VolitionRX Limited — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2013. The unaudited statements cover VolitionRX, a development-stage company developing diagnostic products, including intended research-use-only products and products for potential in-vitro diagnostic use.
Financial performance and position
| Metric | Period / date | Reported amount |
|---|---|---|
| Revenue | Q2 2013 / six months 2013 | $0 / $0 |
| Operating expenses | Q2 2013 / six months 2013 | $1,047,491 / $1,955,288 |
| Net loss | Q2 2013 / six months 2013 | $1,047,491 / $1,955,288 |
| Net loss per share, basic and diluted | Q2 2013 / six months 2013 | $0.10 / $0.19 |
| Net cash used in operations | Six months 2013 | $1,547,096 |
| Cash and cash equivalents | June 30, 2013 | $750,749 |
| Total assets / total liabilities | June 30, 2013 | $2,493,468 / $1,814,882 |
| Current assets / current liabilities | June 30, 2013 | $1,059,628 / $674,340 |
| Grant repayable | June 30, 2013 | $1,140,542 |
Revenue was absent in 2013; consequently, a meaningful operating margin is not available. The company reported a $385,288 excess of current assets over current liabilities on the balance sheet. Management separately cited a $169,455 working-capital surplus after excluding a $215,833 related-party prepaid balance. There was no note payable outstanding at June 30, 2013. The filing does not provide a clear debt-maturity schedule.
Changes versus prior comparable periods
- Q2 operating expenses rose 11% to $1.05 million; net loss increased 12% to $1.05 million. Six-month operating expenses rose 11% to $1.96 million and net loss increased 13% to $1.96 million.
- Research and development expense rose $81,207 in Q2 and $163,360 for the six-month period, reflecting increased staff, materials and collaboration activity, among other costs.
- Revenue fell from $11,707 in Q2 2012 and $27,379 in the first half of 2012 to zero in both 2013 periods.
- Cash increased from $376,421 at December 31, 2012 to $750,749 at June 30, 2013. Six-month financing provided $1,937,459, including $1,421,500 from share issuance and $517,280 in grants; operating activities used $1,547,096.
Outlook, risks and notable items
- Management stated that cash reserves were adequate only for a limited period and that the company expected to rely on further financing. It planned to pursue equity financing, additional grants and/or debt financing, with no assurance of success.
- The filing identifies substantial doubt about the company’s ability to continue as a going concern, citing cumulative losses of $9,540,924 and limited revenue. Failure to obtain adequate capital could delay product development, clinical validation and regulatory work, or force cessation of operations.
- Management said that, if financing is delayed, it would prioritize research and development staff and facilities and patent rights. It reported progress in line with its business plan but cautioned that resources, costs, processes and results could cause delays.
- The Walloon Region grant is repayable under specified conditions: at least $408,948 if the project is deemed unsuccessful; if successful, that minimum plus a 6% royalty on relevant sales. The maximum repayment is twice the funding received. The company received $520,221 for approved expenditures in Q2.
- After quarter-end, the company received $150,000 for 75,000 shares at $2.00 per share. During the first half, it issued shares in private placements and issued warrants and options; additional share issuance may dilute existing holders.
- Disclosure controls were assessed as ineffective at June 30, 2013, citing the absence of an audit committee financial expert and controls not designed to ensure all required disclosures were addressed in the financial statements. Management reported no significant subsequent changes in internal control over financial reporting.
- The company reported no material legal proceedings and no significant off-balance-sheet arrangements.
Important facts for investors to verify
- Cash runway, near-term cash needs and the availability and terms of additional financing.
- Grant repayment exposure, including the applicable success or failure determination and any future royalty obligations.
- Progress and funding needs for product development, clinical validation and regulatory plans.
- The effect of outstanding warrants, options and future equity issuance on dilution.
- Remediation of the disclosed weaknesses in disclosure controls and procedures.