BioNexus Gene Lab Corp: Form 10-Q for the period ended Sep 30, 2024

Description of Business

As used herein, unless the context otherwise indicates, references to the “Company,” “we,” “our,” “us,” “BioNexus” refer to BioNexus Gene Lab Corp., a Wyoming company (“BGLC”), and its wholly owned subsidiaries, MRNA Scientific Sdn. Bhd. (“MRNA Scientific Malaysia”), and Chemrex Corporation Sdn. Bhd. (“Chemrex”), both are Malaysian companies.

BGLC is an emerging technology company focused on the application of functional genomics to enable early detection of infectious diseases and cancers. On August 23, 2017, we acquired all of the outstanding capital stock of MRNA Scientific Malaysia, which was incorporated in Malaysia on April 7, 2015. MRNA Scientific Malaysia owns algorithm software, technology, and know-how related to the detection of common diseases through blood analysis which we use in our business. Our non-invasive blood screening tests analyze changes in ribonucleic acid (or RNA) to Coronavirus, Dengue, HIV, HPV and the risk potentiality of cancers diseases. This unique blood genomic biomarker approach is based on the scientific observation that circulating blood reflects, in a detectable way, what is occurring throughout the body currently.

The corporate and principal office address of the Company and MRNA Scientific Malaysia is Unit A-28-7, Tower A, Menara UOA Bangsar, No.5 Jln Bangsar Utama 1 , Kuala Lumpur, Malaysia., our lab is located at Lab 353, Chemical Science Centre, University Science Malaysia, George Town, Penang, Malaysia. Another lab focuses on Covid-19 and colon cancer screening is located at 4th floor, Lifecare Diagnostic Centre, Kuala Lumpur, Malaysia. Our telephone number is (+60) 18-2218762 and our website is www.bionexusgenelab.com (http://www.bionexusgenelab.com).

Chemrex is a wholesaler of industrial chemicals for the manufacture of industrial, medical, appliance, aero, automotive, mechanical and electronic industries in Asean region. On December 31, 2020, we acquired all of the outstanding capital stock of Chemrex, which was incorporated in Malaysia on September 29, 2004.

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

The results of operations for Chemrex were adversely impacted during fiscal year 2023 and the slow recovery into 2024 as the businesses of Chemrex customers especially manufacturers continue to suffer from the lingering impact of Covid and supply chain shocks to the global economy. Many customers across Malaysia saw their supply chains interrupted, demand for their products and services decline and experienced shortages in supplies and inputs.

Recent Developments.

On July 1, 2024, the Company entered into an advisory service agreement with Maxim Group LLC (“Maxim”) to provide merger and acquisition (M&A) services, general financial advisory services, and investment banking services to the Company. The Company agreed and issued 300,000 shares of our common stock to Maxim for such service. Pursuant to the agreement, Maxim agrees to return a proportionate number of the shares to the company if Maxim is in material breach of the agreement.

If at any time during the term of the agreement or within twelve months from the effective date of the termination of the agreement, the Company proposes to effect a public offering of its securities on a US exchange, private placement of securities or other financing, the Company shall offer to retain Maxim as sole book running manager of such offering, or as its exclusive placement or sales agent in connection with such financing or other matter, upon such terms as the parties may mutually agree.

(a) Strategic Investment into Ascension Innovation Sdn Bhd. by our subsidiary, MRNA Scientific Sdn. Bhd.

Pursuant to a Form 8-K filed on April 18, 2024, the Company announced a strategic investment in Ascension Innovation Sdn Bhd (AISB), a privately held Malaysian company. Please refer to that filing for more information on the investment.

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(b) Notification of delisting and stay of suspension

On November 6, 2023, the Company reported that it received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) regarding the Company’s failure to comply with Nasdaq Continued Listing Rule (“Rule”) 5550(a)(2), which requires listed securities to maintain a minimum bid price of $1.00 per share. A failure to comply with Rule 5550(a)(2) exists when listed securities fail to maintain a closing bid price of at least $1.00 per share for 30 consecutive business days.

Under Rule 5810(c)(3)(A), the Company automatically was provided a period of 180 calendar days, until May 6, 2024, to regain compliance.

The Company then applied to NASDAQ to receive an additional 180 calendar days to regain compliance. On August 8, 2024, the Company received notification from NASDAQ that the compliance period has been extended to November 4, 2024. If at any time during this 180-day period the closing bid price of the Company’s securities is at least $1.00 for a minimum of ten consecutive business days, the Company’s compliance will be regained.

On November 5, 2024, BioNexus Gene Lab Corp (the "Company") received a notification from the Nasdaq Stock Market LLC ("Nasdaq") indicating that the Company’s common stock will be delisted from the Nasdaq Capital Market due to its failure to comply with Nasdaq Listing Rule 5550(a)(2), which requires listed securities to maintain a minimum bid price of $1 per share. The Company had been provided two consecutive 180-day grace periods, ending on November 4, 2024, to regain compliance but was unable to meet the requirement within the designated period.

In response, on November 8, 2024, the Company submitted a formal request for a hearing before a Nasdaq Hearings Panel to appeal the delisting determination. The Nasdaq Hearings Department has acknowledged receipt of the Company’s hearing request, which stays the suspension of trading of the Company’s common stock pending a decision by the Panel. The Company intends to present a compliance plan at the hearing, including potential corrective actions such as a reverse stock split, among other strategic initiatives, to regain compliance with Nasdaq’s listing standards.

(c) Appointment of director, committee appointments, and appointment of officers

On November 5, 2024, the Board of Directors of the Company appointed Ms. Jook Yuen Low as an independent director to the Board, effective immediately. Ms. Low has also been assigned to serve as a member of the Audit Committee and the Nomination & Corporate Governance Committee, bringing her expertise in corporate governance, legal compliance, and audit oversight. Ms. Low will serve in her capacity until the next annual meeting of shareholders.

Ms. Low (Age 46) holds a Bachelor of Laws (LL.B) and a Master of Business in Public Relations from the Queensland University of Technology, Australia. She was called to the Bar as an Advocate & Solicitor of the High Court of Malaya in 2004. Currently, Ms. Low is a partner at the law firm Azura Mokhtar & Low. Her legal career spans over 20 years, during which she has gained substantial experience in conveyancing, corporate law, and wealth management consulting. Her expertise includes advising on property, real estate, banking transactions, and corporate agreements such as shareholders’ agreements, joint ventures, and power of attorney.

There is no arrangement or understanding between the new director and any other person pursuant to which the new director was selected to be a director of the Company.

Ms. Low will receive the standard independent director compensation set by the Compensation Committee of the Company, which is $1,000 USD per month.

Except as stated above, there is no material plan, contract or arrangement (whether or not written) to which the new director is a party or in which each party participates that is entered into or a material amendment in connection with the triggering event or any grant or award to any such covered person or modification thereto, under any such plan, contract or arrangement in connection with any such event.

Additionally, the Board has re-appointed Mr. Su-Leng Tan Lee as Secretary of the Company and has appointed him as President, effective immediately. No change has been made to his compensation package as a result of his appointments.

(d) Internal Controls Enhancement

During and subsequent to the reporting period ending September 30, 2024, as a result of recent transactions occurring at its Chemrex subsidiary (See Note 14 to Unaudited financial statements included in this 10-Q filing), the Company focused on enhancing its internal control environment and improving governance procedures within its Chemrex subsidiary. Following the internal review of these recent transactions, management has implemented additional protocols to strengthen compliance with corporate policies and regulatory requirements, particularly concerning related-party transactions and transaction authorization at the subsidiary level.

The Company also acknowledges a recent communication from our independent auditors JP Centurion & Partners, in which the audit firm expressed concerns regarding certain aspects of Chemrex’s financial reporting and internal control structure. The Company is addressing these matters through comprehensive oversight, led by the audit committee, to ensure transparency, accuracy, and compliance in all reported information. These efforts aim to reinforce the integrity of our financial reporting and provide shareholders with reliable information on the Company’s operational and financial performance.

Translation of amounts from MYR into US$1.00 has been made at the following exchange rates for the respective period and year:

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Results of Operations

Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023.

The following table sets forth key selected financial data for the three months ended September 30, 2024 and 2023.

Consolidated

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Segmented Information

Revenue. For the quarter ended September 30, 2024, we had total revenue of $2,630,376 as compared to total revenue of $2,553,686 for the quarter ended September 30, 2023, an increase of 3% from the prior quarter.

Chemrex contributed $2,627,813 (99.9%) of the total revenue for the current quarter ended September 30, 2024, as compared to $2,537,150 (99.4%) of the total revenue for the quarter ended September 30, 2023. Chemrex’s revenues slight increase of 3.6% from same quarter last year was due to an increase in purchases from existing customers.

MRNA Scientific contributed $2,563 (0.1%) of the total revenue for the quarter ended September 30, 2024, compared to $16,536 (0.6%) of the total revenue for the quarter ended September 30, 2023. Revenues decreased by $13,973 from the same quarter last year, reflecting an 84.5% decline due to fewer client referrals from diagnostics centers.

Cost of Revenue. For the quarter ended September 30, 2024, we incurred $2,303,840 in cost of revenues, as compared to $2,199,354 for the quarter ended September 30, 2023, a slight increase of 4.8% was due to higher sales and fluctuations in purchasing conditions.

Chemrex had incurred $2,301,722 (99.9%) of the total cost of revenue during the current quarter period ended September 30, 2024, as compared to the quarter ended September 30, 2023, wherein Chemrex had incurred $2,192,053 (99.7%) of the total cost of revenue. The slight decrease in Chemrex’s cost of revenues for the current period was due to decreased revenues.

MRNA Scientific had incurred $2,118 (0.1%) of the total cost of revenues during the current quarter period ended September 30, 2024, as compared to $7,301 (0.3%) for the quarterly period ended September 30, 2023. Cost of revenue decreased by $5,183 from prior quarter due to its decreased revenues as stated above.

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Gross Profit. For the quarterly period ended September 30, 2024, we had total gross profit of $326,536 as compared to gross profit of $354,332 for the quarterly period ended September 30, 2023. The decrease of 7.8% from the prior period is due to the reasons discussed above.

Chemrex contributed $326,091 (99.9%) of the total gross profit for the current quarter ended September 30, 2024, as compared to $345,097 (97.4%) of the total gross profit for the quarter ended September 30, 2023. Chemrex’s gross profit decreased by $19,006 reflecting a decline of 5.5% from the prior quarter due to general business fluctuations.

MRNA Scientific contributed $445 (0.1%) of the total gross profit of $326,536 for the current quarter ended September 30, 2024 as compared to gross profit of $9,235 (2.6%) of the total gross profit of $354,332 from the quarter ended September 30, 2023. The decrease of $8,790 from the prior period is due to decreased revenues for the current period.

Other Income. For the quarterly period ended September 30, 2024, we had $465,527 in other income, as compared to of $199,284 for the quarterly period ended September 30, 2023, an increase of approximately 133.6%.

Chemrex contributed $442,755 (95.1%) to other income for the current quarter ended September 30, 2024, as compared to $197,527 (99.1%) of other income for the quarter ended September 30, 2023. Chemrex’s other income increased by 124.1% due to dividends received from other investments, increases in fixed deposits resulting in higher interest income, gains on equity investment, and the recovery of doubtful debts and loss allowances.

MRNA Scientific contributed $22,772 (4.9%) of other income for the current quarter ended September 30, 2024, as compared to $1,757 (0.9%) of the other income for the quarter ended September 30, 2023. The increase of $21,015, approximately 1,196%, is due to increases in fixed deposits resulting in higher interest revenue, along with higher rental income and gain on unrealised forex transactions.

Operating Expenses. For the quarter ended September 30, 2024, we had total operating expenses of $2,129,685 compared to total operating expenses of $3,082,128 for the quarter ended September 30, 2023. The decrease of approximately 30.9% primarily stemmed from lower professional expenses at the parent level which were related to our Nasdaq listing in 2023, along with a reduction in share-based compensation and a lower provision for loss allowance from Chemrex.

Chemrex incurred $1,452,543 (68.2%) of the total operating expenses for the current quarter ended September 30, 2024, compared to $1,322,231 (42.9%) of the total operating expenses for the quarter ended September 30, 2023. The increase of approximately 9.9% was due to increases in directors’ remuneration and staff salaries, and a higher loss on the fair value of investments.

MRNA Scientific incurred $290,544 (13.6%) of the total operating expenses for the quarter ended September 30, 2024, compared to $71,870 (2.3%) of the total operating expenses for the quarter ended September 30, 2023. The increase of approximately 304.3% for the current quarter was due to increases in directors’ remuneration, staff salaries for marketing and business development, amortization of the right-of-use asset, office utilities, additional costs related to losses on realized exchange rates, unrealized exchange rates, and lease terminations.

BGLC, the holding company, incurred $386,598 (18.2%) of total operating expenses for the current quarter ended September 30, 2024, compared to $1,688,027 (54.8%) of total operating expenses for the quarter ended September 30, 2023. This represents a decrease of $1,301,429, or approximately 77.1%, in operating costs for the quarter ended September 30, 2024. The decrease was due to additional professional expenses related to the company's successful listing on Nasdaq, as well as costs incurred for advisory, legal, and underwriting services which occurred in the last quarter of 2023 which were not repeated in the same period of 2024. The reduction also includes discontinued expenses for medical advisers, investor relations services, and securities underwriting.

Loss from Operations. We had a loss from operations of $1,337,622 for the quarter ended September 30, 2024, compared to a loss of $2,528,512 for the quarter ended September 30, 2023, reflecting a reduction of approximately 47.1% from the prior period.

Income tax expense. For the quarter ended September 30, 2024, we had a tax expense of $1,555 as compared to tax expenses of $76,418 for the quarter ended September 30, 2023, for Chemrex. The lower tax expense was lower due to operating losses during the prior period. There was no tax provision for MRNA Scientific-Malaysia for the quarters ended September 30, 2024, and 2023.

Foreign currency exchange gain/(loss). We are exposed to fluctuations in foreign exchange rates on the revaluation of monetary assets and liabilities denominated in currencies other than the US Dollar. Therefore, any change in the relevant exchange rate would require us to recognize a transaction gain or loss on revaluation. For the three-month period ended September 30, 2024, we experienced a foreign currency gain of $1,046,789 as compared with a foreign currency loss of $18,603 for the three-month period ended September 30, 2023.

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Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023.

The following table sets forth key selected financial data for the nine months ended September 30, 2024 and 2023.

Consolidated

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Segmented Information

Revenue. For the nine months period ended September 30, 2024, we had total revenue of $6,986,791 as compared to total revenue of $7,497,739 for the same period in 2023, a 6.8% decrease from the same period last year.

Chemrex contributed $6,975,567 (99.8%) of the total revenue for the nine month period ended September 30, 2024, as compared to $7,469,271 (99.6%) of the total revenue for the same period last year. Chemrex’s revenues had decreased by $493,704 from the same period last year, representing a decline of 6.61%. We had a decrease in revenue in the first two quarters attributable to increased competition and the lack of new projects in the market, resulting in fewer orders from existing customers, however, conditions gradually improved in the third quarter of 2024.

MRNA Scientific contributed $11,224 (0.2%) of total revenue for the nine-month period ended September 30, 2024, compared to $28,468 (0.4%) for the same period last year. MRNA Scientific's revenue decreased by $17,244 from the nine months of 2023, a 60.6% decrease. The decrease in revenue for 2024 was due to RNA machine breakdowns that occurred during the current period for BGS tests along with fewer client referrals from diagnostics centers.

Cost of Revenue. For the nine months period ended September 30, 2024, we incurred $6,006,504 in cost of revenues as compared to $6,434,796 for the same period in 2023, which represents a decrease of $428,292. The 6.7% decrease was due to reduction in costs related to lower revenues discussed above.

Chemrex had incurred $5,999,781 (99.9%) of the total cost of revenue during the current period ended September 30, 2024, as compared to $6,419,947 for the same period in last year wherein Chemrex had incurred (99.8%) of the total in cost of revenue, a decrease of $420,166. The 6.55% decrease was due to the reason stated above.

MRNA Scientific had incurred $6,723 (0.1%) of the total cost of revenues during the current period ended September 30, 2024 as compared to $14,849 (0.2%) for the same period last year. Cost of revenue decreased by $8,126 from the prior nine month period due a reduction of revenues during the current nine month period.

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Gross Profit. For the nine months period ended September 30, 2024, we had total gross profit of $980,287 as compared to gross profit of $1,062,943 for the same period in 2023, a decrease of approximately 7.8% from the prior period.

Chemrex contributed $975,786 (99.5%) of the total gross profit for the current nine months period ended September 30, 2024, as compared to $1,049,324 (98.7%) of the total gross profit for the same period last year, a decrease of $73,538. The 7.01% decrease for current period was due to lower revenues, mainly at Chemrex, as stated above.

MRNA Scientific had a gross profit of $4,501 (0.5%) of the total gross profit of $980,287 for the current nine months period ended September 30, 2024, as compared to $13,619 (1.3%) of the total gross profit of $1,062,943 from the same period last year 2023. The gross profit decrease of 67% was due to a reduction in revenues for the current period as stated above.

Other Income. For the nine months period ended September 30, 2024, we had $1,397,479 as compared to $511,792 for the same period in 2023, increased by $885,687 approximately 173.1%.

Chemrex contributed $1,298,649 (92.9%) of other income for the current nine months period ended September 30, 2024, as compared to $507,870 (99.2%) of the other income for the same period last year, an increase of $790,779. The 155.71% increase was generated from dividends received, gain on equity investment, doubtful debts recovered, and provision losses allowance recovered.

MRNA Scientific had $98,830 (7.1%) for nine months period ended September 30, 2024, as compared to $3,922 (0.8%) for the same period in 2023. The 2,419.9% was due to increased interest income from US dollar deposits in Malaysian accounts and gains on unrealised foreign exchange and rental income.

Operating Expenses. For the nine-month period ended September 30, 2024, we had total operating expenses of $3,535,248 compared to total operating expenses of $4,426,077 for the same period in 2023, a decrease of $890,829. The 20.1% decrease was primarily due to BGLC, the holding company, which reduced professional expenses from advisors, attorneys, underwriting costs and share-based compensation.

Chemrex had incurred $2,149,306 (60.8%) of the total operating expenses for the current nine months period in 2024 as compared to $2,348,127(53.1%) of the total operating expenses for the same period last year 2023, a decrease of $198,821. The decrease of 8.47% is due to the reduction in the provision for losses on account receivables.

MRNA Scientific incurred $475,762 (13.5%) of the total operating expenses for the current nine-month period, compared to $170,590 (3.9%) of the total operating expenses for the same period last year, an increase of $305,172. The 178.9% increase in operating costs for the current nine-month period was due to the hiring of new staff for marketing and business development, an increase in directors’ remuneration, additional costs from the settlement of a supplier contract dispute, motor vehicle maintenance fees, and unrealized exchange rate losses of $208,674.

BGLC, the holding company, incurred $910,180 (25.7%) of total operating expenses for the current nine-month period ended September 30, 2024, compared to $1,907,360 (43.1%) of total operating expenses for the same period last year 2023, a decrease of $997,180. The 52.28% reduction for the current period was primarily due to reduced expenses of consultant fees for capital, corporate advisory services and compliance services and share-based compensation. The reduction also includes discontinued expenses for medical advisers, investor relations services, and underwriting costs.

Loss from Operations. We had a loss from operations of $1,157,482 for nine months period ended September 30, 2024, as compared to loss of $2,851,342 for the same period in 2023, a decrease of $1,693,860. The 59.4% decrease was due to the reasons discussed above.

Income tax expense. For the nine-months period ended September 30, 2024, we had income tax provided by Chemrex $77,207 and MRNA Scientific had no tax provision as compared to the same period in 2023 which had a tax estimated $76,418 from Chemrex and no tax provided from MRNA Scientific-Malaysia.

Foreign currency exchange gain/(loss). We are exposed to fluctuations in foreign exchange rates on the revaluation of monetary assets and liabilities denominated in currencies other than the US Dollar. Therefore, any change in the relevant exchange rate would require us to recognize a transaction gain or loss on revaluation. For the nine-months period ended September 30, 2024, we experienced a foreign currency gain of $839,344 as compared with a foreign currency loss of $391,533 for the same period in 2023.

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LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2024, we had working capital of $5,635,310 compared with working capital of $6,415,877 as of December 31, 2023. The decrease in working capital as of September 30, 2024 was due principally to investments and expansion of operations.

Our primary uses of cash had been for operations and strategic investments. The main sources of cash were generated from operational revenues, the private placement of our common stock, and the proceeds of our public offering. The following trends could result in a material decrease in our liquidity over the near to long term:

• Addition of administrative and marketing personnel as the business grows,
• 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 (used in) / generated from operating, investing, and financing activities for the nine months ended September 30, 2024 and 2023

Operating Activities

During the nine months ended September 30, 2024, the Company incurred a net loss of $1,250,023 which, after adjusting for amortization, depreciation, dividend income, allowances for expected credit losses of $122,843, recovery for expected credit losses of 842,401, fair value gain on share investment, gain on disposal on share investment, loss arising from settlement of supplier contract dispute of $29,140, share-based compensation of $141,000, an increase in inventories, a decrease in trade and other receivables, advance payment from customer and a substantial reduction in trade payables, resulted in net cash of $2,164,489 being used in operating activities during the nine months ended September 30, 2024.

By comparison, during the nine months ended September 30, 2023, the Company incurred a net loss of $2,937,506 which, after adjusting for amortization, depreciation, dividend income, fair value gain on share investment, allowances for expected credit losses of $1,372,573, share-based compensation of $601,741, an increase in inventories, a decrease in trade receivables and a substantial reduction in trade payables, advance payment from customer, resulted in net cash of $1,039,686 being used in operating activities during the nine months ended September 30, 2023.

Investing Activities

During the nine months ended September 30, 2024, the Company had net cash of $75,956 used in investment activities from the acquisition of quoted shares valued at $486,170, purchase of plant & equipment of $222,967, proceeds from disposal of share investments of $494,741, refund from settlement of supplier contract dispute at $78,787 and dividend income of $59,653. By comparison during the nine months ended September 30, 2023, the Company had net cash of $368,824 used in investment activities from acquisition of share investment of $296,109, purchase of plant & equipment of $148,461, proceeds from disposal of share investments of $26,854 and dividend income of $48,892

Financing Activities

During the nine months ended September 30, 2024, the Company had net cash of $1,612 used in financing activities due to advances from directors of $5,362 and offset by interest expense of $6,974. By comparison during the nine months ended September 30, 2023, the Company had net cash of $5,743,206 generated from financing activities due to our initial public offering of 1,437,500 shares at a price of $4.00 per share for total proceeds of $5,750,000 and offset by interest expense of $6,794.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this item.

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Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this quarterly report, an evaluation was carried out by the Company’s management, with the participation of the principal executive officer and the principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(c) and 15d-15(e) under the Exchange Act (“Exchange Act”) as of September 30, 2024. 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 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 accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.

Recent internal reviews of various transactions occurring subsequent to the end of the current reporting period (September 30, 2024) identified areas for improvement within Chemrex, particularly in relation to documentation, transaction approval processes, and related-party transaction oversight. This review was further necessary after the resignation of Mr. Wei Foong Lim on October 9, 2024. Mr. Lim served as a director of both BioNexus Gene Lab Corp. and Chemrex. This resignation has prompted a reassessment of governance controls at Chemrex. Management and the audit committee are implementing strengthened review and authorization procedures to address any potential control gaps, thereby reinforcing compliance with internal governance standards and regulatory expectations. These actions are expected to enhance the Company’s internal controls going forward.

Management’s Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process, under the supervision of the principal executive officer and the principal financial officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with United States generally accepted accounting principles (GAAP). Internal control over financial reporting includes those policies and procedures that:

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

ii) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with the authorizations of management and the board of directors; and

iii) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

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 had assessed the effectiveness of our internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and this assessment identified material weaknesses in internal control over financial reporting had shown improvement. A material weakness could create reasonable possibility that a material misstatement in annual or interim financial statements. The management considers its internal control over financial reporting required further improvement.

This quarterly report does not include an attestation report of our registered public accounting firm regarding our internal controls over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to Section 404(c) of the Sarbanes-Oxley Act that permit us to provide only management’s report in this annual report.

Changes in Internal Controls over Financial Reporting

During the period ended September 30, 2024, there had been no change in internal control over financial reporting that had materially affected or was reasonably likely to materially affect our internal control over financial reporting.

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