Virax Biolabs Group Ltd annual report, Q4 FY2022

Virax Biolabs Group Limited — FY2022 Form 20-F

Reporting period: Fiscal year ended March 31, 2022; audited annual results, not a separate 2021 Q4 report. The company reports under IFRS as issued by the IASB. The filing describes a shift from FMCG imports to Virax-branded diagnostics and medical products, which began reaching the market in 2020. ViraxClear and ViraxCare distribute third-party products; the planned Virax Immune T-cell diagnostic remained under development.

Financial performance and liquidity

Metric (US$)FY2022FY2021
Revenue0123,820
Cost of revenue0133,254
Gross profit (loss)0(9,434)
Operating expenses1,733,679635,104
Operating loss(1,733,679)(644,538)
Net loss(1,749,870)(672,915)
Net cash used in operations(809,069)(590,186)
Cash at year-end21,75617,621
  • Revenue fell 100%. FY2021 revenue included $104,820 from ViraxClear/ViraxCare and $19,000 of consulting revenue. No revenue was recorded in FY2022.
  • FY2022 R&D expense was $433,743, up from $120,221; general and administrative expense was $1,286,118, up from $457,680, largely reflecting higher accounting and legal costs related to the IPO. Sales and marketing expense declined to $13,818 from $57,203.
  • Gross margin is not meaningful for FY2022 because the company recorded neither revenue nor cost of revenue. FY2021 had a gross loss of $9,434.
  • At March 31, 2022, current assets were $48,706, including $21,756 cash, while current liabilities were $1,245,414. The resulting current ratio was approximately 0.04. Total liabilities were $1,245,414 and total stockholders’ deficit was $1,196,708.
  • Accounts payable and accrued liabilities were $1,115,473, versus $496,626 a year earlier. Related-party balances were $126,183, and $3,758 was due to a shareholder. The filing reports $100,000 of convertible-note proceeds during FY2022; the note was converted into shares during the year.
  • Operating cash outflow increased year over year. Financing provided $813,205, including $519,613 from share issuance, $193,592 from related parties and the $100,000 convertible note. There were no investing cash flows or capital expenditures.

Material changes and subsequent financing

  • The company moved from modest FY2021 sales to no FY2022 revenue while continuing to incur development and corporate expenses; net loss rose by approximately 160%.
  • The auditor’s report states that significant operating losses raise substantial doubt about the company’s ability to continue as a going concern. Management said the July 2022 IPO proceeds were expected to support operations through 2022, while also noting that additional capital may be required.
  • After year-end, the company completed an IPO and partial over-allotment on July 25, 2022, raising $7,762,500 gross and approximately $7,049,656 net. This is a subsequent event, not FY2022 operating cash flow.

Outlook, risks and unusual items

  • Management’s stated priorities include R&D, regulatory approvals, distribution expansion and working capital. The filing does not provide a quantified revenue, earnings or cash-flow forecast.
  • Virax Immune had a functioning prototype but had not been submitted to a regulator for approval. The filing describes planned submissions in multiple markets and, in one passage, an anticipated submission in the first half of 2023; timing and regulatory pathway remain uncertain.
  • Key risks include continued losses and financing needs; no FY2022 sales; dependence on a small number of customers and suppliers; changing demand for COVID-19-related products; product validation and regulatory approval; and operations and regulatory uncertainty involving China and Hong Kong.
  • The company disclosed a supplier arbitration award of $836,298 from August 2020 and said it planned to pursue collection. It did not report a material legal proceeding, and the filing does not make clear whether or when the award will be collected.
  • The filing contains apparent inconsistencies worth checking: it reports $290,364 of FY2022 stock-based compensation in the cash-flow reconciliation while an accounting note says there were no share-based payments for either year. Share-count disclosures also vary across sections and reflect different dates and reorganizations.

Key facts investors should verify

  • Whether the post-IPO cash balance and subsequent spending provide adequate runway, and whether further financing is needed.
  • Why FY2022 revenue was zero, whether sales have resumed, and how customer concentration has changed.
  • The Virax Immune clinical-validation, regulatory-submission and commercialization timetable, including the intended FDA classification and approval route.
  • The composition, aging and settlement plans for the $1.12 million of accounts payable and accrued liabilities, as well as related-party balances.
  • The status and recoverability of the $836,298 arbitration award and any associated legal costs.
  • The stock-based compensation and share-count disclosures, including reconciliation of historical share classes to the post-IPO ordinary shares.