BioNexus Gene Lab Corp 10-Q for FY2021 Q3
BioNexus Gene Lab Corp (BGLC)
About this 10-Q
BioNexus Gene Lab Corp filed this 10-Q on November 15, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $3.58M
- up 15.7% from $3.09M a year earlier
- Net income
- $295.32K
- up 26.0% from net income of $234.46K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________
Commission File Number:
(Exact name of registrant as specified in its charter) |
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(State or Other Jurisdiction of |
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(Address of Principal Executive Offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer, “ “ accelerated filer, “ “non-accelerated filer ,” “ smaller reporting company, “ and “ emerging growth company “ in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 9, 2021, there were
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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PART I — FINANCIAL INFORMATION
ITEM 1. Financial Statements
BIONEXUS GENE LAB CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2021 AND DECEMBER 31, 2020
(Currency expressed in United States Dollars (“US$”))
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ASSETS |
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CURRENT ASSETS |
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Cash and bank balances |
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Fixed deposits placed with financial institutions |
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Trade receivables |
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Other receivables, deposits and prepayments |
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Tax Recoverable |
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Inventories |
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Total current assets |
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NON-CURRENT ASSETS |
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Operating lease right of use asset, net |
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Property, plant and equipment, net |
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Other investments |
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Total non-current assets |
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TOTAL ASSETS |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES |
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Trade payables |
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Other payables and accrued liabilities |
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Current portion of obligation under finance lease |
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Current portion of operating lease liabilities |
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Tax payables |
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Amount owing to director |
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Total current liabilities |
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See accompanying notes to the condensed consolidated financial statements.
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| Table of Contents |
ITEM 1. FINANCIAL STATEMENTS (CONT’D)
BIONEXUS GENE LAB CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2021 AND DECEMBER 31, 2020
(Currency expressed in United States Dollars (“US$”))
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NON-CURRENT LIABILITIES |
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Non-current portion of obligation under finance lease |
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Non-current portion of operating lease liabilities |
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Deferred tax liabilities |
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Total non-current liabilities |
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TOTAL LIABILITIES |
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STOCKHOLDERS’ EQUITY |
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As at September 30, 2021, common stock, no par value; 300,000,000 shares authorized and 171,218,152 shares outstanding, and preferred stock, no par value; 30,000,000 shares authorized and no shares outstanding. As at December 31, 2020, common stock, no par value; 300,000,000 shares authorized and 171,218,152 shares outstanding, and preferred stock, no par value; 30,000,000 shares authorized and no shares outstanding. |
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Additional paid in capital |
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Accumulated surplus |
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Other comprehensive (losses) /income |
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TOTAL STOCKHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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See accompanying notes to the condensed consolidated financial statements.
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BIONEXUS GENE LAB CORP.
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
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REVENUE |
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COST OF REVENUE |
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GROSS PROFIT |
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OTHER INCOME |
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OPERATING EXPENSES |
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General and administrative |
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PROFIT FROM OPERATIONS |
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FINANCE COSTS |
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PROFIT BEFORE TAX |
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Tax expense |
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NET PROFIT |
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Other comprehensive income: |
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Foreign currency translation (loss)/gain |
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COMPREHENSIVE INCOME |
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Earnings per share - Basic and diluted |
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Weighted average number of common shares outstanding – Basic and diluted |
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See accompanying notes to the condensed consolidated financial statements.
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| Table of Contents |
BIONEXUS GENE LAB CORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
AS OF SEPTEMBER 30, 2021 AND 2020
(Amount expressed in United States Dollars (“US$))
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Balance as of December 31, 2019 |
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Issuance of shares |
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Net profit for the period |
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Foreign currency translation loss |
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Balance as of March 31, 2020 |
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Net loss for the period |
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Foreign currency translation gain |
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Balance as of June 30, 2020 |
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Net profit for the period |
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Foreign currency translation gain |
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Balance as of September 30, 2020 |
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See accompanying notes to the condensed consolidated financial statements.
| 6 |
| Table of Contents |
BIONEXUS GENE LAB CORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
AS OF SEPTEMBER 30, 2021 AND 2020
(Amount expressed in United States Dollars (“US$))
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| Accumulated |
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| Total |
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| Number of shares |
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| capital |
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| surplus/(loss) |
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| Equity |
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Balance as of December 31, 2020 |
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Net profit for the period |
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Foreign currency translation loss |
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Balance as of March 31, 2021 |
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| $ | (74,784 | ) |
| $ | 6,792,430 |
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Net profit for the period |
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| 28,262 |
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| 28,262 |
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Foreign currency translation loss |
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| (7,468 | ) |
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Balance as of June 30, 2021 |
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| 171,218,152 |
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| $ | 10,779,574 |
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| $ | (5,011,891 | ) |
| $ | 1,127,793 |
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| $ | (82,252 | ) |
| $ | 6,813,224 |
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Net profit for the period |
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| 295,322 |
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| 295,322 |
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Foreign currency translation loss |
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| (56,940 | ) |
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Balance as of September 30, 2021 |
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| 171,218,152 |
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| $ | 10,779,574 |
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| $ | (5,011,891 | ) |
| $ | 1,423,115 |
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| $ | (139,192 | ) |
| $ | 7,051,606 |
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See accompanying notes to the condensed consolidated financial statements.
| 7 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30 2021 AND 2020
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
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Cash flows from operating activities: |
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Net profit |
| $ |
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| $ | 1,268,261 |
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Adjustments to reconcile net profit to net cash generated from operating activities: |
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Amortization of right of use asset |
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Depreciation of property, plant and equipment |
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Dividend income |
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Fair value loss on other investments |
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Loss on disposal of other investments |
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Gain on disposal of property, plant and equipment |
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Operating profit before working capital changes |
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Changes in operating assets and liabilities: |
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Inventories |
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Trade and other receivables |
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Trade and other payables |
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Operating lease liabilities |
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Tax recoverable |
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Cash used in operating activities |
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Cash flows from investing activities: |
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Acquisition of other investment |
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Dividend income |
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Net cash from acquisition of business under common control |
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Purchase of plant and equipment |
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Proceeds from disposal of other investments |
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Proceeds from disposal of property, plant and equipment |
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Net cash (used in)/ generated from investing activities |
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| 8 |
| Table of Contents |
ITEM 1. FINANCIAL STATEMENTS (CONT’D)
BIONEXUS GENE LAB CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30 2021 AND 2020
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
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| Nine months ended |
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| September 30, |
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Cash flows from financing activities: |
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Repayment of finance lease |
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Repayment from Directors |
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Net cash used in from financing activities |
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Foreign currency translation adjustment |
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NET CHANGE IN CASH AND CASH EQUIVALENTS |
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CASH AND CASH EQUIVALENTS, BEGINNING OF FINANCIAL YEAR |
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CASH AND CASH EQUIVALENTS, END OF FINANCIAL YEAR |
| $ |
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| $ |
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CASH AND CASH EQUIVALENTS INFORMATION: |
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Fixed deposits placed with financial institutions |
| $ |
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| $ |
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Cash at bank |
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Cash and cash equivalents, end of financial year |
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| 1,700,396 |
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|
| 2,190,072 |
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information: |
|
|
|
|
|
|
|
|
Interest paid |
| $ | ( | ) |
| $ | ( | ) |
Income taxes paid |
|
| ( | ) |
|
| ( | ) |
See accompanying notes to the condensed consolidated financial statements.
| 9 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
NOTE 1 - BASIS OF PREPARATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.
In the opinion of management, the consolidated balance sheet as of September 30, 2021 which has been derived from unaudited financial statements and these unaudited condensed 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, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2021 or for any future period.
These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
NOTE 2 - ORGANIZATION AND BUSINESS BACKGROUND
BioNexus Gene Lab Corp. was incorporated in the State of Wyoming on May 12, 2017. On
On December 31, 2020, the Company consummated a Share Exchange Agreement with Chemrex Corporation Sdn. Bhd. (“Chemrex”) and the Chemrex shareholders pursuant to which we acquired all of the issued and outstanding shares of capital stock of Chemrex from the Chemrex shareholders in exchange for
The acquisition of Chemrex 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. Chemrex) and recognized by the receiving entity (i.e. the Company). The difference between the consideration transferred and the carrying amounts of the net assets is recognized in equity.
| 10 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
The corporate structure as at September 30, 2021 is depicted below:
|
|
| BioNexus Gene Lab Corp. a Wyoming company |
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
100% owned |
|
| 100% owned |
| |||
Bionexus Gene Lab Sdn. Bhd., a Malaysian company |
|
| Chemrex Corporation Sdn. Bhd., a Malaysian company |
| |||
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying consolidated financial statements and notes.
• | Basis of presentation |
The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
• | Basis of consolidation |
The condensed consolidated financial statements include the accounts of Bionexus Gene Lab Corp. and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
| 11 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
• | Use of estimates |
|
|
In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the periods reported. Actual results may differ from these estimates. | |
• | Cash and cash equivalents |
Cash and cash equivalents represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of nine months or less as of the purchase date of such investments.
• | Trade receivables |
Trade receivables are recorded at the invoiced amount and do not bear interest. Management reviews the adequacy of the allowance for expected credit losses on an ongoing basis, using historical collection trends and aging of receivables. Management also periodically evaluates individual customer’s financial condition, credit history, and the current economic conditions to make adjustments in the allowance when it is considered necessary. Trade balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
• | 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 first-in, first-out (FIFO) 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 Statement 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.
| 12 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
Prior to January 1, 2019, the Company accounted for leases under ASC 840, Accounting for Leases. Effective January 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.
• | Property, plant and equipment |
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis to write off the cost over the following expected useful lives of the assets concerned.
The principal annual rates used are as follows:
Categories |
| Principal Annual Rates |
| |
Air conditioner |
|
| % | |
Buildings |
|
| % | |
Computer and software |
|
| % | |
Equipment |
|
| % | |
Furniture and fittings |
| % | ||
Lab Equipment |
|
| % | |
Motor vehicle |
| % | ||
Office equipment |
|
| % | |
Renovation |
| % | ||
Signboard |
|
| % | |
Leasehold lands are depreciated over the period of lease term. 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.
Fully depreciated plant and equipment are retained in the financial statements until they are no longer in use.
| 13 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
• | Impairment of long-lived assets |
Long-lived assets primarily include goodwill, intangible assets and property, plant and equipment. In accordance with the provision of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, the Company generally conducts its annual impairment evaluation to its long-lived assets, usually in the fourth quarter of each fiscal year, or more frequently if indicators of impairment exist, such as a significant sustained change in the business climate. The recoverability of long-lived assets is measured at the lowest level group. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset. There has been no impairment charge for the years presented.
• | 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:
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.
• | Cost of revenues |
Cost of revenue includes the purchase cost of retail goods for re-sale to customers and packing materials (such as boxes). It excludes purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs and other costs of distribution network in cost of revenues.
| 14 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
• | Comprehensive income |
ASC Topic 220, “Comprehensive Income” establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying statements of stockholders’ equity consists of changes in unrealized gains and losses on foreign currency translation and cumulative net change in the fair value of available-for-sale investments held at the balance sheet date. This comprehensive income is not included in the computation of income tax expense or benefit.
• | Income taxes |
Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC Topic 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclosed in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
The Company conducts major businesses in Malaysia and is subject to tax in their own jurisdictions. As a result of its business activities, the Company will file separate tax returns that are subject to examination by the foreign tax authorities.
• | Net earnings or loss per share |
The Company calculates net earnings or loss per share in accordance with ASC Topic 260 “Earnings per share”. Basic earnings or loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted earnings or loss per share is computed similar to basic earning or loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
| 15 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
• | Foreign currencies translation |
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations.
The functional currency of the Company is the United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. In addition, the subsidiaries maintain its books and record in a local currency, Malaysian Ringgit (“MYR” or “RM”), which is functional currency as being the primary currency of the economic environment in which the subsidiaries operate.
In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income.
Translation of amounts from MYR into US$1.00 has been made at the following exchange rates for the respective period and year:
|
| September 30, 2021 |
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| December 31, 2020 |
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Period ended September 30, 2021 /Year-ended December 31, 2020 US$1: MYR exchange rate |
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| September 30, 2021 |
|
| September 30, 2020 |
| ||
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9 months average US$1: MYR exchange rate |
|
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| 4.2386 |
| |
• | Related parties |
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
| 16 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
• | Fair value of financial instruments |
The carrying value of the Company’s financial instruments: cash and cash equivalents, trade receivable, deposits and other receivables, amount due to related parties and other payables approximate at their fair values because of the short-term nature of these financial instruments.
The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a six-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
• | Level 1 : Observable inputs such as quoted prices in active markets; |
|
|
• | Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
• | Level 3 : Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions |
As of September 30, 2021, and December 31, 2020, the Company did not have any nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements, at least annually, on a recurring basis, nor did the Company have any assets or liabilities measured at fair value on a non-recurring basis.
• | Recent accounting pronouncements |
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
NOTE 4 - 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, 2021 and December, 31, 2020. The Company’s trade receivables consist of receivable from customers which are unrelated to the Company.
| 17 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
NOTE 5 - 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 statements 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.
Provision for income taxes consisted of the following:
United States of America, The Company is registered in the State of Wyoming and is subject to the tax laws of the United States of America.
|
| As of |
| |||||
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Tax Recoverable |
|
|
|
|
|
| ||
Local |
| $ |
|
| $ |
| ||
Foreign, representing Malaysia |
|
|
|
|
| ( | ) | |
Tax Recoverable |
|
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|
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| ( | ) | |
|
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Income tax liabilities: |
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Local |
| $ |
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| $ |
| ||
Foreign, representing Malaysia |
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Income tax liabilities |
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Deferred tax liabilities: |
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Local |
| $ |
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| $ |
| ||
Foreign, representing Malaysia |
|
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Deferred tax liabilities |
|
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Total |
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| 18 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
NOTE 6 - LEASE RIGHT OF USE ASSET AND LEASE LIABILITIES
Operating lease right of use as follow: |
| As of |
| |||||
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Balance as of beginning of the year |
| $ |
|
| $ |
| ||
Add: Addition of right of use assets |
|
|
|
|
|
| ||
Less: Amortization |
|
| ( | ) |
|
| ( | ) |
Foreign translation differences |
|
| ( | ) |
|
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| |
Balance |
| $ |
|
| $ |
| ||
|
|
|
|
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|
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|
Operating lease liability as follow: |
| As of | ||||||
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Balance as of beginning of the year |
| $ |
|
| $ |
| ||
Add: Addition of lease liabilities |
|
|
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|
| ||
Less: gross repayment |
|
| ( | ) |
|
| ( | ) |
Add: imputed interest |
|
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Foreign translation differences |
|
| ( | ) |
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Balance as of end of the year |
|
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Less: lease liability current portion |
|
| ( | ) |
|
| ( | ) |
Lease liability non-current portion |
| $ |
|
| $ |
| ||
The amortization of the operating lease right of use asset for the nine months’ period ended September 30, 2021 and the year ended September 30, 2020 were $
Other information: |
| As of |
| |||||
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Cash paid for amounts included in the measurement of lease liabilities: |
|
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Operating cash flow from operating lease |
| $ |
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| $ |
| ||
Right of use assets obtained in exchange for operating lease liabilities |
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Remaining lease term for operating lease (years) |
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Weighted average discount rate for operating lease |
| $ | % |
| $ | % | ||
| 19 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
NOTE 7 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
|
| As of |
| |||||
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
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|
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Air conditioner |
| $ |
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| $ |
| ||
Computer and software |
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Equipment |
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Furniture and fittings |
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Lab equipment |
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Land and buildings |
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Motor vehicle |
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Office equipment |
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Renovation |
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Signboard |
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(Less): Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Add: Foreign translation differences |
|
| ( | ) |
|
|
| |
Property, plant and equipment, net |
| $ |
|
| $ |
| ||
Depreciation expense for the nine months’ period ended September 30, 2021 and 2020 were $
NOTE 8 - OTHER INVESTMENTS
|
| As of |
| |||||
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
As of beginning of the year |
| $ |
|
| $ |
| ||
Acquisition of business under common control |
|
|
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|
| ||
Addition during the year |
|
|
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| ||
Disposal during the year |
|
| ( | ) |
|
| ( | ) |
Fair value (loss)/gain |
|
| ( | ) |
|
|
| |
Foreign exchange translation |
|
| ( | ) |
|
|
| |
As of end of the year |
| $ |
|
| $ |
| ||
The other investments consists of the following shares:
|
| As of |
| |||||
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Investment in quoted shares: |
|
|
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|
| ||
Malaysia |
|
|
|
|
|
| ||
Singapore |
|
|
|
|
|
| ||
Hong Kong |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
Investment in unquoted shares: |
|
|
|
|
|
|
|
|
Malaysia |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
| 20 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
NOTE 9 - TRADE PAYABLES
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 10 - FINANCE LEASE
The Company purchased motor vehicles under finance lease agreements with the effective interest rate of 5.70% per annum, with principal and interest payable monthly. The obligations under the finance lease are as follows:
|
| As of |
| |||||
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Finance lease |
| $ |
|
| $ |
| ||
Less: interest expense |
|
| ( | ) |
|
| ( | ) |
Net present value of finance lease |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Current portion |
|
|
|
|
|
| ||
Non-current portion |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
NOTE 11- AMOUNT OWING TO DIRECTOR
As of September 30, 2021, a director of the Company advanced Nil to the Company, which is unsecured, interest-free with no fixed repayment term, for working capital purpose. Imputed interest is considered insignificant.
NOTE 12 - STOCK HOLDERS’ EQUITY
As at September 30, 2021, the Company issued and outstanding common stock is
| 21 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
NOTE 13 - SEGMENTED INFORMATION
At September 30, 2021, the Company (“BGLC”) operates in the biochemical industry segment through its two Malaysian subsidiaries, BioNexus Malaysia and Chemrex.
|
|
| BioNexus Gene Lab Corp. a Wyoming company |
|
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| |
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| |
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| |
100% owned |
|
| 100% owned |
| |||
Bionexus Gene Lab Sdn. Bhd., a Malaysian company |
|
| Chemrex Corporation Sdn. Bhd., a Malaysian company |
| |||
For the quarter ended September 30, 2021, segmented (unaudited) revenue and net profit/(loss) (Currency expressed in United States Dollars (“US$”) are as follows:
|
| BioNexus Malaysia |
|
| Chemrex |
|
| BGLC |
|
| Total |
| ||||
|
| Nine months ended September 30, 2021 |
| |||||||||||||
REVENUE |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCE COSTS |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROFIT BEFORE TAX |
|
|
|
|
|
|
|
| ( | ) |
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET PROFIT/(LOSS) |
| $ |
|
| $ | 502,730 |
|
| $ | ( | ) |
| $ |
| ||
| 22 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
|
| BioNexus Malaysia |
|
| Chemrex |
|
| BGLC |
|
| Total |
| ||||
|
| Nine months ended September 30, 2020 |
| |||||||||||||
REVENUE |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS (LOSS)/PROFIT |
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCE COSTS |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS)/PROFIT BEFORE TAX |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense |
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS)/PROFIT |
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| ||
|
| As of September 30, 2021 and December 31, 2020 |
| |||||||||||||
|
| Total Assets |
|
| Total Liabilities |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
BGLC & Bionexus |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Chemrex |
|
|
|
|
|
|
|
|
|
|
|
| ||||
TOTAL |
|
|
|
|
|
|
|
|
|
|
|
| ||||
NOTE 14 - SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after September 30, 2021 up through November 9, 2021 of these consolidated financial statements.
| 23 |
| Table of Contents |
BIONEXUS GENE LAB CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
NOTE 15 - CONCENTRATION OF RISKS
a) Major customers
For three months ended September 30, 2021 and 2020, the customers who accounted for 10% or more of the Company’s revenues and its accounts received balance at period-end are presented as follows:
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||
|
| Revenues |
|
| Percentage of revenue |
|
| Accounts receivable trade |
| |||||||||||||||
Customer A |
| $ |
|
| $ |
|
|
| % |
|
|
|
| $ |
|
| $ | - |
| |||||
|
| $ |
|
| $ | - |
|
|
| % |
|
| - |
|
| $ |
|
| $ | - |
| |||
For nine months ended September 30, 2021 and 2020, there is no customers accounted for 10% or more of the Company’s revenues nor with significant outstanding receivables
b) Major suppliers
For three months ended September 30, 2021 and 2020, the vendors who accounted for 10% or more of the Company’s cost of sales and its accounts payable balance at period-end are presented as follows:
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||
|
| Purchase |
|
| Percentage of purchases |
|
| Accounts payable trade |
| |||||||||||||||
Vendor A |
| $ |
|
| $ |
|
|
| % |
|
| % |
| $ |
|
| $ |
| ||||||
Vendor B |
| $ |
|
| $ |
|
|
| % |
|
| % |
| $ |
|
| $ |
| ||||||
Vendor C |
| $ |
|
| $ |
|
|
| % |
|
| % |
| $ |
|
| $ |
| ||||||
|
| $ | 1,136,159 |
|
| $ | 743,134 |
|
|
| 39.35 | % |
|
| 28.92 | % |
| $ | 1,058,855 |
|
| $ | 679,197 |
|
For nine months ended September 30, 2021 and 2020, the vendors who accounted for 10% or more of the Company’s cost of sales and its accounts payable balance at period-end are presented as follows:
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||
|
| Purchase |
|
| Percentage of purchases |
|
| Accounts payable trade |
| |||||||||||||||
Vendor A |
| $ |
|
| $ |
|
|
| % |
|
| % |
| $ |
|
| $ |
| ||||||
Vendor B |
| $ |
|
| $ |
|
|
| % |
|
| % |
| $ |
|
| $ |
| ||||||
Vendor C |
| $ |
|
| $ | 616,834 |
|
|
| % |
|
| % |
| $ |
|
| $ |
| |||||
Vendor D |
| $ |
|
| $ |
|
|
| % |
|
| % |
| $ |
|
| $ |
| ||||||
|
| $ | 4,457,338 |
|
| $ | 3,514,899 |
|
|
| 53.19 | % |
|
| 59.30 | % |
| $ | 991,301 |
|
| $ | 1,594,049 |
|
| 24 |
| Table of Contents |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
| 25 |
| Table of Contents |
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 September 30, 2021, we completed roughly 13,635 tests at an average charge per test of $30.
Translation of amounts from MYR into US$1.00 has been made at the following exchange rates for the respective period and year:
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
|
|
|
|
|
|
| ||
Period ended September 30, 2021 /Year-ended December 31, 2020 US$1: MYR exchange rate |
|
| 4.1870 |
|
|
| 4.0170 |
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||
|
|
|
|
|
|
|
|
|
9 months average US$1: MYR exchange rate |
|
| 4.1315 |
|
|
| 4.2386 |
|
| 26 |
| Table of Contents |
Results of Operations
Three Months Ended September 30, 2021 Compared with the Three Months Ended September 30, 2020.
The following table sets forth key selected financial data for the three months ended September 30, 2021 and 2020.
Consolidated
|
| Three months ended |
| |||||
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
REVENUE |
| $ | 3,575,966 |
|
| $ | 3,091,012 |
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE |
|
| (2,887,867 | ) |
|
| (2,568,790 | ) |
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
| 688,099 |
|
|
| 522,222 |
|
|
|
|
|
|
|
|
|
|
OTHER INCOME |
|
| 46,848 |
|
|
| 9,089 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
General and administrative |
|
| (362,306 | ) |
|
| (294,005 | ) |
|
|
|
|
|
|
|
|
|
PROFIT FROM OPERATIONS |
|
| 372,641 |
|
|
| 237,306 |
|
|
|
|
|
|
|
|
|
|
FINANCE COSTS |
|
| (2,150 | ) |
|
| (2,356 | ) |
|
|
|
|
|
|
|
|
|
PROFIT BEFORE TAX |
|
| 370,491 |
|
|
| 234,950 |
|
|
|
|
|
|
|
|
|
|
Tax expense |
|
| (75,169 | ) |
|
| (492 | ) |
|
|
|
|
|
|
|
|
|
NET PROFIT |
| $ | 295,322 |
|
| $ | 234,458 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
Foreign currency (loss)/gain |
|
| (56,940 | ) |
|
| 248,070 |
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME |
| $ | 238,382 |
|
| $ | 482,528 |
|
| 27 |
| Table of Contents |
BioNexus-Malaysia and Chemrex
|
| BioNexus Malaysia |
|
| Chemrex |
|
| BioNexus Malaysia |
|
| Chemrex |
| ||||
|
| Three months ended September 30, 2021 |
|
| Three months ended September 30, 2020 |
| ||||||||||
REVENUE |
| $ | 1,038,594 |
|
| $ | 2,537,372 |
|
| $ | 23,471 |
|
| $ | 3,067,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE |
|
| (750,289 | ) |
|
| (2,137,578 | ) |
|
| (15,253 | ) |
|
| (2,553,537 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
| 288,305 |
|
|
| 399,794 |
|
|
| 8,218 |
|
|
| 514,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME |
|
| 1,488 |
|
|
| 45,360 |
|
|
| 2,895 |
|
|
| 6,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| (20,127 | ) |
|
| (287,002 | ) |
|
| (20,598 | ) |
|
| (223,469 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCE COSTS |
|
| (962 | ) |
|
| (1,188 | ) |
|
| (119 | ) |
|
| (2,237 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROFIT/(LOSS) BEFORE TAX |
|
| 268,704 |
|
|
| 156,964 |
|
|
| (9,604 | ) |
|
| 294,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense |
|
| (37,414 | ) |
|
| (37,755 | ) |
|
| (492 | ) |
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET PROFIT/(LOSS) |
| $ | 231,290 |
|
| $ | 119,209 |
|
| $ | (10,096 | ) |
| $ | 294,490 |
|
Revenue. For the quarterly period ended September 30, 2021, we had total revenue of $3,575,966 as compared to total revenue of $3,091,012 for the same period in 2020, an increase of approximately 15.70% from the prior period.
Chemrex contributed $2,537,372 (71%) of the total revenue for the current quarterly period as compared to $3,067,541 (99.2%) of the total revenue for the same quarter last year. Chemrex’s revenues had decreased to $530,169 from prior quarter of $3,067,541, a decrease of 17.3%. The revenue decrease in 2021 was due to some customers stopped business operation in July & August due to 2nd Covid-19 Movement Control Order (MCO) in Malaysia.
BioNexus-Malaysia contributed $1,038,594 (29%) of the total revenue for the current quarter as compared to revenue of $23,471 (0.8%) of the total revenue from the same quarter last year. BioNexus’s revenue had increase to $1,015,123 for the current period is due to the outsource of Covid19 PCR test from Ministry of Health (MOH) which began on May 2021 for contract value of $549,133 had completed in mid of July 2021 and an additional contract on July 23, 2021 for contract value of $859,804 had completed 99.4% as of Sep 30, 2021
Cost of Revenue. For the quarterly period ended September 30, 2021, we incurred $2,887,867 in cost of revenues, as compared to $2,568,790 for the same quarter in 2020, an increase of approximately 12.4%. Due to the reasons stated above.
Chemrex had incurred $2,137,578 (74%) of the total cost of revenue during the current quarter as compared to the same period last year wherein Chemrex had incurred $2,553,537 (99.4% of the total) in cost of revenue. The decreased of 16.3% in Chemrex’s cost of revenues for the current period was due to its decreased revenues for the current period and reasons as stated above.
BioNexus had incurred $750,289 (26%) of the total cost of revenues during the current quarter as compared to $15,253 (0.6%) for the same period in 2020. The increase of 4,819% 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.
| 28 |
| Table of Contents |
Gross Profit. For the quarterly period ended September 30, 2021, we had total gross profit of $688,099 as compared to gross profit of $522,222 for the same period in 2020, an increase of approximately 31.8% from the prior period.
Chemrex contributed $399,794 (58.1%) of the total gross profit for the current quarterly period as compared to $514,004 (98.4%) of the total gross profit for the same quarter last year. The gross profit decreased of 22.2% for Chemrex in current quarter was due to its decreased revenues for the current period and reasons as stated above.
BioNexus-Malaysia contributed $288,305 (41.9%) of the total gross profit of $688,099 for the current quarter as compared to $8,218 (1.6%) of the total gross profit from the same quarter last year. The increase of 3,408% 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 September 30, 2021, we had of $46,848 as compared to of $9,089 for the same quarter in 2020, an increase of approximately 415%. Chemrex contributed $45,360 (96.8%) of other income for the current quarterly period as compared to $6,192 (68.1%) of the other income for the same quarter last year. Chemrex’s other income increased 633% due to an addition to gains on fair value of investment $17,641 and bank interest $2,019 and unrealized forex gain $6,420 for this current quarterly.
Operating Expenses. For the quarterly period ended September 30, 2021, we had total operating expense of $362,306 as compared to total operating expenses of $294,004 for the same quarter in 2020, an increase of approximately 23.20%. 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 $287,002 (79.22%) of the total operating expenses of $362,306 for the current quarter as compared to $223,469 (76.01%) of the total operating expenses for the same quarter last year. The slight increase of 28% for the current period in operating expenses was due to increased logistics, port charges and travel associated with the increased revenue for the period.
BioNexus-Malaysia had incurred $20,127 (5.55%) of the total operating expenses for the current quarter as compared to $20,598 (7%) of the total operating expenses for the same quarter last year. The slight decrease of 2.3% in operating costs of the current quarter was due to less traveling expenses
BGLC had incurred $55,177 (15.23%) of total operating expenses for the current quarter as compared to $49,939 (17%) of the total operating expenses for the same quarter last year. The increase of 10.5% in operating costs of the current quarter was due to increase of professional fees and processing fees for investment underwrite
Profit/Loss from Operations. We had a profit from operations of $372,641 quarterly period ended September 30, 2021 as compared to $237,306 for the same period in 2020, an increase of approximately 57% for the reasons discussed above.
Income tax expense. For the three-month period ended September 30, 2021, we had $75,169 income tax which is an estimated expense ($37,755 for Chemrex and $37,414 for Bionexus) as compared to Bionexus estimated income tax expenses of $492 for the same quarter last year ($0 for Chemrex and $492 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 September 30, 2021, we experienced a foreign currency loss of $56,940 as compared with a foreign currency gain of $248,070 for the same period in 2020.
| 29 |
| Table of Contents |
Nine Months Ended September 30, 2021 Compared with the Nine Months Ended September 30, 2020.
The following table sets forth key selected financial data for the nine months ended September 30, 2021 and 2020.
Consolidated
|
| Nine months ended |
| |||||
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
REVENUE |
| $ | 10,117,296 |
|
| $ | 7,264,554 |
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE |
|
| (8,379,025 | ) |
|
| (5,927,735 | ) |
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
| 1,738,271 |
|
|
| 1,336,819 |
|
|
|
|
|
|
|
|
|
|
OTHER INCOME |
|
| 159,764 |
|
|
| 779,458 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
General and administrative |
|
| (1,043,271 | ) |
|
| (839,415 | ) |
|
|
|
|
|
|
|
|
|
PROFIT FROM OPERATIONS |
|
| 854,764 |
|
|
| 1,276,862 |
|
|
|
|
|
|
|
|
|
|
FINANCE COSTS |
|
| (8,987 | ) |
|
| (6,762 | ) |
|
|
|
|
|
|
|
|
|
PROFIT BEFORE TAX |
|
| 845,777 |
|
|
| 1,270,100 |
|
|
|
|
|
|
|
|
|
|
Tax expense |
|
| (183,449 | ) |
|
| (1,839 | ) |
|
|
|
|
|
|
|
|
|
NET PROFIT |
| $ | 662,328 |
|
| $ | 1,268,261 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
Foreign currency loss |
|
| (272,876 | ) |
|
| (3,068 | ) |
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME |
| $ | 389,452 |
|
| $ | 1,265,193 |
|
| 30 |
| Table of Contents |
BioNexus-Malaysia and Chemrex
|
| BioNexus Malaysia |
|
| Chemrex |
|
| BioNexus Malaysia |
|
| Chemrex |
| ||||
|
| Nine months ended September 30, 2021 |
|
| Nine months ended September 30, 2020 |
| ||||||||||
REVENUE |
| $ | 1,504,064 |
|
| $ | 8,613,232 |
|
| $ | 30,012 |
|
| $ | 7,234,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE |
|
| (1,108,817 | ) |
|
| (7,270,208 | ) |
|
| (45,561 | ) |
|
| (5,882,174 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
| 395,247 |
|
|
| 1,343,024 |
|
|
| (15,549 | ) |
|
| 1,352,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME/(LOSS) |
|
| 5,335 |
|
|
| 154,429 |
|
|
| 10,540 |
|
|
| 768,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| (64,255 | ) |
|
| (843,620 | ) |
|
| (67,852 | ) |
|
| (673,211 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCE COSTS |
|
| (3,265 | ) |
|
| (5,722 | ) |
|
| (1,480 | ) |
|
| (5,282 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROFIT/(LOSS) BEFORE TAX |
|
| 333,062 |
|
|
| 648,111 |
|
|
| (74,341 | ) |
|
| 1,442,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense |
|
| (38,068 | ) |
|
| (145,381 | ) |
|
| (1,839 | ) |
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET PROFIT/(LOSS) |
| $ | 294,994 |
|
| $ | 502,730 |
|
| $ | (76,180 | ) |
| $ | 1,442,785 |
|
Revenue. For the nine-month period ended September 30, 2021, we had total revenues of $10,117,296 as compared to total revenue of $7,264,544 for the quarterly period ended September 30, 2020, an increase of approximately 39.3% from the prior period.
For the current quarterly period, Chemrex contributed $8,613,232 (85.10%) of total revenues compared to its contribution of $7,234,542 (99.6%) of total revenues for the same period last year, an increase of 19%. The increase was due to Covid impact on revenues from the prior year’s nine-month period. Covid did not significantly impact Chemrex’s operations and revenues of during the current nine-month period.
the material selling prices have been increased since January, 2021.
BioNexus had a revenue of $1,504,064 (14.9%) for the current nine-month period compared to revenues of $30,012 (0.4%) from the same quarterly period last year, an increase of 4,911%. BioNexus revenues for the current quarter resulted from the outsource of Covid19 PCR test to MOH which began on May 2021 for contract value of $549,133 had completed in mid of July 2021 and an additional contract on July 23, 2021 for contract value of $859,804 had completed 99.4% as of Sep30,2021
Cost of revenues. For the nine-month period ended September 30, 2021, we incurred $8,379,025 in the cost of revenues, as compared to $5,927,735 for the same period 2020, an increase of approximately 41.4% due to reasons as stated above.
Chemrex had incurred $7,270,208 (86.8%) of the total cost of revenue of $8,379,025 for the current nine-month period as compared to the same period last year wherein Chemrex had incurred $5,882,174 (99.2%) of the total cost of revenue of $5,927,735. The increase of 23.6% 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 $1,108,817 (13.2%) on cost of revenues for the current nine-month period as compared to $45,561 (0.8%) for the same period last year. The increase of 2,334% 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.
| 31 |
| Table of Contents |
Other Income. For the nine-month period ended September 30, 2021, we had other income of $159,764 as compared to $779,458 for the same period in 2020. A reduction of 79.5% from the prior quarterly period is due principally to a net income of $707,618 from disposal of a property which occurred during the nine month period last year. We did not have a similar gain during the current nine month period.
Operating Expenses. For the nine-month period ended September 30, 2021, we had an operating expense of $1,043,271 as compared to operating expenses of $839,415 for the same period ended September 30, 2020, an increase of approximately 24.3%. 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 $843,620 (80.9%) of the total operating expenses of $1,043,271 during the current nine-month period in 2021 as compared to $673,211 for the same period last year. The increase of 25.31% 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. In addition, Chemrex incurred a loss of $57,249 from fair value investments and a loss of $138,406 from unrealized and realized forex transactions during the current period.
BioNexus Malaysia had incurred $64,255 (6.2%) on operating expenses during for the current nine-month period in 2021 as compared to $67,852 (8.1%) 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,
BGLC had incurred $135,396 (13%) on operating expenses during for the current nine-month period in 2021 as compared to $98,352 (11.7%) for the same period last year. The increase of 37.66% in BGLC operating expenses for the current period due to increase of professional fee such as audit fees.
Profit from Operations. We had a profit from operations of $845,777 during the nine-month period ended September 30, 2021 compared to $1,276,862 for the same period in 2020, a reduction of 33.4% 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 September 30, 2021, we had $183,449 for the period as compared with $1,839 for the nine-month period ended September 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 nine-month period ended September 30, 2021, we experienced a foreign currency loss of $272,876 compared with a foreign currency loss of $3,068 for the nine-month period ended September 30, 2020.
| 32 |
| Table of Contents |
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2021, we had working capital of $4,737,425 compared with working capital of $4,611,896 as of December 31, 2020. The increase in working capital as of September 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 nine months ended September 30, 2021 and 2020:
|
| Nine months ended |
| |||||
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Net Cash Used in Operating Activities |
| $ | (473,846 | ) |
| $ | (379,802 | ) |
Net cash (used in) /generated from investing activities |
|
| (414,285 | ) |
|
| 1,736,495 |
|
Net cash used in generated from financing activities |
|
| (23,263 | ) |
|
| (7,203 | ) |
Foreign currency translation adjustment |
|
| (175,902 | ) |
|
| (18,494 | ) |
Net Change in Cash and Cash Equivalents |
| $ | (1,087,296 | ) |
| $ | 1,330,996 |
|
Operating Activities
During the nine months ended September 30, 2021, the Company incurred a net profit of $662,328 which, after adjusting for amortization, depreciation, dividend income, fair value on investment, an increase in inventories, trade receivables and deposits, a substantial reduction in trade payables, operating lease liabilities, resulted in net cash of $473,846 being used in operating activities during the period. By comparison, during the nine months ended September 30, 2020, the Company had a net profit of $1,268,261 which, after adjusting for amortization, depreciation, dividend income, gain on disposal of property, plant and equipment $701,447, a decrease in inventories, a reduce in receivables and deposits, a substantial reduction in trade payables, operating lease liabilities, resulted in net cash of $379,802 being used in operating activities during the period.
Investing Activities
During the nine months ended September 30, 2021, the Company had net cash of $414,285 used in investment activities. During the nine months ended September 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 $1,736,495
Financing Activities
During the nine months ended September 30, 2021, Company continued the repayment of a finance lease resulting in net cash used in financing activities of $23,263. By comparison, during the nine months ended September 30, 2020, we had financing activities of $7,203 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 nine months, starting from April 1, 2020 till September 30, 2020
| 33 |
| Table of Contents |
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this quarterly report, an evaluation was carried out by the Company’s management, with the participation of the principal executive officer and the principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act (“Exchange Act”) as of September 30, 2021. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, the Company’s management concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission’s rules and forms, and that such information was not accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.
Management’s Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process, under the supervision of the principal executive officer and the principal financial officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with United States generally accepted accounting principles (GAAP). Internal control over financial reporting includes those policies and procedures that:
| i) | Pertain to the maintenance of records that is in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets; |
| ii) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with the authorizations of management and the board of directors; and |
| iii) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. |
| 34 |
| Table of Contents |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management conducted an assessment of the effectiveness of our internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, which assessment identified material weaknesses in internal control over financial reporting. A material weakness is a control deficiency, or a combination of deficiencies in internal control over financial reporting that creates a reasonable possibility that a material misstatement in annual or interim financial statements will not be prevented or detected on a timely basis. Since the assessment of the effectiveness of our internal control over financial reporting did identify a material weakness, management considers its internal control over financial reporting to be ineffective.
Management has concluded that our internal control over financial reporting had the following material deficiencies:
| i | Lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. |
While these control deficiencies did not result in any audit adjustments to our 2021 or 2020 interim or annual financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties. Accordingly, we have determined that this control deficiency constitutes a material weakness.
To the extent reasonably possible, given our limited resources, our goal is, upon consummation of a merger with a private operating company, to separate the responsibilities of principal executive officer and principal financial officer, intending to rely on two or more individuals. We will also seek to expand our current board of directors to include additional individuals willing to perform directorial functions. Since the recited remedial actions will require that we hire or engage additional personnel, this material weakness may not be overcome in the near term due to our limited financial resources. Until such remedial actions can be realized, we will continue to rely on the advice of outside professionals and consultants.
This quarterly report does not include an attestation report of our registered public accounting firm regarding our internal controls over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to Section 404(c) of the Sarbanes-Oxley Act that permit us to provide only management’s report in this annual report.
Changes in Internal Controls over Financial Reporting
During the quarter ended September 30, 2021, there has been no change in internal control over financial reporting that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
| 35 |
| Table of Contents |
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
There are presently no material pending legal Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable to our Company.
Item 5. Other Information.
None
| 36 |
| Table of Contents |
Item 6. Exhibits.
Exhibit |
| Description |
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
101.INS |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).* |
|
|
|
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document.* |
|
|
|
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document.* |
|
|
|
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document.* |
|
|
|
101.LAB |
| Inline XBRL Taxonomy Extension Labels Linkbase Document.* |
|
|
|
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document.* |
|
|
|
104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
__________
+ | In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed. |
|
|
* | Filed herewith. |
| 37 |
| Table of Contents |
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 thereunto duly authorized.
BIONEXUS GENE LAB CORPORATION |
|
|
|
/s/ Chan Chong Wong |
|
Chan Chong Wong |
|
Chief Executive Officer and Director |
|
(Principal Executive Officer) |
|
|
|
/s/ Wei Li Leong |
|
Wei Li Leong |
|
Chief Financial Officer |
|
(Principal Financial and Accounting Officer) |
|
|
|
November 9, 2021 |
|
| 38 |