VolitionRx Limited — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Unaudited results. VolitionRx develops blood-based diagnostic tests using its Nucleosomics and Nu.Q platforms for human and veterinary applications; operations remain predominantly in the research and development stage.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenue | $544 | $0 |
| Operating expenses | $5.87 million | $3.99 million |
| Operating loss | $5.87 million | $3.99 million |
| Net loss | $5.86 million | $4.20 million |
| Net loss per share, basic and diluted | $0.14 | $0.12 |
| Net cash used in operating activities | $4.80 million | $3.65 million |
At March 31, cash and cash equivalents were $11.97 million, down from $16.97 million at year-end 2019. Current assets were $13.10 million and current liabilities $4.63 million. Total liabilities were $7.69 million; long-term debt carrying value was $2.68 million, excluding interest. Contractual payments, including interest and specified collaboration obligations, totaled approximately $6.47 million, including $2.01 million remaining for 2020. Stockholders’ equity was $9.19 million.
Margins are not meaningful given nominal revenue and operating losses. The company reported $0.33 million of property and equipment purchases and $0.20 million of net cash used in financing activities. It had no share sales under its equity distribution agreement during the quarter.
Changes versus prior comparable period
- Revenue was only $544, compared with none in Q1 2019; the company said it had limited revenue.
- Operating expenses rose 47% to $5.87 million. Research and development increased 57% to $3.89 million, primarily due to antibody, laboratory, personnel, and Volition Germany management costs. General and administrative expenses rose 39% to $1.70 million, including higher foreign-exchange and legal costs.
- Net loss increased about 39% to $5.86 million. The prior-year period included a $196,957 expense related to amended financing warrants; there was no corresponding expense in Q1 2020.
- Operating cash use increased to $4.80 million, which management attributed mainly to higher antibody spending, a collaborator stage payment, and shares issued for services. Q1 2019 financing cash inflow included $6.7 million from warrant exercises; Q1 2020 had no comparable proceeds.
Outlook, risks, and unusual items
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern for one year from issuance, citing cumulative losses of $95.7 million, negative operating cash flows, and limited revenue. It expects to seek grants, debt or equity financing, licensing payments, and faster product development, while controlling costs. There is no assurance of funding; inadequate capital could force cessation of operations.
- COVID-19: No significant Q1 impact was observed, but the company warned the pandemic could disrupt clinical-trial enrollment and sites, development, collaborators, operations, liquidity, and future financial results. Employees were working remotely where possible and travel was restricted.
- Development and commercialization: Delays or unavailable resources could defer clinical validation and regulatory approvals for human IVD and veterinary products. Risks also include regulatory clearance, market acceptance, competition, and intellectual-property protection. The filing gives no quantified revenue or earnings guidance.
- Acquisition and compensation: Volition acquired Octamer GmbH in January and renamed it Volition Germany GmbH. The transaction was accounted for as hiring management and acquiring assets, not as a business combination. The company recorded approximately $753,000 in compensation expense associated with cash, shares, a holdback, and assumed expenses; it also agreed to management payments and product royalties.
- Controls: Disclosure controls remained ineffective due to material weaknesses involving segregation of finance duties, IT oversight, and review of complex accounting. A remediation plan was underway.
- Other obligations: Future research and collaboration commitments were approximately $2.05 million. The filing reported no material legal proceedings and no significant off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the company can raise sufficient capital and sustain operations given its going-concern warning, cash use, and contractual payment schedule.
- Progress, timing, and funding needs for clinical validation, regulatory approvals, and commercialization of Nu.Q products, including potential COVID-19-related delays.
- Whether revenue can grow beyond the nominal Q1 level and whether research and development spending translates into validated products.
- Execution of the internal-control remediation plan and resolution of the disclosed material weaknesses.
- Actual costs and obligations related to Volition Germany, collaboration agreements, debt, leases, and grant repayments.