VolitionRx Limited — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Unaudited consolidated results. VolitionRx develops blood-based diagnostic and monitoring tests using its Nucleosomics platform, with products targeting veterinary cancer, human cancer, and diseases associated with NETosis.
Financial performance and position
| Metric | Q2 2022 / June 30, 2022 | Comparable period / prior date |
|---|---|---|
| Revenue | $39,752 for Q2; $153,963 for six months | $24,782 for Q2 2021; $50,312 for six months 2021 |
| Operating expenses | $8.14 million Q2; $15.93 million six months | $5.93 million Q2 2021; $12.04 million six months 2021 |
| Net loss | $7.73 million Q2; $15.45 million six months | $5.57 million Q2 2021; $11.70 million six months 2021 |
| Net loss per share | $0.14 Q2; $0.28 six months | $0.10 Q2 2021; $0.22 six months 2021 |
| Cash and cash equivalents | $16.73 million | $20.58 million at December 31, 2021 |
| Cash flow from operations | Used $3.28 million in six months | Used $11.57 million in six months 2021 |
| Debt | $2.83 million balance-sheet long-term debt, including current portion | Contractual debt payments including interest: $3.10 million |
| Total liabilities / equity | $20.27 million / $4.08 million | At June 30, 2022 |
Revenue remains minimal relative to expenses, so operating and profit margins are not meaningful indicators of performance. Q2 revenue was primarily from Nu.Q Vet product sales and Nu.Q Discover services. The six-month revenue increase was from those sources; the filing does not report licensing revenue for the $10 million Heska upfront payment because related performance obligations remained incomplete.
Changes versus prior year
- Six-month revenue increased by $103,651, while net loss widened by $3.75 million to $15.45 million.
- Six-month operating expenses rose 32%. General and administrative expenses increased 57%, and sales and marketing expenses increased to $3.37 million from $0.89 million. Research and development expenses fell 9% to $6.87 million.
- Management attributed expense increases mainly to hiring, personnel costs, stock-based compensation, and professional and marketing costs. R&D reductions reflected lower research, collaboration, and laboratory costs.
- Operating cash use fell year over year, primarily because of the $10 million Heska payment received during 2022. Cash nevertheless declined by $3.85 million from year-end; financing cash flow was nearly flat, compared with $20.71 million provided in the prior-year period.
Outlook, risks, and notable items
- Going concern: Management reports substantial doubt about the company’s ability to continue as a going concern without additional financing. The company has incurred $152.3 million of cumulative losses, minimal revenue, and expects to rely on financing, licensing, grants, or future revenue. It warns that funding shortfalls could delay clinical validation and regulatory work or force cessation of operations.
- Heska agreement: In March 2022, Volition granted Heska exclusive worldwide point-of-care rights for its companion-animal Nu.Q Vet test and received a $10 million upfront payment. It may receive up to $18 million in additional milestone payments. The upfront payment is recorded as deferred revenue pending satisfaction of performance obligations.
- Subsequent funding: After quarter-end, the company sold 3.45 million shares at $2.00 each, receiving approximately $6.4 million net before offering expenses. It also reported a $1.5 million Namur Invest loan awarded in July 2022, bearing 6% interest and repayable over four years.
- Further spending: An August 2022 amendment to the DXOCRO agreement added U.S. clinical studies of Nu.Q NETs and Nu.Q Cancer, with costs estimated at up to $4.2 million, including the original project, and expected completion within 12 months.
- Clinical and business risks: COVID-19 may disrupt trial enrollment, sample collection, and site participation. Other stated risks include regulatory approval, commercial adoption, competition, third-party manufacturing and distribution, intellectual property protection, and the need for additional capital.
- Internal controls: Disclosure controls were not effective at June 30, 2022 because of material weaknesses in financial-reporting controls, including segregation of duties. Management described remediation steps, but the weakness had not been resolved.
- The company reported no material pending legal proceedings and no material change in its previously disclosed risk factors. No specific financial guidance or quantified revenue outlook was provided.
Important facts for investors to verify
- Progress in recognizing the $10 million Heska deferred revenue and achievement, timing, and terms of any additional milestones.
- Cash burn and liquidity needs, particularly after considering the post-quarter equity proceeds, new loan, and planned clinical-study spending.
- Clinical results, regulatory milestones, and commercialization progress for Nu.Q Vet, Nu.Q NETs, and human cancer tests.
- Whether the company raises additional capital, and the potential dilution or debt obligations associated with financing.
- Remediation and independent assessment of the disclosed material weaknesses in internal controls.