VolitionRx Limited — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015; comparative period is Q1 2014. VolitionRx is a development-stage diagnostics company with no operating revenue, focused on research and development, including colorectal cancer testing. Financial statements are unaudited.
Financial results and position
| Metric | Q1 2015 / March 31, 2015 | Prior comparable / December 31, 2014 |
|---|---|---|
| Revenue | $0 | $0 in Q1 2014 |
| Operating expenses | $2.35 million | $1.24 million in Q1 2014 |
| Net loss | $2.01 million; $0.12 per share | $2.19 million; $0.18 per share in Q1 2014 |
| Net cash used in operations | $2.21 million | $0.98 million in Q1 2014 |
| Cash and cash equivalents | $11.03 million | $2.14 million |
| Working capital | $10.33 million surplus | — |
| Total liabilities | $1.28 million | $3.06 million |
| Stockholders’ equity | $11.08 million | $0.37 million |
Operating loss was $2.35 million. No gross margin is reported because there was no revenue. Cash flow from investing activities was a $73,302 use, including $55,000 for a patent purchase. Financing provided $11.20 million, primarily from common-stock issuances. The company reported no interest paid and no income taxes paid. No conventional borrowings are identified; grant repayable obligations totaled $314,006 at quarter-end.
Material changes versus Q1 2014
- Operating expenses rose $1.11 million, or 90%. Reported drivers included higher research and development costs, including the Hvidovre Hospital study; increased professional and legal fees associated with the NYSE MKT listing and contracts; and higher general and administrative costs.
- Net loss narrowed by $184,294 despite higher operating expenses, largely because the company recorded $339,744 of derivative remeasurement income in Q1 2015, versus a $1.10 million derivative remeasurement expense in Q1 2014. The derivative liability fell from $1.58 million at year-end to zero.
- Cash increased by $8.89 million, mainly following equity financing. Common shares outstanding rose from 14.69 million at December 31, 2014 to 17.93 million at March 31, 2015; weighted-average shares rose 34% year over year.
Outlook, risks and unusual items
- Management intends to use cash predominantly for further R&D. The company expects to rely on additional financing, particularly equity sales, and gives no assurance that financing will be available. Additional share sales could dilute existing holders.
- The filing states that accumulated losses were $21.52 million and that the company had no revenue, creating substantial doubt about its ability to continue as a going concern. Management’s plans include cost controls, seeking grant funds, and obtaining debt or equity financing. If financing is delayed, clinical validation and regulatory approval work could be delayed; a prolonged funding shortfall could force cessation of operations.
- Management reported that operations had proceeded satisfactorily against its plan, but noted risks of resource availability, cost, and research-process delays. No quantified revenue, profitability, or commercialization guidance is provided.
- Contingencies and commitments include Walloon Region grant repayment and a 6% royalty on qualifying product or service revenue, subject to a stated aggregate cap; research agreements with Bonn University and Hvidovre Hospital; and operating leases. On April 8, 2015, after quarter-end, the company entered a five-year lease to purchase three laboratory automation machines for $597,518, with an initial installment and 59 subsequent payments.
- Disclosure controls and procedures were concluded to be ineffective as of March 31, 2015. Management reported no significant subsequent changes in internal control over financial reporting. The company reported no material pending legal proceedings and no significant off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the cash balance and working-capital surplus are sufficient for planned R&D, clinical validation, and regulatory work, given the reported operating cash use and going-concern uncertainty.
- Financing needs and potential dilution, including the effect of outstanding warrants and options.
- Progress, costs, and timing of clinical studies and any path toward regulatory approval or revenue; the filing provides no commercialization timetable.
- The terms and potential future obligations under grant repayment and royalty provisions, research agreements, leases, and the post-quarter equipment lease.
- Remediation of ineffective disclosure controls and any related material weaknesses described in the company’s 2014 Form 10-K.