conjunction with the historical financial statements of CCSB included in this Form 8-K.
The unaudited pro forma condensed combined balance sheet as of September 30, 2020 is presented as if the Acquisition occurred on September 30, 2020. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 is presented as if the Acquisition had taken place on January 1, 2020. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 is presented as if the Acquisition had taken place on January 1, 2019.
Note 2. CCSB Acquisition
On December 31, 2020, BGLC, a Wyoming corporation consummated its acquisition of CCSB, pursuant to a Share Exchange Agreement (the “SEA”) by BGLC and CCSB. BioNexus desires to acquire all of the issued and outstanding shares of capital stock of CCSB from the CCSB Shareholders in exchange for 68,487,261 shares of BGLC, and, similarly, the CCSB Shareholders desire to acquire 68,487,261 shares of common stock of BGLC in exchange for all of their shares of common stock of the Acquired Corporation, all in a transaction that qualifies under Section 354 and 368(a)(1)(b) of the Internal Revenue Code of 1986, as amended (“Exchange”). The transfer of CCSB’s shares to BGLC was completed on February 9, 2021.
The acquisition of CCSB has been accounted for as a common control transaction as there is no change in the control over the assets acquired and liabilities assumed. The net assets are derecognized by the transferring entity (i.e. CCSB) and recognized by the receiving entity (i.e. BGLC). The difference between the consideration transferred and the carrying amounts of the net assets is recognized in equity.
See accompanying notes to unaudited pro forma condensed combined financial statements.
| 4 |
BIONEXUS GENE LAB CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 3. Pro Forma Adjustments
The following pro forma adjustments are included in the unaudited pro forma condensed combined balance sheet:
(A) To record the following adjustments to common stocks:
| Increase in common stocks via shares exchange |
| $ | 157,520,700 |
|
| Recognition of difference between the consideration and net assets acquired |
|
| (152,213,689 | ) |
| Effect of shares exchange with CCSB |
|
| 5,307,011 |
|
| Elimination of common stocks of CCSB |
|
| (395,306 | ) |
| Pro Forma adjustments |
| $ | 4,911,705 |
|
| Balance as of September 30, 2020 (Unaudited) - BGLG |
| $ | 6,484,669 |
|
| - CCSB |
|
| 395,306 |
|
| Pro Forma adjustments |
|
| 4,911,705 |
|
| Pro Forma Combined as of September 30, 2020 |
| $ | 11,791,680 |
|
(B) To record the following adjustments to accumulated (deficit)/surplus:
| Balance as of September 30, 2020 (Unaudited) |
| $ | (507,836 | ) |
|
|
|
|
|
|
| Effect of acquisition of CCSB |
|
| 4,993,951 |
|
| Elimination of pre-acquisition equity account of CCSB |
|
| (4,993,951 | ) |
|
|
|
|
|
|
| Pro Forma Combined as of September 30, 2020 |
| $ | (507,836 | ) |
(C) To record the following adjustments to accumulated other comprehensive (loss)/income:
| Balance as of September 30, 2020 (Unaudited) |
| $ | (33,352 | ) |
|
|
|
|
|
|
| Effect of acquisition of CCSB |
|
| 82,246 |
|
| Elimination of pre-acquisition equity account of CCSB |
|
| (82,246 | ) |
|
|
|
|
|
|
| Pro Forma Combined as of September 30, 2020 |
| $ | (33,352 | ) |
See accompanying notes to unaudited pro forma condensed combined financial statements.
| 5 |