VolitionRx Limited — Q2 2015 Form 10-Q
Business context and period. Clinical-stage life sciences company developing blood-based cancer and disease diagnostic tests. This unaudited report covers the quarter and six months ended June 30, 2015. The company reported no operating revenue in either period.
Financial performance and liquidity
| Metric | Q2 2015 | Six months 2015 | Comparable 2014 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $2.018 million | $4.367 million | $1.050 million Q2; $2.289 million six months |
| Net income (loss) | $(1.871) million | $(3.881) million | $0.817 million Q2; $(1.378) million six months |
| Basic and diluted EPS | $(0.10) | $(0.23) | $0.06 Q2; $(0.11) six months |
| Research and development expense | $1.357 million | $2.568 million | $0.791 million Q2; $1.662 million six months |
Operating margins are not meaningful because the company had no revenue. Q2 operating expenses rose 92% year over year; six-month expenses rose 91%. Higher R&D spending, personnel and share-based compensation, and professional and legal fees contributed. The six-month net loss increased 182% year over year.
Cash was $9.309 million at June 30, 2015, versus $2.139 million at December 31, 2014. Current assets were $9.689 million and current liabilities $1.275 million, producing reported working capital of $8.414 million. Total liabilities were $1.922 million. Capital lease liabilities totaled approximately $610,674; grant repayable totaled approximately $287,785. The derivative liability was reduced to zero.
For the six months, operating cash use was $4.138 million, investing cash use $117,247, and financing cash provided $11.416 million. Cash increased $7.170 million. Financing included approximately $9.7 million net from the February public offering and $1.5 million from a first-quarter private placement. Management said cash on hand was expected to fund current and planned operations for at least 12 months, while noting that further financing may be needed.
Material changes, outlook and risks
- The prior-year Q2 included a $1.867 million gain from derivative remeasurement; Q2 2015 had no such gain. For the six-month periods, derivative gains were $339,744 in 2015 versus $767,001 in 2014. These non-operating, noncash items materially affect comparisons.
- Management plans to direct cash mainly to R&D and clinical validation. Its stated commercial strategy focused on the European clinical market, including CE marking of a first product, and initially pursuing U.S. market access through technology licensing to a CLIA laboratory, subject to regulatory review. The filing provides no quantified revenue or earnings guidance.
- The filing repeats substantial doubt about the company’s ability to continue as a going concern, citing cumulative losses of $23.390 million, no revenue, and dependence on financing, grants, cost controls, and eventual profitability. Management warned that financing shortfalls could delay validation and regulatory work or force reduced operations.
- Key risks include clinical validation and regulatory clearance, market acceptance, competition and technology change, future capital availability and dilution, and dependence on third parties. The filing reports no material legal proceedings and no significant off-balance-sheet arrangements.
- Disclosure controls remained ineffective due to material weaknesses, including inadequate segregation and authorization controls over cash. Management was implementing remediation; an IT backup weakness had been addressed, with effectiveness review planned.
- Unusual commitments include a $610,674 five-year capital lease for laboratory equipment and research agreements, including a Hvidovre Hospital study with total payments of $1.523 million plus a $50,000 amendment. These commitments may affect future cash needs.
Important facts for investors to verify
- Whether cash burn, clinical-study spending, and capital commitments remain consistent with the stated 12-month runway.
- Progress and timing for clinical validation, CE marking, and the proposed U.S. licensing route; no commercial revenue had yet been generated.
- Availability and terms of future financing, including potential dilution or debt restrictions.
- Remediation and independent verification of the disclosed internal-control weaknesses.
- Fully diluted share exposure: 3.308 million warrants and 1.588 million options were outstanding at June 30; the company reported 18.035 million common shares outstanding then, and 18.060 million as of August 11, 2015.