SECURITIES AND EXCHANGE COMMISSION
[X]X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedSeptember June 30, 20172018
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number: 001-36833
(Exact name of registrant as specified in its charter)
Delaware |
| 91-1949078 |
(State or other jurisdiction of incorporation
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| (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
[X] [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No
Large accelerated filer |
| [ ] |
| Accelerated filer | [ ] |
Non-accelerated filer |
| [ ] (Do not check if a smaller reporting company) |
| Smaller reporting company | [X] |
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| Emerging growth company | [ ] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B)13(a) of the SecuritiesExchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ]Yes] Yes [X] No
1
FOR THE THREE MONTHS AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20172018
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PART I |
| FINANCIAL INFORMATION |
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ITEM 1. |
| FINANCIAL STATEMENTS | 3 | |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 17 | ||
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 25 | ||
ITEM 4. | CONTROLS AND PROCEDURES | 25 | ||
PART II | OTHER INFORMATION | |||
ITEM 1. | LEGAL PROCEEDINGS | 26 | ||
ITEM 1A. |
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RISK FACTORS |
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ITEM 2. |
| UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
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ITEM 3. |
| DEFAULTS UPON SENIOR SECURITIES |
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ITEM 4. |
| MINE SAFETY DISCLOSURES |
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ITEM 5. |
| OTHER INFORMATION |
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ITEM 6. |
| EXHIBITS |
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SIGNATURES |
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2
PART I - FINANCIAL INFORMATION
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4 | ||
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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) | 5 | |
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6 | ||
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Notes to the Condensed Consolidated Financial Statements (Unaudited) | 7 |
3
Condensed Consolidated Balance Sheets (Unaudited)
(Expressed in United States Dollars,, except share numbers)
| September 30, 2017 $ |
| December 31, 2016 $ | June 30, 2018 $ |
| December 31, 2017 $ |
| (UNAUDITED) |
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| (UNAUDITED) |
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Cash and cash equivalents | 13,840,930 |
| 21,678,734 | 11,894,166 |
| 10,116,263 |
Prepaid expenses | 244,667 |
| 165,927 | 425,613 |
| 248,661 |
Other current assets | 170,883 |
| 166,887 | 200,629 |
| 202,295 |
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Total Current Assets | 14,256,480 |
| 22,011,548 | 12,520,408 |
| 10,567,219 |
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Property and equipment, net | 3,510,355 |
| 2,119,027 | 3,257,434 |
| 3,480,782 |
Intangible assets, net | 592,876 |
| 602,193 | 519,910 |
| 576,397 |
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Total Assets | 18,359,711 |
| 24,732,768 | 16,297,752 |
| 14,624,398 |
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LIABILITIES |
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Accounts payable | 431,734 |
| 281,179 | 1,155,949 |
| 351,735 |
Accrued liabilities | 1,759,161 |
| 1,439,275 | 1,701,614 |
| 1,278,428 |
Management and directors’ fees payable | 54,994 |
| 81,057 | 26,708 |
| 35,397 |
Current portion of long-term debt | 408,307 |
| 30,655 | 282,159 |
| 443,908 |
Current portion of capital lease liabilities | 136,307 |
| 119,016 | 137,455 |
| 139,084 |
Deferred grant income | - |
| 45,510 | |||
Current portion of grant repayable | 41,356 |
| 36,804 | 40,917 |
| 41,930 |
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2,831,859 |
| 2,033,496 | 3,344,802 |
| 2,290,482 | |
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Long-term debt | 1,050,536 |
| 432,027 | |||
Capital lease liabilities | 897,303 |
| 889,810 | |||
Grant repayable | 185,991 |
| 202,325 | |||
Long-term debt, net of current portion | 1,976,389 |
| 1,312,785 | |||
Capital lease liabilities, net of current portion | 784,364 |
| 874,684 | |||
Grant repayable, net of current portion | 143,100 |
| 188,579 | |||
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Total Liabilities | 4,965,689 |
| 3,557,658 | 6,248,655 |
| 4,666,530 |
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STOCKHOLDERS’ EQUITY |
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Common Stock |
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Authorized: 100,000,000 shares of common stock, at $0.001 par value |
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Issued and outstanding: 26,518,700 shares and 26,126,049 shares, respectively | 26,519 |
| 26,126 | |||
Issued and outstanding: 30,031,225 shares and 26,519,394 shares, respectively | 30,031 |
| 26,519 | |||
Additional paid-in capital | 65,151,681 |
| 62,287,252 | 74,959,980 |
| 65,774,870 |
Accumulated other comprehensive loss | (132,882) |
| (193,297) | |||
Accumulated other comprehensive income(loss) | 17,761 |
| (129,343) | |||
Accumulated deficit | (51,651,296) |
| (40,944,971) | (64,958,675) |
| (55,714,178) |
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Total Stockholders’ Equity | 13,394,022 |
| 21,175,110 | 10,049,097 |
| 9,957,868 |
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Total Liabilities and Stockholders’ Equity | 18,359,711 |
| 24,732,768 | 16,297,752 |
| 14,624,398 |
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(The accompanying notes are an integral part of these condensed consolidated financial statements)
4
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
(Expressed in United States Dollars, except share numbers)
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| For the three months ended September 30, 2017 $ |
| For the three months ended September 30, 2016 $ |
| For the nine months ended September 30, 2017 $ |
| For the nine months ended September 30, 2016 $ |
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Revenue |
| – |
| – |
| – |
| – |
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Expenses |
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General and administrative |
| 226,606 |
| 163,870 |
| 729,449 |
| 558,120 |
Sales and marketing |
| 134,737 |
| 88,989 |
| 435,971 |
| 249,591 |
Professional fees |
| 520,372 |
| 400,698 |
| 1,182,837 |
| 1,272,638 |
Salaries and office administrative fees |
| 943,510 |
| 857,093 |
| 2,720,620 |
| 1,686,210 |
Research and development |
| 2,203,985 |
| 1,968,490 |
| 5,774,004 |
| 5,180,466 |
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Total Operating Expenses |
| 4,029,210 |
| 3,479,140 |
| 10,842,881 |
| 8,947,025 |
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Net Operating Loss |
| (4,029,210) |
| (3,479,140) |
| (10,842,881) |
| (8,947,025) |
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Other Income |
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Grants received |
| 136,556 |
| – |
| 136,556 |
| 25,891 |
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Total Other Income |
| 136,556 |
| – |
| 136,556 |
| 25,891 |
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Income tax expense |
| – |
| – |
| – |
| – |
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Net Loss |
| (3,892,654) |
| (3,479,140) |
| (10,706,325) |
| (8,921,134) |
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Other Comprehensive Income/(Loss) |
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Foreign currency translation adjustments |
| (32,399) |
| 15,462 |
| 60,415 |
| (33,583) |
Total Other Comprehensive Income/(Loss) |
| (32,399) |
| 15,462 |
| 60,415 |
| (33,583) |
Net Comprehensive Loss |
| (3,925,053) |
| (3,463,678) |
| (10,645,910) |
| (8,954,717) |
Net Loss per Share – Basic and Diluted |
| (0.15) |
| (0.15) |
| (0.41) |
| (0.40) |
Weighted Average Shares Outstanding – Basic and Diluted |
| 26,512,195 |
| 23,524,982 |
| 26,343,101 |
| 22,075,538 |
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| Three-Months Ended June 30, |
| Six-Months Ended June 30, | ||||
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| 2018 $ |
| 2017 $ |
| 2018 $ |
| 2017 $ |
Revenue |
| – |
| – |
| – |
| – |
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Operating Expenses |
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Research and development |
| 2,686,473 |
| 1,807,636 |
| 5,109,675 |
| 3,480,987 |
General and administrative |
| 1,643,681 |
| 1,427,875 |
| 3,485,774 |
| 2,823,594 |
Sales and marketing |
| 235,366 |
| 207,042 |
| 599,510 |
| 476,450 |
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Total Operating Expenses |
| 4,565,520 |
| 3,442,553 |
| 9,194,959 |
| 6,781,031 |
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Operating Loss |
| (4,565,520) |
| (3,442,553) |
| (9,194,959) |
| (6,781,031) |
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Other Expenses |
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Interest expense |
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Net Loss |
| (4,592,076) |
| (3,462,988) |
| (9,244,497) |
| (6,813,671) |
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Other Comprehensive Loss |
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Foreign currency translation adjustments |
| 132,157 |
| 61,309 |
| 147,104 |
| 92,814 |
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Net Comprehensive Loss |
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| (3,401,679) |
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| (6,720,857) | ||
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| (0.13) |
| (0.32) |
| (0.26) | ||
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Weighted Average Shares Outstanding – Basic and Diluted |
| 30,027,260 |
| 26,383,228 |
| 28,655,711 |
| 26,137,241 |
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(The accompanying notes are an integral part of these condensed consolidated financial statements)
5
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Expressed in United States Dollars)
| For the nine months ended September 30, 2017 |
| For the nine months ended September 30, 2016 |
| Six-Months Ended June 30, | ||
| $ |
| $ |
| 2018 |
| 2017 |
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| $ |
| $ |
Operating Activities: |
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Operating Activities |
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Net loss | (10,706,325) |
| (8,921,134) |
| (9,244,497) |
| (6,813,671) |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization | 371,362 |
| 230,606 |
| 317,981 |
| 225,740 |
Loss on disposal of property and equipment | 11,262 |
| 3,668 | ||||
Stock based compensation | 1,827,604 |
| 1,106,623 | ||||
| (41) |
| 1,929 | ||||
Stock options issued for services |
| 1,388,295 |
| 1,220,798 | |||
Warrants issued for services | 38,806 |
| 105,995 |
| 4,326 |
| 28,482 |
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Changes in operating assets and liabilities: |
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Accounts receivable | (12,356) |
| - | ||||
Deferred grant income | (50,855) |
| (335) | ||||
Prepaid expenses | (75,723) |
| (35,283) |
| (174,504) |
| (131,526) |
Other current assets | 25,105 |
| (36,456) |
| (188,285) |
| 31,560 |
Accounts payable and accrued liabilities | 264,266 |
| 872,934 |
| 1,406,197 |
| (46,685) |
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Net Cash Used In Operating Activities | (8,306,854) |
| (6,673,382) | ||||
Net Cash Used in Operating Activities |
| (6,490,528) |
| (5,483,373) | |||
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Investing Activities: |
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Purchases of property and equipment | (1,340,230) |
| (89,433) |
| (125,513) |
| (1,234,892) |
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Net Cash Used in Investing Activities | (1,340,230) |
| (89,433) |
| (125,513) |
| (1,234,892) |
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Financing Activities: |
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Net proceeds from issuance of common shares | 998,412 |
| 13,506,295 |
| 7,796,001 |
| 879,412 |
Proceeds from debt payable | 908,075 |
| – |
| 875,652 |
| 664,573 |
Debt repaid | (29,807) |
| – | ||||
Grants repaid | (38,487) |
| (36,135) | ||||
Payments on debt payable |
| (332,856) |
| – | |||
Payments on grants repayable |
| (40,863) |
| (38,487) | |||
Payments on capital lease obligations | (94,227) |
| (62,225) |
| (72,524) |
| (60,874) |
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Net Cash Provided By Financing Activities | 1,743,966 |
| 13,407,935 | ||||
Net Cash Provided by Financing Activities |
| 8,225,410 |
| 1,444,624 | |||
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Effect of foreign exchange on cash | 65,314 |
| (33,343) |
| 168,534 |
| 100,117 |
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(Decrease)/Increase in Cash | (7,837,804) |
| 6,611,777 | ||||
Net change in cash and cash equivalents |
| 1,777,903 |
| (5,173,524) | |||
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Cash and cash equivalents – Beginning of Period | 21,678,734 |
| 5,916,006 |
| 10,116,263 |
| 21,678,734 |
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Cash and cash equivalents – End of Period | 13,840,930 |
| 12,527,783 |
| 11,894,166 |
| 16,505,210 |
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Supplemental Disclosures of Cash Flow Information: |
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Interest paid | 50,234 |
| 9,159 |
| 49,737 |
| 32,639 |
Income tax paid | – |
| – |
| – |
| – |
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Non Cash Investing and Financing Activities: |
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Common stock issued on cashless exercises of stock options | – |
| 21 | ||||
Capital lease obligation for equipment purchases | – |
| 329,334 | ||||
Non-Cash Investing and Financing Activities: |
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Common stock issued on cashless exercises of stock options and warrants |
| 12 |
| – | |||
Offering costs from issuance of common stock |
| 604,000 |
| – |
(The accompanying notes are an integral part of these condensed consolidated financial statements)
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 1 - Condensed Financial Statements
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’sCompany’s Annual Report on Form 10-K, for the fiscal year ended December 31, 20162017, as filed with the Securities and Exchange Commission on March 10, 2017.1, 2018. The results of operations for theperiods ended SeptemberJune 30, 20172018 and 20162017 are not necessarily indicative of the operating results for the full years.
Note 3 - Summary of Significant Accounting Policies
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 3 - Summary of Significant Accounting Policies (continued)
7
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 3 - SummaryPrinciples of Significant Accounting Policies (continued)Consolidation
Principles of Consolidation
The accompanying condensed consolidated financial statements for the periodperiods ended SeptemberJune 30, 20172018 include the accounts of the Company and its wholly-owned subsidiaries, Singapore Volition Pte. Ltd,Limited, Belgian Volition SPRL (“Belgian Volition”), Hypergenomics Pte. Ltd, ,Limited, Volition America, Inc., which was formed on February 3, 2017 (“Volition America”), and Volition Diagnostics UK Limited (“Volition Diagnostics”). All significant intercompany balances and transactions have been eliminated in consolidation.
Basic and Diluted Net Loss Per Share
Recent Accounting Pronouncements
In March 2016, the FASB Issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)”. The amendments in this update simplify aspects of accounting for share-based payment transactions. An entity can now make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur. The amendments in this update are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016.
8
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 4 - Property and Equipment
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| Cost $ |
| Accumulated Depreciation $ |
| September 30, 2017 Net Carrying Value $ |
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| June 30, | |||||
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| 2018 | ||||||||||
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| Accumulated |
| Net Carrying | ||||||||
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| Cost |
| Depreciation |
| Value | ||||||
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| Useful Life |
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| Useful Life |
| $ |
| $ |
| $ | |||||
Computer hardware and software |
| 3 years |
| 267,773 |
| 110,888 |
| 156,885 |
| 3 years |
| 300,781 |
| 128,425 |
| 172,356 |
Laboratory equipment |
| 5 years |
| 817,851 |
| 262,517 |
| 555,334 |
| 5 years |
| 1,573,407 |
| 791,058 |
| 782,349 |
Equipment held under capital lease |
| 5 years |
| 675,293 |
| 307,562 |
| 367,731 | ||||||||
Office furniture and equipment |
| 5 years |
| 186,508 |
| 27,643 |
| 158,865 |
| 5 years |
| 200,205 |
| 56,001 |
| 144,204 |
Buildings |
| 30 years |
| 1,549,446 |
| 30,096 |
| 1,519,350 |
| 30 years |
| 1,533,006 |
| 68,123 |
| 1,464,883 |
Building improvements |
| 5 -15 years |
| 683,820 |
| 26,158 |
| 657,662 |
| 5-15 years |
| 656,875 |
| 56,758 |
| 600,117 |
Land |
| Not amortized |
| 94,528 |
| - |
| 94,528 |
| Not amortized |
| 93,525 |
| – |
| 93,525 |
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| 4,275,219 |
| 764,864 |
| 3,510,355 |
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| 4,357,799 |
| 1,100,365 |
| 3,257,434 | ||
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| December 31, 2016 Net Carrying Value $ |
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| December 31, | |||||||||
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| 2017 | ||||||||||
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| Accumulated Depreciation $ |
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| Accumulated |
| Net Carrying | ||||||
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| Cost $ |
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| Cost |
| Depreciation |
| Value | |||||
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| Useful Life |
| Accumulated Depreciation $ |
| Useful Life |
| $ |
| $ |
| $ | ||||
Computer hardware and software |
| 3 years |
| 155,870 |
| 67,097 | 88,773 |
| 3 years |
| 239,133 |
| 93,422 |
| 145,711 | |
Laboratory equipment |
| 5 years |
| 313,655 |
| 151,541 | 162,114 |
| 5 years |
| 1,575,354 |
| 653,636 |
| 921,718 | |
Equipment held under capital lease |
| 5 years |
| 578,830 |
| 183,296 |
| 395,534 | ||||||||
Office furniture and equipment |
| 5 years |
| 32,932 |
| 23,361 |
| 9,571 |
| 5 years |
| 207,208 |
| 54,479 |
| 152,729 |
Buildings |
| 30 years |
| 1,378,911 |
| - |
| 1,378,911 |
| 30 years |
| 1,571,004 |
| 43,632 |
| 1,527,372 |
Building improvements |
| 5 -15 years |
| - |
| - |
| - |
| 5-15 years |
| 673,157 |
| 35,748 |
| 637,409 |
Land |
| Not amortized |
| 84,124 |
| - |
| 84,124 |
| Not amortized |
| 95,843 |
| – |
| 95,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
| 2,544,322 |
| 425,295 |
| 2,119,027 |
|
| 4,361,699 |
| 880,917 |
| 3,480,782 |
9
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
|
| Cost $ |
| Accumulated Amortization $ |
| September 30, 2017 Net Carrying Value $ |
|
|
| June 30, | ||
|
|
|
|
| 2018 | |||||||
|
|
|
| Accumulated |
| Net Carrying | ||||||
|
| Cost |
| Amortization |
| Value | ||||||
|
| $ |
| $ |
| $ | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents |
| 1,198,930 |
|
| 606,054 |
| 592,876 | 1,187,959 |
| 668,049 |
| 519,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,198,930 |
|
| 606,054 |
| 592,876 |
|
|
| December 31, | |
|
|
|
|
|
|
|
| 2017 | ||||
|
| Cost $ |
|
| Accumulated Amortization $ |
| December 31, 2016 Net Carrying Value $ |
|
| Accumulated |
| Net Carrying |
|
|
|
|
| Cost |
| Amortization |
| Value | |||
|
|
|
|
| $ |
| $ |
| $ | |||
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
| |||||
Patents |
| 1,085,133 |
|
| 482,940 |
| 602,193 | 1,213,314 |
| 636,917 |
| 576,397 |
|
| 1,085,133 |
|
| 482,940 |
| 602,193 |
The Company amortizes the long-livedits intangible assets on a straight-line basis with terms ranging fromof 8 to 20 years. The annual estimated amortization schedule over the next five years is as follows:
2017 - remaining | $26,321 | |||
2018 | $91,504 | |||
2018- remaining |
| $ | 43,719 | |
2019 | $91,504 |
| $ | 90,660 |
2020 | $91,504 |
| $ | 90,660 |
2021 | $91,504 |
| $ | 90,660 |
2022 |
| $ | 90,660 | |
Thereafter |
| $ | 113,551 | |
|
|
|
| |
Total |
| $ | 519,910 |
The Company periodically reviews its long-lived assets on an annual basis, to ensure that their carrying value does not exceed their fair market value. The Company carried out such a review in accordance with ASC 360 as of December 31, 2016.2017. The result of this review confirmed that the fairongoing value of the patents exceeded their carrying valuewas not impaired as of December 31, 2016.2017.
10
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 6 - Related Party Transactions
Issuances Upon Warrant ExercisesAs of June 30, 2018, the Company was authorized to issue 100 million shares of common stock, par value $0.001 per share, of which 30,031,225 and 26,519,394 shares were issued and outstanding as of June 30, 2018 and December 31, 2017, respectively.
From March 13, 2017 through April 3, 2017, 27,500During the six-monthperiod ended June 30, 2018, 29,375 warrants were exercised to purchase shares of common stock at a price of $2.20$2.00 per share for net cash proceeds toin cashless exercises that resulted in the Companyissuance of $60,500. As a result, a total of 27,50011,831 shares of common stock were issued.stock.
From April 3, 2017 through May 9, 2017, 313,151 warrants were exercised at a price of $2.60 per share, for net cash proceeds to the Company of $814,193. As a result, a total of 313,151 shares of common stock were issued. Of this issuance, 163,499 shares of common stock were issued to related parties, for net cash proceeds to the Company of $425,097.
On July 7, 2017, 5,000 warrants were exercised at a price of $2.20 per share, for net cash proceeds to the Company of $11,000. As a result, a total of 5,000 shares of common stock were issued.
From July 9, 2017 through July 19, 2017, 45,000 warrants were exercised at a price of $2.40 per share for net cash proceeds to the Company of $108,000. As a result, a total of 45,000 shares of common stock were issued.
See Note 7.
|
| Number of Warrants |
| Weighted Average Exercise Price ($) |
| Number of Warrants |
| Weighted Average Exercise Price ($) |
Outstanding at December 31, 2016 |
| 2,162,638 |
| 2.40 | ||||
Outstanding at December 31, 2017 |
| 1,731,680 |
| 2.36 | ||||
Granted |
| - |
| - |
| – |
| – |
Exercised |
| (392,651) |
| (2.38) |
| (29,375) |
| 2.00 |
Expired |
| (38,307) |
| (2.40) |
| (375) |
| 2.00 |
Outstanding at September 30, 2017 |
| 1,731,680 |
| 2.36 | ||||
Outstanding at June 30, 2018 |
| 1,701,930 |
| 2.37 | ||||
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2017 |
| 1,606,680 |
| 2.35 | ||||
Exercisable at June 30, 2018 |
| 1,576,930 |
| 2.36 |
On February 14, 2017, the Company modified the performance criteria for a vesting milestone on an employee warrant agreement and as a result the Company re-measured warrants held by an employee, to purchase 25,000 shares of common stock at an exercise price of $2.47 per share. These warrants vest on achievement of certain business objectives and expire 3 years from the date of vesting. The Company has calculated the estimated fair market value of these warrants using the Black-Scholes model and the following assumptions: term: 0.5 years, stock price: $4.52, exercise price: $2.47, 55.65% volatility, 0.66% risk free rate.
11
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 8 – Warrants and Options (continued)
On May 10, 2017, 28,307 warrants expired and on September 5, 2017, 10,000 warrants expired.
Effective August 22, 2017, the Company amended the expiry period of 24,000 warrants, originally granted on September 26, 2014. The expiration period was extended from three to four years for all 24,000 warrants, with their new expiration date being September 26, 2018. The Company recalculated the estimated fair market value of these warrants using the Black-Scholes model, but the result was deemed to be immaterially different to the original calculation and the financial statements were not adjusted.
Effective August 22, 2017, the Company amended the expiry period of 19,000 warrants, originally granted on November 17, 2014. The expiration period was extended from three to four years for all 19,000 warrants, with their new expiration date being November 17, 2018. The Company recalculated the estimated fair market value of these warrants using the Black-Scholes model, but the result was deemed to be immaterially different to the original calculation and the financial statements were not adjusted.
Date Issued |
| Number Outstanding |
| Number Exercisable |
| Exercise Price ($) |
| Contractual Life (Years) |
| Weighted Average Remaining Contractual Life (Years) |
| Expiration Date |
| Proceeds to Company if Exercised ($) | ||
03/20/13 |
| 125,000 |
| - |
|
| 2.47 |
| 8.0 to 9.0 |
| 0.26 |
| 06/30/20 to 12/31/21 |
|
| 308,750 |
03/20/13 |
| 25,000 |
| 25,000 |
|
| 2.47 |
| 7.5 |
| 0.06 |
| 09/18/20 |
|
| 61,750 |
06/10/13 |
| 29,750 |
| 29,750 |
|
| 2.00 |
| 5.0 |
| 0.01 |
| 06/10/18 |
|
| 59,500 |
11/25/13 |
| 456,063 |
| 456,063 |
|
| 2.40 |
| 5.0 |
| 0.30 |
| 11/25/18 |
|
| 1,094,551 |
12/31/13 |
| 64,392 |
| 64,392 |
|
| 2.40 |
| 5.0 |
| 0.05 |
| 12/31/18 |
|
| 154,541 |
02/26/14 |
| 948,475 |
| 948,475 |
|
| 2.20 |
| 5.0 |
| 0.77 |
| 02/26/19 |
|
| 2,086,645 |
09/26/14 |
| 24,000 |
| 24,000 |
|
| 3.00 |
| 3.0 |
| 0.01 |
| 09/26/18 |
|
| 72,000 |
11/17/14 |
| 19,000 |
| 19,000 |
|
| 3.75 |
| 3.0 |
| 0.01 |
| 11/17/18 |
|
| 71,250 |
11/14/16 |
| 40,000 |
| 40,000 |
|
| 4.53 |
| 4.0 |
| 0.07 |
| 11/14/20 |
|
| 181,200 |
|
| 1,731,680 |
| 1,606,680 |
|
|
|
|
|
| 1.55 |
|
|
|
| 4,090,187 |
Number Outstanding |
| Number Exercisable |
| Exercise Price ($) |
| Weighted Average Remaining Contractual Life (Years) |
| Proceeds to Company if Exercised ($) |
|
|
|
|
|
|
|
|
|
948,475 |
| 948,475 |
| 2.20 |
| 0.37 |
| 2,086,645 |
520,455 |
| 520,455 |
| 2.40 |
| 0.13 |
| 1,249,092 |
150,000 |
| 25,000 |
| 2.47 |
| 0.39 |
| 370,500 |
24,000 |
| 24,000 |
| 3.00 |
| 0.00 |
| 72,000 |
19,000 |
| 19,000 |
| 3.75 |
| 0.00 |
| 71,250 |
40,000 |
| 40,000 |
| 4.53 |
| 0.06 |
| 181,200 |
1,701,930 |
| 1,576,930 |
|
|
| 0.95 |
| 4,030,687 |
12
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)$0.
Note 8 – Warrants and b)Options (continued)
b) Options
|
| Number of Options |
| Weighted Average Exercise Price ($) |
Outstanding at December 31, 2016 |
| 2,384,300 |
| 3.75 |
Granted |
| 871,000 |
| 4.99 |
Exercised |
| - |
| - |
Expired |
| (211,000) |
| (4.05) |
Outstanding at September 30, 2017 |
| 3,044,300 |
| 4.08 |
|
|
|
|
|
Exercisable at September 30, 2017 |
| 2,173,300 |
| 3.72 |
|
| Number of Options |
| Weighted Average Exercise Price ($) |
Outstanding at December 31, 2017 |
| 2,939,134 |
| 4.09 |
Granted |
| 780,000 |
| 4.00 |
Exercised |
| – |
| – |
Expired/Cancelled |
| (120,167) |
| 4.99 |
Outstanding at June 30, 2018 |
| 3,598,967 |
| 4.04 |
|
|
|
|
|
Exercisable at June 30, 2018 |
| 2,808,967 |
| 4.05 |
Effective February 13, 2017, the Company granted stock options to purchase 25,000 shares of common stock. These options vest on February 13, 2018 and expire 5 years after the vesting date, with an exercise price of $5.00 per share. The Company has calculated the estimated fair market value of these options at $76,773, using the Black-Scholes model and the following assumptions: term 6 years, stock price $4.52, exercise price $5.00, 80.17% volatility, 2.24% risk free rate.
On March 1, 2017, stock options to purchase 5,000 shares of common stock expired unexercised.
On March 30, 2017, the Company granted stock options to purchase 686,000 shares of common stock. These options vest on March 30, 2018 and expire five years after their vesting date, with an exercise price of $5.00 per share. The Company has calculated the estimated fair market value of these options at $1,898,322, using the Black-Scholes model and the following assumptions: term 6 years, stock price $4.18, exercise price $5.00, 79.41% volatility, 2.25% risk free rate.
Effective April 10, 2017, the Company granted stock options to purchase 100,000 shares of common stock. These options vest on April 10, 2018 and expire 5 years after the vesting date, with an exercise price of $5.00 per share. The Company has calculated the estimated fair market value of these options at $258,077, using the Black-Scholes model and the following assumptions: term 6 years, stock price $3.96, exercise price $5.00, 79.33% volatility, 2.18% risk free rate.
On May 25, 2017, stock options to purchase 101,000 shares of common stock expired unexercised.
On May 31, 2017, stock options to purchase 25,000 shares of common stock expired unexercised.
Effective July 13, 2017, the Company granted stock options to purchase 10,000 shares of common stock. These options vest on July 13, 2018 and expire 5 years after the vesting date, with an exercise price of $5.00 per share. The Company has calculated the estimated fair market value of these options at $19,068, using the Black-Scholes model and the following assumptions: term 6 years, stock price $3.15, exercise price $5.00, 78.41% volatility, 2.16% risk free rate.
Effective August 14, 2017, the Company amended the expiry period of stock options to purchase 37,000 shares of common stock, which options were originally granted on March 20, 2013 and amended on June 27, 2016. The expiration period was extended from four to six years, with the outside expiration date of March 20, 2022, after vesting for all 37,000 stock options. The Company recalculated the estimated fair market value of these options using the Black-Scholes model, but the result was deemed to be immaterially different to the original calculation and the financial statements were not adjusted.
13
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 8 – Warrants and Options (continued)
Effective August 14, 2017, the Company amended the expiry period of stock options to purchase 16,300 shares of common stock, which options were originally granted on September 2, 2013 and amended on June 27, 2016. The expiration period was extended from four to six years, with the outside expiration date of September 2, 2022, after vesting for all 16,300 stock options. The Company recalculated the estimated fair market value of these options using the Black-Scholes model, but the result was deemed to be immaterially different to the original calculation and the financial statements were not adjusted.
On August 31, 2017, stock options to purchase 75,000 shares of common stock expired unexercised.
On September 1, 2017, stock options to purchase 5,000 shares of common stock expired unexercised.
On September 8, 2017, an amendment to the 2015 Stock Incentive Plan (the “2015 Plan”) was approved by stockholders at the annual meeting to increase the number of shares of common stock available for issuance under the 2015 Plan by 750,000 shares to an aggregate maximum of 2,500,000 shares.
Date Issued |
| Number Outstanding |
| Number Exercisable |
| Exercise Price ($) |
| Contractual Life (Years) |
| Weighted Average Remaining Contractual Life (Years) |
| Expiration Date |
| Proceeds to Company if Exercised ($) |
11/25/11 |
| 303,000 |
| 303,000 |
| 4.00-5.00 |
| 6.0-7.0 |
| 0.06 |
| 11/25/17-11/25/18 |
| 1,414,000 |
09/01/12 |
| 10,000 |
| 10,000 |
| 6.31 |
| 6.0 |
| 0.00 |
| 03/01/18-09/01/18 |
| 63,100 |
03/20/13 |
| 37,000 |
| 37,000 |
| 2.35-4.35 |
| 6.5-9.0 |
| 0.04 |
| 09/20/19-03/20/22 |
| 123,950 |
09/02/13 |
| 16,300 |
| 16,300 |
| 2.35-4.35 |
| 6.5-9.0 |
| 0.02 |
| 03/02/20-09/02/22 |
| 54,605 |
05/16/14 |
| 25,000 |
| 25,000 |
| 3.00-5.00 |
| 3.5-6.0 |
| 0.01 |
| 11/16/17-05/16/20 |
| 100,000 |
08/18/14 |
| 645,000 |
| 645,000 |
| 2.50 and 3.00 |
| 4.5 and 5.5 |
| 0.40 |
| 02/18/19-02/18/20 |
| 1,773,750 |
05/18/15 |
| 20,000 |
| 20,000 |
| 3.80 |
| 4.5 |
| 0.01 |
| 11/18/19 |
| 76,000 |
07/23/15 |
| 317,000 |
| 317,000 |
| 4.00 |
| 4.5 |
| 0.25 |
| 01/23/20 |
| 1,268,000 |
04/15/16 |
| 775,000 |
| 775,000 |
| 4.00 |
| 6.0 |
| 1.16 |
| 04/15/22 |
| 3,100,000 |
06/23/16 |
| 15,000 |
| 15,000 |
| 4.00 |
| 6.0 |
| 0.02 |
| 06/23/22 |
| 60,000 |
11/11/16 |
| 10,000 |
| 10,000 |
| 5.00 |
| 6.0 |
| 0.02 |
| 11/11/22 |
| 50,000 |
01/01/17 |
| 50,000 |
| - |
| 4.80 |
| 6.0 |
| 0.09 |
| 01/01/23 |
| 240,000 |
02/13/17 |
| 25,000 |
| - |
| 5.00 |
| 6.0 |
| 0.04 |
| 02/13/23 |
| 125,000 |
03/30/17 |
| 686,000 |
| - |
| 5.00 |
| 6.0 |
| 1.24 |
| 03/30/23 |
| 3,430,000 |
04/10/17 |
| 100,000 |
| - |
| 5.00 |
| 6.0 |
| 0.18 |
| 04/10/23 |
| 500,000 |
07/13/17 |
| 10,000 |
| - |
| 5.00 |
| 6.0 |
| 0.02 |
| 07/13/23 |
| 50,000 |
|
| 3,044,300 |
| 2,173,300 |
|
|
|
|
| 3.56 |
|
|
| 12,428,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number Outstanding |
| Number Exercisable |
| Exercise Price ($) |
| Weighted Average Remaining Contractual Life (Years) |
| Proceeds to Company if Exercised ($) |
17,766 |
| 17,766 |
| 2.35 |
| 0.01 |
| 41,750 |
322,500 |
| 322,500 |
| 2.50 |
| 0.06 |
| 806,250 |
322,500 |
| 322,500 |
| 3.00 |
| 0.14 |
| 967,500 |
17,767 |
| 17,767 |
| 3.35 |
| 0.01 |
| 59,519 |
20,000 |
| 20,000 |
| 3.80 |
| 0.01 |
| 76,000 |
1,895,333 |
| 1,115,333 |
| 4.00 |
| 2.18 |
| 7,581,332 |
17,767 |
| 17,767 |
| 4.35 |
| 0.02 |
| 77,286 |
50,000 |
| 50,000 |
| 4.80 |
| 0.06 |
| 240,000 |
930,334 |
| 920,334 |
| 5.00 |
| 1.10 |
| 4,651,670 |
5,000 |
| 5,000 |
| 6.31 |
| 0.00 |
| 31,550 |
3,598,967 |
| 2,808,967 |
|
|
| 3.59 |
| 14,532,857 |
14
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 9 – Commitments and Contingencies
a) Walloon Region GrantCapital Lease Obligations
b)Consulting Agreement
On May 11, 2016, Singapore Volition, upon the review and approval by the Company’s Compensation Committee, entered into a consultancy agreement with PB Commodities Pte. Ltd (“PB Commodities”), for the services of Cameron Reynolds (the “2016 Reynolds Consulting Agreement”). Under the terms of the 2016 Reynolds Consulting Agreement, PB Commodities received $25,925 per month for the services provided to Singapore Volition by Mr. Reynolds on its behalf. The 2016 Reynolds Consulting Agreement replaced and terminated the existing consultancy agreement for the provision of office space, office support staff, and consultancy services between Singapore Volition and PB Commodities dated August 6, 2010, as amended. The 2016 Reynolds Consulting Agreement was terminated on March 31, 2017 in connection with Mr. Reynolds entering into an Employment Agreement with Volition Diagnostics, effective April 1, 2017.
c)Lease Obligations Payable
The Company leasespurchase three Tecan machines (automated liquid handling robots) under a lease classified as a capital lease. The total costfor €550,454 Euros. As of this leased laboratory equipment is $650,416 (€550,454). The leased equipment is depreciated on a straight-line basis over five years. Total depreciation charged toJune 30, 2018, the income statement, related tobalance payable was $186,469.
In 2016, the leased equipment is $97,307 (€82,568) for the nine months ended September 30, 2017 and $92,139 (€82,568) for the nine months ended September 30, 2016.
On October 4, 2016, and effective on October 25, 2016, Belgian VolitionCompany entered into a Real Estate Capital Lease Agreement (the “Capital Lease Agreement”)real estate capital lease with ING Asset Finance Belgium S.A. (“ING”). The Capital Lease Agreement became to purchase a contractual obligation of Belgian Volition upon the execution of the Deed of Sale to acquire the Company’s new research and development facility described below. Pursuant to the Capital Lease Agreement, ING paid $1.32 million (€1.12 million) in return for Belgian Volition granting to ING a right of emphyteusis (a form of leasehold) on the property located in Belgium for €1.12 million Euros. As of June 30, 2018, the Belgian Créalys zoning at 5032 Isnes-Spy, Rue Phocas Lejeune 22, Gembloux cadastre, 8th division, Section B, n 55 (the “Property”) for a period of 27 years, extendable to the authorized maximum legal term of 99 years. In addition, the Capital Lease Agreement provides that ING shall grant Belgian Volition a 15-year lease over the Property with an option for Belgian Volition to purchase the Property outright upon payment of $39,702 (€33,600) at the end of the lease. The Capital Lease Agreement provides that Belgian Volition make the first lease payment of $519,904 (€440,000) following the execution of the Capital Lease Agreement, and then quarterly lease payments of approximately $15,889 (€13,447), based on a fixed rate of 2.62% for the term of the lease. On October 25, 2016, Belgian Volition acquired the Property by entering into a Deed of Sale to the Sale Agreement with Gerard Dekoninck S.A. The purchase price for the Property consisted of $1.42 million (€1.2 million), exclusive of any closing costs (the “Purchase Price”). The Purchase Pricebalance payable was funded by Belgian Volition with cash on hand and the monies received under the Capital Lease Agreement. Occupation of the Property occurred in March 2017. Total depreciation charged to the income statement, related to the leased building is $30,096 (€25,471) for the nine months ended September 30, 2017 and $nil (€nil) for the nine months ended September 30, 2016.
15
VOLITIONRX LIMITED$735,350.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 9 – Commitments and Contingencies (continued)
The following is a schedule showing the future minimum lease payments under capital leases by years and the present value of the minimum payments as of SeptemberJune 30, 2017.2018:
2017 |
| $ | 40,216 | ||
2018 |
| $ | 160,860 | ||
2018- remaining | $ | 79,577 | |||
2019 |
| $ | 160,862 | $ | 159,155 |
2020 |
| $ | 110,603 | $ | 109,429 |
2021 |
| $ | 63,555 | $ | 62,880 |
Thereafter |
| $ | 659,357 | ||
|
|
|
| ||
2022 | $ | 62,879 | |||
Greater than 5 years | $ | 589,480 | |||
Total minimum lease payments |
| $ | 1,195,453 | $ | 1,063,400 |
Less: Amount representing interest |
| $ | (161,843) | $ | (141,581) |
|
|
|
| ||
Present value of minimum lease payments |
| $ | 1,033,610 | $ | 921,819 |
|
|
|
| ||
Made up of: |
|
|
| ||
Current portion |
| $ | 136,307 | ||
Long term portion |
| $ | 897,303 | ||
|
|
|
| ||
Present value of minimum lease payments |
| $ | 1,033,610 |
2017 | $ | 204,965 | ||
2018 | $ | 221,240 | ||
2018- remaining | $ | 110,157 | ||
2019 | $ | 85,088 | $ | 66,264 |
2020 | $ | 50,333 | $ | 53,240 |
2021 | $ | 13,803 | $ | 14,426 |
Total | $ | 575,429 | ||
Total Operating Lease Obligations | $ | 244,087 |
d)c)Hvidovre Hospital, Denmark AgreementGrants Repayable
2018- remaining | $ | – |
2019 | $ | 40,917 |
2020 | $ | 40,917 |
2021 | $ | 37,885 |
2022 | $ | 35,072 |
Greater than 5 years | $ | 29,226 |
Total Grants Repayable | $ | 184,017 |
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 9 – Commitments and Contingencies (continued)
In 2016, the Company entered into a 15-year loan agreement with ING for €270,000 Euros with a fixed interest rate of 2.62%. As of June 30, 2018, the principal balance payable was $289,930.
In 2017, the Company entered into a 4-year loan agreement with Namur Invest for €350,000 Euros with a fixed interest rate of 4.00%. As of June 30, 2018, the principal balance payable was $354,162.
In 2017, the Company entered into a 7-year loan agreement with SOFINEX for up to €1 million Euros with a fixed interest rate of 4.50%. As of June 30, 2018, €500,000 Euros has been drawn down under this agreement and the principal balance payable was $584,532.
On June 27, 2018, the Company entered into a 4-year loan agreement with Namur Innovation andGrowth for €500,000 Euros with a fixed interest rate of 4.00%. As of June 30, 2018, the principal balance payable was $584,532.
As of June 30, 2018, the total balance for long-term debt payable was $2,258,548 and the annual payments remaining were as follows:
2018- remaining | $ | 133,680 |
2019 | $ | 494,751 |
2020 | $ | 702,996 |
2021 | $ | 629,598 |
2022 | $ | 273,525 |
Greater than 5 years | $ | 325,428 |
Total | $ | 2,559,978 |
Less: Amount representing interest | $ | (301,430) |
Total Long-Term Debt | $ | 2,258,548 |
e)Collaborative Agreement Obligations
In 2015, the Company entered into a research sponsorship agreement with DKFZ, in Germany for a 3-year period for €338,984 Euros. As of June 30, 2018, $87,680 is still to be paidby the Companyunder this agreement.
In 2016, the Company entered into a research co-operation agreement with DKFZ, in Germany for a 5-year period for €400,000 Euros. As of June 30, 2018, $261,230 is still to be paid by the Company under this agreement.
In 2016, the Company entered into a collaborative research agreement with Munich University, in Germany for a 3-year period for €360,000 Euros. As of June 30, 2018, $177,096 is still to be paid by the Company under this agreement.
In 2016, the Company entered into a phase one clinical research agreement with Hvidovre Hospital, University of Copenhagen in Denmark relating tofor a program2-year period for DKK 15 million Danish Kroner. As of samples testing associated with CRC and other diseases. The first phase of the agreement will expire on SeptemberJune 30, 2018, and the Company may participate in additional phases upon its election (and payment of required amounts). Total payments (inclusive of local taxes)$727,170 is still to be madepaid by the Company under the agreement for the first phase are $2,382,995 (DKR 15,000,000).this agreement.
16
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 9 – Commitments and Contingencies (continued)
e) Long Term Debt: Preface S.A. Loan Agreements
On September 16, 2016, Belgian Volition entered into an unsecured loan agreement with Namur Invest or Preface S.A. forIn 2017, the amount of $519,904 (€440,000) (the “Loan Agreement”). The proceeds from the Loan Agreement were received by Belgian Volition on October 20, 2016. The Loan Agreement provides for an approximate 7-year term, a fixed interest rate at 4.85%, and interest only payments between the receipt of proceeds and June 30, 2017. Thereafter, monthly repayments of $7,785 (€6,588) will be made. See Note 9(c) for the use of the proceeds from the Loan Agreement.
On May 2, 2017, Belgian Volition entered into an additional unsecured loan agreement with Namur Invest or Preface S.A. for the amount of $413,560 (€350,000) (the “May 2017 Loan Agreement”). The May 2017 Loan Agreement provides for an approximate 3.5-year repayment term, a fixed interest rate at 4.00% and interest only payments between the receipt of proceeds and December 31, 2017. Thereafter, monthly repayments of $10,568 (€8,944) will be made. The proceeds from the May 2017 Loan Agreement will be used to fund a pathway study for our product – the Nu.QTM Colorectal Cancer Screening Triage Test.
f) Long Term Debt: ING Loan Agreement
On October 25, 2016, Belgian VolitionCompany entered into a secured loanresearch collaboration agreement with ING for an amount up to $319,032 (€270,000) (the “Supplemental Loan”). The Supplemental Loan providesNational University Hospital of Singapore for a 15-year term commencing on March 31, 2017, a fixed interest rate at 2.96%, and quarterly repayments2-year period for $48,000. As of $6,542 (€5,536), commencing on April 28, 2017. The maximum amount of the loan facility had been drawn down by Belgian VolitionJune 30, 2018, $9,600 is still to be paid by the loan commencement date of March 31,Company under this agreement.
In 2017, and interest only payments were made from the initial draw down of the loan until September 30, 2017. The proceeds of the Supplemental Loan were used to finance the construction of a laboratory in the new research and development facility (see Note 9(c)).
g)Clinical Study Agreement with the University of Michigan
On July 17, 2017, Volition AmericaCompany entered into a Clinical Study Agreementclinical study research agreement with the Regents of the University of Michigan (the “University of Michigan”), with regards to Volition America’s participation with the University of Michigan and the National Cancer Institute Early Detection Research Network (“EDRN”), in for a clinical study (the “University of Michigan Clinical Study Agreement”) involving approximately 13,500 samples. The enrollment3-year period and sample collection is anticipated to takefor up to 3 years to complete. The total maximum payment due by Volition America in accordance with the agreement is $3 million spread over 12 equal quarterly installments of $250,000. The foregoing description of the University of Michigan Clinical Study Agreement does not purport to summarize all terms and conditions thereof and is qualified in its entirety by reference to Exhibit 10.1.
h) Straight Loan: ING Loan Agreement
On August 28, 2017, Belgian Volition received prefunding of $236,320 (€200,000) from ING, pursuant to a loan agreement (the “Straight Loan Agreement”) entered into on December 13, 2016 and repayable upon receipt of grants for investment in Créalys business park from the Walloon Region. The term of the Straight Loan Agreement is until July 2018, on a rolling monthly basis at an interest rate of the Euribor rate + 2%. The proceeds of the Straight Loan Agreement were used to finance the investment in the Créalys business park.
i) Long Term Debt: SOFINEX Loan Agreement
On September 20, 2017, VolitionRx and Belgian Volition entered into an unsecured loan agreement with SOFINEX, a Belgian public organization focused on the internationalization of Walloon companies, for an amount of $1,200,000 (€1,000,000) (the “SOFINEX Loan Agreement”). The SOFINEX Loan Agreement provides for a 7-year repayment term, with a grace period for principal payments until December 31, 2019, and a fixed interest rate of 4.5%.million. As of SeptemberJune 30, 2017, no cash has been drawn down2018, up to $2.25 million is still to be paid by the Company under this agreement.
j) As of June 30, 2018, the total amount to be paid for future research and collaboration commitments was $3,641,359 and the annual payments remaining were as follows:
2018- remaining | $ | 1,893,518 |
2019 | $ | 1,140,288 |
2020 | $ | 607,553 |
Total Collaborative Agreement Obligations | $ | 3,641,359 |
17
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
On July 9, 2018, the Company entered into a research collaboration agreement with the University of Taiwan for a 3-year period for a cost to the Company of up to$2.55 million payable over such period.
On August 10, 2018, the Company issued to Cotterford Company Limited in a private placement offering (PIPE) 5 million shares of common stock at a purchase price of $1.80 per share, as well as a warrant to purchase up to an additional 5 million shares of common stock at an exercise price of $3.00 per share payable in cash, for aggregate gross proceeds, before the deduction of offering expenses, of $9 million (excluding the proceeds from any exercise of the warrant). The warrant has an expiration date of August 10, 2019 and is exercisable for a period of 6 months commencing on February 10, 2019.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
18
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Cautionary Note Regarding Forward-Looking Statements
We have based our forward-looking statements on our current expectations and projections about trends affecting our business and industry and other future events. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Forward-looking statements are subject to substantial risks and uncertainties that could cause our future business, financial condition, results of operations or performance, to differ materially from our historical results or those expressed or implied in any forward-looking statement contained in this Report. For instance, if we fail to develop and commercialize diagnostic products, we may be unable to execute our plan of operations. Other risks and uncertainties include our failure to obtain necessary regulatory clearances or approvals to distribute and market future products in the clinical in-vitro diagnostics, or IVD market; a failure by the marketplace to accept the products in our development pipeline or any other diagnostic products we might develop; we will face fierce competition and our intended products may become obsolete due to the highly competitive nature of the diagnostics market and its rapid technological change; and other risks identified elsewhere in this Report, as well as in our other filings with the Securities and Exchange Commission, or the SEC. In addition, actual results may differ as a result of additional risks and uncertainties of which we are currently unaware or which we do not currently view as material to our business. For these reasons, readers are cautioned not to place undue reliance on any forward-looking statements.
You should read this Report in its entirety, together with our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed with the SEC on March 10, 2017,1, 2018, or our Annual Report, the documents that we file as exhibits to this Report and the documents that we incorporate by reference into this Report, with the understanding that our future results may be materially different from what we currently expect. The forward-looking statements we make speak only as of the date on which they are made. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations. If we do update or correct any forward-looking statements, readers should not conclude that we will make additional updates or corrections.
19
Our tests are based mainly on the science of Nucleosomics,®, which is the practice of identifying and measuring nucleosomes in the bloodstream or other bodily fluid - an indication that disease is present. We have developed a novel suite of blood assays for epigenetically altered circulating nucleosomes as biomarkers in cancer. Nu.Qproducts are simple, low-cost, ELISA platform tests and can incorporate other off patent, low cost ELISA tests in our panels (e.g. CEA, PSA, and CA125) for higher accuracy.
As cancer screening programs becomeOur diagnostic target in the blood includes the same tumor chromosome fragment as targeted by ctDNA tests, but our approach is to test for chromosome protein and nucleic acid changes in intact chromosome fragments by ELISA, rather than chemically extracting, amplifying, and sequencing the ctDNA and discarding the rest of the nucleosome. ELISA is possible because the targets of our tests occur globally across all nucleosomes within a tumor cell, whereas individual ctDNA changes must be identified within the three billion base-pair genomes. This means that the targets of our tests are exponentially more widespread, our products aim to helpprevalent in diagnosing a range of cancers quickly, simply, accurately, cost effectivelycirculating blood, and with much higher population compliance. Early diagnosis through widespread screening has the potential to not only prolong the life of patients, but also to improve their quality of life.detectable using simple laboratory methods.
We are developing blood-based diagnostics for the most prevalent cancers, beginning with Colorectal Cancer,colorectal cancer, or CRC. Following CRC, we anticipate focusing on lung cancer, prostate and pancreatic cancer, using our Nucleosomics® biomarker discovery platform. Our development pipeline includes assays to be used for symptomatic patients or asymptomatic (screening) populations. The platform employs a range of simpleNu.QTMimmunoassays on an industry standard ELISA format, which allows rapid quantification of epigenetic changes in biofluids (whole blood, plasma, serum, sputum, urine, etc.) compared to other more complicated and expensive approaches such as bisulfite conversion and polymerase chain reaction. Our Nu.QTM biomarkers can be used alone, or in combination to generate profiles related to specific conditions.
We have developed thirty-nineare developing forty-eight Nu.QTM blood-based assays to date to detect specific biomarkers that can be used individually or in combination to generate a profile which forms the basis of a product for a particular cancer or disease. We are also looking at a range of additional low cost orthogonal ELISA markers that may add to the test accuracy while maintaining our aim of providing a low-cost test that requires only a small amount of blood.
We anticipate that because of their ease of use and cost efficiency, our tests have the potential to become the first method of choice for cancer diagnostics, allowing detection of a range of cancers at an earlier stage. We anticipate the initial use will be for the testing of individuals who, for reasons such as time, cost, or aversion to current methods, are not currently screened, or are not up to date with their screening.
We intend to commercialize our products in the future through various channels within the European Union, the United States and throughout the rest of the world, beginning with Asia. Patient compliance is critical for asymptomatic CRC population screening programs; however, current CRC screening programs have poor compliance. For example, in the United States there are several recommended CRC screening test options, including: colonoscopy, fecal tests and computed tomography colonoscopy; however, the participation rate as of 2014 was just 65.7% of the eligible patient population. The UK, like many European countries, employs a front-line fecal test for screening that also has a low compliance rate of between 59% and 67%. These figures indicate that about one-third of the populations of the United States and the UK are unscreened. The unscreened populations of many other countries are much higher. This low level of screening participation is a serious issue as it often leads to the late diagnosis of cancer when it is much harder to treat.
We believe that the only viable option to achieve high levels of compliance will come from affordable blood tests that use a small amount of blood taken as part of the patient’s normal health check procedure. We aim to launch such a front-line CRC population screening test for asymptomatic people who are non-compliant with current screening methods in Europe in 20182019 and in Asia soon after. This product will require a small amount of blood and will use the same established, robust, low-cost ELISA methodology employed in the PSA test for prostate cancer.
We are also very serious about meeting this urgent need for a highly compliant asymptomatic CRC screening test in the United States. To this end, in July 2017 we signed a contract to participate in a large 13,500 screening subject trial in the United States in conjunction with the National Cancer Institute’s Early Detection Research Network. Over 4,500 samples have already been collected and up to 9,000 samples will now be collected prospectively over the coming two to three years. The aim of this study is to validate a panel of biomarkers including our Nu.QTM Colorectal Cancer Screening Test in a large asymptomatic population to support U.S. regulatory approval.
Our first product – the Nu.QTM Colorectal Cancer Screening Triage Test, which we refer to as the Triage Test, achieved the CE Mark in December 2016, allowing us to start commercialization in the European Union. This test is undergoing continuing development. In addition, in conjunction with our collaborators in Denmark, we are undertaking a pathway design study.
We are also taking our first regulatory steps in Asia as we prepare the submission of our tests to numerous Asian regulatory authorities. We aim to announce several trials in Asia for our various potential CRC products in the coming quarters.
20
Overview of Plan of Operations
Liquidity and Capital Resources
The CompanyNet cash used $8,306,854 in net cash for operating activities was $6.5 million and $5.5 million for the nine monthssix-months ended SeptemberJune 30, 2018 and June 30, 2017, compared to $6,673,382 for the nine months ended September 30, 2016.respectively. The increase in cash used year-over-year is,in operating activities for the period ended June 30, 2018 when compared to a large extent,same period in 2017 was primarily due to increased expenditures on research and development activities, in the current period. The increase in salariesgeneral and office administrative fees is mainly a result of non-cash adjusting, stock and warrant amortization. See “Results of Operations” for more detail.activities, including increases to stock-based compensation.
Net cash provided by financing activities amounted to $1,743,966was $8.2 million and $1.4 million for the nine monthssix-months ended SeptemberJune 30, 2018 and June 30, 2017, respectively. The increase in cash provided by financing activities for the period ended June 30, 2018 when compared to $13,407,935 forsame period in 2017 was primarily the nine months ended September 30, 2016. Primarily the Company received combined proceedsresult of $908,075 from an ING bank loan and a Preface S.A. loan in the nine months ended September 30, 2017 along with approximately $998,412$7.8 million in net cash proceeds from the exercise of warrants. During the comparable 2016 period, the Company raised $13,107,030 in net cash proceeds in March 20162018 through the sale and issuance of approximately 4.33.5 million shares of common stock in a public offering and raised $399,265 in net cash proceeds from the exercise of warrants.offering.
Going Concern
21
Approximate Payments (Including Interest) Due by Year
| Total |
| 2018 (Remaining) |
| 2019 - 2022 |
| 2023 + | |
Description |
| $ |
| $ |
| $ |
| $ |
Capital Lease Obligations |
| 1,063,400 |
| 79,577 |
| 394,343 |
| 589,480 |
Operating Lease Obligations |
| 244,087 |
| 110,157 |
| 133,930 |
| – |
Grants Repayable |
| 184,017 |
| – |
| 154,791 |
| 29,226 |
Long-Term Debt(1) |
| 3,180,722 |
| 133,680 |
| 2,294,059 |
| 752,983 |
Collaborative Agreements Obligations |
| 3,641,359 |
| 1,893,518 |
| 1,747,841 |
| – |
Total |
| 8,313,585 |
| 2,216,932 |
| 4,724,964 |
| 1,371,689 |
(1)Long-term debt includes the total value of the SOFINEX loan of €1.0 million Euros although only €500,000 Euros had been drawn down as of June 30, 2018. See Note 9(d) to theCondensed Consolidated Financial Statements for further details.
|
| Three months Ended September 30, 2017 ($) |
| Three months Ended September 30, 2016 ($) |
| Increase/ (Decrease) ($) |
| Percentage Increase/ (Decrease) (%) |
|
|
|
|
| ||||
|
|
|
|
| ||||
|
|
|
|
| ||||
Revenues |
| - |
| - |
| - |
| - |
|
|
|
|
| �� |
|
|
|
General and administrative expenses |
| 226,606 |
| 163,870 |
| 62,736 |
| 38% |
Sales and marketing expenses |
| 134,737 |
| 88,989 |
| 45,748 |
| 51% |
Professional fees |
| 520,372 |
| 400,698 |
| 119,674 |
| 30% |
Salaries and office administrative fees |
| 943,510 |
| 857,093 |
| 86,417 |
| 10% |
Research and development expenses |
| 2,203,985 |
| 1,968,490 |
| 235,495 |
| 12% |
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
| (4,029,210) |
| (3,479,140) |
| 550,070 |
| 16% |
|
|
|
|
|
|
|
|
|
Other Income |
| 136,556 |
| - |
| 136,556 |
| 100% |
|
|
|
|
|
|
|
|
|
Income Taxes |
| - |
| - |
| - |
| - |
|
|
|
|
|
|
|
|
|
Net Loss |
| (3,892,654) |
| (3,479,140) |
| 413,514 |
| 12% |
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss Per Common Share |
| (0.15) |
| (0.15) |
| - |
| - |
|
|
|
|
|
|
|
|
|
Weighted Average Basic and Diluted Common Shares Outstanding |
| 26,512,195 |
| 23,524,982 |
| 2,987,213 |
| 13% |
|
|
|
|
|
|
|
| Percentage |
|
| Three-Months Ended June 30, |
| Increase |
| Increase | ||
|
| 2018 |
| 2017 |
| (Decrease) |
| (Decrease) |
|
| $ |
| $ |
| $ |
| % |
Revenues |
| – |
| – |
| – |
| – |
|
|
|
|
|
|
|
|
|
Research and development |
| (2,686,473) |
| (1,807,636) |
| 878,837 |
| 49% |
| (1,643,681) |
| (1,427,875) |
| 215,806 |
| 15% | |
Sales and marketing |
| (235,366) |
| (207,042) |
| 28,324 |
| 14% |
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
| (4,565,520) |
| (3,442,553) |
| 1,122,967 |
| 33% |
|
|
|
|
|
|
|
|
|
Interest expense |
| (26,556) |
| (20,435) |
| 6,121 |
| |
|
|
|
|
|
|
|
|
|
Net Loss |
| (4,592,076) |
| (3,462,988) |
| 1,129,088 |
| 33% |
|
|
|
|
|
|
|
|
|
| (0.15) |
| (0.13) |
| 0.02 |
| 15% | |
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding - Basic and Diluted |
| 30,027,260 |
| 26,383,228 |
| 3,644,032 |
| 14% |
The Company had not generated revenues from operations in either the three months ended September 30, 2017 or the three months ended September 30, 2016. The Company’sRevenues
Our operations are still predominantly in the research and development stage. stage and we had no revenues during the three-months ended June 30, 2018 and June 30, 2017, respectively.
For the three months ended September 30, 2017, the Company’s totalTotal operating expenses increased by $550,070, or 16%, compared to $4.6 million for the same periodthree-months ended June 30, 2018 from $3.4 million forthe three-months ended June 30, 2017.
Research and Development Expenses
Research and development expenses increased to $2.7 million for the three-months ended June 30, 2018 from $1.8 million for the three-months ended June 30, 2017. This increase in 2016. Total operating expenses are comprised of general and administrative expenses, sales and marketing expenses, professional fees, salaries and office administrative fees, andoverall research and development expenses described below.expenditures was primarily related to our participation in the trial with the University of Michigan and increased headcountduring the period.
| Three-Months Ended June 30, |
|
| ||
| 2018 |
| 2017 |
| Change |
| $ |
| $ |
| $ |
Personnel expenses | 867,114 |
| 782,258 |
| 84,856 |
Stock-based compensation | 125,522 |
| 156,018 |
| (30,496) |
Direct research and development expenses | 1,626,742 |
| 487,852 |
| 1,138,890 |
Other research and development | (80,603) |
| 257,080 |
| (337,683) |
Depreciation and amortization | 147,698 |
| 124,428 |
| 23,270 |
Total Research and Development expenses | 2,686,473 |
| 1,807,636 |
| 878,837 |
General and Administrative Expenses
| Three-Months Ended June 30, |
|
| ||
2018 |
| 2017 |
| Change | |
| $ |
| $ |
| $ |
523,224 |
| 479,432 |
| 43,792 | |
Stock-based compensation | 330,986 |
| 464,561 |
| (133,575) |
Legal and professional fees | 261,819 |
| 318,487 |
| (56,668) |
Other general and administrative | 518,527 |
| 165,100 |
| 353,427 |
Depreciation and amortization | 9,125 |
| 295 |
| 8,830 |
Total General and Administrative expenses | 1,643,681 |
| 1,427,875 |
| 215,806 |
Sales and marketing expenses increased by $45,748, or 51%,to $235,366 for the three-months ended June 30,2018 from$207,042 for the three-months ended June 30, 2017. This increase in the three-month period ended September 30, 2017 compared to the prior year period. The increase was primarily a result of the recruitment of additionaloverall sales and marketing personnel, incurring newexpenditures was primarily related to increased staff costs of $67,806 in 2017. These increased costs were offset against decreases in marketing fees across certain areas. during the period.
22
| Three-Months Ended June 30, |
|
| ||
| 2018 |
| 2017 |
| Change |
| $ |
| $ |
| $ |
Personnel expenses | 166,475 |
| 124,505 |
| 41,970 |
Stock-based compensation | 38,688 |
| 34,496 |
| 4,192 |
Direct marketing and professional fees | 30,203 |
| 48,041 |
| (17,838) |
Total Sales and Marketingexpenses | 235,366 |
| 207,042 |
| 28,324 |
Professional FeesOther Expenses
Professional fees increased by $119,674, or 30%For the three-months ended June 30, 2018, the Company’s other expenses, in the three-month period ended September 30, 2017comprised of interest expense, were $26,556 compared to $20,435 for the prior year period. The increase was mainly due to higher consultancy fees of $88,234 for preparation of Sarbanes-Oxley compliance and conference costs of $22,848.three-months ended June 30, 2017.
Salaries and Office Administrative FeesNet Loss
Salaries and office administrative fees increased by $86,417, or 10%, in the three-month period ended September 30, 2017 compared to the prior year period. The increase was mainly the result of increased stock option and warrant amortization costs of $53,441, with increased employee headcount and staff salaries also contributing to the total change.
Research and Development Expenses
Research and development expenses increased by $235,495, or 12%, in the three-month period ended September 30, 2017 compared to the prior year period. The increase was predominantly due to the first-time payment required for the EDRN study in the United States of $250,000.
Other Income
Other income amounted to $136,556 for the three months ended September 30, 2017 of grant funds from public bodies for approved expenditure with no obligation to repay. For the comparable period in 2016, no grant income was received.
Net Loss
For the three monthsthree-months ended SeptemberJune 30, 2017,2018, the Company’s net loss was $3,892,654,$4.6 million, an increase of $413,514,approximately $1.1 million, or 12%33%, in comparison to a net loss of $3,479,140$3.5 million for the three monthsthree-months ended SeptemberJune 30, 2016.2017. The change was a result of the factors described above.
23
Nine Months Ended September 30, 2017 and September 30, 2016
Comparison of the Six-Months Ended June 30, 2018 and June 30, 2017.
|
| Nine months Ended September 30, 2017 ($) |
| Nine months Ended September 30, 2016 ($) |
| Increase/ (Decrease) ($) |
| Percentage Increase/ (Decrease) (%) |
|
|
|
|
| ||||
|
|
|
|
| ||||
|
|
|
|
| ||||
Revenues |
| - |
| - |
| - |
| - |
|
|
|
|
|
|
|
|
|
General and administrative expenses |
| 729,449 |
| 558,120 |
| 171,329 |
| 31% |
Sales and marketing expenses |
| 435,971 |
| 249,591 |
| 186,380 |
| 75% |
Professional fees |
| 1,182,837 |
| 1,272,638 |
| (89,801) |
| (7%) |
Salaries and office administrative fees |
| 2,720,620 |
| 1,686,210 |
| 1,034,410 |
| 61% |
Research and development expenses |
| 5,774,004 |
| 5,180,466 |
| 593,538 |
| 11% |
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
| (10,842,881) |
| (8,947,025) |
| 1,895,856 |
| 21% |
|
|
|
|
|
|
|
|
|
Other Income |
| 136,556 |
| 25,891 |
| 110,665 |
| 427% |
|
|
|
|
|
|
|
|
|
Income Taxes |
| - |
| - |
| - |
| - |
|
|
|
|
|
|
|
|
|
Net Loss |
| (10,706,325) |
| (8,921,134) |
| 1,785,191 |
| 20% |
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss Per Common Share |
| (0.41) |
| (0.40) |
| 0.01 |
| 3% |
|
|
|
|
|
|
|
|
|
Weighted Average Basic and Diluted Common Shares Outstanding |
| 26,343,101 |
| 22,075,538 |
| 4,267,563 |
| 19% |
|
|
|
|
|
|
|
| Percentage |
|
| Six-Months Ended June 30, |
| Increase |
| Increase | ||
|
| 2018 |
| 2017 |
| (Decrease) |
| (Decrease) |
|
| $ |
| $ |
| $ |
| % |
Revenues |
| – |
| – |
| – |
| – |
|
|
|
|
|
|
|
|
|
Research and development |
| (5,109,675) |
| (3,480,987) |
| 1,628,688 |
| 47% |
General and administrative |
| (3,485,774) |
| (2,823,594) |
| 662,180 |
| 23% |
Sales and marketing |
| (599,510) |
| (476,450) |
| 123,060 |
| 26% |
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
| (9,194,959) |
| (6,781,031) |
| 2,413,928 |
| 36% |
|
|
|
|
|
|
|
|
|
Interest expense |
| (49,538) |
| (32,640) |
| 16,898 |
| 52% |
|
|
|
|
|
|
|
|
|
Net Loss |
| (9,244,497) |
| (6,813,671) |
| 2,430,826 |
| 36% |
|
|
|
|
|
|
|
|
|
Net Loss Per Share – Basic and Diluted |
| (0.32) |
| (0.26) |
| 0.06 |
| 23% |
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding - Basic and Diluted |
| 28,655,711 |
| 26,137,241 |
| 2,518,470 |
| 10% |
The Company had not generated revenues from operations in either the nine months ended September 30, 2017 or the nine months ended September 30, 2016. The Company’sRevenues
For the nine months ended September 30, 2017, the Company’s totalTotal operating expenses increased by $1,895,856, or 21%, compared to $9.2 million for the same periodsix-months ended June 30, 2018 from $6.8 million for the six-months ended June 30, 2017.
Research and Development Expenses
| Six-Months Ended June 30, |
|
| ||
| 2018 |
| 2017 |
| Change |
| $ |
| $ |
| $ |
Personnel expenses | 1,829,454 |
| 1,301,937 |
| 527,517 |
Stock-based compensation | 340,029 |
| 348,389 |
| (8,360) |
Direct research and development expenses | 2,558,177 |
| 1,109,224 |
| 1,448,953 |
Other research and development | 82,035 |
| 503,374 |
| (421,339) |
Depreciation and amortization | 299,980 |
| 218,063 |
| 81,917 |
Total Research and Development expenses | 5,109,675 |
| 3,480,987 |
| 1,628,688 |
General and Administrative Expenses
| Six-Months Ended June 30, |
|
| ||
| 2018 |
| 2017 |
| Change |
| $ |
| $ |
| $ |
Personnel expenses | 1,068,308 |
| 1,001,570 |
| 66,738 |
Stock-based compensation | 950,481 |
| 866,016 |
| 84,465 |
Legal and professional fees | 838,072 |
| 592,739 |
| 245,333 |
Other general and administrative | 610,683 |
| 362,974 |
| 247,709 |
Depreciation and amortization | 18,230 |
| 295 |
| 17,935 |
Total General and Administrative expenses | 3,485,774 |
| 2,823,594 |
| 662,180 |
Sales and marketing expenses increased by $186,380, or 75%to $599,510 for the six-months ended June 30, 2018, from the $476,450 for the six-months ended June 30, 2017. This increase in overall sales and marketing expenditures was primarily related to increased marketing and professional fees during the period.
| Six-Months Ended June 30, |
|
| ||
| 2018 |
| 2017 |
| Change |
| $ |
| $ |
| $ |
Personnel expenses | 321,392 |
| 356,629 |
| (35,237) |
Stock-based compensation | 102,111 |
| 34,875 |
| 67,236 |
Direct marketing and professional fees | 176,007 |
| 84,946 |
| 91,061 |
Total Sales and Marketingexpenses | 599,510 |
| 476,450 |
| 123,060 |
For the six-months ended June 30, 2018, the Company’s other expenses, in the nine-month period ended September 30, 2017comprised of interest expense, were $49,538 compared to $32,640 for the prior year period. The increase was primarily a result of the recruitment of additional marketing personnel, incurring new costs of $182,399.
24
Professional Feessix-months ended June 30, 2017.
Professional fees decreased by $89,801, or 7%, in the nine-month period ended September 30, 2017 compared to the prior year period. The decrease in professional fees was mainly as a result of reduced legal fees in respect of capital raises in 2016.Net Loss
Salaries and Office Administrative Fees
Salaries and office administrative fees increased by $1,034,410, or 61%, in the nine-month period ended September 30, 2017 compared to the prior year period. The increase was the result of an increase in the cost of stock option and warrant amortization expense of $604,950 year-over-year, as well as some headcount and remuneration increases.
Research and Development Expenses
Research and development expenses increased by $593,538, or 11%, in the nine-month period ended September 30, 2017 compared to the prior year period. Increases in costs on a year-over-year basis include the first payment for the EDRN study in the United States of $250,000, increase in employment costs due to headcount and remuneration of $235,063, and an increase in the cost of stock option amortization expense of $59,150. Depreciation expense also increased by $81,255 year-over-year due to the new research and development facility in March 2017.
Other Income
Other income increased to $136,556 for the nine months ended September 30, 2017 compared to the comparable figure in 2016 of $25,891, relating to grant funds received from public bodies in respect of approved expenditure with no obligation to repay.
Net Loss
Off-Balance Sheet Arrangements
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’smanagement’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
25
Recently Issued Accounting Pronouncements
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’sSEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our Principal Executive and Principal Financial Officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our management carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded, as they previously concluded as of December 31, 2016,2017, that our disclosure controls and procedures continuenot to not be effective as of SeptemberJune 30, 2017,2018, because of material weaknesses in our internal control over financial reporting, as described below and in detail in our Annual Report.
Changes in Internal Control over Financial Reporting
As of SeptemberJune 30, 2017,2018, we did not maintain sufficient internal controls over financial reporting:
due to a lack of adequate segregation of duties in some areas of Finance; and
Limitations of the Effectiveness of Disclosure Controls and Internal Controls
27
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the quarter ended September 30, 2017, the Company issued the shares described below in private placements pursuant to Section 4(a)(2) of the Securities Act, and Rule 506 of Regulation D, in each case on the basis that the shares were offered and sold in a non-public offering to an “accredited investor” as defined in Rule 501 of Regulation D. Additionally, at the time of the issuances, unless registered for resale, the shares were deemed to be restricted securities under the Securities Act and the certificates evidencing such shares bear a legend to that effect.None.
On July 7, 2017, 5,000 warrants were exercised at a price of $2.20 per share, for net cash proceeds to the Company of $11,000. As a result, a total of 5,000 shares of common stock were issued to one U.S. accredited investor. The shares were registered for resale on Form S-3 (Registration No. 333-195213).
From July 9, 2017 through July 19, 2017, 45,000 warrants were exercised at a price of $2.40 per share for net cash proceeds to the Company of $108,000. As a result, a total of 15,000 shares of common stock were issued to one (1) U.S. accredited investor and 30,000 shares of common stock were issued to two (2) non – U.S. accredited investors.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
ITEM 4.MINE SAFETY DISCLOSURES
28
|
|
|
| Incorporated by Reference |
| |||||||||
Exhibit Number |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing Date |
| Filed Herewith | ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| Clinical Study Agreement, dated July 17, 2017, by and between Volition America, Inc. and the Regents of the University of Michigan. |
|
|
|
|
|
|
|
|
| X | |||
| Unsecured Credit Agreement, dated September 20, 2017, by and among VolitionRx Limited, Belgian Volition SPRL and SOFINEX (English translation of French original). |
| 8-K |
| 001-36833 |
| 10.1 |
| 09/21/17 |
|
| |||
| Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended. |
|
|
|
|
|
|
|
|
| X | |||
| Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended. |
|
|
|
|
|
|
|
|
| X | |||
| Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
|
| X | |||
101.INS |
| XBRL Instance Document. |
|
|
|
|
|
|
|
|
| X | ||
101.SCH |
| XBRL Taxonomy Extension Schema Document. |
|
|
|
|
|
|
|
|
| X | ||
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
|
|
|
|
|
| X | ||
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
|
|
|
|
|
| X | ||
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
|
|
|
|
|
| X | ||
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
|
|
|
|
|
|
| X |
Incorporated by Reference | ||||||||||||||
Exhibit Number | Exhibit Description | Form | File No. | Exhibit | Filing Date | Filed Herewith | ||||||||
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended. | X | |||||||||||||
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended. | X | |||||||||||||
32.1* | Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||||
101.INS | XBRL Instance Document. | X | ||||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | X | ||||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | X | ||||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X | ||||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | X |
SIGNATURES
|
| VOLITIONRX LIMITED |
|
|
|
|
|
|
|
| By:/s/ Cameron Reynolds |
|
| Cameron Reynolds |
|
| President and Chief Executive Officer (Authorized Signatory and Principal Executive Officer) |
|
|
|
|
|
|
|
| By:/s/ David Vanston |
|
| David Vanston |
|
| Chief Financial Officer and Treasurer (Authorized Signatory and Principal Financial and Accounting Officer) |
2928