As filed with the Securities and Exchange Commission on July 3, 2023 

Registration No. 333-269753

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

AMENDMENT NO.2

TO

FORM S-1/A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

BIONEXUS GENE LAB CORP.

(Exact name of registrant as specified in its charter)

 

Wyoming

 

8071

 

35-2604830

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

Unit 02, Level 10, Tower B, Vertical Business Suite

Bangsar South, 8 Jalan Kerinchi

59200 Kuala Lumpur

Malaysia

60 1221-26512

 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Cloud Peak Law Group, P.C.

1095 Sugar View Dr, Ste 100 Sheridan, Wyoming 82801, USA

 (Address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

William S. Rosenstadt, Esq.

Mengyi “Jason” Ye, Esq.

Ortoli Rosenstadt LLP

366 Madison Avenue, 3rd Floor

New York, NY 10017

+1-212-588-0022 - telephone

+1-212-826-9307 - facsimile

 

Fang Liu, Esq.

VCL Law LLP

1945 Old Gallows Road, Suite 630

Vienna, VA 22182

+1 (703) 919-7285

 

Approximate date of proposed sale to the public

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 7(a)(2)(B) of the Securities Act. ☐

 

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.

 

 

 

 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS

 

SUBJECT TO COMPLETION, DATED July 3, 2023

 

BIONEXUS GENE LAB CORP.

1,250,000 Shares of Common Stock 

 

 We are offering up to an aggregate of 1,250,000 shares of our common stock, no par value per share, of BioNexus Gene Lab Corp, a Wyoming corporation, on a firm commitment basis.

 

We expect the offering price of our common stock will be $[●] per share. Prior to this offering, our common stock was quoted on the OTCQB under the symbol “BGLC.” As of the date of this prospectus, the trading price for our common stock, as reported on the OTCQB, was $[●] per share ($[●] on a post-reverse split basis). We have applied to list our common stock under the symbol “BGLC” on the Nasdaq Capital Market (“Nasdaq”). However, there is no assurance that the offering will close and that our common stock will be trading on Nasdaq. The closing of this offering is conditioned upon Nasdaq’s final approval of our listing application, and there is no guarantee or assurance that our common stock will be approved for listing on Nasdaq.

 

The share and per share information in this prospectus reflects, other than in our Financial Statements and the Notes thereto, our proposed reverse stock split of the outstanding common stock of 12 for 1 to occur immediately upon our common stock’s listing on Nasdaq.

 

We are both an “emerging growth company” and a “smaller reporting company” under the federal securities laws and have elected to comply with certain reduced public company reporting requirements available to each. See “Prospectus Summary—Implications of Being an Emerging Growth Company” and “Prospectus Summary—Implications of Smaller Reporting Company.”

 

 

 

Per Share

 

 

Total

Without Over-

Allotment

Option

 

 

Total

With Full

Over-

Allotment Option

 

Public offering price

 

US$

 

 

 

 

 

US$

 

 

 

 

 

US$

 

 

 

 

Underwriting discount (1)

 

US$

 

 

 

 

 

US$

 

 

 

 

 

US$

 

 

 

 

Proceeds to us, before expenses (2)

 

US$

 

 

 

 

 

US$

 

 

 

 

 

US$

 

 

 

 

    

(1) We have agreed to give the Underwriter a discount equal to eight percent (8%) of the gross proceeds of this offering. See “Underwriting” beginning on page 85 for additional information regarding the Underwriter’s compensation.

 

(2) We estimate the total expenses of this offering will be approximately $418,851.

 

This offering is being conducted on a firm commitment basis. The Underwriter is obligated to take and pay for all of the shares offered pursuant to this offering if any such shares are taken by the Underwriter. We have also granted the Underwriter an option to purchase up to an additional 187,500 shares of common stock from us at the public offering price, less underwriting discounts, within 45 days from the date on which this registration statement is declared effective by the Securities and Exchange Commission to cover over-allotments, if any. If the Underwriter exercises the option in full, the total underwriting discounts payable will be $[●], and the total proceeds to us, before expenses, will be $[●].

 

If we complete this offering, net proceeds will be delivered to us on the closing date.

 

The Underwriter expects to deliver the common stock against payment in U.S. dollars to purchasers on or about [●], 2023. 

 

Investing in our common stock and warrants (collectively, “Securities”) involves a high degree of risk. See “Risk Factors” beginning on page 14 of this prospectus for a discussion of information that should be considered in connection with an investment in our Securities.

 

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

bion_s1aimg20.jpg

The date of this prospectus is July 3, 2023

 

The following table of contents has been designed to help you find information contained in this prospectus. We encourage you to read the entire prospectus.

 

 
2

 

 

TABLE OF CONTENTS

 

 

 

Page

 

Prospectus Summary

 

4

 

Risk Factors

 

14

 

Special Note Regarding Forward-Looking Statements

 

35

 

Use of Proceeds

 

35

 

Capitalization

 

36

 

Dividend Policy

 

37

 

Dilution

 

37

 

Selected Consolidated Financial Data

 

39

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

40

 

Business

 

54

 

Regulation

 

69

 

Management

 

73

 

Executive Compensation

 

77

 

Principal Shareholders

 

79

 

Related Party Transactions

 

80

 

Description of Capital Stock

 

80

 

Market for Registrant’s Common Equity and Related Stockholder Matters

 

81

 

Shares Eligible for Future Sale

 

82

 

Taxation

 

83

 

Enforcement of Civil Liabilities

 

87

 

Underwriting

 

88

 

Legal Matters

 

92

 

Experts

 

92

 

Where You Can Find Additional Information

 

92

 

Index to Financial Statements

 

F-1

 

 

Neither the underwriter nor we have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell shares of our common stock and seeking offers to buy shares of our common stock, only in jurisdictions where such offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

 

In this prospectus, we rely on and refer to information and statistics regarding our industry. We obtained this statistical, market, and other industry data and forecasts from publicly available information. While we believe that the statistical data, market data, and other industry data and forecasts are reliable, we have not independently verified the data.

 

For investors outside of the United States: neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and observe any restrictions relating to this offering and the distribution of this prospectus.

 

 
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Table of Contents

 

PROSPECTUS SUMMARY

 

This summary highlights information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. You should read the entire prospectus carefully before making an investment in one share of common stock. You should carefully consider, among other things, our consolidated financial statements and the related notes and the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

 

Prospectus Conventions

 

Except where the context otherwise requires and for purposes of this prospectus only, any references to “BioNexus” and “BGLC” are to BioNexus Gene Lab Corp., a Wyoming company, and any references to “we,” “our,” “the Company,” “our company” and “us” are to BioNexus Gene Lab Corp. and its subsidiaries. Unless otherwise indicated, in this prospectus, references to:

 

 

 

 

·

“BGL” or “BioNexus Malaysia” refers to BioNexus Gene Lab Sdn Bhd, a Malaysian corporation and a wholly owned subsidiary of BioNexus.

 

 

 

 

·

“Chemrex” refers to Chemrex Corporation Sdn Bhd., a Malaysian corporation and a wholly owned subsidiary of BioNexus.

 

 

 

 

·

“Dollar,” “USD,” “US$,” or “$” are to U.S. dollars.

 

 

 

 

·

“FRP” refers to fibre-reinforced polymer.

 

 

 

 

·

“FY” refers to financial year.

 

 

 

 

·

“RNA” refers to ribonucleic acid.

 

 

 

 

·

“R&D” refers to research and development.

 

 

 

 

·

“RM” and “Ringgit” refer to the legal currency of Malaysia. 

 

 

 

 

 ·

 “Underwriter” refers to Network 1 Financial Securities, Inc.

 

Overview

 

BioNexus Gene Lab Corp., through our wholly owned subsidiary BioNexus Gene Lab Sdn Bhd, is in the business of developing and providing safe, effective, and non-invasive liquid biopsy tests for the early detection of disease risks derived from evidence-based research to minimize treatment costs and improve patient management on his current health status. Our non-invasive blood tests provide analysis of changes in RNA to detect the potential risk of 11 different diseases. 

 

Furthermore, through our wholly owned subsidiary Chemrex Corporation Sdn Bhd., we focus on the sale of chemical raw materials for the manufacture of industrial, medical, appliance, aero, automotive, mechanical, and electronic industries in the Southeast Asia region. These countries include Malaysia, Indonesia, Vietnam, and other countries in Southeast Asia.

 

 

 
4

Table of Contents

 

Our Products 

 

Non-invasive Blood Tests

 

Through our wholly owned subsidiary BGL, we provide non-invasive blood tests to analyze changes in RNA to detect the potential risk of 11 different diseases by biomarkers in Malaysia. These diseases include eight cancers (nasopharyngeal, lung, liver, stomach, breast, cervical, prostate and colon), two bowel diseases (colitis and Crohn’s) and osteoarthritis.

 

As of March 31, 2023 and March 31, 2022, respectively, 0.3% and 0.8% of our revenue was from the sales of non-invasive blood tests.

 

As of December 31, 2022 and December 31, 2021, respectively, 0.9% and 11.34% of our revenue was from the sales of non-invasive blood tests.

 

 

Since August 2022, we had proposed to the Chief Secretary of the Health Ministry of Malaysia a nationwide RNA screening on 0.2% of the population aged 40 and above. The Deputy Director General from Public Health scheduled a meeting on January 17, 2023 to examine the cost effectiveness of our RNA screening. Meanwhile, we had presented our technology and expansion plan nationally and globally to the Minister of Science and Technology. We received favorable response and we are advised to submit for a technology grant for the continuation of research, commercialization and expansion.

 

Chemical Raw Material Products

 

Through our wholly owned subsidiary Chemrex, we focus on chemical raw material products. We purchase raw chemical materials, mostly FRP, from domestic and international manufacturers and sell them to customers in Southeast Asia Maldives Islands, Sri Lanka, Bangladesh, and Africa. The FRP and other raw materials we offer are used to produce a wide variety of goods, including handrails, bench tops, automotive and aero parts, cleanroom panels, and covers for various instruments used in manufacturing.

 

As of March 31, 2023, and March 31, 2022, respectively, 99.7% and 99.2%, of our revenue are from the sales of FRP and other raw materials.

 

As of December 31, 2022, and December 31, 2021, respectively, 99.1% and 88.66%, of our revenue are from the sales of FRP and other raw materials.

 

 

Our Strategies

 

 

BGL

 

 

 

 

·

Continue to leverage our relationships with healthcare providers. To date, we have relied upon the efforts of management and their relationships with healthcare providers to create continued interest in our blood-based genomic screening. These relationships have been located primarily in the Klang Valley market. We will continue to use our relationships with providers in the Klang Valley market and elsewhere in Malaysia to increase sales and product awareness.

 

 

 

 

·

Continue to collaborate with local hospitals on our research and development. Continue with our research on Cardiovascular Disease, Stroke, Pancreas Cancer, Alzheimer, Mental Disorders (Depression, Obsessive Compulsive Disorder and Schizophrenia) for the next few years. To date, we have collaborative partnerships with these local hospitals such as National Heart Centre, University Malaya Medical Centre, National University Hospital and Monash University, Australia.

 

 

 

 

·

Allocate more capital resources to our marketing efforts. Apart from sales through existing relationships with healthcare providers, we intend to allocate more capital to marketing and promotion. As part of these efforts, we have appointed two commission-based marketing companies, Gloco and Yakin Healthcare, to bring awareness of our services in Malaysia.

 

 

 

 

·

Increase focus on corporate clients. To date, we have entered arrangements with six corporate clients to provide our 11 diseases/disorders screening services to their employees. In addition, we intend to solicit more corporate clients in the Klang Valley and major cities in Malaysia. We commenced these efforts last year and will continue in 2023. Our officers and the Marketing Companies will undertake these efforts.

 

 

 

 

·

Expand to other regions in Malaysia. We intend to expand to other large cities in Malaysia, such as Penang, Ipoh, Seremban, Melaka, Johor Bahru, and Kuantan.

 

 

 

 

Chemrex

 

 

·

Continue to leverage our relationships with suppliers and customers. Most suppliers and customers have been doing business with Chemrex for more than 10 years. Chemrex’s mission is to supply innovative chemical raw material for the composite industry. We have reach across Southeast Asia, the Maldives Islands, Sri Lanka, Bangladesh and Africa. Given, our decade of experience in the composite industry and our long-standing relationship with several leading name in the fiberglass manufacturing, we pledged to offer consistently superior grade products.

 

 

·

Online and off-line marketing. Most of the new customers are reviewing Chemrex products online before visiting the sales office for further discussion and finalization of orders. They may start with one product and ended up ordering a combination of four to six products instead of sourcing from few other suppliers in view of the competitive quantity discount

 

 

 

 

·

Reduce logistics costs and optimize inventory capacity. Space optimizing with cross docking from manufacturers/suppliers to customers to cut down logistic and warehousing costs. Automate the stock arrangement and speedy stock retrieval for existing warehouses and new regional warehouses where the revenues increase to $5m or more.

 

 
5

Table of Contents

 

 Our Competitive Strengths

 

 

 

 

 

BGL

 

 

·

Our screening (a simple blood draw) is less invasive, unlike tissue biopsies. A tissue biopsy is a procedure in which a physician removes a piece of tissue or a sample of cells from a patient’s body to be analyzed in a laboratory. If a patient experiences certain signs and symptoms or the physician has identified an area of concern, he may undergo a biopsy to determine whether the patient has cancer or another ailment. While biopsies can have higher accuracy, it is a more invasive procedure that is difficult to repeat and thus impractical for periodic monitoring. BGL’s screening tests are a form of liquid biopsy which utilizes RNA biomarkers. Broadly speaking, a liquid biopsy is the collection of a blood sample to test for relevant biomarkers to inform patient management, most applied to the collection of peripheral blood for analysis of cell-free circulating tumor ribonucleic acids (RNA). Since liquid biopsies are performed on peripheral blood, which is easy to access, it allows for more widespread use, particularly in patients who cannot have surgery. As a result, liquid biopsies can reduce the time to treatment, improve the efficiency of medical staff and resources, and be used to screen more diseases.

 

 

 

 

·

Non-DNA blood tests for diseases like cancer are not dispositive. There currently exist various examinations to detect diseases in patients. For example, abnormally high or low levels of certain substances in your body can be a sign of disease. Testing of blood, urine or other body fluids that measure these substances can help doctors make a diagnosis. However, abnormal lab results are not a sure sign of disease. Lab conventional blood tests are an important tool but are not always reliable because of low sensitivity, specificity, and predictive value.

 

 

 

 

 

·

Other Conventional tests could require a longer turnaround time. Imaging is a procedure in which physicians utilize pictures of areas inside the body that help the doctor see whether a disease is present. These images can be taken in several ways, including a CT scan, Nuclear Scan, MRI, PET Scan, and Ultrasound. Imaging is useful in providing physicians with real-time images to assist with diagnosis. However, imaging techniques can have longer turnaround times, the information provided can be limited, and the patient may be exposed to radiation.

 

 

 

 

·

Our screening provides a predictive risk assessment for developing the 11 diseases. Most other screening procedures detect diseases only when they are already present in the body and most cases, in the final stages of the disease, making it difficult to treat or reverse. Our screening can detect the 11 diseases at an earlier stage before any symptoms even appear. Early detection and targeted medical intervention could be crucial in saving patients’ lives and financial resources.

 

 

 

 

·

Our screening measures the current risk of specific individuals. DNA tests measure a specific individual’s lifetime risk based on their DNA. However, since DNA does not change with external factors, it cannot quantify an individual’s specific risk of the disease materializing. However, our RNA-based test is highly specific since RNA expression changes with lifestyle and other external factors. Hence, at-risk patients can make timely adjustments to their lifestyles to reduce the potentiality of these diseases. Lifestyle adjustments may include reduction or changes to food, tobacco, and alcohol intake, change of working environment, and the implementation of exercise programs, among other changes.

 

 

 

 

 

Chemrex

 

 

 

 

·

Technical Expertise: Our technical staff, comprising two chemists and one engineer, are highly competent and familiar with the technical advancements in the FRP industry. They provide technical know-how on mixing various products and offer product suggestions or modifications to our customers, which may involve strengthening or enhancing existing products sold by our customers.

 

 

 

 

·

Pricing Advantage: As a prominent reseller of FRP products in the domestic market with significant market share, we distribute our products at a relatively higher volume than our competitors. Hence, we enjoy the discounts we order from our suppliers in bulk which we then pass on to our customers. As a result, prospective customers could incur higher prices if they purchase from our competitors who do not transact at such a high volume.

 

 

 

 

·

Convenience: We provide a wide variety of over 100 FRP products from different suppliers and manufacturers. In contrast, some of our competitors might have a smaller product range. In addition, prospective customers could incur higher logistics if they purchase from many different sellers instead of relying on us as a one stop shop for all their business needs. 

 

 

 

 

·

Sourcing New Raw Materials for product development: We source a broad range of raw materials worldwide. This global reach greatly expands our potential customers and provides more opportunities for our customers to develop new products from a greater variety of raw materials.

 

 
6

Table of Contents

   

Sales and Marketing

 

 

 

 

·

Online Promotion. We market our product offerings through our website www.chemrex.com.my. We utilize Google’s search engine optimization to drive traffic to our website. Additionally, we also engage the services of PanPages, an internet marketing company to further market our products to new consumers over the internet. New prospective customers can forward their inquiries via phone or our website. Our marketing and technical representatives will then contact the prospective customer and discuss how we can fulfill their order and accommodate any specific requests.

 

 

 

 

·

Product Display. We invite current and potential customers to examine our product range at our warehouse; thus, customers may get a more comprehensive assessment of our product’s quality.

 

 

 

 

·

Marketing Personnel. Our product sales and marketing are performed by our Managing Director Mr. Tham Too Kam, our Executive Director Mr. Tan Liong Tai, and our Marketing Manager Mr. Chan Kwan Wah, together with three marketing and technical representatives.

 

 

 

 

·

Business Introduction from Suppliers. We meet our suppliers regularly. From time to time, our suppliers will also provide us with the contact details of new potential customers we can provide our products to and our marketing personnel will follow up on these new sales leads.

 

 

 

 

Summary of Risks

 

Investing in our common stock involves risks. The risks summarized below are qualified by reference to “Risk Factors” beginning on page 11 of this prospectus, which you should carefully consider before deciding to purchase our shares of common stock. If any of these risks occurs, our business, financial condition or results of operations would likely be materially adversely affected. In such case, the trading price of our shares of common stock would likely decline, and you may lose all or part of your investment.

 

Risk Factors Related to Our Financial Prospects and Capitalization

 

 

 

 

·

BioNexus’ limited operating history may make it difficult to evaluate our current business and this makes predictions about our future success or viability subject to significant uncertainty. (on page 11).

 

 

 

 

·

BioNexus’ growth (organic and inorganic) may require substantial capital and long-term investments (on page 11).

 

 

 

 

·

BioNexus may incur net losses in the near future (on page 12).

 

 

 

 

·

Any additional capital BioNexus raises may not be available on satisfactory terms and may adversely affect stockholders’ holdings or rights (on page 12).

 

 

 

 

·

Raising additional capital may lead to dilution of shareholdings by BioNexus’ existing shareholders, restrict BioNexus’ operations, and may further result in fair value loss adversely affecting BioNexus’ financial results (on page 12).

 

 
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Table of Contents

 

 

Risk Factors Related to Our Business and Industry

 

 

·

Global economic conditions could materially adversely impact demand for BioNexus’ products and services (on page 13).

 

 

 

 

·

Business disruptions could seriously harm BioNexus’ future revenue and financial condition and increase its costs and expenses (on page 14).

 

 

 

 

·

BGL’s financial prospects depend substantially upon the successful commercialization of the company’s services and products in the future, which may fail or experience significant delays (on page 15).

 

 

 

 

·

The marketing, sale and use of BGL’s products and services could result in substantial damages arising from products or service liability or professional liability claims, that exceed BGL’s resources (on page 17).

 

 

 

 

·

BGL may face technology transfer challenges and expenses in adding new tests to its portfolio and in expanding its reach into new geographical areas (on page 18).

 

 

 

 

·

BGL’s biomarkers have undergone limited clinical trials (on page 18).

 

 

 

 

·

BGL’s use both “open source” and proprietary software could subject its proprietary software to general release, adversely affect its ability to sell its tests and subject the company to possible litigation (on page 21).

 

 

 

 

·

BGL may face competition from other biotechnology competitors and its operating results will suffer if BGL fail to compete effectively (on page 21).

 

 

 

 

·

The chemical raw material industry is cyclical and both recessions and prolonged periods of slow economic growth could have an adverse effect on Chemrex’s business (on page 22).

 

 

 

 

·

The results of Chemrex’s operations are sensitive to volatility in the cost of raw materials, particularly fibre reinforced plastics (on page 22).

 

 

 

 

·

Disruptions in the supply of chemicals that we distribute or in the operations of our customers could adversely affect our business (on page 23).

 

 

 

 

·

We have non-written contracts with suppliers and customers, which are generally terminable upon notice, and the termination of our relationships with suppliers and customers contracts could negatively affect our business (on page 23).

 

 
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Table of Contents

 

 

 

Risks Related to Its Operations

 

 

 

 

·

BioNexus’ officers and directors may in future have outside business activities. As a result, there may be potential conflicts of interest and negatively impact the amount of time they will be able to dedicate to the company (on page 24).

 

 

 

 

·

BioNexus may be subject to intellectual property claims, which are extremely costly to defend, could require us to pay significant damages and could limit the company’s ability to use certain technologies in the future (on page 25).

 

 

 

 

·

BioNexus may pursue collaborations, in-licensing or out-license arrangements, joint ventures, strategic alliances, partnerships or other strategic investments or arrangements, which may fail to produce anticipated benefits and adversely affect the company’s operations (on page 25).

 

 

 

 

Risks Related to Doing Business in the Southeast Asia Region

 

 

 

 

·

Changes in policies in Malaysia and other Southeast Asian countries could have a significant impact upon BioNexus’s ability to operate profitably in Malaysia and the Southeast Asia region (on page 26).

 

 

 

 

·

Developments in the social, political, regulatory and economic environment in Malaysia may have a material adverse impact on us (on page 27).

 

 

 

 

·

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in Malaysia against the BioNexus or its management named in the prospectus based on foreign laws, and the ability of U.S. authorities to bring actions in Malaysia may also be limited (on page 27).

 

 

 

 

Risks Related to This Offering

 

 

·

The offering price for the securities offered under this prospectus may not accurately reflect the value of your investment. Price movement could be affected by the industry market trend and announcement (on page 28).

 

 

 

 

·

BioNexus may experience periods of being a “thinly traded” stock. As a result, if BioNexus’ shareholders sell a large number of shares, the market price of its shares may decline due to the downward pressure (on page 28).

 

 

 

 

·

BioNexus does not intend to pay dividends on BioNexus’ common stock, so any returns on your investment in the company’s common stock will be limited to appreciation in the value of BioNexus’ stock (on page 29).

 

 

 

 

·

The price of BioNexus’ common stock may be volatile, and you could lose all or part of your investment (on page 30).

 

 

 

 

·

You may experience extreme stock price volatility, including any stock-run up, unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our common stock (on page 30).

 

 

 

 

·

You will experience immediate and substantial dilution in the net tangible book value of our common stock purchased (on page 30).

 

 

 

 

·

If securities or industry analysts do not publish research or reports about our business, or if the publish a negative report regarding our common stock, the price of our common stock and trading volume could decline (on page 30).

 

 
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 Implications of Being an Emerging Growth Company

 

We qualify as an “emerging growth company” within the meaning of the federal securities laws. For as long as we are an emerging growth company, we will not be required to comply with the requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and the exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We intend to take advantage of these reporting exemptions until we are no longer an emerging growth company.

 

Following this offering, we will continue to qualify as an emerging growth company until the earliest to occur of (1) the last day of the fiscal year during which we had total annual gross revenues of at least $1.235 billion (as indexed for inflation), (2) the last day of the fiscal year following the fifth anniversary of the date of our public offering under this prospectus, (3) the date on which we have, during the previous three-year period, issued more than $1.235 billion in non-convertible debt and (4) the date on which we are deemed to be a “large accelerated filer,” as defined under the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”). We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

Implications of Being a Smaller Reporting Company

 

We are a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act and have elected to take advantage of certain scaled disclosure available to smaller reporting companies.

 

 

 
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Corporate History

 

BioNexus Gene Lab Corp was incorporated in the State of Wyoming on May 12, 2017.

 

On August 23, 2017, BioNexus acquired all the outstanding capital stock of BioNexus Gene Lab Sdn. Bhd. (which we refer to as “BGL” and is formerly known as BGS Lab Sdn. Bhd.), a Malaysian corporation incorporated in Malaysia on April 7, 2015.

 

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 the issued and outstanding shares of capital stock of Chemrex, which as incorporated in Malaysia on September 29, 2004, from the Chemrex shareholders in exchange for 68,487,261 shares of common stock of BioNexus issued to the Chemrex shareholders.

 

Corporate Information

 

The address of BioNexus’s principal office 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, and we have a blood collection center located at 1st floor, Lifecare Medical Centre, Kuala Lumpur, Malaysia. Our telephone number is (+60) 1221-26512, and our website is www.bionexusgenelab.com. 

 

Chemrex’s distribution center and warehouse is located at 4 Jalan CJ 1/6 Kawasan Perusahaan Cheras Jaya, Selangor, Malaysia. Chemrex’s phone number is (+60) 1922-23815, and its website is www.chemrex.com.my.

 

The information on our websites is not part of this prospectus. We have included our website address as a factual reference and do not intend it to be an active link to our website. The information contained in or connected to our website is not incorporated by reference into, and should not be considered part of, this prospectus. The trade names, trademarks, and service marks of other companies appearing in this prospectus are the property of the respective holders.

 

Corporate Structure

 

The following diagram illustrates our corporate structure as of the date of this prospectus and upon closing of this offering:

 

bion_s1aimg43.jpg

   

 

 
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The Offering

 

 

 

Common stock offered:

 

1,250,000 shares of common stock (excluding the over-allotment discussed below).

 

 

 

Common stock outstanding prior to completion of the offering:

 

14,480,845 shares of common stock (assuming the completion of our proposed reverse stock split of the outstanding common stock of 12 for 1 immediately upon our common stock’s listing on Nasdaq, in which fractional shares or odd lots (less than 100 shares to any record or beneficial holder) issuable in the reverse stock split shall be rounded up to the nearest whole share, or rounded up to 100 shares, respectively).

 

 

 

Common stock outstanding immediately after the offering:

 

15,730,845 shares of common stock (or 15,918,345 shares of common stock if the Underwriter exercises its over-allotment option in full), excluding shares of common stock underlying the Underwriter Warrants.

 

 

 

Assumed offering price:

 

$[●] per share of common stock.

 

 

 

Gross proceeds before expenses to us:

 

US$[●], excluding proceeds from the exercise of the Underwriter’s over-allotment option.

 

 

 

Listing:

 

Presently, our common stock trades on the OTCQB. As of the date of this prospectus, our common stock was trading at a price of $[●] ($[●] on a post-reverse split basis). In connection with this offering, we have applied to list our common stock on the Nasdaq Capital Market. The closing of this offering is conditioned upon Nasdaq’s final approval of our listing application, and there is no guarantee or assurance that our common stock will be approved for listing on Nasdaq.

 

Ticker symbols:

 

BGLC.

 

 

 

Over-allotment:

 

We have granted a 45-day option to the Underwriter to purchase up to an additional 187,500 shares of common stock, which is 15% of the total number of shares of common stock to be offered by us in the offering, to cover over-allotments, if any, at the public offering price, less underwriting discounts and commissions on the same terms as set forth in this prospectus.

 

Underwriter Warrants:

 

We will issue to the Underwriter warrants to purchase a number of shares of common stock equal to eight percent (8%) of the common stock offered in this offering, including any over-allotment shares (the “Underwriter Warrants”). The Underwriter Warrants will be exercisable at any time, and from time to time, in whole or in part, for a period of five years from the closings of the offering. The Underwriter Warrants are exercisable at a per share price of $[●], which is 110% of the public offering price.

 

Transfer Agent:

 

Securities Transfer Corporation

 

 

 

Use of Proceeds

 

We intend to use the proceeds from this offering for research and development, working capital and general corporate purposes. See “Use of Proceeds” for more information.

 

 

 

Lock-up:

 

We and each of our officers and directors and existing stockholders holding in excess of 1% of the shares outstanding have agreed with the Underwriter, subject to certain exceptions, not to sell, transfer or otherwise dispose of any shares of common stock or similar securities for a period of 180 days after the date of this prospectus. See “Shares Eligible for Future Sale” and “Underwriting” for more information.

 

 

 

Risk factors:

 

Investing in these securities involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section of this prospectus before deciding to invest in our shares of common stock.

 

 

 

Dividend Policy:

 

We have no present plans to declare dividends and plan to retain our earnings to continue to grow our business.

    

 
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Summary of Financial Information  

 

The following table summarizes selected historical financial data regarding our business and should be read in conjunction with our consolidated financial statements, and related notes contained elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  

 

The summary consolidated balance sheet and statement of operations for the fiscal years ended December 31, 2022 and 2021 respectively and the consolidated financial statements are derived from the audited consolidated financial statements of BioNexus Gene Lab Corp., a Wyoming corporation, included elsewhere in this prospectus. We derived our summary consolidated financial data for three months ended March 31, 2023 and 2022, and the years ended December 31, 2022 and 2021. These financials include all adjustments, consisting of normal recurring adjustments, that our management considers necessary for a fair presentation of our financial position and results of operations as of the dates and for the periods presented. The results of operations for past accounting periods are not necessarily indicative of the results to be expected for any future accounting period.  

 

Consolidated Statements of Operations Data

 

 

Three months ended

 

 

Year ended

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2022

 

 

2021

 

REVENUE

 

$2,377,205

 

 

$3,028,945

 

 

$10,928,707

 

 

$13,362,567

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE

 

 

(2,008,308 )

 

 

(2,672,612 )

 

 

(9,669,678 )

 

 

(11,095,626 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

368,897

 

 

 

356,333

 

 

 

1,259,029

 

 

 

2,266,941

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME

 

 

117,344

 

 

 

46,394

 

 

 

179,283

 

 

 

66,491

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

(536,872 )

 

 

(368,036 )

 

 

(1,729,489 )

 

 

(1,277,605 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS)/PROFIT FROM OPERATIONS

 

 

(50,631 )

 

 

34,691

 

 

 

(291,177 )

 

 

1,055,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINANCE COSTS

 

 

(2,445 )

 

 

(3,326 )

 

 

(12,479 )

 

 

(12,973 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS)/PROFIT BEFORE TAX

 

 

(53,076 )

 

 

31,365

 

 

 

(303,656 )

 

 

1,042,854

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax

 

 

-

 

 

 

-

 

 

 

(3,898 )

 

 

(26,736 )

Income tax

 

 

(15,990 )

 

 

(14,299 )

 

 

(48,412 )

 

 

(264,547 )

Total tax expense

 

 

(15,990 )

 

 

(14,299 )

 

 

(52,310 )

 

 

(291,283 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS)/PROFIT

 

$(69,066 )

 

$17,066

 

 

$(355,966 )

 

$751,571

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

(39,039 )

 

 

(68,776 )

 

 

(308,800 )

 

 

(233,946 )

COMPREHENSIVE LOSS

 

$(108,105 )

 

$(51,710 )

 

$(664,766 )

 

$517,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - Basic and diluted

 

 

(0.001 )

 

 

0

 

 

 

(0.002 )

 

 

0.004

 

Weighted average number of common shares outstanding – Basic and diluted

 

 

173,718,152

 

 

 

171,218,152

 

 

 

172,916,782

 

 

 

171,218,152

 

 

Consolidated Balance Sheets Data

 

 

As of

 

 

As of

 

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

 

 

(Audited)

 

 

(Audited)

 

 

(Audited)

 

Current assets

 

$5,458,763

 

 

$6,021,826

 

 

$7,149,855

 

Total assets

 

$8,186,641

 

 

$8,740,162

 

 

$9,574,390

 

Current liabilities

 

$1,563,379

 

 

$2,004,077

 

 

$2,328,755

 

Total liabilities

 

$1,629,733

 

 

$2,075,149

 

 

$2,394,611

 

Total equity

 

$6,556,908

 

 

$6,665,013

 

 

$7,179,779

 

 

 
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RISK FACTORS

 

An investment in one share of common stock involves a high degree of risk. Before deciding whether to invest in one share of common stock, you should consider carefully the risks described below, together with all the other information set forth in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and our consolidated financial statements and related notes. If any of these risks actually occurs, our business, financial condition, results of operations or cash flow could be materially and adversely affected, which could cause the trading price of one share of common stock to decline, resulting in a loss of all or part of your investment. The risks described below and in the sections referenced above are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business. You should only consider investing in one share of common stock if you can bear the risk of loss of your entire investment.

 

Risk Factors Related to Our Financial Prospects and Capitalization

 

BioNexus’ limited operating history may make it difficult to evaluate our current business and this makes predictions about our future success or viability subject to significant uncertainty.

 

BioNexus’ limited operating history may make it difficult to evaluate our current business and this makes predictions about our future success or viability subject to significant uncertainty. In combination with other anticipated increased operating expenses in connection with becoming a public company, these anticipated changes in our operating expenses may make it difficult to evaluate our current business, assess our future performance relative to prior performance and accurately predict BioNexus’ future performance.

 

BioNexus will continue to encounter risks and difficulties frequently experienced by early commercial-stage companies, including those associated with increasing the size of BioNexus’ organization and the prioritization of BioNexus’ commercial, research and business development activities. If BioNexus does not address these risks successfully, BioNexus’ business could suffer.

 

BioNexus’ growth (organic and inorganic) may require substantial capital and long-term investments. 

 

BioNexus’ competitiveness and growth depend on our ability to fund our capital expenditures. BioNexus cannot assure you that it will be able to fund our capital expenditures at reasonable costs due to adverse macroeconomic conditions, our performance or other external factors.

 

In the future, BioNexus expects to incur significant costs in connection with its operations. BioNexus intends to expand BioNexus’ business through increased marketing efforts of BioNexus Malaysia and Chemrex. These development activities generally require a substantial investment before BioNexus can determine commercial viability, and the proceeds of this offering will not be sufficient to fully fund these activities. BioNexus expects to need to raise additional funds through public or private equity or debt financings, collaborations or licensing arrangements to continue to fund or expand BioNexus’ operations.

 

BioNexus’ actual liquidity and capital funding requirements will depend on numerous factors, including:

 

 

the scope and duration of and expenditures associated with BGL’ discovery efforts and research and development programs;

 

 

the costs to fund BGL’ commercialization strategies for any product candidates for which BioNexus receive marketing authorization or otherwise launch and to prepare for potential product marketing authorizations, as required;

 

 

the costs of any acquisitions of complementary businesses or technologies that BioNexus may pursue;

 

 
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potential licensing or partnering transactions, if any;

 

 

BioNexus’ facilities expenses, which will vary depending on the time and terms of any facility lease or sublease BioNexus may enter into, and other operating expenses;

 

 

the scope and extent of the expansion of BioNexus’ sales and marketing efforts;

 

 

the settlement of the government investigation described below, potential and pending litigation, potential pay or recoupments of reimbursement amounts, and other contingencies;

 

 

the commercial success of BioNexus’ products;

 

 

BioNexus’ ability to obtain more extensive coverage and reimbursement for BGL’ tests and therapeutic products, if any, including in the general, average-risk patient population; and

 

 

BioNexus’ ability to collect its accounts receivable.

 

The availability of additional capital, whether from private capital sources (including banks) or the public capital markets, fluctuates as BioNexus’ financial condition and market conditions in general change. There may be times when the private capital sources and the public capital markets lack sufficient liquidity or when BioNexus’ securities cannot be sold at attractive prices or at all, in which case BioNexus would not be able to access capital from these sources. In addition, a weakening of BioNexus’ financial condition or deterioration in its credit ratings could adversely affect BioNexus’ ability to obtain necessary funds. Even if available, additional financing could be costly or have adverse consequences.

 

BioNexus may incur net losses in the near future.

 

BioNexus has devoted substantial resources to the development and commercialization of the products of BioNexus Malaysia and Chemrex. BioNexus might not remain profitable for any period. BioNexus’ failure to achieve profitability would negatively affect BioNexus’ business, financial condition, results of operations, and cash flows. If BioNexus is unable to execute BioNexus’ sales and marketing strategy and BioNexus’ products are unable to gain sufficient acceptance in the market, BioNexus may be unable to generate sufficient revenues to sustain BioNexus’ business.

 

Any additional capital BioNexus raises may not be available on satisfactory terms and may adversely affect stockholders’ holdings or rights.

 

Additional capital, if needed, may not be available on satisfactory terms or at all. In addition, the terms of any financing may adversely affect stockholders’ holdings or rights. Debt financing, if available, may include restrictive covenants. To the extent that BioNexus raises additional funds through collaborations and licensing arrangements, it may be necessary to relinquish some rights to BioNexus’ technologies or grant licenses on terms that may not be favorable to us.

 

If BioNexus is not able to obtain adequate funding when needed, BioNexus may be required to delay development programs or sales and marketing initiatives. If BioNexus is unable to raise additional capital in sufficient amounts or on satisfactory terms, BioNexus may have to make reductions in BioNexus’ workforce and may be prevented from continuing BioNexus’ discovery, development, and commercialization efforts and exploiting other corporate opportunities. In addition, it may be necessary to work with a partner on one or more of BioNexus’ tests or products under development, which could lower the economic value of those products to us. Each of the foregoing may harm BioNexus’ business, operating results, and financial condition and may impact BioNexus’ ability to continue as a going concern.

 

Raising additional capital may lead to dilution of shareholdings by BioNexus’ existing shareholders, restrict BioNexus’ operations, and may further result in fair value loss, adversely affecting BioNexus’ financial results.

 

BioNexus may seek additional funding through a combination of equity and debt financings and collaborations. To the extent that BioNexus raises additional capital through the sale of equity or convertible debt securities, the ownership interest of existing holders of BioNexus’ shares will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of BioNexus’ existing shareholders.

 

 
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The incurrence of additional indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in certain additional restrictive covenants, such as limitations on BioNexus’ ability to incur additional debt or issue additional equity, limitations on BioNexus’ ability to acquire or license IP rights and other operating restrictions that could adversely impact BioNexus’ ability to conduct its business.

 

Risk Factors Related to Our Business and Industry

 

General Business and Industry Risks

 

BioNexus is unable to predict the duration of current economic conditions.

 

Economic downturns, prolonged slow growth or stagnation in the economy have materially adversely affected BioNexus’ 2022 business. For 2023, results of operations, financial condition and cash flows could be affected as long as current economic conditions persist.

 

Global economic conditions could materially adversely impact demand for BioNexus’ products and services.

 

BioNexus’ operations and performance depend significantly on economic conditions. Global financial conditions continue to be subject to volatility arising from international geopolitical developments and global economic phenomenon, as well as general financial market turbulence and natural phenomena such as the COVID-19 pandemic. Uncertainty about global economic conditions could result in

 

 

customers postponing purchases of its products and services in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors, which could have a material negative effect on demand for its products and services; and

 

 

 

 

third-party suppliers being unable to produce devices for its products or raw materials in the same quantity or on the same timeline or being unable to deliver such parts and components as quickly as before or subject to price fluctuations, which could have a material adverse effect on the services and products provided by BGL; and accordingly, on its business, results of operations or financial condition.

 

Access to public financing and credit can be negatively affected by the effect of these events on Malaysian, U.S. and global credit markets. The health of the global financing and credit markets may affect its ability to obtain equity or debt financing in the future and the terms at which financing or credit is available to us. These instances of volatility and market turmoil could adversely affect its operations and the trading price of its common stock.

 

BioNexus’ risk management programs, processes, or procedures for identifying and addressing risks in BGL’s business may not be adequate or effectively applied, and this may adversely impact its businesses.

 

BGL relies on a combination of technical and human factors to protect us against risks. BGL policies, procedures and practices are used to identify, monitor and control a variety of risks, including risks related to human error and hardware and software errors. The administration and results of each test are reviewed by a physician and a scientist in Malaysia before the results are released to the patient. The Company’s standard of operations has been developed internally primarily by Dr. Liew. These risk-management methods may not adequately prevent losses and may not protect us against all risks, in which case BioNexus’ business, economic conditions, operations and cash flows may be materially adversely affected.

 

BioNexus has risk-management policies, control systems and compliance manuals in place; however, there is no guarantee that such policies, systems, and manuals will be effectively applied in every circumstance by BioNexus’ staff. For example, employees could override the system technology and theoretically waive requirements, thereby exposing the company accurately conduct its quality control, reporting, payment or stock movement.

 

 
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BioNexus may be adversely impacted by changes in laws and regulations, or in their application.

 

Currently, there are no governmental regulations that materially restrict BioNexus’s screening and chemical distribution business in Malaysia. BGL’s laboratory in Malaysia was established through an invitation by the Malaysian Health Minister alongside a government grant of $1,250,000. BGL’s screening tests have gone through preclinical and clinical trials involving private hospitals and government agencies including the Institute of Medical Research (IMR), Malaysian Biotechnology Corporation (BiotechCorp) and the Clinical Research Centre (CRC). The findings of the preclinical and clinical trials are published in peer reviewed journals such as the Journal of Molecular and Cellular Cardiology, and Physiological Genomics. Once published, BGL would do confirmational tests before applying for commercialization. BGL’s Malaysian lab is currently national operating under an operating license granted by the city of Kuala Lumpur.

 

The Malaysian government passed the Pathology Laboratory Bill of 2007 (“Pathology Act”). However, since 2007, the government has not implemented the regulations underlying the legislation nor has the government enforced the Pathology Act. Any such regulations could establish criteria for the various classes and specialties of laboratories, the organization and management system of the laboratory, the qualification and experience of the person-in-charge, the qualification and competence of pathologists, scientific and technical staff engaged to conduct tests, and the standards of laboratory practice. BGL cannot predict whether it would be able to comply with the Pathology Act and its regulations, if implemented. In addition, there also is a risk that the regulations arising from the Pathology Act or new legislation or regulations could increase BGL’ costs of doing business or otherwise prevent BioNexus from carrying out the expansion of its business. Accordingly, BioNexus’ business may be harmed if BioNexus is not able to comply with any future governmental legislation or regulations, including the Pathology Act.

 

BGL and Chemrex are currently operating under an operating license granted by the City Hall of Kuala Lumpur and Kajang, respectively. Under Malaysian and local laws, Chemrex may continue to operate under its current operating license and fire insurance, which Chemrex currently has. BioNexus cannot predict whether there will be future regulations which may impact its ability to conduct its business.

 

Currently, there are no governmental regulations that affecting the business of BGL and Chemrex in Malaysia. Future legislation or regulations could increase BGL and Chemrex’s costs of doing business or otherwise prevent BioNexus from carrying out the expansion of its business.

 

Business disruptions could seriously harm BioNexus’ future revenue and financial condition and increase its costs and expenses.

 

BioNexus’ operations could be subject to power shortages, telecommunications failures, wildfires, water shortages, floods, earthquakes, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or man-made disasters or business interruptions. The occurrence of any of these business disruptions could seriously harm BGL’ operations and financial condition and increase BGL’ costs and expenses. Unfavorable global economic conditions could adversely affect BioNexus’ business, financial condition, or results of operations.

 

BioNexus do not carry insurance for all categories of risk that BioNexus’ business may encounter. Although BGL intend to obtain some form of business interruption insurance in the future, there can be no assurance that BioNexus will secure adequate insurance coverage or that any such insurance coverage will be sufficient to protect BioNexus operations to significant potential liability in the future. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect BioNexus’ financial position and results of operations.

 

Our lack of insurance could expose us to significant costs and business disruption.

 

We currently do not have any product liability or disruption insurance to cover our operations in Malaysia or overseas. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. If we suffer any losses, damages or liabilities in the course of our business operations, we may not have adequate insurance coverage to provide sufficient funds to cover any such losses, damages or product claim liabilities. Therefore, there may be instances when we will sustain losses, damages and liabilities because of our lack of insurance coverage, which may in turn materially and adversely affect our financial condition and results of operations.

 

 
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Our internal controls are progressively improved with additional independent directors coming on board and audit committee appointed which could cause our financial reporting to be reasonably reliable.

 

Our management, including our chief executive officer and chief financial officer, is responsible for establishing and maintaining adequate internal control over our financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America and includes those policies and procedures that: pertain to the maintenance of records in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and/or directors of the Company; and 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.

 

In connection with the audits of our consolidated financial statements as of December 31, 2022 and 2021, we identified these “material weaknesses,” were rectified with independent directors and audit committee be included in 2022 significant improvement in our internal control over financial reporting.

 

 

We maintained segregation of duties within our business operations and reliance on several individuals fulfilling the role of officers and directors;

 

 

 

 

A functioning audit committee and a majority of independent members and outside directors on our Board of Directors, resulting in better oversight in the establishment and monitoring of required internal control and procedures;

 

We will expand our current board of directors to include additional individuals from US public company in the near term due to our limited financial resources. Until such remedial actions can be fully realized, we will continue to rely on the advice of outside professionals and consultants.

 

As a public company, we may become subject to the Section 404 of the Sarbanes-Oxley Act, or SOX 404, which requires that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 10-K and in our quarterly report on Form 10-Q if we are qualified as an accelerated filer.

 

We are currently a “smaller reporting company”, meaning that we are not an investment company, an asset- backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and annual revenues of less than $50.0 million during the most recently completed fiscal year. In the event that we are still considered a “smaller reporting company,” at such time as we cease being an “emerging growth company,” we will be required to provide additional disclosure in our SEC filings. However, similar to an “emerging growth companies”, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as a “smaller reporting company” may make it harder for investors to analyze our results of operations and financial prospects.

 

 
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Our independent registered public accounting firm may be required to attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

 

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of SOX 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with SOX 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our shares. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

 

Fluctuations in foreign currency exchange rates could have a material adverse effect on our financial results.

 

We earn revenues, pay expenses, own assets and incur liabilities in countries using Malaysian Ringgit other than the U.S. dollar. Since our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against Malaysian currency affect our net operating revenues, operating income and the value of balance sheet items denominated in foreign currencies. We cannot assure you that fluctuations in foreign currencies exchange rates, particularly the strengthening or weakening of the U.S. dollar against Malaysian currency would not materially affect our financial results.

 

Risk Related to BGL’s Business and Industry 

 

Exponential growth and competition in biotechnology.

 

Biotechnology is a rapidly changing field that continues to transform both in scope and impact. Well-funded established molecular labs are gathering big data on health records, genomics, lifestyle information that led to new health solutions. Digitization is revolutionizing health care, allowing for patient reported symptoms, health outcome to be captured as mineable data. BGL could lose out to its competitors’ exponential growth if we unable to establish network with medical centers, pharmaceutical groups and other molecular laboratories synergistically in sharing customers and big data.

 

If BGL grows too quickly without adequate planning and management, BGL’s future business could be harmed.

 

BGL expects to continue to add personnel in the areas of sales and marketing, research & development, laboratory operations, finance, quality assurance and compliance. As BGL builds its commercialization efforts and expands research and development activities, operating expenses and capital requirements will increase, and BGL expects that such costs will continue to increase significantly. BGL’s ability to manage its rapid expansion effectively requires us to forecast expenses accurately, and to properly prepare and expand operational and testing facilities, if necessary, to expend funds to improve our operational, financial and management controls, reporting systems and procedures. As BGL moves forward in marketing our tests and developing our test portfolio, the company will also need to effectively manage its recent established strategic alliances with Health Ministry, Medical Tourism Board, Science & Technology Ministry and Finance Ministry at the Federal and State levels to service their hospitals, insurance, government linked corporations, small and medium enterprises. If BGL is unable to allocate adequate resources to keep pace with its rapidly expanding business requirements, BGL’s future business could be hindered.

 

 
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BGL’s financial prospects depend substantially upon the successful commercialization of the Company’s services and products in the future, which may fail or experience significant delays.

 

BGL’s future success depends upon BGL’s ability to continuously develop technologies and successfully market its existing cancer genetic offerings to customers within Malaysia and expand overseas. BGL’s ability to generate significant revenue in the next several years will depend primarily on the successes of each key stage of its business, including pre-clinical research and development, clinical trials, regulatory approval, marketing and commercialization of its services and products, which is subject to significant uncertainty. BGL’s ability to generate sales revenue from its products and services and its future profitability depends on several factors, including its ability to:

 

 

obtain regulatory approvals and marketing authorizations for BGL’s services and products;

 

 

 

 

obtain market acceptance by patients, hospitals, clinicians, biopharmaceutical companies and others in the medical community;

 

 

establish sufficient testing capacity and commercial capabilities, either by expanding BGL’s current facility or making arrangements with third parties;

 

 

develop and maintain BGL’s sales network to launch and commercialize its new cancer genomic testing services and products;

 

 

set appropriate and favorable prices for BGL’s genomic testing services and products and obtaining adequate reimbursement from third-party payers;

 

 

maintain commercially viable supply relationships with third parties and maintaining sufficient research and development capabilities and infrastructure;

 

 

address any competing technological and market developments; and

 

 

maintain, protect, and expand BGL’s portfolio of intellectual property rights including trade secrets and know-how.

 

The marketing, sale and use of BGL’s products and services could result in substantial damages arising from products or service liability or professional liability claims, that exceed BGL’s resources.

 

Due to the nature of BGL’s business, it may face claims for products or service liability. These claims may arise from the inaccurate or erroneous diagnosis of patient information or the mix-up of patient information whereby a patient receives the wrong diagnostic information. While the company feels confident in its quality control measures to ensure the safeguard of patient and client information, it cannot provide assurances that products or service liability claims will arise in the future.

 

Moreover, litigation or adverse publicity resulting from these allegations could materially and adversely affect BGL’s business, regardless of whether the allegations are valid or whether the company is liable. Currently BGL has no products and service liability insurance coverage, and even if there was such coverage, such coverage might not be sufficient to properly protect BGL. Further, claims of this type, whether substantiated or not, may divert BGL’s financial and management resources from revenue generating activities and the business operation.

 

 
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BGL may face technology transfer challenges and expenses in adding new tests to its portfolio and in expanding its reach into new geographical areas.

 

BGL’s plan for expanding its business includes developing and acquiring additional tests or additional biomarkers that can be transferred into its current and future diagnostic product portfolio and distributed in target markets. Due to differences in the hardware and software platforms available at different laboratories for running molecular tests, BGL’s may need to adjust the configuration of the reagents and there may be changes to the related software in order for the tests to be performed on particular hardware platforms. Making any such adjustments could take a considerable amount of time and expense, and BGL’s might not will succeed in running its tests on the hardware and software that it may encounter in different laboratories. To manage this issue, BGL’s may license or acquire additional instruments and software from another company that will be compatible with its tests. This may include additional licenses and license fees needed for reagents or components required hereto as well.

 

BGL’s biomarkers have undergone limited clinical trial.

 

As there are no governmental regulations that materially restrict our screening business in Malaysia, BGL has conducted limited clinical trials on its biomarkers. While BGL believes that its tests help detect the potential risk of different diseases, the specificity and sensitivity of those tests have been determined in limited clinical trials let alone those that may not meet the scope or standards of clinical trials that would satisfy regulators in the United States or the European Union. If BGL were to conduct extensive clinical trials, the results might prove to be less successful than we anticipate, and such tests might not be approved for sale in markets that require such clinical trials.

 

BGL currently receives and expects to continue to receive a significant portion of its revenues from its genomic screening products, and if its efforts to further increase the use and adoption of these products fail, its business will be harmed.

 

BGL currently receives and expects to continue to receive a significant portion of its revenues from its screening tests. BGL undertakes efforts to increase the awareness and adoption of its tests among laboratories, clinics, clinicians, physicians, payors, and patients in new markets. Continued and additional market acceptance and its ability to attract new customers are key elements to its future success.

 

 
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BGL’s ability to increase sales of its services and establish greater levels of adoption and reimbursement for its tests is uncertain for many reasons, including, among others:

 

 

BGL may be unable to demonstrate to laboratories, clinics, clinicians, physicians, payors, and patients that its services are superior to alternatives with respect to value, convenience, specificity, sensitivity, scope of coverage, and other factors;

 

 

third-party coverage and reimbursement are currently primarily limited to high-risk pregnancies and may not gain acceptance for use in the average-risk pregnancy population or for the screening of microdeletions, limiting the overall addressable market;

 

 

third-party payors may set the amounts of reimbursement at prices that reduce its profit margins or do not allow us to cover its expenses;

 

 

BGL may not be able to maintain and grow effective sales and marketing capabilities;

 

 

its sales and marketing efforts may fail to effectively reach customers or communicate the benefits of its services;

 

 

 

 

superior alternatives to its services may be developed and commercialized;

 

 

BGL may experience supply constraints, including due to the failure of its key suppliers to provide required sequencing instruments and reagents;

 

 

regulatory or legislative bodies may adopt new regulations or policies or take other actions that impose significant restrictions on its ability to market its services.

 

If the market and its market share for its genomic products fail to grow or grow more slowly than expected, its business, operating results, and financial condition would be adversely affected.

 

BGL’s success depends on their ability to improve and enhance its current tests and new test candidates, which is complex and costly, and the results are uncertain.

 

Effective execution of research and development activities and the timely introduction of enhanced, improved, or new tests and test candidates to the market are important elements of BGL’s business strategy. For example, BGL is currently collaborating with the National Heart Institute in Malaysia to identify genomic signatures in acute myocardial infarctions. However, the development of enhanced, improved, or new heart attack risks is complex, costly, and uncertain and requires us to, among other factors, accurately anticipate patients’, clinicians’, and payors’ needs, and emerging technology trends.

 

In the development of enhanced, improved, or new test and test candidates, BioNexus can provide no assurance that:

 

 

BGL will develop any tests that meet its desired target product profile and address the relevant clinical need or commercial opportunity;

 

 

any tests that BGL develop will prove to be effective in clinical trials, platform validations, or otherwise;

 

 

BGL will obtain necessary regulatory authorizations, in a timely manner or at all;

 

 

any tests that BGL develop will be successfully marketed to and ordered by healthcare providers;

 

 

any tests that BGL develop will be produced at an acceptable cost and with appropriate quality;

 

 

its current or future competitors will not introduce tests similar to ours that have superior performance, lower prices, or other characteristics that cause healthcare providers to recommend, and consumers to choose, such competitive tests over ours; or

 

 

third parties do not or will not hold patents in any key jurisdictions that would be infringed by its tests.

 

 
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These and other factors beyond BGL’s control could delay its launch of enhanced, improved, or new test and test candidates.

 

The research and development process in the biotechnology industry generally requires a significant amount of time from the research and design stage through commercialization. The launch of such new test requires the completion of certain clinical development and/or assay validations in the commercial laboratory. This process is conducted in various stages, and each stage presents the risk that BGL will not achieve its goals and will not be able to complete clinical development for any planned test in a timely manner. Such development and/or validation failures could prevent or significantly delay its ability to obtain FDA clearance or approval as may be necessary or desired, obtain approval by entities that provide oversight over laboratory diagnostic tests in the localities BGL operate in, or launch any of its planned tests and test candidates. At times, it may be necessary for us to abandon a product in which BGL has invested substantial resources. Without the timely introduction of new test candidates and improvements or enhancements of its current tests, its tests may become obsolete over time and its competitors may develop tests that are more competitive, in which case its business, operating results, and financial condition will be harmed.

 

BGL faces challenges from the evolving regulatory environment and increasing public awareness on privacy, personal data protection and cyber security. Actual or alleged failure to comply with privacy, cybersecurity and data protection-related laws and regulations could adversely affect BGL’s business and reputation.

 

BGL face risks inherent in handling large volumes of data and in protecting the security of such data. In particular, BGL faces a number of challenges relating to data inter-connected with regional labs, including:

 

 

protecting the data in and hosted on BGL’s system, including against hacking on BGL’s system by outside parties or its employees;

 

 

 

 

addressing concerns related to privacy and sharing, safety, security and others;

 

 

 

 

complying with applicable laws, rules and regulations relating to the collection, use, disclosure of personal information, including any requests from regulatory and government authorities relating to such data;

 

 

 

 

Any systems failure or security breach or lapse those results in the release of user data could harm BGL’s reputation and brand and, consequently, BGL’s business, in addition to exposing us to potential legal liability.

 

As the company’s operations expand, it may be subject to these laws in other jurisdictions where its customers and other participants are located. The laws, rules and regulations of other jurisdictions may impose more stringent or conflicting requirements and penalties than those in Malaysia, compliance with which could require significant resources and costs. BGL’s privacy policies and practices concerning the collection, use and disclosure of user data are posted on its websites. Any failure, or perceived failure, by us to comply with BGL’s posted privacy policies or with any regulatory requirements or privacy protection-related laws, rules and regulations could result in proceedings or actions against us by authorities or others. These proceedings or actions may subject us to significant penalties and negative publicity, require BGL to change its business practices, increase its costs and severely disrupt its business.

 

 BGL’s software is highly complex and may contain undetected errors.

 

BGL’s proprietary software underlying its diagnosis is highly complex and may contain undetected errors or vulnerabilities, some of which may only be discovered after a diagnosis. This may result in an inaccurate diagnosis which could expose us to substantial liability due to the misdiagnosis. Any errors or vulnerabilities discovered in BGL’ software could result in damage to BioNexus’ reputation, loss of clients, loss of revenue or liability for damages, any of which could adversely affect BioNexus’ growth prospects and its business.

 

 
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BGL’s use both “open source” and proprietary software could subject its proprietary software to general release, adversely affect its ability to sell its tests and subject the company to possible litigation.

 

 A portion of the screenings by BGL incorporate so-called “open-source” software and BGL may incorporate open-source software into other tests and technologies in the future. Such open-source software generally is licensed by its authors or other third parties under open-source licenses. Some open-source licenses may contain certain unfavorable conditions, such as requirements that BGL disclose source code for modifications or derivative works that the company makes to the open-source software and that the company license such modifications or derivative works to third parties at no cost or under the terms of the particular open-source license. BGL monitors its use of open-source software in an effort to avoid uses in a manner that would require it to disclose or grant licenses under its proprietary source code; however, there can be no assurance that such efforts will be successful. Open-source license terms are often ambiguous and such use could inadvertently occur. There is little legal precedent governing the interpretation of many of the terms of these licenses, and the potential impact of these terms on BioNexus’ business may result in unanticipated obligations regarding its technologies. If an author or other third party that distributes such open-source software were to allege that BGL had not complied with the conditions of an open-source license, the company could incur significant legal costs defending itself against such allegations. In the event such claims were successful, BGL could be subject to significant damages or be enjoined from the distribution of the infringing product. These risks could be difficult to eliminate or manage, and, if not addressed, could harm BioNexus’ business, financial condition and results of operations.

 

For screening process on cancers, inflammatory diseases and osteoarthritis, BGL uses company proprietary algorithm software for data analysis and interpretation established by Co-founder Professor Choong Chin Liew.

 

BGL may face competition from other biotechnology competitors and its operating results will suffer if BGL fail to compete effectively.

 

BGL competes with companies worldwide that specialize in RNA blood analysis to detect disease. Laboratories in universities and research institutions that are attempting to extend their research from DNA into RNA screening could become competitors if they succeed. Many of BGL’ competitors and potential competitors may have stronger financial resources than the company. Their discovery and development of novel protocols could make BGL’s screening obsolete. As a result of these factors, BGL’s competitors may succeed in obtaining patent protection and/or FDA approval or discovering, developing and commercializing screening process for cancer, inflammation, osteoarthritis and many more indications.

 

In addition, smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. In addition, many universities and private and public research institutes may become active in BGL’s target disease areas.

 

If BGL’s competitors market products that are more effective, safer or less expensive or that reach the market sooner than BGL’s future tests, if any, BioNexus may not achieve commercial success. In addition, because of BGL’s limited resources, it may be difficult for us to stay abreast of the rapid changes in each technology. If BGL fails to stay at the forefront of technological change, BGL may be unable to compete effectively. Technological advances or products developed by BGL’s competitors may render BGL’s technologies or test candidates obsolete, less competitive or not economical.

 

Security breaches, loss of data, and other disruptions could compromise sensitive information related to BGL’s business or prevent us from accessing critical information and expose us to liability, which could adversely affect BGL’s business and its reputation.

 

In the ordinary course of BGL’s business, BGL collect and store sensitive data, including protected health information, personally identifiable information, financial information, intellectual property, and proprietary business information owned or controlled by the company or its customers, payers, and other parties. BGL manages and maintains its applications and data utilizing a combination of on-site systems and cloud-based data centers. The company utilize external security and infrastructure vendors to manage parts of its data centers. BGL also communicates sensitive data, including patient data, electronically, and through relationships with multiple third-party vendors and their subcontractors. These applications and data encompass a wide variety of business-critical information, including research and development information, patient data, commercial information, and business and financial information. BGL faces a number of risks relative to protecting this critical information, including loss of access risk, inappropriate use or disclosure, inappropriate modification, and the risk of the company being unable to adequately monitor, audit, and modify its controls over critical information. This risk extends to the third-party vendors and subcontractors BGL uses to manage this sensitive data.

 

 
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The secure processing, storage, maintenance, and transmission of this critical information are vital to BGL’s operations and business strategy, and BGL devote significant resources to protecting such information. Although BGL takes measures to protect sensitive data from unauthorized access, use or disclosure, BGL’s information technology and infrastructure may be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance, or other malicious or inadvertent disruptions. In addition, while BGL has implemented security measures and a formal, dedicated enterprise security program to prevent unauthorized access to patient data, such data is currently accessible through multiple channels, and there is no guarantee BGL can protect its data from breach. Unauthorized access, loss, or dissemination could also result in delays of BGL’s services and tests development and commercialization as well as damage BGL’s reputation, including BGL’s ability to conduct its analysis, deliver test results, process claims and appeals, provide customer assistance, conduct research and development activities, collect, process, and prepare company financial information, provide information about BGL’s tests and other patient and physician education and outreach efforts through its website, and manage the administrative aspects of its business.

 

Any such unauthorized access, loss, or dissemination of information could also result in legal claims or proceedings, liabilities under Malay laws and regulations in relation to the protection of personal information and cybersecurity as well as those specifically governing patient and medical data. BGL shall establish, maintain and execute internal systems to safeguard relevant personal healthcare data. Any failure to comply with above-mentioned regulation would result in administrative liabilities including but not limited to informed criticism.

 

BGL plans to expand its tests and services to multiple countries exposes us to risks associated with doing business outside of Malaysia. The expansion may not be successful, which could limit BGL’s ability to grow its revenue, net income, and profitability.

 

As BGL plan to set up RNA screening labs operations in Indonesia, Middle East, USA, China and Germany, if approved, its businesses are subject to risks associated with doing business outside Malaysia including an increase in BioNexus’ expenses, diversion of BioNexus’ management’s attention from the research and development of additional diseases/disorders risk detection or forgoing profitable licensing opportunities in these economies. Additionally, Chemrex currently offers and sells chemical raw materials to customers in Southeast Asia markets outside of Malaysia.

 

Accordingly, the Company’s business and financial results in the future could be adversely affected due to a variety of factors including the risks associated with expanding into markets in which the Company has limited or no experience and in which the company may be less well-known. The Company may be unable to attract a sufficient number of customers and other participants, fail to anticipate competitive conditions or face difficulties in operating effectively in these new markets. The expansion of the Company’s cross-border business will also expose us to risks relating to staffing and managing cross-border operations, increased costs to protect intellectual property, tariffs and other trade barriers, differing and potentially adverse tax consequences, increased and conflicting regulatory compliance requirements, lack of acceptance of the Company’s product and service offerings, challenges caused by distance, language and cultural differences, exchange rate risk and political instability. Accordingly, any efforts the Company make to expand its cross-border operations may not be successful, which could limit the Company’s ability to grow its revenue, net income and profitability.

 

Risk Related to Chemrex’s Business and Industry

 

The chemical raw material industry is cyclical and both recessions and prolonged periods of slow economic growth could have an adverse effect on Chemrex’s business.

 

Demand for most of Chemrex’s products is cyclical in nature and sensitive to general economic conditions. Chemrex’s business supports cyclical industries such as the construction, energy, appliance and medical devices. As a result, downturns in the Malaysian economy, the global economy or any of these industries could materially adversely affect Chemrex’s results of operations, financial condition and cash flows. The global economy is recovering from its lows during the third quarter of 2022, but the pace of the recovery in 2023 will likely depend on how quickly normal activities can resume as well as government stimulus programs or infrastructure spending. We expect that Chemrex can do better in 2023 if investments and visitors (especially from China) resume their entry into Malaysia as was the same pre-pandemic. The boosts in the tourism and public transportation industry will push up the FRP material usage for industrial needs. Nonetheless, even with this economic recovery, challenges from ongoing uncertainties, both in Malaysia and in other regions of the world, remain. However, we believed that Chemrex’s customers in the manufacturing, construction, and oil and gas sectors would resume their normal operations from the second or third quarter of 2023.

 

BioNexus is unable to predict the duration of current economic conditions. Future economic downturns, prolonged slow growth or stagnation in the economy, or a sector-specific slowdown in one of its key end-use markets, such as non-residential construction, could materially adversely affect Chemrex’s business, results of operations, financial condition and cash flows, especially considering the capital-intensive nature of Chemrex’s business.

 

The results of Chemrex’s operations are sensitive to volatility in the cost of raw materials, particularly fibre reinforced plastics.

 

Chemrex, as a reseller, rely on outside vendors to supply us with raw materials, including fibre reinforced plastics. Chemrex purchase most of its primary raw material, from numerous other sources located throughout Malaysia and internationally.

 

Prices of these chemical raw materials are volatile and are influenced by changes exports in response to demands of Chemrex’s global competitors and customers, as well as currency fluctuations. At any given time, Chemrex may be unable to obtain an adequate supply of these chemical raw materials with price and other terms acceptable to us. The availability and prices of raw materials may also be negatively affected by new laws and regulations, allocation by suppliers, interruptions in production, accidents or natural disasters, changes in exchange rates, worldwide price fluctuations, and the availability and cost of transportation.

 

If Chemrex’s suppliers increase the prices of its chemical raw materials, Chemrex may not have alternative sources of supply. In addition, to the extent that Chemrex has quoted prices to its customers and accepted customer orders for its products prior to purchasing necessary raw materials, it may be unable to raise the price of its products to cover all or part of the increased cost of the materials. Also, if Chemrex are unable to obtain adequate and timely deliveries of its chemical raw materials, it may be unable to timely deliver orders of its products. This could cause Chemrex to lose sales, incur additional costs or suffer harm to its reputation.

 

 
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Disruptions in the supply of chemicals that we distribute or in the operations of our customers could adversely affect our business.

 

Our business depends on access to adequate supplies of the chemicals that our customers purchase from us. From time to time, we may be unable to access adequate quantities of certain chemicals because of supply disruptions due to natural disasters (including hurricanes and other extreme weather), industrial accidents, scheduled production outages, high demand leading to allocation, port closures and other transportation disruptions and other circumstances beyond our control, or we may be unable to purchase chemicals that we are obligated to deliver to our customers at prices that enable us to earn a profit. In addition, unpredictable events may have a significant impact on the industries in which many of our customers operate, reducing demand for products that we normally distribute in significant volumes.

 

Significant changes in the business strategies of our suppliers could also disrupt our supply. Large chemicals manufacturers may elect to distribute certain products (or products in certain regions) directly to end user customers, instead of relying on independent distributors such as us. While we do not believe that our results depend materially on access to any individual producer’s products, a reversal of the trend toward more outsourced distribution of chemicals would likely result in increasing margin pressure or products becoming unavailable to us. Any of these developments could have a material adverse effect on our business, financial condition and results of operations.

 

We have non-written contracts with suppliers and customers, which are generally terminable upon notice, and the termination of our relationships with suppliers and customers contracts could negatively affect our business.

 

Our purchases and sales of chemicals are typically made pursuant to verbal purchase orders rather than written contracts. Many of our contracts with both customers and suppliers are terminable without cause upon 30 days’ notice to us from the supplier or customer. Our business relationships and reputation may suffer if we are unable to meet our delivery obligations to customers which may occur because many of our suppliers are not subject to contracts or can terminate contracts on short notice. In addition, renegotiation of purchase or sales terms to our disadvantage could reduce our sales margins. Any of these developments could adversely affect our business, financial condition, and results of operations.

 

We may lose customers and suffer damage to our reputation if we are unable to meet customer demand for a particular product.

 

We face the risk of dissatisfied customers and damage to our reputation if we cannot meet customer demand for a particular chemical because we are short on inventories. In addition, particularly in cases of pronounced cyclicality in the end market, it can be difficult to anticipate our customers’ requirements for particular chemicals, and we could be asked to deliver larger-than-expected quantities of a particular chemical on short notice. If for any reason we experience widespread, systemic difficulties in filling customer orders, our customers may be dissatisfied and discontinue their relationship with us or we may be required to pay a higher price to obtain the needed chemical on short notice, thereby adversely affecting our margins.

 

We may be exposed to product returns and product liability claims and latent defect liability claims.

 

Our FRP and other raw materials are used to produce a wide variety of goods including handrails, bench tops, automotive and aero parts, cleanroom panels, and covers for various instruments used in manufacturing. We are exposed to potential product returns and latent defect liability claims from our customers and the end-users of goods and products. Although we have put in place stringent quality control measures, including the setting up of different teams for incoming quality control, quality control and quality assurance which monitor the quality of the raw material, semi-finished products as well as finished products, there may be undetected flaws or manufacturing defects or other irregularities that may be subsequently detected at any point in the life of our products. We have adopted return policy on products with manufacturing defects to accommodate our customers. If after any checkup or analysis by our laboratory the defect of a product is found to be manufacturing defect, return and replacement of products will be made. Therefore, if undetected flaws or manufacturing defects or other irregularities from either the design or manufacture of our products are to occur, additional costs and expenses which we may not recoup may incur, and our revenue and costs control can be negatively impacted.

 

In addition, if our defective or sub-standard products cause bodily injuries or property damage, our suppliers may face latent defect liability claims from our customers or the end-users of goods and products made with our products and regardless of the merits or the outcome of these claims, we may be required to address and, if necessary, and divert management attention and other resources from our business and operations. We may also face adverse publicity associated with such claims, which could have an adverse effect on our business, results of operations and financial condition.

 

 
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Risks Related to Its Operations

 

BioNexus’ officers and directors may in future have outside business activities. As a result, there may be potential conflicts of interest and negatively impact the amount of time they will be able to dedicate to the company.

 

Currently BioNexus’ officers, who are also directors, have been working on promoting business for the Company. A potential conflict of interest may arise in the future that may cause BioNexus’ business to fail, including conflicts of interest in allocating their time to the company and their other business interests. While BioNexus’ officers have verbally agreed to devote sufficient time and attention to the affairs of the Company, and BioNexus has determined to sign agreements with these officers regarding this matter, as of the date of this prospectus, we have yet obtained any executed such written agreements. As a result, BioNexus may face conflicts between business decisions that they may have to make regarding its operations and that of their other business interests.

 

BioNexus may not be able to attract and retain key senior management members and research and development personnel.

 

BioNexus’ future success depends upon the continuing services of members of its senior management team and key research and development personnel and consultants. Although BioNexus typically requires BioNexus’ key personals to enter into non-compete and confidentiality agreement with us, BioNexus cannot prevent they join the company’s competitor after the non-compete period, which is currently two years for those who have signed non-compete agreements. The loss of their services could adversely impact its ability to achieve its business objectives. If one or more of BioNexus’ senior management or key clinical and scientific personnel are unable or unwilling to continue in their present positions or joins a competitor or forms a competing company, the company may not be able to replace them in a timely manner or at all, which will have a material and adverse effect on its business, financial condition and results of operations.

 

In addition, the continued growth of BioNexus’ business depends on its ability to hire additional qualified personnel with expertise in molecular biology, chemistry, biological information processing, software, engineering, sales, marketing, and technical support. BioNexus compete for qualified management and scientific personnel with other life science and technology companies, universities, and research institutions in Malaysia and overseas. Competition for these individuals is intense, and the turnover rate can be high. Failure to attract and retain management and scientific and engineering personnel could prevent the company from pursuing collaborations or developing its services and products or technologies. 

 

BioNexus may be unable to protect the company’s intellectual property adequately.

 

We regard our trademarks, know-how, technologies and similar intellectual property as critical to our success. To establish and protect its intellectual property rights, BioNexus relies primarily upon trade secrets, and to a lesser extent, contractual provisions with current and future employees. The company also has plans to patent technologies that it is currently developing. As a result, BioNexus’ efforts to protect its intellectual property may not be sufficient or effective. If these measures do not protect its intellectual property rights, third parties could use the Company’s technology, and its ability to compete in the market would be reduced significantly.

 

 
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In addition, BioNexus may not be effective in policing unauthorized use of the company’s intellectual property. Even if BioNexus does detect violations, BioNexus may need to engage in litigation to enforce its intellectual property rights. Any enforcement efforts BioNexus undertake, including litigation, could be time-consuming and expensive and could divert BioNexus’ management’s attention. In addition, BioNexus’ efforts may be met with defenses and counterclaims challenging the validity and enforceability of its intellectual property rights or may result in a court determining that its intellectual property rights are unenforceable. If BioNexus is unable to cost-effectively protect its intellectual property rights, then its business could be harmed.

 

BioNexus may be subject to intellectual property claims, which are extremely costly to defend, could require us to pay significant damages and could limit the company’s ability to use certain technologies in the future.

 

Companies in bio-medical or bio-technology industries are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. To the extent BioNexus gain greater public recognition, BioNexus may face a higher risk of being the subject of intellectual property claims. Third-party intellectual property rights may cover significant aspects of BioNexus’ technologies or business methods or block us from expanding its offerings. Any intellectual property claims against us, with or without merit, could be time consuming and expensive to settle or litigate and could divert the attention of its management. Litigation regarding intellectual property rights is inherently uncertain due to the complex issues involved, and the company may not be successful in defending itself in such matters.

 

In addition, some of BioNexus’ competitors have extensive portfolios of issued patents. Many potential litigants, including some of BioNexus’ competitors and patent holding companies, have the ability to dedicate substantial resources to enforcing their intellectual property rights. Any claims successfully brought against us could subject us to significant liability for damages and BioNexus may be required to stop using technology or other intellectual property alleged to be in violation of a third party’s rights. BioNexus also might be required to seek a license for third-party intellectual property. Even if a license is available, BioNexus could be required to pay significant royalties or submit to unreasonable terms, which would increase its operating expenses. BioNexus may also be required to develop alternative non-infringing technology, which could require significant time and expense. If BioNexus cannot license or develop technology for any allegedly infringing aspect of its business, BioNexus would be forced to limit its service and may be unable to compete effectively. Any of these results could harm BioNexus’ business.

 

BioNexus may pursue collaborations, in-licensing or out-license arrangements, joint ventures, strategic alliances, partnerships or other strategic investments or arrangements, which may fail to produce anticipated benefits and adversely affect the company’s operations.

 

BioNexus may pursue opportunities for collaboration, in-licensing, out-license, joint ventures, acquisitions of products, assets or technology, strategic alliances, or partnerships that BioNexus believes would be complementary to or promote BioNexus’ existing business. Proposing, negotiating and implementing these opportunities may be a lengthy and complex process. Other companies, including those with substantially greater financial, marketing, sales, technology, or other business resources, may compete with us for these opportunities or arrangements. BioNexus may not be able to identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms, or at all.

 

BioNexus has limited experience with respect to these business development activities. Management and integration of a licensing arrangement, collaboration, joint venture or other strategic arrangement may disrupt BioNexus’ current operations, decrease its profitability, result in significant expenses, or divert management resources that otherwise would be available for its existing business. BioNexus may not realize the anticipated benefits of any such transaction or arrangement.

 

 
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Furthermore, partners, collaborators, or other parties to such transactions or arrangements may fail to fully perform their obligations or meet its expectations or cooperate with us satisfactorily for various reasons and subject us to potential risks, including the followings:

 

 

partners, collaborators, or other parties have significant discretion in determining the efforts and resources that they will apply to a transaction or arrangement;

 

 

partners, collaborators, or other parties could independently develop, or develop with third parties, services and products that compete directly or indirectly with its services and products;

 

 

partners, collaborators, or other parties may stop, delay or discontinue research and development, and commercialization efforts;

 

 

partners, collaborators, or other parties may not properly maintain or defend BioNexus’ intellectual property rights or may use its intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate its intellectual property or proprietary information or expose us to potential liability;

 

 

 

 

disputes may arise between us and partners, collaborators, or other parties that cause the delay or termination of the research, development or commercialization of BioNexus’ services and products, or that result in costly litigation or arbitration that diverts management attention and resources;

 

 

partners, collaborators, or other parties may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable services and products; and

 

 

partners, collaborators, or other parties may own or co-own intellectual property covering BioNexus’ services and products that results from BioNexus’ collaborations with them, and in such cases, BioNexus would not have the exclusive right to commercialize such intellectual property.

 

Any such transactions or arrangements may also require actions, consents, approval, waiver, participation or involvement of various degrees from third parties, such as regulators, government authorities, creditors, licensors or licensees, related individuals, suppliers, distributors, shareholders or other stakeholders or interested parties. There is no assurance that such third parties will be cooperative as BioNexus desires, or at all, in which case BioNexus may be unable to carry out the relevant transactions or arrangements.

 

Risks Related to Doing Business in the Southeast Asia Region

 

Changes in policies in Malaysia and other Southeast Asian countries could have a significant impact upon the company’s ability to operate profitably in Malaysia and the Southeast Asia region. 

 

Changes in the political and economic policies of Malaysia and other governments in Southeast Asia may materially and adversely affect BioNexus’ business, financial condition and results of operations and may result in its inability to sustain its growth and expansion strategies. Accordingly, BioNexus’ financial condition and results of operations are affected to a significant extent by economic, political and legal developments in Southeast Asia region.

 

The Southeast Asia economy differs from the economies of most developed countries in many respects, including the extent of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. In addition, the government continues to play a significant role in regulating industry development by imposing industrial policies. The government also exercises significant control over economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, regulating financial services and institutions and providing preferential treatment to particular industries or companies.

 

Local governments have implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall economy, but may also have a negative effect on us. BioNexus’ financial condition and results of operation could be materially and adversely affected by government control over capital investments or changes in tax regulations that are applicable to us. In addition, the government has implemented in the past certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activity, which in turn could lead to a reduction in demand for its services and consequently have a material adverse effect on its businesses, financial condition and results of operations.

 

 
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Developments in the social, political, regulatory and economic environment in Malaysia may have a material adverse impact on us.

 

BioNexus’ business, prospects, financial condition and results of operations may be adversely affected by social, political, regulatory and economic developments in Malaysia. Such political and economic uncertainties include, but are not limited to, the risks of war, terrorism, nationalism, nullification of contract, changes in interest rates, imposition of capital controls and methods of taxation.

 

All sectors of the economy in 2022 across Malaysia saw their supply chains interrupted, demand for their products and services decline, shortages in supplies and inputs. We will emerge in a very different world compared to the one before the outbreak. All organizational functions are intended to prioritize and optimize spending or postpone tasks that will not bring value in the current environment. It created serious consequences because various businesses are facing massive losses due to their declining activities and the accompanying unpredictable future of many businesses. A substantial decrease has been observed in overall spending, which resulted in an array of estimated long-term uncertainty impacts. Consequently, many businesses and firms closed, and employees were dismissed. Towards a new recovery phase in 2022, most businesses and organizational functions were prioritizing our spending or postpone any tasks and events that do not bring any value to the current situation because even when the challenges are successfully addressed, this will not guarantee any promising future. Hence, we were alerted about the available survival strategies to sustain us throughout this unforeseen circumstance and in the future. A “new normal” indicates how we should digest the current situation and initiate a business growth pattern. Returning to the pre-pandemic business pattern will take time and depends on the government’s response to the population health and socioeconomic demands arising due to the pandemic.

 

Although the overall Malaysian economic environment (in which BioNexus predominantly operate) appears to be positive, there can be no assurance that this will continue to prevail in the future. Economic growth is determined by countless factors, and it is extremely difficult to predict with any level of absolute certainty.

 

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in Malaysia against the company or its management named in the prospectus based on foreign laws, and the ability of U.S. authorities to bring actions in Malaysia may also be limited.

 

The company’s operating subsidiaries are incorporated in Malaysia and conduct substantially all of its operations in Southeast Asia. All of BioNexus’ executive officers and directors reside outside the United States, and all their assets are located outside of the United States. As a result, it may be difficult or impossible for shareholders to bring an action against us or against these individuals in Malaysia in the event that you believe that your rights have been infringed under the securities laws of the United States or otherwise. Even if you are successful in bringing an action of this kind, the laws of Malaysia may render you unable to enforce a judgment against BioNexus’ assets or the assets of BioNexus’ directors and officers. As advised by our Malaysian counsel Yusuf Khan & Fong, as of the date of this prospectus, there is no statutory recognition in Malaysia of judgments obtained in the United States, although the courts of Malaysia will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. The rights of shareholders to take legal action against us and BioNexus’ directors, actions by minority shareholders and the fiduciary responsibilities of its directors are to a large extent governed by the common law of Malaysia. The common law of Malaysia is derived in part from comparatively limited judicial precedent in Malaysia as well as from English common law, which provides persuasive, but not binding, authority in a court in Malaysia. The rights of BioNexus’ shareholders and the fiduciary responsibilities of its directors under Malaysian law are not as clearly established as they would be under statutes or judicial precedents in the United States. Malaysia has a less developed body of securities laws than the United States and provides significantly less protection to investors. As a result, BioNexus’ public shareholders may have more difficulty in protecting their interests through actions against us, its management, its directors or its major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States. In addition, to receive any form of remedy, the shareholders would have to engage Malaysian counsel regarding the process to receive any such remedy.

 

 
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BioNexus is subject to foreign exchange control policies in Malaysia.

 

The ability of BioNexus’ subsidiaries to pay dividends or make other payments may be restricted by the foreign exchange control policies in the countries where they operate. For example, there are foreign exchange policies in Malaysia which support the monitoring of capital flows into and out of the country in order to preserve its financial and economic stability. The foreign exchange policies are administered by the Foreign Exchange Administration, an arm of Bank Negara Malaysia (“BNM”), the central bank of Malaysia. The foreign exchange policies monitor and regulate both residents and non-residents. Under the current Foreign Exchange Administration rules issued by BNM, non-residents are free to repatriate any amount of funds from Malaysia in foreign currency other than the currency of Israel at any time (subject to limited exceptions), including capital, divestment proceeds, profits, dividends, rental, fees and interest arising from investment in Malaysia, subject to any withholding tax. In the event BNM or any other country where BioNexus operates introduces any restrictions in the future, it may be affected in its ability to repatriate dividends or other payments from BioNexus’ subsidiaries in Malaysia or in such other countries. Since BioNexus rely principally on dividends and other payments from its subsidiaries for its cash requirements, any restrictions on such dividends or other payments could materially and adversely affect its liquidity, financial condition and results of operations.

 

Risks Related to This Offering

 

The offering price for the securities offered under this prospectus may not accurately reflect the value of your investment. Price movement could be affected by the industry market trend and announcement.

 

The offering price per share offered by this prospectus was negotiated between us and the Underwriter. Factors considered in determining the price of our common stock include:

 

 

the history and prospects of companies with operations similar to ours;

 

 

 

 

prior offerings of those companies;

 

 

 

 

our capital structure;

 

 

 

 

an assessment of our management and its experience;

 

 

 

 

general conditions of the securities markets at the time of this offering; and

 

 

 

 

other factors we deemed relevant.

 

The offering price may not accurately reflect the value of our common stock and may not be realized upon any subsequent disposition of the shares.

 

BioNexus may experience periods of being a “thinly traded” stock. As a result, if BioNexus’ shareholders sell a large number of shares, the market price of its shares may decline due to the downward pressure.

 

The Company is offering up to 1,250,000 shares of the company’s common stock through this prospectus, excluding the shares of common stock underlying the Underwriter’s over-allotment option and Underwriter Warrant. Presently, the company’s common stock is quoted on the OTCQB tier under the symbol “BGLC.” Although BGLC is quoted on the OTCQB tier of OTC Markets in the United States, BioNexus’ shares trade with minimal volume. BioNexus cannot assure you that a regular trading market will develop or will be sustained.

 

Our stock may also experience periods when it could be considered “thinly traded,” meaning that the number of persons interested in purchasing our common shares at or near ask prices at any given time may be relatively small or non-existent. Financing transactions resulting in a large number of newly issued shares that become readily tradable, or other events that cause current stockholders to sell shares, could place further downward pressure on the trading price of our stock. In addition, the lack of a robust resale market may require a stockholder who desires to sell a large number of shares to sell the shares in increments over time to mitigate any adverse impact of the sales on the market price of our stock. In the absence of volume on any exchange or platform, an investor may be unable to liquidate its investment at the time of price of choosing, if at all.

 

Sales of common stock resulting from issuances of common stock for Rule 144 sales in the future will have a depressive effect on our common stock price.

 

A significant number of the outstanding shares of the company common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act. As restricted securities, those shares may be resold only pursuant to an effective registration statement or pursuant to the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides in essence that an affiliate (i.e., an officer, director or control person) who has held restricted securities for a prescribed period may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed 1.0% of the issuer’s outstanding common stock.

 

Pursuant to the provisions of Rule 144, there is no limit on the number of restricted securities that may be sold by a non-affiliate (i.e., a stockholder who has not been an officer, director or control person for at least 90 consecutive days before the date of the proposed sale) after the restricted securities have been held by the owner for a prescribed period, although there may be other limitations and/or criteria to satisfy. A sale pursuant to Rule 144 or pursuant to any other exemption from the Securities Act, if available, or pursuant to registration of shares of BioNexus’ common stock held by its stockholders, may reduce the price of its common stock in any market that may develop.

 

 
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BioNexus’ stockholders may not be able to liquidate their investment since there is no assurance that a public market will develop for BioNexus’ common stock or that its common stock will ever be approved for trading on a major exchange.

 

If, after being listing on the Nasdaq Capital Market, BioNexus are delisted and its shares become subject to the penny stock rules, it would become more difficult to trade BioNexus’ shares.

 

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If BioNexus does not maintain a listing on Nasdaq and if the price of the Company’s common stock is less than $5.00, BioNexus’ common stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for BioNexus’ common stock, and therefore stockholders may have difficulty selling their shares.

 

In the future, BioNexus may issue additional common and preferred shares, which would reduce your percent of ownership and dilute BioNexus’ share value.

 

BioNexus’ Articles of Incorporation authorize the issuance of 300,000,000 shares of common stock. As of the date of this prospectus, the Company has 14,480,845 shares of common stock outstanding, assuming the completion of the outstanding common stock of 12 for 1 immediately upon our common stock’s listing on Nasdaq. Accordingly, BioNexus may issue up to an additional 285,519,155 shares of common stock. In addition, BioNexus has the right to issue 30,000,000 shares of preferred stock. The preferred stock is known as “blank check” as the Board of Directors is authorized to set the rights, privileges and preference of the preferred stock without the need for shareholder approval. The future issuance of common stock and preferred may result in substantial dilution in the percentage of BioNexus’ common stock held by its then existing shareholders. BioNexus may value any common stock issued in the future on a basis with which you disagree. The issuance of common stock or preferred stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by BioNexus’ investors and might have an adverse effect on any trading market for BioNexus’ common stock.

 

BioNexus does not intend to pay dividends on BioNexus’ common stock, so any returns on your investment in the company’s common stock will be limited to appreciation in the value of BioNexus’ stock.

 

BioNexus intends to retain any future earnings to finance the development and expansion of BioNexus’ business. BioNexus does not anticipate paying any cash dividends on the company’s common stock in the foreseeable future. Unless BioNexus pays dividends, BioNexus’ stockholders will not be able to receive a return on their shares unless they sell them. There is no assurance that stockholders will be able to sell shares when desired.

 

 
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The price of BioNexus’ common stock may be volatile, and you could lose all or part of your investment.

 

The market price for BioNexus’ common stock is likely to be highly volatile as is the stock market in general and the market for biochemical-related stocks.

 

The following factors will add to BioNexus’ common stock price’s volatility:

 

 

·

fluctuations in the company’s quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

 

 

 

 

·

changes in estimates of the company’s results or recommendations by securities analysts;

 

 

 

 

·

changes in market valuations of similar companies;

 

 

 

 

·

changes in the company’s capital structure, such as future issuances of securities or the incurrence of additional debt;

 

 

 

 

·

regulatory developments in Malaysia or other countries wherein BioNexus expects to conduct business;

 

 

 

 

·

litigation involving the company, the general industry or both;

 

 

 

 

·

investors’ general perception of us; and

 

 

 

 

·

changes in general economic, industry and market conditions

 

Many of these factors are beyond BioNexus’ control. These factors may decrease the market price of BioNexus’ common stock, regardless of BioNexus’ operating performance. In the past, plaintiffs have initiated securities class action litigation against a company following periods of volatility in the market price of its securities. In the future, BioNexus may be the target of similar litigation. Additionally, securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

 

You may experience extreme stock price volatility, including any stock-run up, unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our common stock.

 

Our common stock may be subject to extreme volatility that is seemingly unrelated to the underlying performance of our business. In particular, our common stock may be subject to rapid and substantial price volatility, low volumes of trades and large spreads in bid and ask prices, given that we will have relatively small public floats after this offering. Such volatility, including any stock-run up, may be unrelated to our actual or expected operating performance, financial condition or prospects.

 

Holders of our common stock may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of our common stock. As a result of this volatility, investors may experience losses on their investment in our common stock. Furthermore, the potential extreme volatility may confuse the public investors of the value of our stock, distort the market perception of our stock price and our company’s financial performance and public image, negatively affect the long-term liquidity of our common stock, regardless of our actual or expected operating performance. If we encounter such volatility, including any rapid stock price increases and declines seemingly unrelated to our actual or expected operating performance and financial condition or prospects, it will likely make it difficult and confusing for prospective investors to assess the rapidly changing value of our common stock and understand the value thereof.

 

You will experience immediate and substantial dilution in the net tangible book value of our common stock purchased.

 

The offering price of our common stock is substantially higher than the net tangible book value per share of our common stock. Consequently, when you purchase our common stock in the offering and upon completion of the offering, you will incur immediate dilution of US$[●] per share, based on an assumed offering price of US$[●] per share. In addition, you may experience further dilution to the extent that additional shares of common stock are issued upon exercise of outstanding warrants or options we may grant from time to time.

 

If securities or industry analysts do not publish research or reports about our business, or if the publish a negative report regarding our common stock, the price of our common stock and trading volume could decline.

 

The trading market for our common stock may depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade us, the price of our common stock would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the price of our common stock and the trading volume to decline.

 

The estimates of market opportunity, forecasts of market growth included in this prospectus may prove to be inaccurate, and any real or perceived inaccuracies may harm our reputation and negatively affect our business. Even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.

 

Market opportunity estimates and growth forecasts included in this prospectus are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The variables that go into the calculation of our market opportunities are subject to change over time, and there is no guarantee that any particular number or percentage of addressable companies covered by our market opportunities estimates will purchase our products and solutions at all or generate any particular level of revenues for us. Even if the market in which we compete meets the size estimates and growth forecasted in this prospectus, our business could fail to grow for a variety of reasons, including reasons outside of our control, such as competition in our industry.

 

 
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Our management has broad discretion to determine how to use the funds raised in the offering and may use them in ways that may not enhance our results of operations or the price of our common stock.

 

We anticipate that we will use the net proceeds from this offering for working capital and other corporate purposes. Our management will have significant discretion as to the use of the net proceeds to us from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the market price of our common stock.

 

Nasdaq may apply additional and more stringent criteria for our initial and continued listing because we plan to have a small public offering and insiders will hold a large portion of the company’s listed securities.

 

Nasdaq Listing Rule 5101 provides Nasdaq with broad discretionary authority over the initial and continued listing of securities in Nasdaq and Nasdaq may use such discretion to deny initial listing, apply additional or more stringent criteria for the initial or continued listing of particular securities, or suspend or delist particular securities based on any event, condition, or circumstance that exists or occurs that makes initial or continued listing of the securities on Nasdaq inadvisable or unwarranted in the opinion of Nasdaq, even though the securities meet all enumerated criteria for initial or continued listing on Nasdaq. In addition, Nasdaq has used its discretion to deny initial or continued listing or to apply additional and more stringent criteria in the instances, including but not limited to: (i) where the company engaged an auditor that has not been subject to an inspection by the Public Company Accounting Oversight Board (“PCAOB”), an auditor that PCAOB cannot inspect, or an auditor that has not demonstrated sufficient resources, geographic reach, or experience to adequately perform the company’s audit; (ii) where the company planned a small public offering, which would result in insiders holding a large portion of the company’s listed securities. Nasdaq was concerned that the offering size was insufficient to establish the company’s initial valuation, and there would not be sufficient liquidity to support a public market for the company; and (iii) where the company did not demonstrate sufficient nexus to the U.S. capital market, including having no U.S. shareholders, operations, or members of the board of directors or management. Our public offering will be relatively small and the insiders of our Company will hold a large portion of the company’s listed securities. Nasdaq might apply the additional and more stringent criteria for our initial and continued listing, which might cause delay or even denial of our listing application.

 

BioNexus is an emerging growth company within the meaning of the Securities Act, as modified by the JOBS Act, and the reduced disclosure requirements applicable to emerging growth companies may make the company’s common stock less attractive to investors.

 

BioNexus qualifies as an “emerging growth company” under the JOBS Act. As a result, BioNexus is permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as BioNexus is an emerging growth company, BioNexus will not be required to:

 

 

 

have an auditor report on BioNexus’ internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

 

 

 

 

comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

 

 

 

 

submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and

 

 

 

 

disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

 

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. BioNexus’ will remain an emerging growth company for up to five full fiscal years, although if the market value of BioNexus’ common stock that is held by non-affiliates exceeds $700 million as of any January 31 before that time, BioNexus would cease to be an emerging growth company as of the following December 31, or if BioNexus’ annual revenues exceed $1.235 billion, BioNexus would cease to be an emerging growth company the following fiscal year, or if BioNexus issue more than $1.235 billion in non-convertible debt in a three-year period, BioNexus would cease to be an emerging growth company immediately. After we are no longer an “emerging growth company,” we expect to incur significant additional expenses and devote substantial management effort toward ensuring compliance increased disclosure requirements.

 

 
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Notwithstanding the above, BioNexus is also currently a “smaller reporting company,” meaning that BioNexus is not an investment company, an asset-backed issuer, nor a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $250 million and annual revenues of less than $100 million during the most recently completed fiscal year. If BioNexus is still considered a “smaller reporting company” at such time as BioNexus ceases to be an “emerging growth company,” BioNexus will be subject to increased disclosure requirements. However, the disclosure requirements will still be less than they would be if BioNexus were not considered either an “emerging growth company” or a “smaller reporting company.” Specifically, similar to “emerging growth companies”, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; are not required to conduct say-on-pay and frequency votes until annual meetings occurring on or after January 21, 2015; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports. Decreased disclosures in its SEC filings due to its status as an “emerging growth company” or “smaller reporting company” may make us less attractive to investors given that it will be harder for investors to analyze the Company’s results of operations and financial prospects and, as a result, it may be difficult for us to raise additional capital as and when BioNexus needs it.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward looking statements that involve risks and uncertainties, principally in the sections entitled “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All statements other than statements of historical fact contained in this prospectus, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology. Although we do not make forward looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in this prospectus, which may cause our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements.

 

You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this prospectus. Before you invest in our securities, you should be aware that the occurrence of the events described in the section entitled “Risk Factors” and elsewhere in this prospectus could negatively affect our business, operating results, financial condition and stock price. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this prospectus to conform our statements to actual results or changed expectations.

 

USE OF PROCEEDS

 

After deducting the estimated placement discount and offering expenses payable by us, we expect to receive net proceeds of approximately $[●] from this offering.

 

We plan to use the net proceeds of this offering for working capital needs, including devoting further resources to the below use of proceeds, which may include investment in product development, sales and marketing activities, acquisition of other companies, technology infrastructure, team development, capital expenditures, improvement of corporate facilities and other general and administrative matters. The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus.

 

We estimate that the net proceeds of this offering together with the funds we will receive from the sale will be used as set forth in the following table.

 

Description of Use

 

Estimated Amount of Net Proceeds

(US $)

 

%

 

Product research and development

 

$

[●]

 

  10

 

Marketing and Business Development

 

$

[●]

 

20

 

New production equipment purchase

 

$

[●]

 

20

 

New business assessment and acquisition

 

$

[●]

 

20

 

Talent acquisition and training

 

$

[●]

 

10

 

Working capital

 

$

[●]

 

20

 

Total

 

$

[●]

 

100

 

   

Pending other uses, we intend to invest the proceeds to us in investment-grade, interest-bearing securities such as money market funds, certificates of deposit, or direct or guaranteed obligations of the U.S. government, or hold as cash. We cannot predict whether the proceeds invested will yield a favorable return. Our management will have broad discretion in the application of the net proceeds we receive from this offering, and investors will be relying on the judgment of our management regarding the application of the net proceeds.

 

 
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CAPITALIZATION

 

The following table sets forth our cash and capitalization as of March 31, 2023:

 

 

 

on an actual basis;

 

on a pro forma basis to reflect the sale of 1,250,000 common stock by us in this offering at an assumed price to the public of $[●] per share, which is the midpoint of the estimated offering range set forth on the cover page of this prospectus, resulting in net proceeds to us of $[●] after deducting (i) underwriter discounts of $[●], and (ii) estimated other offering expenses of $418,851. The table below assumes no exercise by the underwriter of their option to purchase additional common stock and/or warrants from us.

 

The pro forma information below is illustrative only and our capitalization following the completion of this offering is subject to adjustment based on the public offering price of our common stock and other terms of this offering determined at pricing. You should read this table together with our financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

Offering (1,250,000 shares of common stock)

U.S. Dollars

 

 

 

As of March 31, 2023

 

 

 

Actual

 

 

Pro

forma (1)

 

Assets:

 

 

 

 

 

 

Current Assets

 

 

5,458,763

 

 

 

9,639,912

 

Long term investment

 

 

1,194,675

 

 

 

1,194,675

 

Right of use assets

 

 

-

 

 

 

 

 

Operating lease right of use asset, net

 

 

51,436

 

 

 

51,436

 

Intangible assets

 

 

-

 

 

 

-

 

Property

 

 

1,481,767

 

 

 

1,481,767

 

Goodwill

 

 

-

 

 

 

-

 

Deferred tax asset

 

 

-

 

 

 

-

 

Other Assets

 

 

-

 

 

 

 

 

Total Assets

 

 

8,186,641

 

 

 

12,367,790

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Current Liabilities

 

 

1,563,379

 

 

 

1,563,379

 

Other Liabilities

 

 

66,354

 

 

 

66,354

 

Total Liabilities

 

 

1,629,733

 

 

 

1,629,733

 

 

 

 

 

 

 

 

 

 

Shareholder’s Equity:

 

 

 

 

 

 

 

 

Preferred Stock, no par value, 30,000,000 shares authorized, and no shares outstanding as of March 31, 2023.

 

 

 

 

 

 

 

 

Common stock, no par value, 300,000,000 shares authorized, 173,718,152 shares issued and outstanding as of March 31, 2023.

 

 

10,929,574

 

 

 

15,929,574

 

Additional paid-in capital (2)

 

 

(5,011,891)

 

 

(5,011,891)

Accumulated deficit

 

 

1,087,326

 

 

 

268,475

 

Accumulated other comprehensive income

 

 

(448,101)

 

 

(448,101)

Noncontrolling interest

 

 

-

 

 

 

-

 

Total shareholders’ equity

 

 

6,556,908

 

 

 

10,738,057

 

Total Liabilities and Shareholders’ Equity

 

 

8,186,641

 

 

 

12,367,790

 

 

(1)

Gives effect to the completion of the firm commitment offering at an assumed public offering price of $[●] per share and reflects the application of the proceeds after deducting the estimated underwriting discounts and our estimated offering expenses.

 

 

(2)

Pro forma adjusted for IPO additional paid in capital reflects the net proceeds we expect to receive, after deducting underwriting discount, underwriter expense allowance and approximately $[●] in other expenses. In the firm commitment offering, we expect to receive net proceeds of approximately $[●] ($[●] offering, less underwriting discount of $[●], non-accountable expense allowance of $[●] and offering expenses of $[●]).

 

Each $1.00 increase or decrease in the assumed offering price per share of $[●], assuming no change in the number of shares to be sold, would increase or decrease the net proceeds that we receive in this offering and each of total shareholders’ equity and total capitalization by approximately $1million or $1.3million, if the underwriter exercise the over-allotment option in full), after deducting (i) estimated underwriter discounts, if the underwriter exercise the over-allotment option in full), and (ii) offering expenses, in each case, payable by us.

 

The table above excludes up to 187,500 common stock issuable upon exercise of the over-allotment in this offering and up to 115,000 common stock issuable upon exercise of the Underwriter Warrants issued in connection with this offering.

 

 
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DIVIDEND POLICY

 

It is unlikely that we will declare or pay cash dividends in the foreseeable future. We intend to retain earnings, if any, to expand our operations. To date, we have paid no dividends on one share of common stock and have no present intention of paying any dividends on one share of common stock in the foreseeable future. The payment by us of dividends on the shares of common stock in the future, if any, rests solely within the discretion of our board of directors and will depend upon, among other things, our earnings, capital requirements and financial condition, as well as other factors deemed relevant by our board of directors.

 

DETERMINATION OF THE OFFERING PRICE

 

As there is an established public market for one share, the offering price has been negotiated between the Underwriter and us. In determining the offering price of the common stock, the following factors were considered:

 

 

·

prevailing market conditions;

 

·

our historical performance and capital structure;

 

·

estimates of our business potential and earnings prospects;

 

·

an overall assessment of our management; and

 

·

the consideration of these factors in relation to market valuation of companies in related businesses.

 

One share do not bear any relationship to assets, earnings, book value or any other objective criteria of value. In addition, we have not consulted any appraiser or other independent third party concerning the offering price for the shares or the fairness of the offering price used for the shares. Accordingly, the offering price should not be considered an indication of the actual value of our securities.

 

DILUTION

 

If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the public offering price per share of our common stock and value per share of our common stock immediately after this offering.

 

Our net tangible book value was approximately $6,556,908, or approximately $0.45 per common stock, as of March 31, 2023. Our net tangible book value represents the amount of our total consolidated tangible assets (which is calculated by subtracting deferred tax assets and intangible assets from our total consolidated assets), less the amount of our total consolidated liabilities. Dilution is determined by subtracting net tangible book value per share after giving effect to this offering.

 

After giving effect to our sale of 1,250,000 common stock in this offering at an assumed public offering price of $0.68 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts, non-accountable expense allowance and estimated offering expenses, and assuming no exercise of the warrants underlying the shares of common stock to be sold in this offering, our pro forma as adjusted net tangible book value as of March 31, 2023 would have been approximately $10,738,057, or approximately $0.68 per common stock. This amount represents an immediate increase in pro forma net tangible book value of $0.23 per share to existing shareholders and an immediate dilution in pro forma net tangible book value of $0.06 per share to purchasers of our common stock in this offering, as illustrated in the following table.

 

Assumed public offering price per share

 

$

 [●]

 

Net tangible book value per common stock as of March 31, 2023

 

$0.45

 

Pro forma net tangible book value per common stock after this offering

 

$0.68

 

Increase in net tangible book value per common stock to the existing shareholders

 

$0.23

 

Dilution in net tangible book value per common stock to new investors in this offering

 

$0.06

 

   

 
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If the Underwriter exercises its over-allotment option in full, the pro forma as adjusted net tangible book value per common stock, as adjusted to give effect to this offering, would be $0.72 per share, and the dilution in pro forma net tangible book value per share to new investors purchasing common stock in this offering would be$0.07 per share.

 

A $1.00 increase (decrease) in the assumed public offering price of $[●] per share would increase (decrease) our pro forma net tangible book value after giving effect to the offering by $1.15 million, the net tangible book value per common stock after giving effect to this offering by $0.07 per common stock and the dilution in net tangible book value per common stock to new investors in this offering by $0.08 per common stock, assuming no change to the number of shares offered by us as set forth on the cover page of this prospectus, no exercise of over-allotment option and after deducting underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us.

 

The pro forma information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual public offering price of our common stock and other terms of this offering determined at pricing.

 

The following table summarizes, as of March 31, 2023, on the pro forma as adjusted basis described above, the differences between the number of shares purchased from us, the total consideration paid to us in cash and the average price per share that existing stockholders and new investors paid for such shares. The calculation below is based on an assumed public offering price of $[●] per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

 

 

Shares Purchased

 

 

Total Consideration

 

 

Average

Price Per

 

 

 

Number

 

 

Percent

 

 

Amount

 

 

Percent

 

 

Share

 

Existing stockholder

 

$14,480,845

 

 

 

92%

 

$10,929,574

 

 

 

70%

 

$0.75

 

New investors

 

 

1,250,000

 

 

 

8%

 

 

4,600,000

 

 

 

30%

 

 

3.68

 

Total

 

$15,730,845

 

 

 

100%

 

$15,529,574

 

 

 

100%

 

$0.99

 

   

The number of shares of our common stock outstanding before and after this offering reflected in the tables and discussion above are based on (i) 14,480,845 shares of common stock outstanding as of the date of this prospectus, assuming the completion of our proposed reverse stock split of the outstanding common stock of 12 for 1 immediately upon our common stock’s listing on Nasdaq, in which fractional shares or odd lots (less than 100 shares to any record or beneficial holder) issuable in the reverse stock split shall be rounded up to the nearest whole share, or rounded up to 100 shares, respectively and (ii) 15,730,845 shares of common stock outstanding on a pro forma as adjusted basis after giving effect to this offering.

 

 
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SELECTED CONSOLIDATED FINANCIAL DATA

 

The following table presents selected consolidated financial data for the periods and at the dates indicated. The selected consolidated statements of operations data for the three months ended March 31, 2023 and 2022 and years ended December 31, 2022 and 2021, and the selected consolidated balance sheet data as of March 31, 2023, December 31, 2022 and 2021 have been derived from our consolidated financial statements, included elsewhere in this prospectus. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period, and our results for any interim period are not necessarily indicative of the results expected for a full fiscal year. You should read the following financial information together with the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.

 

Consolidated Statements of Operations Data

 

 

 

Three months ended

 

 

Year ended

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2022

 

 

2021

 

REVENUE

 

$2,377,205

 

 

$3,028,945

 

 

$10,928,707

 

 

$13,362,567

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE

 

 

(2,008,308 )

 

 

(2,672,612 )

 

 

(9,669,678 )

 

 

(11,095,626 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

368,897

 

 

 

356,333

 

 

 

1,259,029

 

 

 

2,266,941

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME

 

 

117,344

 

 

 

46,394

 

 

 

179,283

 

 

 

66,491

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

(536,872 )

 

 

(368,036 )

 

 

(1,729,489 )

 

 

(1,277,605 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS)/PROFIT FROM OPERATIONS

 

 

(50,631 )

 

 

34,691

 

 

 

(291,177 )

 

 

1,055,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINANCE COSTS

 

 

(2,445 )

 

 

(3,326 )

 

 

(12,479 )

 

 

(12,973 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS)/PROFIT BEFORE TAX

 

 

(53,076 )

 

 

31,365

 

 

 

(303,656 )

 

 

1,042,854

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax

 

 

-

 

 

 

-

 

 

 

(3,898 )

 

 

(26,736 )

Income tax

 

 

(15,990 )

 

 

(14,299 )

 

 

(48,412 )

 

 

(264,547 )

Total tax expense

 

 

(15,990 )

 

 

(14,299 )

 

 

(52,310 )

 

 

(291,283 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS)/PROFIT

 

$(69,066 )

 

$17,066

 

 

$(355,966 )

 

$751,571

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

(39,039 )

 

 

(68,776 )

 

 

(308,800 )

 

 

(233,946 )

COMPREHENSIVE LOSS

 

$(108,105 )

 

$(51,710 )

 

$(664,766 )

 

$517,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - Basic and diluted

 

 

(0.001 )

 

 

0

 

 

 

(0.002 )

 

 

0.004

 

Weighted average number of common shares outstanding – Basic and diluted

 

 

173,718,152

 

 

 

171,218,152

 

 

 

172,916,782

 

 

 

171,218,152

 

 

Consolidated Balance Sheets Data

 

 

As of

 

 

As of

 

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

 

 

(Audited)

 

 

(Audited)

 

 

(Audited)

 

Current assets

 

$5,458,763

 

 

$6,021,826

 

 

$7,149,855

 

Total assets

 

$8,186,641

 

 

$8,740,162

 

 

$9,574,390

 

Current liabilities

 

$1,563,379

 

 

$2,004,077

 

 

$2,328,755

 

Total liabilities

 

$1,629,733

 

 

$2,075,149

 

 

$2,394,611

 

Total equity

 

$6,556,908

 

 

$6,665,013

 

 

$7,179,779

 

  

 
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Table of Contents

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS

 

The information set forth in this section contains certain “forward-looking statements”, including, among others (i) expected changes in our revenue and profitability, (ii) prospective business opportunities and (iii) our strategy for financing our business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as “believes”, “anticipates”, “intends” or “expects”. These forward-looking statements relate to our plans, liquidity, ability to complete financing and purchase capital expenditures, growth of our business including entering into future agreements with companies, and plans to successfully develop and obtain approval to market our product. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Although we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this prospectus should not be regarded as a representation by us or any other person that our objectives or plans will be achieved. We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements. Our revenues and results of operations could differ materially from those projected in the forward-looking statements as a result of numerous factors, including, but not limited to, the following: the risk of significant natural disaster, the inability of our company to insure against certain risks, inflationary and deflationary conditions and cycles, currency exchange rates, and changing government regulations domestically and internationally affecting our products and businesses.

 

You should read the following discussion and analysis in conjunction with the Financial Statements and Notes attached hereto, and the other financial data appearing elsewhere in this prospectus.

 

Company Overview

 

BioNexus Gene Lab Corp., through our wholly owned subsidiary Chemrex Corporation Sdn. Bhd. focuses on the sale of chemical raw materials for the manufacture of industrial, medical, appliance, aero, automotive, mechanical, and electronic industries in the Southeast Asia region. These countries include Malaysia, Indonesia, Vietnam, and other countries in Southeast Asia.

 

Furthermore, through our wholly owned subsidiary BioNexus Gene Lab Sdn Bhd, the Company is also in the business of developing and providing safe, effective, and non-invasive liquid biopsy tests for the early detection of biomarkers that we believe are linked to diseases to minimize treatment costs and improve patient management. Our non-invasive blood tests provide analysis of changes in RNA to detect the potential risk of 11 different diseases. 

 

 
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Table of Contents

 

Result of Operations

 

Three Months Ended March 31, 2023 Compared with the Three Months Ended March 31, 2022.

 

The following table sets forth key components of the results of operations for the three months ended March 31, 2023 and 2022, respectively. As stated herein, on December 31, 2020, the Company consummated its acquisition of Chemrex, pursuant to a Share Exchange Agreement by and among the Company and Chemrex and the Chemrex shareholders. Accordingly, the financial information for the period ended March 31, 2023 includes the accounts of Chemrex and BioNexus Malaysia.

 

Consolidated

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2023

 

 

2022

 

REVENUE

 

$2,377,205

 

 

$3,028,945

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE

 

 

(2,008,308 )

 

 

(2,672,612 )

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

368,897

 

 

 

356,333

 

 

 

 

 

 

 

 

 

 

OTHER INCOME

 

 

117,344

 

 

 

46,394

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

General and administrative

 

 

(536,872 )

 

 

(368,036 )

 

 

 

 

 

 

 

 

 

(LOSS)/PROFIT FROM OPERATIONS

 

 

(50,631 )

 

 

34,691

 

 

 

 

 

 

 

 

 

 

FINANCE COSTS

 

 

(2,445 )

 

 

(3,326 )

 

 

 

 

 

 

 

 

 

(LOSS)/PROFIT BEFORE TAX

 

 

(53,076 )

 

 

31,365

 

 

 

 

 

 

 

 

 

 

Tax expense

 

 

(15,990 )

 

 

(14,299 )

 

 

 

 

 

 

 

 

 

NET (LOSS)/PROFIT

 

$(69,066 )

 

$17,066

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Foreign currency loss

 

 

(39,039 )

 

 

(68,776 )

 

 

 

 

 

 

 

 

 

COMPREHENSIVE LOSS

 

$(108,105 )

 

$(51,710 )

 

 
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Segmented Information

 

 

 

BioNexus

Malaysia

 

 

Chemrex

 

 

BioNexus

Malaysia

 

 

Chemrex

 

 

 

Three months ended March 31, 2023

 

 

Three months ended March 31, 2022

 

REVENUE

 

$7,436

 

 

$2,369,769

 

 

$24,269

 

 

$3,004,676

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE

 

 

(5,347 )

 

 

(2,002,961 )

 

 

(8,038 )

 

 

(2,664,574 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

2,089

 

 

 

366,808

 

 

 

16,231

 

 

 

340,102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME

 

 

1,126

 

 

 

116,218

 

 

 

2,076

 

 

 

44,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

(46,255 )

 

 

(383,177 )

 

 

(44,042 )

 

 

(297,769 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINANCE COSTS

 

 

(666 )

 

 

(1,779 )

 

 

(799 )

 

 

(2,527 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS)/PROFIT BEFORE TAX

 

 

(43,706 )

 

 

98,070

 

 

 

(52,269 )

 

 

170,751

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax expense

 

 

-

 

 

 

(15,990 )

 

 

-

 

 

 

(14,299 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS)/PROFIT

 

$(43,706 )

 

$82,080

 

 

$(52,269 )

 

$156,452

 

 

Revenue. For the quarter ended March 31, 2023, we had total revenue of $2,377,205 as compared to total revenue of $3,028,945 for the quarter ended March 31, 2022, decreased by 21.5% from the prior quarter.

 

Chemrex contributed $2,369,769 (99.7%) of the total revenue for the current quarter ended March 31, 2023 as compared to $3,004,676 (99.2%) of the total revenue for the quarter ended March 31, 2022. Chemrex’s revenues had a decrease by $634,907 of 21.13% from prior quarter. The revenue decreased in first quarter of 2023 was due to material cost for Resin & Fiberglass mat has been reduced in Malaysia. As a result, we adjusted the selling price of our product to stay competitive. Chemrex is catching up with the markets change post pandemic by targeting the right manufacturers to reduce cost of logistics and warehousing meanwhile may scarify some small retail business. 

 

BioNexus-Malaysia contributed $7,436 (0.3%) of the total revenue for the quarter ended March 31, 2023 as compared to revenue of $24,269 (0.8%) of the total revenue from the quarter ended March 31, 2022. Revenues had decreased by $16,833 from the prior quarter of $24,269, a 69.4% decrease. RNA screening process have been adversely impacted by the onset of the Covid-19 pandemic, followed by a number of prominent variants, including Alpha, Beta, Delta, and Omicron. Although new variants are an expected part of the evolution of viruses, new variant is more aggressive, highly transmissible, vaccine-resistant, able to cause more severe disease in Malaysia. We believe that most people were reluctant to visit hospitals and clinics in view of the post Covid-19 Omicron and its subvariants for fear of transmission from other patients or medical staff. Since our RNA screening is administered at a diagnostic center, our business had been adversely affected as a result.

 

Cost of Revenue. For the quarter ended March 31, 2023, we incurred $2,008,308 in cost of revenues, as compared to $2,672,612 for the quarter ended March 31, 2022, a decrease of approximately 24.9% was due to reason as stated above.

 

Chemrex had incurred $2,002,961 (99.7%) of the total cost of revenue during the current quarter period ended March 31, 2023 as compared to the quarter ended March 31, 2022 wherein Chemrex had incurred $2,664,574 (99.7%) of the total cost of revenue. The decrease in Chemrex’s cost of revenues of 24.8% for the current period was due to its decreased revenues and reason as stated above.

 

BioNexus had incurred $5,347 (0.3%) of the total cost of revenues during the current quarter period ended March 31, 2023 as compared to $8,038 (0.3%) for the quarterly period ended March 31, 2022. Cost of revenue had decreased by $2,691 from prior quarter of 33.5% decrease was due to its decreased revenues and reason as stated above.

 

 
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Gross Profit. For the quarterly period ended March 31, 2023, we had total gross profit of $368,897 as compared to gross profit of $356,333 for the quarterly period ended March 31, 2022, an increase by approximately 3.5% from the prior period.

 

Chemrex contributed $366,808 (99.4%) of the total gross profit for the current quarter ended March 31, 2023 as compared to $340,106 (95.4%) of the total gross profit for the quarter ended March 31, 2022. Chemrex’s gross profit increased by $26,706 from prior quarter, approximately 7.85% increase. The gross profit increase for Chemrex in current quarter was due to cost of revenue had been reduced.

 

BioNexus-Malaysia contributed $2,089 (0.6%) of the total gross profit of $368,897 for the current quarter ended March 31, 2023  as compared to gross profit of $16,231 (4.6%) of the total gross profit from the quarter ended March 31, 2022. The substantial decrease by approximately 87.1% from the prior period due to its decreased revenues and less lab consumables purchased for the same reason stated above.

 

Other Income. For the quarterly period ended March 31, 2023, we had of $117,344, as compared to of $46,394 for the quarterly period ended March 31, 2022, an increase of approximately 152.9%.

 

Chemrex contributed $116,218 (99%) of other income for the current quarter ended March 31, 2023 as compared to $44,306 (95.5%) of the other income for the quarter ended March 31, 2022. Chemrex’s other income increased by 162.3% due to gain on fair value of investment, bank interest earning and unrealized forex gain.

 

BioNexus-Malaysia contributed $1,126 (1%) of other income for the current quarter ended March 31, 2023 as compared to $2,076 (4.5%) of the other income for the quarter ended March 31, 2022. The decrease of 45.8% due to bank interest earning has been reduced.

 

Operating Expenses. For the quarter ended March 31, 2023, we had total operating expense of $536,872 as compared to total operating expenses of $368,036 for the quarter ended March 31, 2022, an increase by approximately 45.9%. It was due to general and administrative expenses which includes depreciation of fixed assets, employee compensation and benefits, professional fees and marketing and travel expenses.

 

Chemrex had incurred $383,177 (71.4%) of the total operating expenses for the current quarter ended March 31, 2023 as compared to $297,769 (80.9%) of the total operating expenses for the quarter ended March 31, 2022, an increase by 28.68%. The increase in operating expenses was due to commission, travelling and increased in medical expenses. 

 

BioNexus-Malaysia had incurred $46,255 (8.6%) of the total operating expenses for the current quarter ended March 31, 2023 as compared to $44,042 (12%) of the total operating expenses for the quarter ended March 31, 2022, a slight increase by 5%. The increase in operating costs of the current quarter was due to traveling and costs incurred for vehicle maintenance.

 

BGLC, the holding company, had incurred $107,440 (20%) of total operating expenses for the current quarter ended March 31, 2023 as compared to $26,255 (7.1%) of the total operating expenses for the quarter ended March 31, 2022. The increase of $81,215, approximately 309.69% in operating costs for the quarter ended March 31, 2023 was due to the expenses on filing fees for form S-1, consultant fees for capital & corporation advisory services, fees for three independent board members and audit committee, SEC compliance services, SEC registration fee, increased fee of shareholder maintenance by Securities Transfer Corporation and an additional review fee for S-1.

 

Loss/Profit from Operations. We had a loss from operations of $50,631 for the quarter ended March 31, 2023 as compared to a profit of $34,691 for the quarter ended March 31, 2022, an increase by approximately 145.9% from the prior period, for the reasons discussed above.

 

Income tax expense. For the quarter ended March 31, 2023, we had estimated income tax expenses of $15,990 as compared to $14,299 for the quarter ended March 31, 2022 for Chemrex. There was no tax provision for Bio-Nexus Malaysia for the quarters ended March 31, 2023 and 2022.

 

Foreign currency exchange 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 March 31, 2023, we experienced a foreign currency loss of $39,039 as compared with a foreign currency loss of $68,776 for the three-month period ended March 31, 2022.

 

 
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Results of Operations for the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 (Audited).

 

The following table sets forth key components of the results of operations for fiscal years ended December 31, 2022 and 2021, respectively. As stated herein, on December 31, 2020, the Company consummated its acquisition of Chemrex Corporation Sdn. Bhd. (“Chemrex”), pursuant to a Share Exchange Agreement by and among the Company and Chemrex and the Chemrex shareholders. Accordingly, the audited financial information for the period ended December 31, 2022 includes the accounts of Chemrex and BioNexus Malaysia and the (audited) financial information for the period ended December 31, 2021 only includes the accounts of BioNexus Malaysia.

 

The discussion following the table addresses these results.

 

 Consolidated

 

Year ended

 

 

 

December 31 (Audited)

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

REVENUE

 

$10,928,707

 

 

$13,362,567

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE

 

 

(9,669,678 )

 

 

(11,095,626 )

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

1,259,029

 

 

 

2,266,941

 

 

 

 

 

 

 

 

 

 

OTHER INCOME

 

 

179,283

 

 

 

66,491

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

General and administrative

 

 

(1,729,489 )

 

 

(1,277,605 )

 

 

 

 

 

 

 

 

 

(LOSS)/PROFIT FROM OPERATIONS

 

 

(291,177 )

 

 

1,055,827

 

 

 

 

 

 

 

 

 

 

FINANCE COSTS

 

 

(12,479 )

 

 

(12,973 )

 

 

 

 

 

 

 

 

 

(LOSS)/PROFIT BEFORE TAX

 

 

(303,656 )

 

 

1,042,854

 

 

 

 

 

 

 

 

 

 

Tax expense:

 

 

 

 

 

 

 

 

Deferred tax

 

 

(3,898 )

 

 

(26,736 )

Income tax

 

 

(48,412 )

 

 

(264,547 )

Total tax expenses

 

 

(52,310 )

 

 

(291,283 )

 

 

 

 

 

 

 

 

 

NET (LOSS)/PROFIT

 

$(355,966 )

 

$751,571

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Foreign currency translation (loss)/gain

 

 

(308,800 )

 

 

(233,946 )

 

 

 

 

 

 

 

 

 

COMPREHENSIVE (LOSS)/ INCOME

 

$(664,766 )

 

$517,625

 

 

Revenues. For the year ended December 31, 2022, we had revenues of $10,928,707 as compared to revenues of $13,362,567 for the year ended December 31, 2021, a decrease of approximately 18.2% due to the aftereffects of Covid pandemic. The 2021’ revenue of $13,362,567 was partly contributed from Covid-19 screening amounting to $1,515,673 outsourced by Health Ministry to BGL.

 

In 2022, all sectors of the economy across the country saw their supply chains interrupted, demand for our products and services decline, shortages and delay in supplies and inputs, we emerged in a very different world compared to the one before the outbreak. Our business was affected because various businesses are facing massive losses due to their declining activities and the accompanying unpredictable future of many businesses. A substantial decrease has been observed in overall spending, which resulted in an array of estimated long-term uncertainty impacts. Consequently, many businesses and firms closed, and employees were dismissed. Towards a new recovery phase in 2022, most businesses and organizational functions were prioritizing our spending or postpone any tasks and events that do not bring any value to the current situation because even when the challenges are successfully addressed, this will not guarantee any promising future.

 

 
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Cost of revenues. For the year ended December 31, 2022 we had cost of revenues of $9,669,678 as compared to cost of revenues of $11,095,626 for the year ended December 31, 2021, a decrease of approximately 12.9% due to lower sales caused by the above reasons.

 

Other Income. For the year ended December 31, 2022, we had other income of $179,283 as compared to other income of $66,491 for the year ended December 31, 2021, an increase of 169.6% for current year. The increase in other income for the current annual period was due to dividend income from Chemrex’ equity investment and additional fund deposited with the bank resulting from the lower revenues with lesser stock purchase.

 

Operating Expenses. For the year ended December 31, 2022, we had operating expenses of $1,729,489 as compared to operating expenses of $1,277,605 for the year ended December 31, 2021, an increase of 35.4% for the current year was due to depreciation on new equipment purchased, equipment maintenance expenses, employee compensation and benefits, professional and directors’ fees, marketing, travel expenses and adjustment of unrealized loss on foreign exchange for subsidiaries BGL and Chemrex.

 

Profit/(loss) from operations. We had a loss from operations of $291,177 for the year ended December 31, 2022 compared to a profit from operations of $1,055,827 for the year ended December 31, 2021, a decrease of 127.6% for the reasons discussed above.

 

Tax expense. For the year ended December 31, 2022, we had the total tax expense of $52,310 from deferred tax of $3,898 and tax provision of $48,412. The year ended December 31, 2021 the total tax expenses were $291,283 from deferred tax of $26,736 and income tax provision of $264,547. The higher tax expense for 2021 was also due to higher profit in 2021.

 

Foreign currency translation (loss)/gain. 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 annual period ended December 31, 2022, we had foreign currency translation loss of $308,800 compared with foreign currency translation loss of $233,946 for the prior annual period.

 

BioNexus Malaysia and Chemrex

 

 

 

BioNexus

Malaysia

 

 

Chemrex

 

 

BioNexus

Malaysia

 

 

Chemrex

 

 

 

Year ended

December 31, 2022

 

 

Year ended

December 31, 2021

 

REVENUE

 

$95,816

 

 

$10,832,891

 

 

$1,515,673

 

 

$11,846,894

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE

 

 

(51,465 )

 

 

(9,618,213 )

 

 

(1,052,938 )

 

 

(10,042,688 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

44,351

 

 

 

1,214,678

 

 

 

462,735

 

 

 

1,804,206

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME

 

 

8,830

 

 

 

170,453

 

 

 

7,467

 

 

 

59,024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

(286,753 )

 

 

(1,051,855 )

 

 

(160,094 )

 

 

(989,617 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINANCE COSTS

 

 

(5,657 )

 

 

(6,822 )

 

 

(4,158 )

 

 

(8,815 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS)/PROFIT BEFORE TAX

 

 

(239,229 )

 

 

326,454

 

 

 

305,950

 

 

 

864,798

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax expense :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax

 

 

(1,428 )

 

 

(2,470 )

 

 

(11,997 )

 

 

(14,739 )

Income tax

 

 

-

 

 

 

(48,412 )

 

 

(30,482 )

 

 

(234,065 )

Total tax expense

 

 

(1,428 )

 

 

(50,882 )

 

 

(42,479 )

 

 

(248,804 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS)/PROFIT

 

$(240,657 )

 

$275,572

 

 

$263,471

 

 

$615,994

 

 

Revenue. For the year ended December 31, 2022, Chemrex contributed $10,832,891 (99.1%) of total combined revenue of $10,928,707 compared to its contribution of $11,846,894 (88.66%) of total combined revenue of $13,362,567 for the year ended December 31, 2021, showing an increase of the contribution to total combined revenue by 8.56%. The revenue decreased in 2022 was due to the lowering of selling price in view of competition. Some competitors were clearing their stock to improve their cash flow position after 1 ½ years of movement controls imposed by the government.

 

For the year ended December 31, 2022, BioNexus Malaysia contributed $95,816 (0.9%) of total combined revenue of $10,928,707 compared to its contribution of $1,515,673 (11.34%) from the same period ended December 31, 2021, showing a decrease of the contribution to total combined revenue by 93.7%. The revenue decreased in 2022 was due to the outsource contract for Covid19 PCR test from Ministry of Health (HHS) had ended in December 2021.

 

 
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Cost of revenues. For the year period ended December 31, 2022, Chemrex had incurred $9,618,213 (99.5%) of the total combined cost of revenue of $9,669,678 as compared to the year ended December 31, 2021 wherein Chemrex had incurred $10,042,688 (90.5%) of the total combined cost of revenue of $11,095,626. The decrease of 4.23% in Chemrex’s cost of revenues was due to its decreased in revenues and reasons stated above.

 

BioNexus Malaysia had incurred $51,465 (0.5%) on cost of revenues for the year ended December 31, 2022 as compared to cost of revenues of $1,052,938 (9.5%) for the same year ended December 31, 2021. The decrease of 95.1% was due to the buying less extract kits, reagents, laboratory consumables for covid-19 samples processing.

 

Other Income. For the year ended December 31, 2022, Chemrex contributed $170,453 (95.1%) of total other combined income of $179,283 as compared to the year ended December 31, 2021, 59,024 (88.8%) The increase of 188.79% was due to dividend income from equity investment and more fund deposited with the bank for interest in view of lower sales and buying lesser stock.

 

BioNexus Malaysia had other income of $8,830 (4.9%) for the year ended December 31, 2022 as compared $7,467 (11.2%) for the year ended December 31, 2021, an increase of 18.3% due to bank interest generated from Covid-19 screening’s revenue.

 

Operating Expenses. For the year ended December 31, 2022, Chemrex had incurred $1,051,855 (78.6%) of the total combined operating expenses of $1,338,608 for the year ended December 31, 2022 as compared to the operating expenses of $989,617 (86.1%) for the year ended December 31, 2021. The increase of 6.29% in Chemrex operating expenses for the 2022 due to increase in director’s remuneration and loss on fair value of equity investment.

 

BioNexus Malaysia had incurred $286,753 (21.4%) on operating expenses for the year ended December 31, 2022 as compared to the operating expenses of $160,094 (13.9%) for the year ended December 31, 2021, an increase of 79.1%. The increase of $126,659 in operating costs was due to increase in marketing expenses, hiring and training new lab staffs, writing off investment in Genenews Diagnostic (company has been closed) and expired covid19 test kits. In addition, expenses incurred in heart attack research/clinical test and year-end adjustment for unrealized loss on foreign exchange of $52,129 due to weakening of Malaysia ringgit against US dollar.

 

Profit /(loss) before tax. Chemrex had a profit before tax of $326,454 for the year ended December 31, 2022 as compared to $864,798 for the year ended December 31, 2021, a decrease of 62.25% while Bionexus Malaysia incurred a loss of $239,229 for the year ended December 31, 2022, a decrease of 178.2% compared to the year ended December 31, 2021, for the reasons discussed above.

 

Income tax expense. Chemrex had total tax expenses of $50,882 (97.3%) from deferred tax of $2,470 and tax provision of $48,412 for the year ended December 31, 2022 as compared to total tax expense of $248,804 (85.42%) for the last year ended December 31, 2021 from deferred tax of $14,739 and tax provision of $234,065.

 

BioNexus Malaysia had deferred tax of $1,428 (2.7%) and no tax provision for current year 2022 as compared to total tax expense of $42,479 (14.58%) for the last year ended December 31, 2021 from deferred tax of $11,997 and tax provision of $30,482.

 

 
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LIQUIDITY AND CAPITAL RESOURCES

 

As of March 31, 2023, we had working capital of $3,895,384 compared with working capital of $4,017,749 as of December 31, 2022. The decrease in working capital as of March 31, 2023 from December 31, 2022 was due principally to the decrease 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 three months ended March 31, 2023 and 2022 and years ended December 31, 2022 and 2021:

 

 

 

Three months ended

 

 

Year ended

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2022

 

 

2021

 

Net cash (used in)/generated from operating activities

 

$(118,297 )

 

$(37,839 )

 

$544,028

 

 

$9,161

 

Net cash used in investing activities

 

 

(5,056 )

 

 

(197,133 )

 

 

(450,498 )

 

 

(490,574 )

Net cash generated from/(used in) financing activities

 

 

-

 

 

 

-

 

 

 

115,962

 

 

 

(28,222 )

Foreign currency translation adjustment

 

 

(22,299 )

 

 

(44,625 )

 

 

(214,547 )

 

 

(154,138 )

Net Change in Cash and Cash Equivalents

 

$(145,652 )

 

$(279,597 )

 

$(5,055 )

 

$(663,773 )

 

Operating Activities

 

During the first quarter ended March 31, 2023, the Company incurred a net loss of $69,066 which, after adjusting for amortization, depreciation, dividend income, fair value gain on share investment, a decrease in inventories, trade receivables and a substantial reduction in trade payables, operating lease liabilities, advance payment from customer, resulted in net cash of $118,297 being used in activities during the first quarter ended 2023. By comparison, during the first quarter ended March 31, 2022, the Company had a net profit of $17,066 after adjusting for amortization, depreciation, dividend income, fair value loss on share investments, an increase in inventories and a decrease in trade receivables, deposits, deferred cost of revenue, a substantial reduction in trade payables, operating lease liabilities, advance payment from customer, deferred revenue, resulted in net cash of $37,839 being used in operating activities during the period.

 

During the year ended December 31, 2022, the Company incurred a net loss of $355,966 which, after adjusting for amortization, depreciation, dividend income, fair value on investment, a decrease in inventories, trade receivables and deposits, a substantial reduction in trade payables, operating lease liabilities, resulted in net cash of $544,028 being generated from operating activities during the period. By comparison, during the year ended December 31, 2021, the Company had a net profit of $751,571 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 $9,161 being generated from operating activities during the period.

 

Investing Activities

 

During the first quarter ended March 31, 2023, the Company had net cash of $5,056 used in investment activities from the acquisition of share investment of $13,646 and the purchase of plant & equipment of $102. During the first quarter ended March 31, 2022, the Company had net cash from acquisition of share investment of $172,172 and the purchase of plant and equipment of $32,191, resulting in net cash used in financing activities of $197,133.

 

During the year ended December 31, 2022, the Company had net cash of $450,498 used in investment activities from acquisition of share investment of $511,706, purchase of plant & equipment of $54,171, and cash generated from dividend income of $115,379. During the year ended December 31, 2021, the Company had net cash from acquisition of share investment of $515,840, purchase of plant and equipment and disposal of other investments, resulting in net cash used in financing activities of $490,574.

 

Financing Activities

 

During the first quarter ended March 31, 2023 and 2022, Company had no financing activities. 

 

During the year ended December 31, 2022, Company had net cash of $115,962 generated from financing activities for 2.5 million shares subscriptions of $150,000 and fully repayment of a finance lease of $34,038. By comparison, during the year ended December 31, 2021, we had net cash used in financing activities of $28,222 for continued repayment of a finance lease of $26,302 and repayment of $1,920 to a director.

 

 
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Table of Contents

 

Summary of Significant Accounting Policies

 

The accompanying 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

 

These accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

 

Basis of consolidation

 

The 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.

 

Use of estimates

 

In preparing these 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 years 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 three 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 impairment 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 adjust 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 Condensed Statements of Operations and Comprehensive Income.

 

 
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Leases

  

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/Expected

Useful Life

 

Air conditioner

 

 

20%

Buildings

 

 

2%

Computer and software

 

 

33%

Equipment

 

 

20%

Furniture and fittings

 

10% to 20

 %

Lab Equipment

 

 

10%

Motor vehicle

 

10% to 20

 %

Office equipment

 

 

20%

Renovation

 

10% to 20

 %

Signboard

 

 

10%

 

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.

 

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.

 

Finance lease 

 

Leases that transfer substantially all the rewards and risks of ownership to the lessee, other than legal title, are accounted for as finance leases. Substantially all of the risks or benefits of ownership are deemed to have been transferred if any one of the four criteria is met: (i) transfer of ownership to the lessee at the end of the lease term, (ii) the lease containing a bargain purchase option, (iii) the lease term exceeding 75% of the estimated economic life of the leased asset, (iv) the present value of the minimum lease payments exceeding 90% of the fair value. At the inception of a finance lease, the Company as the lessee records an asset and an obligation at an amount equal to the present value of the minimum lease payments. The leased asset is amortized over the shorter of the lease term or its estimated useful life if title does not transfer to the Company, while the leased asset is depreciated in accordance with the Company’s depreciation policy if the title is to eventually transfer to the Company. The periodic rent payments made during the lease term are allocated between a reduction in the obligation and interest element using the effective interest method in accordance with the provisions of ASC Topic 835-30, “Imputation of Interest”.

 

 
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Revenue recognition

 

Revenue recognized when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of the revenue can be measured reliably. Revenue is measured at the fair value of consideration received or receivable.

 

a.

The Company follows the guidance of Accounting Standards Codification (ASC) 606, Revenue from Contracts, ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes

 

 

i.

Identifying the contracts or agreements with a customer,

ii.

Identifying our performance obligations in the contract or agreement,

iii.

Determining the transaction price,

iv.

Allocating the transaction price to the separate performance obligations, and

v.

Recognizing revenue as each 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.

 

Shipping and handling fees

 

Shipping and handling fees, if billed to customers, are included in revenue. Shipping ang handling fees associated with inbound and outbound freight are expensed as incurred and included in selling and distribution expenses.

 

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 loss per share in accordance with ASC Topic 260 “Earnings per share.” Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed similar to basic 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.

 

 
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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 Company maintains 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 entity operates.

 

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 RM into US$1.00 has been made at the following exchange rates for the respective period and year:

 

 

 

March 31,

 

 

December 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Period ended March 31, 2023 /Year-ended December 31, 2022 and 2021 US$1: MYR exchange rate

 

 

4.4170

 

 

 

4.3900

 

 

 

4.1650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1, 2023 to March 31,

 

 

January 1, 2022 to March 31,

 

 

January 1, 2022 to December 31,

 

 

2023

 

 

2022

 

2022

 

3 months average 2023/2022 and Yearly average 2022 US$1: MYR exchange rate

 

 

4.3968

 

 

 

4.1938

 

 

 

4.3996

 

 

 

 
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Related parties

 

Parties, which can be a corporation or individual, are 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.

 

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 three-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 December 31, 2022, and December 31, 2021, the Company did not have any non-financial 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.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable to smaller reporting companies.

 

Item 8. Financial Statements and Supplementary Data.

 

Our financial statements are contained in pages F-1 through F-21, which appear at the end of this Form 10-K Annual Report.

 

 
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

None.

 

Item 9A. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

In connection with the preparation of this annual 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 December 31, 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:

 

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets;

 

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 authorizations of management and the board of directors; and

 

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.

 

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 December 31, 2021, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013) as set forth in its Internal Control - Integrated Framework. This 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:

 

We were unable to maintain segregation of duties within our business operations due to our reliance on a single individual fulfilling the role of sole officer and director.

 

 

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 control and procedures.

 

 
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These control deficiencies to our 2020 or 2019 interim or annual financial statements 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 annual 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 year ended December 31, 2021, there had 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.

 

Item 9B. Other Information.

 

None.

 

BUSINESS

 

 Overview

 

BioNexus Gene Lab Corp., through our wholly owned subsidiary Chemrex Corporation Sdn. Bhd., focuses on the sale of chemical raw materials for the manufacture of industrial, medical, appliance, aero, automotive, mechanical, and electronic industries in the Southeast Asia region. These countries include Malaysia, Indonesia, Vietnam, and other countries in Southeast Asia.

 

Furthermore, through our wholly owned subsidiary BioNexus Gene Lab Sdn Bhd, the Company is also in the business of developing and providing safe, effective, and non-invasive liquid biopsy tests for the early detection of biomarkers that we believe are linked to diseases to minimize treatment costs and improve patient management. Our non-invasive blood tests provide analysis of changes in RNA to detect the potential risk of 11 different diseases. 

 

Corporate History

 

BioNexus was incorporated in the State of Wyoming on May 12, 2017. On August 23, 2017, the Company acquired all of the outstanding capital stock of BioNexus Gene Lab Sdn. Bhd. (formerly BGS Lab Sdn. Bhd.), a Malaysian corporation incorporated in Malaysia on April 7, 2015, which subsequently changed its name to BioNexus Gene Lab Sdn. Bhd.

 

On December 31, 2020, the Company consummated a Share Exchange Agreement with Chemrex and the Chemrex shareholders, pursuant to which we acquired all of the issued and outstanding shares of capital stock of Chemrex, which was incorporated in Malaysia on September 29, 2004, from the Chemrex shareholders in exchange for 68,487,261 shares of common stock of BioNexus issued to the Chemrex shareholders.

 

 
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Corporate Structure

 

The corporate structure as of the date of this prospectus is depicted below:

 

bion_s1aimg44.jpg

        

Chemical Raw Material Business

 

 Our Products

 

Chemrex, our wholly owned subsidiary, is involved in the wholesale of chemical raw material products. We purchase raw chemical materials, mostly FRP, from domestic and international manufacturers and sell them to manufacturers in Southeast Asia. The FRP and other raw materials we offer are used to produce a wide variety of goods, including handrails, bench tops, automotive and aero parts, cleanroom panels, and covers for various instruments used in manufacturing.

 

The following table reflects Chemrex’s five top selling products for FY2022, indicated by revenues, finished goods use, and percentage of total revenues of $10,832,891:

 

Raw Materials

 

Finished Goods

 

Revenue

 

 

% of total Revenue

 

1. Resin, Stitch Mat, Roving

 

Chemical / water storage tanks

 

$

865,971

 

 

 

8.00

2. Chopped Strand Mat, Woven Roving

 

Bus & Car bodies, swimming pool

 

$

855,548

 

 

 

7.90

%

3. Resin, Pultrusion Roving

 

Floor grating, cable casing, electrical cable supporting arms

 

$

663,966

 

 

 

6.13

%

4. Resin, Stitch Mat

 

Oil & gas pipes and waste water pipes

 

$

576,908

 

 

 

5.33

%

5. Resin ATH Power

 

Laboratory table top and kitchen table top

 

$

393,260

 

 

 

3.63

%

 

As can be seen from the table above, a substantial portion of the Company’s revenue comes from the sale of FRP products. FRP products are highly sought after by our customers due to:

 

 

·

The material’s lightweight coupled with high strength.

 

 

 

 

·

The material’s ability to be a good electrical insulator with no electro-magnetic behavior and no electric spark.

 

 

 

 

·

The material’s rust-free nature and resistance to acid, alkali, organic dissolvents, and other gas and liquid mixtures.

 

 

 

 

·

The material’s resistance to aging with more than 20 years of useful life under normal working conditions.

 

 

 

 

·

The material’s ease of maintenance.

 

To mitigate our raw materials revenue concentration risk, we purchased and sold the raw materials based on current market needs and manufacturers’ privileged information on the change in technology, market trend, and substitution materials based on long-term mutually beneficial business relations.

 

Chemical Raw Material Product Examples

 

Listed below are some examples of FRP chemical raw material products the company sells. In addition, there are both general purpose and more specific use case materials.

 

 
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Table of Contents

 

Polyester Resin SHCP 268

 

SHCP 268 is a thixotropic, quick-curing unsaturated polyester resin suitable as a general-purpose resin. It can be used in generally all FRP products. However, it might not suffice depending on the customer’s needs since it might not have the required structural integrity, chemical resistance, or UV resistance properties a customer requires for their products. For example, one of the ways this material has been used is in the construction of train seats. 

 

bion_s1aimg23.jpg

  

Polyester Resin 9509

 

This is a premium raw material compared to Polyester Resin SHCP 268 and is priced higher. Like Polyester Resin SHCP 268, it is a general-purpose material but provides more structural integrity and is longer lasting. Customers have used this material to produce marine boats and water slides.

 

bion_s1aimg24.jpg

Polyester Resin 2802

 

This is also a more premium grade of resin. It has a niche use case and is generally used as a key component in the pultrusion process by certain manufacturers.

 

bion_s1aimg25.jpg

 

Chemical Raw Material Product Applications

 

Our chemicals are used to produce a wide variety of finished goods. Common products utilizing our FRP materials include handrails, bench tops, automotive and aero parts, paneling for hospital/laboratory/industrial clean rooms, and covers for various instruments used in manufacturing. Some examples of FRP end-user products manufactured by our customers are displayed below:

 

Medical and Industrial Equipment

 

bion_s1aimg26.jpg

 

 
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Platform, Handrail and Decking

 

bion_s1aimg27.jpg

 

Medical appliances 3

 

bion_s1aimg28.jpg

 

3 These pictures illustrate the casing of medical appliances made from our chemical raw materials.

 

Research and Development

 

The cost analysis of existing and planned R&D efforts may be up to USD 0.8m. As part of our current research and development efforts, we are working closely with external R&D companies, such as Sift Center Sdn.Bhd. (www.siftcenter.com) and PCA Group Sdn.Bhd. (www.pcagroup.com), to produce and supply FRP products to Shell petrol stations. Sift Center Sdn. Bjd. And PCA Group Sdn. Bhd. are attempting to use the infusion vacuum process to produce Electrical Vehicle (EV) charging and hydrogen fueling stations. As part of our collaboration, we will be providing the resin and fiberglass required to produce the infusion vacuum chamber and our technical expertise regarding the viability of the design.

 

Sales and Marketing

 

 

·

Online Promotion. We market our product offerings through our website www.chemrex.com.my. We utilize Google’s search engine optimization to drive traffic to our website. Additionally, we also engage the services of PanPages, an internet marketing company to further market our products to new consumers over the internet. New prospective customers can forward their inquiries via phone or our website. Our marketing and technical representatives will then contact the prospective customer and discuss how we can fulfill their order and accommodate any specific requests. Our marketing team also conducts online searches and look for new customers from time to time.

 

 

 

 

·

Product Display. We invite current and potential customers to examine our product range at our warehouse; thus, customers may get a more comprehensive assessment of our product’s quality.

 

 

 

 

·

Marketing Personnel. Our product sales and marketing are performed internally by our Managing Director Mr. Tham Too Kam, our Executive Director Mr. Tan Liong Tai, and our Marketing Manager Mr. Chan Kwan Wah, together with three marketing and technical representatives. Our marketing team visits our existing customers on a monthly basis, and we have several discussions with them to get information of new players in the market.

 

 

 

 

·

Business Introduction from Suppliers. We meet our suppliers regularly. From time to time, our suppliers will also provide us with the contact details of new potential customers we can provide our products to and our marketing personnel will follow up on these new sales leads.

 

 
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Our Chemical Raw Material Customers

 

Most of our existing customers are well-established manufacturers and contractors with long-term relationships with Chemrex who regularly place orders. Typically, they would give us a forecast of the products they need and place their orders monthly. Our top five customers, based on revenue, accounted for approximately 30.92% of our revenue for the fiscal year ended December 31, 2022.

 

Chemrex Top 5 Customers

 

A

 

$858,990

 

 

 

7.93%

B

 

$855,710

 

 

 

7.90%

C

 

$577,023

 

 

 

5.33%

D

 

$664,098

 

 

 

6.13%

E

 

$393,339

 

 

 

3.63%

Total

 

$3,349,159

 

 

 

30.92%

     

From time to time, we assist customers with their new product development or projects with suitable and compatible raw materials. In addition, leveraging on our prior successful dealings with local and international raw materials manufacturers, we often collaborate with our customer’s research teams to meet their new product needs, such as the various technical and aesthetic requirements of their new products or projects.

 

Our Chemical Raw Material Suppliers

 

We consider our major vendors in each period to be those vendors that accounted for more than 10% of overall purchases in such period. We had four suppliers accounted for 15.56%, 14.82%, 14.81% and 12.18 of the Company’s total chemical raw material purchase, respectively. We had four major vendors during the fiscal year ended December 31, 2022, who collectively accounted for 57.37% of total purchases. We had four major vendors during the fiscal year ended December 31, 2021, who collectively accounted for 64.11% of total purchases. We purchase from a variety of suppliers and believe these raw materials are widely available. If we were unable to purchase from our primary suppliers, we do not expect we would face difficulties in locating another supplier at substantially the same price. We have secure and efficient access to all the raw materials necessary to produce customers’ products saving them the trouble of sourcing from several distributors. We believe our relationships with the suppliers of these raw materials are strong. While the prices of such raw materials may vary greatly from time to time, we believe we could hedge such risk by adjusting our price or absorb the higher cost at times if necessary.

 

 

Fiscal Year

 

2022

 

Vendor Name

 

Cost of Revenue (USD)

 

 

% of Cost of Revenue

 

A

 

 

1,497,142

 

 

 

15.56%

B

 

 

1,425,867

 

 

 

14.82%

C

 

 

1,424,476

 

 

 

14.81%

D

 

 

1,171,511

 

 

 

12.18%

Total

 

 

5,518,996

 

 

 

57.37%

 

 

 

 

 

 

 

 

 

Fiscal Year

 

2021

 

Vendor Name

 

Cost of Revenue (USD)

 

 

% of Cost of Revenue

 

C

 

 

2,026,842

 

 

 

20.18%

A

 

 

1,815,817

 

 

 

18.08%

B

 

 

1,404,442

 

 

 

13.98%

D

 

 

1,191,344

 

 

 

11.86%

Total

 

 

6,438,444

 

 

 

64.11%

 

Quality Control Policies

 

We have a strict quality control process centered around the handling, storage, and expiry dates of our chemical raw materials before they are delivered to our customers. All products supplied by us are attached with a Certificate of Analysis (“COA”) issued by manufacturers. COA contains the batch numbers, test result data, and manufacturing date. There are also labels on the packaging of our products stating the production date and batch number.

 

 
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Competition

 

Based on the information provided by our customers and suppliers, Malaysia’s industrial chemical market size is approximately USD 50 million per annum, and our current market share is around 20% of the domestic market. In the wider Southeast Asian region, including Indonesia, Thailand, Vietnam, Philippines, Myanmar, and Cambodia, we rely on close relationships with our distributors to distribute our product to customers. As a result, the market size of the Southeast Asian market is USD 500 million per annum, and our current market share is around 2.0% of the Southeast Asian market.

 

As Chemrex’s clients are primarily in Malaysia, we consider Chemrex’s principal competitors to be in the Malaysian domestic market for selling chemical raw materials. Chemex’s competitors include Kaliba Sdn.Bhd. (“Kaliba”), Myeast Sdn.Bhd. and RP Product Sdn.Bhd. Some of these competitors, such as Kaliba, may have greater resources than us. They are leading providers of Fibreglass reinforced materials such as Polyester Resin, Chopped Strand Mat, and Woven Roving, many of which overlap with our product offerings. 

 

Additionally, most of the chemical raw materials we distribute are made to industry standard specifications and either produced by or available from multiple sources. Our suppliers may also distribute directly or through multiple chemical distributors. Even for products that are unique in formulation or other characteristics, there are typically other products available that are functional substitutes, such as natural plant fiber green products, such that we face significant competition even where we are the exclusive distributors of a specialty product. Hence, our suppliers may also choose to limit their distribution outsourcing, particularly with respect to higher margin products, or to partner with other wholesalers or resellers for distribution, which could increase competition.

 

Competitive Advantages

 

Notwithstanding the competition, we are a well-established and reliable quality composite material distributor with professional services. In addition, we offer the following benefits to our existing and potential customers:

 

·

Technical Expertise: Our technical staff, comprising two chemists and one engineer, are highly competent and familiar with the technical advancements in the FRP industry. They provide technical know-how on mixing various products and offer product suggestions or modifications to our customers, which may involve strengthening or enhancing existing products sold by our customers.

 

·

Pricing Advantage: As a prominent reseller of FRP products in the domestic market with significant market share, we distribute our products at a relatively higher volume than our competitors. Hence, we enjoy the discounts we order from our suppliers in bulk which we then pass on to our customers. As a result, prospective customers could incur higher prices if they purchase from our competitors who do not transact at such a high volume.

 

·

Convenience: We provide a wide variety of over 100 FRP products. In contrast, some of our competitors might have a smaller product range. In addition, prospective customers could incur higher logistics if they purchase from many different sellers instead of relying on us as a one stop shop for all their business needs. 

 

·

 

Sourcing New Raw Materials for product development: We source a broad range of raw materials worldwide. This global reach greatly expands our potential customers and provides more opportunities for our customers to develop new products from a greater variety of raw materials.

 

Growth strategy

   

The composite raw materials market is expected to reach an estimated $40.2 billion by 2024 and is forecasted to grow at a CAGR of 3.3% from 2019 to 2024. Furthermore, the composites end-user market is expected to reach an estimated $114.7 billion by 2024. The major drivers for growth in this market are the increasing demand for lightweight materials in the aerospace, defense, and automotive industries. Also, corrosion and chemical resistance materials are in demand in the construction and pipe and water tank industries. With our wide variety of product offerings, we are well-positioned to take advantage of this increase in chemical composite market demand. Source: Composites Market: Trends, Opportunities and Competitive Analysis (https://www.researchandmarkets.com/categories/chemicals-materials)

  

We are looking towards using automated warehousing and logistics powered by artificial intelligence to guide our inventory control/movement and business decisions more efficiently and quickly. We also want to deepen our ties with our major business partners, who have cooperated with us successfully for many years. Additionally, we are looking to hire more young and talented professionals to open more domestic and foreign markets, so our business growth strategy can be successfully implemented and sustained. We are also constantly looking for new products through various channels, such as trade shows to source new products to add to our product line. From 2023 to 2024, we are projecting 40% revenue growth, mainly driven by more orders for our raw materials from electric vehicle charging station manufacturers. From 2025 onwards, we are projecting that the growth rate will stabilize at 15%.

 

 
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Regulatory Matters

 

We are unaware of and do not anticipate spending significant resources to comply with governmental regulations. We are subject to the laws and regulations of those jurisdictions in Malaysia.

 

Listed below are the licenses Chemrex currently holds to conduct its business in Malaysia.

 

License/Permit/Approval

Holding entity

Issuing authority

Date of grant

Date of expiry

Warehouse License

Chemrex

District Town

Council of Selangor 

September 22, 2022 

 September 21, 2023

Importer Certificate

Chemrex

Department of

Custom

October 14, 2020

Expired once the goods cleared from the Custom

 

Product Liability

 

Due to the nature of Chemrex’s business, we may face claims for product liability resulting from any environmental or personal injury because of the chemical raw materials sold by Chemrex. We currently do not hold any insurance should a claim arise.

 

Diagnostics Business

 

Through our subsidiary BGL, we also engaged in applying genomic testing to e