VolitionRx Limited — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Unaudited U.S. GAAP results; comparative period is Q1 2021. VolitionRx develops blood-based diagnostics using its Nucleosomics platform, with products and programs in human and veterinary diagnostics.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $114,211 | $25,530; up $88,681 |
| Operating expenses | $7.79 million | $6.11 million; up 28% |
| Operating loss | $7.68 million | $6.09 million |
| Net loss | $7.72 million; $0.14 per share | $6.13 million; $0.12 per share |
| Cash from operations | Provided: $2.99 million | Used: $6.17 million |
| Cash and cash equivalents | $23.73 million at March 31 | $20.58 million at December 31, 2021 |
| Total assets / total liabilities | $31.68 million / $20.87 million | $27.49 million / $9.77 million at December 31, 2021 |
Revenue comprised $60,254 of services and $53,957 of product sales. The filing does not provide a clear gross profit or gross margin value. Q1 operating cash flow included a $10 million deferred payment under the Heska agreement, so the positive figure should not be read as evidence of positive underlying operating cash generation.
Research and development expense fell 7% to $3.59 million; general and administrative expense rose 44% to $2.60 million; sales and marketing expense rose to $1.60 million from $427,401. Management attributed increases mainly to personnel and stock-based compensation, with marketing and professional costs also contributing. Total stock-based compensation was $915,031, versus $555,342 a year earlier.
At March 31, current assets were $25.96 million and current liabilities $17.51 million. The $10 million current deferred-revenue balance arose from the Heska upfront payment; the payment was not recognized as Q1 revenue because related performance obligations remained incomplete. Long-term debt was $3.37 million, including current and noncurrent portions; scheduled debt payments including interest totaled $3.69 million. Total contractual payments listed for debt, leases, grants and research collaborations were approximately $6.26 million.
Material changes and business developments
- On March 28, 2022, Volition entered a license and product supply agreement with Heska Corporation. Volition received $10 million upfront for exclusive worldwide point-of-care rights to sell the Nu.Q Vet Cancer Test for companion animals and may receive up to $18 million in additional near- and mid-term milestone payments. Heska also received non-exclusive rights to sell the test in kit format through its central reference laboratory network.
- Revenue increased from a low base, reflecting Nu.Q Discover laboratory services and product sales including Nu.Q Vet and H3.1 kits. The company said it was transitioning from research and development toward commercialization.
- Operating expenses increased 28% and net loss widened by $1.59 million. Sales and marketing expansion was especially pronounced. Weighted-average shares increased to 53.78 million from 50.93 million.
- Cash increased during the quarter, while Q1 2021 financing cash flow had included substantial equity-offering proceeds. Q1 2022 financing cash flow was $366,172, including $620,549 in debt proceeds and $9,467 in net stock proceeds.
Outlook, risks and contingencies
The filing provides no quantified revenue, earnings or cash-flow guidance. Management expects to use cash for research and development and product launches and anticipates needing additional funding, principally through equity or debt financing and licensing arrangements. Management states that revenue is insufficient to cover annual expenses. The company has incurred $144.6 million of cumulative losses, and management concludes substantial doubt exists about its ability to continue as a going concern without additional financing. Failure to secure capital could delay clinical validation and regulatory work or force the company to discontinue operations.
Key execution risks include product development, clinical validation, regulatory clearance, market acceptance, manufacturing and distribution partners, and competition. COVID-19-related disruption could delay trial enrollment and sample collection. The company reported material weaknesses in internal control over financial reporting, primarily involving segregation of duties; disclosure controls were deemed ineffective as of March 31, 2022, and remediation is ongoing. Management reported no material change in risk factors from its 2021 Form 10-K and no material pending legal proceedings.
Unusual items and commitments include $601,000 accrued for cash performance bonuses subject to corporate goals and continued service, and approximately $767,678 in remaining research and collaboration commitments. The 2021 equity distribution agreement was terminated effective May 7, 2022; no additional shares were sold under it after March 31 through termination.
Important facts for investors to verify
- Heska agreement terms, remaining performance obligations, revenue-recognition timing and conditions for the potential $18 million in milestones.
- Cash runway and recurring operating cash burn after excluding the one-time $10 million Heska receipt; management does not provide a clear runway estimate.
- Progress on commercialization, clinical validation and regulatory clearances for the planned human and veterinary tests.
- Availability and terms of future financing, including potential dilution or debt restrictions, alongside scheduled debt and other contractual payments.
- Whether the company remediates its identified internal-control material weaknesses and improves the effectiveness of disclosure controls.