(The accompanying notes are an integral part of these condensed consolidated financial statements)
(The accompanying notes are an integral part of these condensed consolidated financial statements)
(The accompanying notes are an integral part of these condensed consolidated financial statements)
(The accompanying notes are an integral part of these condensed consolidated financial statements)
(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 – Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The interim consolidated financial statements of VolitionRx Limited (the “Company” or “VolitionRx”) for the three and six months ended June 30, 2022 and June 30, 2021, respectively, are unaudited. These interim consolidated financial statements are prepared in accordance with the requirements for unaudited interim periods and, consequently, do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of the Company’s management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position as of June 30, 2022, and its results of operations and cash flows for the periods ended June 30, 2022 and June 30, 2021, respectively. The results of operations for the periods ended June 30, 2022 and June 30, 2021, respectively, are not necessarily indicative of the results for a full-year period. These interim consolidated financial statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2022.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company also regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances, useful lives of property and equipment and intangible assets, borrowing rate used in operating lease right-of-use asset and liability valuations, impairment analysis of intangible assets, and valuations of stock-based compensation.
The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations could be affected.
Principles of Consolidation
The accompanying condensed consolidated financial statements for the period ended June 30, 2022 include the accounts of the Company and its subsidiaries. The Company has two wholly owned subsidiaries, Singapore Volition Pte. Limited (“Singapore Volition”) and Volition Global Services SRL (“Volition Global”). Singapore Volition has one wholly owned subsidiary, Belgian Volition SRL (“Belgian Volition”). Belgian Volition has four subsidiaries, Volition Diagnostics UK Limited (“Volition Diagnostics”), Volition America, Inc. (“Volition America”), Volition Germany GmbH (“Volition Germany”), and its one majority owned subsidiary Volition Veterinary Diagnostics Development LLC (“Volition Vet”). See Note 8(f), Commitments and Contingencies – Other Commitments, for more information regarding Volition Vet and Volition Germany. All intercompany balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
For the purposes of the statements of cash flows, the Company considers interest bearing deposits with original maturity dates of three months or less to be cash equivalents. The Company invests excess cash from its operating cash accounts in overnight investments and reflects these amounts in cash and cash equivalents in the condensed consolidated balance sheets at fair value using quoted prices in active markets for identical assets. As of June 30, 2022, cash and cash equivalents totaled approximately $16.7 million, of which $10.2 million was held in an overnight money market account.
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (continued)
Accounts Receivables
Trade accounts receivable are stated at the amount the Company expects to collect. Due to the nature of the accounts receivable balance, the Company believes the risk of doubtful accounts is minimal and therefore no allowance is recorded. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. The Company may provide for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. As of June 30, 2022, the accounts receivable balance was $8,489 and the allowance for doubtful debts was $nil.
Revenue Recognition
The Company adopted Accounting Standards Codification (“ASC”)606, “Revenue from Contracts with Customers,” effective January 1, 2019. Under ASC 606, the Company recognizes revenues when the customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company recognizes revenues following the five step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) the Company satisfies the performance obligation(s).
The Company generates product revenues from the sale of its Nu.Q® Vet Cancer Screening Test, from the sale of nucleosomes, and from the sale of Research Use Only kits. In addition, revenue is received from external third parties for Nu.Q® Discover services the Company performs for them in its laboratory.
Revenues, and their respective treatment for financial reporting purposes under ASC 606, are as follows:
Product
The Company includes revenue from product sales recognized during the period in which goods are shipped to third parties, and the amount is deemed collectable from the third parties. These are presented in “Product” in the consolidated statements of operations and comprehensive loss.
Services
The Company includes revenue recognized from laboratory services performed in the Company’s laboratory on behalf of third parties in “Services” in the consolidated statements of operations and comprehensive loss.
For each development and/or commercialization agreement that results in revenue, the Company identifies all performance obligations, aside from those that are immaterial, which may include a license to intellectual property and know-how, development activities and/or transition activities. In order to determine the transaction price, in addition to any upfront payment, the Company estimates the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract. The Company constrains (reduces) the estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required.
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (continued)
Licensing
The Company includes revenue recognized from the licensing of certain rights to third parties in “Licensing” in the consolidated statements of operations and comprehensive loss. For each development and/or commercialization agreement that results in revenues, the Company identifies all performance obligations, aside from those that are immaterial, which may include a license to intellectual property and know-how, development activities and/or transition activities. In order to determine the transaction price, in addition to any upfront payment, the Company estimates the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract. The Company constrains (reduces) the estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required.
Deferred Revenue (Contract Liabilities) and Contract Assets
Deferred revenue consists of amounts for which the Company has an unconditional right to bill, and/or amounts for which payment has been received–including non-refundable amounts, but have not been recognized as revenue because the related performance obligations are deemed incomplete. As at June 30, 2022, the Company recorded $10.0 million as deferred revenue in respect of a non-refundable payment received in relation to a licensing and product supply agreement with Heksa Corporation.
Contract assets include costs and services incurred on contracts with open performance obligations. These contract assets were immaterial as of June 30, 2022.
Basic and Diluted Net Loss Per Share
The Company computes net loss per share in accordance with ASC 260, “Earnings Per Share,” which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations and comprehensive loss. Basic EPS is computed by dividing net loss available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. As of June 30, 2022, 6,460,018 potential common shares equivalents from warrants, options, and restricted stock units (“RSUs”) were excluded from the diluted EPS calculations as their effect is anti-dilutive.
Foreign Currency Translation
The Company has functional currencies in Euros, US Dollars and British Pounds Sterling and its reporting currency is the US Dollar. Management has adopted ASC 830-20, “Foreign Currency Matters – Foreign Currency Transactions.”. All assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. For revenues and expenses, the weighted average exchange rate for the period is used. Gains and losses arising on translation of foreign currency denominated transactions are included in other comprehensive income (loss).
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (continued)
Research and Development
In accordance with ASC 730, the Company follows the policy of expensing its research and development costs in the period in which they are incurred. The Company incurred research and development expenses of $3.3 million and $2.9 million during the six-months ended June 30, 2022, and June 30, 2021, respectively.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation.” Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized over the employee’s requisite service period, which is generally the vesting period. The fair value of our stock options and warrants is estimated using a Black-Scholes option valuation model. RSUs are valued based on the closing stock price on the date of grant. Refer to Note 7, Stock-Based Compensation, for further details.
Reclassification
Certain amounts presented in previously issued financial statements have been reclassified to be consistent with the current period presentation. The Company has reclassified the prior period comparative amounts for the quarter ended June 30, 2022. Certain reclassifications have been made to the prior years’ financial statements in relation to Research and Development expenses, General and Administrative expenses and Sales and Marketing expenses to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. The Company does not believe there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
COVID-19 Pandemic Impact
As of the date of this filing, there continue to be widespread concerns regarding the ongoing impacts and disruptions caused by the COVID-19 pandemic in the regions in which the Company operates. As a result of the impacts of the COVID-19 pandemic, the Company has experienced and may continue to experience disruptions to its clinical trials, including patient enrollment and sample collection delays.
Although the Company has taken steps to mitigate the impacts of the COVID-19 pandemic, the extent to which the pandemic will impact its business, financial condition, and results of operations in future periods is highly uncertain and will be affected by a number of factors outside of the Company’s control. These include the duration and extent of the COVID-19 pandemic, the development of new variants of the COVID-19 virus that may be more contagious or virulent than previous versions, the scope of mandated or recommended containment and mitigation measures, the effect of government stabilization and recovery efforts, and the success of vaccine distribution programs.
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 2 - Going Concern
The Company’s condensed consolidated financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred losses since inception of $152.3 million, has had negative cash flows from operations on an annual basis, and has minimal revenues, which creates substantial doubt about its ability to continue as a going concern for a period of at least one year from the date of issuance of these condensed consolidated financial statements.
The future of the Company as an operating business will depend on its ability to obtain sufficient capital contributions, financing and/or to generate revenues as may be required to sustain its operations. Management plans to address the above as needed by (a) securing additional grant funds, (b) obtaining additional financing through debt or equity transactions, (c) granting licenses to third parties in exchange for specified up-front and/or milestone payments and (d) developing and commercializing its products on an accelerated timeline. Management continues to exercise tight cost controls to conserve cash.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually attain profitable operations. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 3 - Property and Equipment
The Company’s property and equipment consisted of the following amounts as of June 30, 2022 and December 31, 2021:
| | | | | | | | June 30, | |
| | | | | | | | 2022 | |
| | | | | | Accumulated | | Net Carrying | |
| | | | Cost | | Depreciation | | Value | |
| | Useful Life | | $ | | $ | | $ | |
Computer hardware and software | | 3 years | | 597,061 | | 440,563 | | 156,498 | |
Laboratory equipment | | 5 years | | 3,291,800 | | 1,585,319 | | 1,706,481 | |
Office furniture and equipment | | 5 years | | 321,356 | | 216,428 | | 104,928 | |
Buildings | | 30 years | | 2,003,306 | | 257,610 | | 1,745,696 | |
Building improvements | | 5-15 years | | 1,244,578 | | 276,041 | | 968,537 | |
Land | | Not amortized | | 125,589 | | - | | 125,589 | |
| | | | 7,583,690 | | 2,775,961 | | 4,807,729 | |
| | | | | | | | December 31, | |
| | | | | | | | 2021 | |
| | | | | | Accumulated | | Net Carrying | |
| | | | Cost | | Depreciation | | Value | |
| | Useful Life | | $ | | $ | | $ | |
Computer hardware and software | | 3 years | | 599,944 | | 474,169 | | 125,775 | |
Laboratory equipment | | 5 years | | 3,032,108 | | 1,434,347 | | 1,597,761 | |
Office furniture and equipment | | 5 years | | 293,427 | | 213,244 | | 80,183 | |
Buildings | | 30 years | | 2,177,641 | | 243,750 | | 1,933,891 | |
Building improvements | | 5-15 years | | 1,293,258 | | 256,309 | | 1,036,949 | |
Land | | Not amortized | | 136,518 | | - | | 136,518 | |
| | | | 7,532,896 | | 2,621,819 | | 4,911,077 | |
During the six-month periods ended June 30, 2022 and June 30, 2021, the Company recognized $407,059 and $425,187, respectively, in depreciation expense.
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 4 - Intangible Assets
The Company’s intangible assets consist of patents, mainly acquired in the acquisition of Belgian Volition. The patents are being amortized over the assets’ estimated useful lives, which range from 8 to 20 years.
| | | | | | | | June 30, | |
| | | | | | | | 2022 | |
| | | | | Accumulated | | | Net Carrying | |
| | Cost $ | | | Amortization $ | | | Value $ | |
Patents | | | 1,080,777 | | | | 929,463 | | | | 151,314 | |
| | | | | | | | | | | | |
| | | | | | | | | | December 31, | |
| | | | | | | | | | 2021 | |
| | | | | | Accumulated | | | Net Carrying | |
| | Cost | | | Amortization | | | Value | |
| | | $ | | | | $ | | | | $ | |
Patents | | | 1,178,135 | | | | 961,259 | | | | 216,876 | |
During the six-month periods ended June 30, 2022 and June 30, 2021, the Company recognized $42,647 and $46,567, respectively, in amortization expense.
The Company amortizes the patents on a straight-line basis with terms ranging from 8 to 20 years. The annual estimated amortization schedule over the next five years is as follows:
2022 - remaining | | $ | 40,148 | |
2023 | | $ | 82,415 | |
2024 | | $ | 28,751 | |
Total Intangible Assets | | $ | 151,314 | |
The Company periodically reviews its long-lived assets 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 Topic “Property, Plant and Equipment” as of December 31, 2021. The result of this review confirmed that the ongoing value of the patents was not impaired as of December 31, 2021.
Note 5 - Related Party Transactions
See Note 6, Common Stock, for common stock issued to related parties and Note 7, Stock-Based Compensation, for stock options, warrants and RSUs issued to related parties. The Company has agreements with related parties for the purchase of products and consultancy services which are accrued under management and directors’ fees payable (see condensed consolidated balance sheets).
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 6 - Common Stock
As of June 30, 2022, the Company was authorized to issue 100 million shares of common stock, par value $0.001 per share, of which 53,846,973 and 53,772,261 shares were issued and outstanding as of June 30, 2022 and December 31, 2021, respectively.
Stock Option Exercises and RSU Settlements
On March 28, 2022, 15,000 RSUs vested and resulted in the issuance of 15,000 shares of common stock.
On April 19, 2022, 26,250 RSUs vested, resulting in the issuance of 21,712 shares of common stock and the withholding of 4,538 shares of common stock for taxes, which were returned as authorized shares to the 2015 Stock Incentive Plan.
On May 1, 2022, 50,000 RSUs vested, resulting in the issuance of 35,000 shares of common stock and the withholding of 15,000 shares of common stock for taxes, which were returned as authorized shares to the 2015 Stock Incentive Plan.
Equity Distribution Agreements
On September 24, 2021, the Company entered into an equity distribution agreement (the “2021 EDA”) with Cantor Fitzgerald & Co. Inc. (“Cantor”) and Oppenheimer & Co. Inc. (“Oppenheimer”), to sell shares of its common stock having an aggregate offering price of up to $25.0 million from time-to-time, through an “at the market offering program” pursuant to the Company’s effective “shelf” registration statement on Form S-3 (File No. 333-259783) and related prospectuses, through Cantor and Oppenheimer each acting as the Company’s agent and/or principal. The Company was not obligated to sell any shares under the 2021 EDA. During the three months ended June 30, 2022, no sales of shares of its common stock were made under the 2021 EDA. From inception through June 30, 2022, the Company raised aggregate net proceeds (net of brokers’ commissions and fees) of approximately $0.7 million under the 2021 EDA through the sale of 193,600 shares of its common stock. Effective May 7, 2022, the Company terminated its 2021 EDA and no further sales of the Company’s common stock will be made under the 2021 EDA.
On May 20, 2022, the Company entered into an equity distribution agreement (the “2022 EDA”) with Jefferies LLC (“Jefferies”) to sell shares of the Company’s common stock, having an aggregate offering price of up to $25 million from time to time, through an “at the market” offering program pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-259783) and related prospectuses, through Jefferies acting as the Company’s agent and/or principal. The Company is not obligated to sell any shares under the 2022 EDA. The 2022 EDA replaces the 2021 EDA. As of June 30 2022, no shares of common stock have been sold under the 2022 EDA.
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 7 - Stock-Based Compensation
a) Warrants
The following table summarizes the changes in warrants outstanding of the Company during the six-month period ended June 30, 2022:
| | | | | Weighted | |
| | | | | Average | |
| | Number of | | | Exercise | |
| | Warrants | | | Price ($) | |
Outstanding at December 31, 2021 | | | 485,000 | | | | 3.88 | |
Granted | | | 54,000 | | | | 3.05 | |
Outstanding at June 30, 2022 | | | 539,000 | | | | 3.80 | |
| | | | | | | | |
Exercisable at June 30, 2022 | | | 485,000 | | | | 3.88 | |
Below is a table summarizing the warrants issued and outstanding as of June 30, 2022, which have an aggregate weighted average remaining contractual life of 3.74 years.
| | | | | | | | | Weighted Average | | | | |
| | | | | | | | | Remaining | | | Proceeds to | |
Number | | | Number | | | Exercise | | | Contractual | | | Company if | |
Outstanding | | | Exercisable | | | Price ($) | | | Life (Years) | | | Exercised ($) | |
| 125,000 | | | | 125,000 | | | | 2.47 | | | | 0.66 | | | | 308,750 | |
| 54,000 | | | | - | | | | 3.05 | | | | 6.27 | | | | 164,700 | |
| 50,000 | | | | 50,000 | | | | 3.45 | | | | 3.67 | | | | 172,500 | |
| 125,000 | | | | 125,000 | | | | 3.95 | | | | 4.51 | | | | 493,750 | |
| 185,000 | | | | 185,000 | | | | 4.90 | | | | 4.59 | | | | 906,500 | |
| 539,000 | | | | 485,000 | | | | | | | | | | | | 2,046,200 | |
Effective April 4, 2022, the Company granted a warrant to purchase 54,000 shares of common stock to a Company employee for services to the Company and/or its subsidiaries. This warrant shall vest in two equal installments at 12 months and 24 months from the grant date, subject to continued service and expire on April 4, 2028 and April 4, 2029, respectively, with an exercise price of $3.05 per share. The Company has calculated the estimated fair market value of this warrant at $80,901, using the Black-Scholes model and the following assumptions: term 3.5 years, stock price $2.95, exercise price $3.05, 71.07% volatility, 2.53% risk-free rate, and no forfeiture rate.
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 7 – Stock-Based Compensation (continued)
a) Warrants (continued)
Stock-based compensation expense related to warrants of $53,601 and $337,823 was recorded in the six months ended June 30, 2022 and June 30, 2021, respectively. Total remaining unrecognized compensation cost related to non-vested warrants is $66,313 and is expected to be recognized over a period of 1.76 years. As of June 30, 2022, the total intrinsic value of warrants outstanding was $nil.
b) Options
The following table summarizes the changes in options outstanding of the Company during the six-month period ended June 30, 2022:
| | | | | Weighted | |
| | | | | Average | |
| | Number of | | | Exercise | |
| | Options | | | Price ($) | |
Outstanding at December 31, 2021 | | | 5,027,518 | | | | 3.87 | |
Granted | | | - | | | | - | |
Exercised | | | - | | | | - | |
Expired/Cancelled | | | - | | | | - | |
Outstanding at June 30, 2022 | | | 5,027,518 | | | | 3.87 | |
| | | | | | | | |
Exercisable at June 30, 2022 | | | 3,977,518 | | | | 3.99 | |
Below is a table summarizing the options issued and outstanding as of June 30, 2022, all of which were issued pursuant to the 2011 Equity Incentive Plan (for option issuances prior to 2016) or the 2015 Stock Incentive Plan (for option issuances commencing in 2016)and which have an aggregate weighted average remaining contractual life of 5.75 years. As of June 30, 2022, an aggregate of 7,750,000 shares of common stock were authorized for issuance under the 2015 Stock Incentive Plan, of which 1,969,890 shares of common stock remained available for future issuance thereunder.
| | | | | | Weighted Average | | |
| | | | | | Remaining | | Proceeds to |
Number | | Number | | Exercise | | Contractual | | Company if |
Outstanding | | Exercisable | | Price ($) | | Life (Years) | | Exercised ($) |
635,000 | | 635,000 | | 3.25 | | 2.62 | | 2,063,750 |
2,717 | | 2,717 | | 3.35 | | 1.18 | | 9,102 |
1,060,000 | | 10,000 | | 3.40 | | 9.10 | | 3,604,000 |
800,000 | | 800,000 | | 3.60 | | 7.85 | | 2,880,000 |
1,682,837 | | 1,682,837 | | 4.00 | | 4.26 | | 6,731,348 |
11,801 | | 11,801 | | 4.35 | | 0.95 | | 51,334 |
89,163 | | 89,163 | | 4.38 | | 5.57 | | 390,534 |
50,000 | | 50,000 | | 4.80 | | 4.51 | | 240,000 |
696,000 | | 696,000 | | 5.00 | | 4.74 | | 3,480,000 |
5,027,518 | | 3,977,518 | | | | | | 19,450,068 |
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 7 – Stock-Based Compensation (continued)
b) Options (continued)
Stock-based compensation expense related to stock options of $784,236 and $418,292 was recorded in the six months ended June 30, 2022 and June 30, 2021, respectively. Total remaining unrecognized compensation cost related to non-vested stock options is $674,046 and is expected to be recognized over a period of 1.26 years. As of June 30, 2022, the total intrinsic value of stock options outstanding was $nil.
c) Restricted Stock Units (RSUs)
Below is a table summarizing the RSUs issued and outstanding as of June 30, 2022, all of which were issued pursuant to the 2015 Stock Incentive Plan.
| | | | | Weighted | |
| | Number of | | | Average | |
| | RSUs | | | Share Price ($) | |
Outstanding at December 31, 2021 | | | 810,750 | | | | 3.33 | |
Granted | | | 207,000 | | | | 2.85 | |
Vested/Settled | | | (91,250 | ) | | | 3.42 | |
Cancelled | | | (33,000 | ) | | | 3.35 | |
Outstanding at June 30, 2022 | | | 893,500 | | | | 3.21 | |
Effective February 8, 2022, the Company granted aggregate RSUs of 8,000 shares of common stock to an employee in exchange for services provided to the Company. These RSUs vest over two years, with 50% vesting on each of February 8, 2023 and February 8, 2024, subject to continued service, and will result in total compensation expense of $22,640.
Effective March 1, 2022, the Company granted aggregate RSUs of 30,000 shares of common stock to various employees in exchange for services provided to the Company. These RSUs vest over two years, with 50% vesting on each of March 1, 2023 and March 1, 2024, subject to continued service, and will result in total compensation expense of $84,300.
On March 28, 2022, 15,000 RSUs vested and resulted in the issuance of 15,000 shares of common stock.
Effective April 4, 2022, the Company granted aggregate RSUs of 32,000 shares of common stock to employees of the Company and/or its subsidiaries in exchange for services provided to the Company and/or its subsidiaries. The RSUs shall vest in two equal installments at 12 months and 24 months from the grant date, subject to continued service, and will result in total compensation expense of $94,400.
Effective April 4, 2022, the Company granted aggregate RSUs of 104,000 shares of common stock to employees of the Company and/or its subsidiaries in exchange for services provided to the Company and/or its subsidiaries. The RSUs shall vest in three equal installments at 12 months , 24 months and 36 months from the grant date, subject to continued service, and will result in total compensation expense of $306,800.
On April 19, 2022, 26,250 RSUs vested and resulted in the issuance of 21,712 shares of common stock and the remaining 4,538 shares of common stock were withheld for taxes and returned as authorized shares under the 2015 Stock Incentive Plan.
On May 1, 2022, 50,000 RSUs vested and resulted in the issuance of 35,000 shares of common stock and the remaining 15,000 shares of common stock were withheld for taxes and returned as authorized shares under the 2015 Stock Incentive Plan.
On May 31, 2022, an aggregate of 33,000 RSUs previously granted to employees were cancelled and returned as authorized shares under the 2015 Stock Incentive Plan upon the resignation of such employees prior to vesting.
Effective June 1, 2022, the Company granted aggregate RSUs of 33,000 shares of common stock to various employees in exchange for services provided to the Company. These RSUs vest over two years, with 50% vesting on each of June 1, 2023 and June 1, 2024, subject to continued service, and will result in total compensation expense of $80,850.
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 7 – Stock-Based Compensation (continued)
c) Restricted Stock Units (RSUs) (continued)
Below is a table summarizing the RSUs issued and outstanding as of June 30, 2022 and which have an aggregate weighted average remaining contractual life of 0.92 years.
| | | | | | Weighted | |
| | | | | | Average | |
| | | | | | Remaining | |
Number | | | Share | | | Contractual | |
Outstanding | | | Price ($) | | | Life (Years) | |
| 33,000 | | | | 2.45 | | | | 1.42 | |
| 30,000 | | | | 2.81 | | | | 1.17 | |
| 8,000 | | | | 2.83 | | | | 1.11 | |
| 136,000 | | | | 2.95 | | | | 1.48 | |
| 39,809 | | | | 3.04 | | | | 0.76 | |
| 560,191 | | | | 3.31 | | | | 0.62 | |
| 24,000 | | | | 3.32 | | | | 0.55 | |
| 4,000 | | | | 3.38 | | | | 0.48 | |
| 43,500 | | | | 3.51 | | | | 0.84 | |
| 15,000 | | | | 3.59 | | | | 0.73 | |
| 893,500 | | | | | | | | | |
Stock-based compensation expense related to RSUs of $931,498 and $136,971 was recorded in the six months ended June 30, 2022 and June 30, 2021, respectively. Total remaining unrecognized compensation cost related to non-vested RSUs is $1,340,640.
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 8 – Commitments and Contingencies
a) Finance Lease Obligations
In 2016, the Company entered into a capital lease with ING Asset Finance Belgium S.A. (“ING”) to purchase a property located in Belgium for €1.12 million, maturing in May 2031 with implicit interest of 2.62%. As of June 30, 2022, the balance payable was $492,173.
In 2018, the Company entered into a capital lease with BNP Paribas leasing solutions to purchase a freezer for the Belgium facility for €25,000, that matured in January 2022 with implicit interest of 1.35%. The leased equipment is amortized on a straight-line basis over 5 years. As of June 30, 2022, the balance payable was $nil.
The following is a schedule showing the future minimum lease payments under finance leases by years and the present value of the minimum payments as of June 30, 2022.
2022 - remaining | | $ | 28,145 | |
2023 | | $ | 56,292 | |
2024 | | $ | 56,291 | |
2025 | | $ | 56,291 | |
2026 | | $ | 56,292 | |
Greater than 5 years | | $ | 302,554 | |
Total | | $ | 555,865 | |
Less: Amount representing interest | | $ | (63,692 | ) |
Present value of minimum lease payments | | $ | 492,173 | |
b) Operating Lease Right-of-Use Obligations
As all the existing leases subject to the new lease standard ASC 842 (“Leases”) were previously classified as operating leases by the Company, they were similarly classified as operating leases under the new standard. The Company has determined that the identified operating leases did not contain non-lease components and require no further allocation of the total lease cost. Additionally, the agreements in place did not contain information to determine the rate implicit in the leases, so the Company used its incremental borrowing rate as the discount rate. The Company’s weighted average discount rate is 2.43% and the weighted average remaining lease term is 31 months.
During the six months ended June 30, 2022, the Company entered into a new lease agreement. The lease is initially for 62 months and the initial rent is $7,642 a month. In connection with the new lease agreement the Company recorded $461,341 of right of use assets in exchange for right of use liabilities.
As of June 30, 2022, operating lease right-of-use assets and liabilities arising from operating leases were $739,015 and $761,323, respectively. During the six months ended June 30, 2022, cash paid for amounts included for the measurement of lease liabilities was $102,424 and the Company recorded operating lease expense of $120,733.
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 8 – Commitments and Contingencies
b) Operating Lease Right-of-Use Obligations (continued)
The following is a schedule showing the future minimum lease payments under operating leases by years and the present value of the minimum payments as of June 30, 2022.
2022 - remaining | | $ | 127,652 | |
2023 | | $ | 263,097 | |
2024 | | $ | 162,756 | |
2025 | | $ | 119,712 | |
2026 | | $ | 120,400 | |
Total Operating Lease Obligations | | $ | 793,617 | |
Less: Amount representing interest | | $ | (32,294 | ) |
Present Value of minimum lease payments | | $ | 761,323 | |
The Company’s office space leases are short-term and the Company has elected under the short-term recognition exemption not to recognize them on the balance sheet. During the six months ended June 30, 2022, the Company recognized $41,708 in short-term lease costs associated with office space leases. The annual payments remaining for short-term office leases were as follows:
2022 - remaining | | $ | 25,715 | |
2023 | | $ | 22,505 | |
Total Operating Lease Liabilities | | $ | 48,220 | |
c) Grants Repayable
In 2010, the Company entered into an agreement with the Walloon Region government in Belgium for a colorectal cancer research grant for €1.05 million. Per the terms of the agreement, €314,406 of the grant is to be repaid, by installments over the period from June 30, 2014 to June 30, 2023. In the event that the Company receives revenue from products or services as defined in the agreement, it is due to pay a 6% royalty on such revenue to the Walloon Region. The maximum amount payable to the Walloon Region, in respect of the aggregate of the amount repayable of €314,406 and the 6.00% royalty on revenue, is equal to twice the amount of funding received. As of June 30, 2022, the grant balance repayable was $57,562.
In 2018, the Company entered into an agreement with the Walloon Region government in Belgium for a colorectal cancer research grant for €605,000. Per the terms of the agreement, €181,500 of the grant is to be repaid by installments over 12 years commencing in 2020. In the event that the Company receives revenue from products or services as defined in the agreement, it is due to pay a 3.53% royalty on such revenue to the Walloon Region. The maximum amount payable to the Walloon Region, in respect of the aggregate of the amount repayable of €181,500 and the 3.53% royalty on revenue, is equal to the amount of funding received. As of June 30, 2022, the grant balance repayable was $112,340.
In 2020, the Company entered into an agreement with the Walloon Region government in Belgium for a research grant for €929,433. Per the terms of the agreement, €278,830 of the grant is to be repaid by installments over 15 years commencing in 2022. In the event that the Company receives revenue from products or services as defined in the agreement, it is due to pay a 4.34% royalty on such revenue to the Walloon Region. The maximum amount payable to the Walloon Region, in respect of the aggregate of the amount repayable of €278,830 and the 4.34% royalty on revenue, is equal to the amount of funding received. As of June 30, 2022, the grant balance repayable was $48,605.
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 8 – Commitments and Contingencies (continued)
c) Grants Repayable (continued)
In 2020, the Company entered into an agreement with the Walloon Region government in Belgium for a research grant for €495,000. Per the terms of the agreement, €148,500 of the grant is to be repaid by installments over 10 years commencing in 2023. In the event that the Company receives revenue from products or services as defined in the agreement, it is due to pay a 2.89% royalty on such revenue to the Walloon Region. The maximum amount payable to the Walloon Region, in respect of the aggregate of the amount repayable of €148,500 and the 2.89% royalty on revenue, is equal to the amount of funding received. As of June 30, 2022, the grant balance repayable was $54,092.
As of June 30, 2022, the total grant balance repayable was $272,599 and the payments remaining were as follows:
2022 - remaining | | $ | 40,743 | |
2023 | | $ | 39,179 | |
2024 | | $ | 17,002 | |
2025 | | $ | 18,716 | |
2026 | | $ | 24,600 | |
Greater than 5 years | | $ | 132,359 | |
Total Grants Repayable | | $ | 272,599 | |
d) Long-Term Debt
In 2016, the Company entered into a 7-year loan agreement with Namur Invest for €440,000 with a fixed interest rate of 4.85%, maturing in December 2023. As of June 30, 2022, the principal balance payable was $119,470.
In 2016, the Company entered into a 15-year loan agreement with ING for €270,000 with a fixed interest rate of 2.62%, maturing in December 2031. As of June 30, 2022, the principal balance payable was $192,996.
In 2017, the Company entered into a 7-year loan agreement with SOFINEX for up to €1 million with a fixed interest rate of 4.50%, maturing in September 2024. As of June 30, 2022, €1 million had been drawn down under this agreement and the principal balance payable was $575,615.
In 2018, the Company entered into a 4-year loan agreement with Namur Innovation and Growth for €500,000 with a fixed interest rate of 4.00%, maturing in June 2022. As of June 30, 2022, the principal balance payable was $0.
In 2019, the Company entered into a 4-year loan agreement with Namur Innovation and Growth for €500,000 with a fixed interest rate of 4.80%, maturing in September 2024. As of June 30, 2022, the principal balance payable was $346,385.
On October 13, 2020, the Company entered into a 10-year loan agreement with Namur Invest for a maximum of €830,000 with fixed interest rate of 4.00%, maturing March 2031. As of June 30, 2022, the principal balance payable was $778,072.
On November 23, 2021, the Company entered into a 3 ½ year loan agreement with SOFINEX for a maximum of €450,000 with fixed interest rate of 5.00%, maturing June 2025. As of June 30, 2022, the principal balance payable was $470,958.
On February 5, 2022, the Company entered into a 9-month loan agreement with First Insurance Funding for a maximum of $620,549 with fixed interest rate of 3.57%, maturing November 2022. As of June 30, 2022, the maximum has been drawn down under this agreement and the principal balance payable was $344,749.
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 8 – Commitments and Contingencies (continued)
d) Long-Term Debt (continued)
As of June 30, 2022, the total balance for long-term debt payable was $2,828,245 and the payments remaining were as follows:
2022 - remaining | | $ | 796,290 | |
2023 | | $ | 772,436 | |
2024 | | $ | 631,800 | |
2025 | | $ | 208,663 | |
2026 | | $ | 128,713 | |
Greater than 5 years | | $ | 564,414 | |
Total | | $ | 3,102,316 | |
Less: Amount representing interest | | $ | (274,071 | ) |
Total Long-Term Debt | | $ | 2,828,245 | |
e) Collaborative Agreement Obligations
In 2016, the Company entered into a research co-operation agreement with DKFZ in Germany for a five-year period for €400,000. As of June 30, 2022, $209,315 is still to be paid by the Company under this agreement.
In 2018, the Company entered into a research collaboration agreement with the University of Taiwan for a three-year period for a cost to the Company of up to $2.55 million payable over such period. As of June 30, 2022, $510,000 is still to be paid by the Company under this agreement.
In 2019, the Company entered into a funded sponsored research agreement with the Texas A&M University (“TAMU”) in consideration for the license granted to the Company for a five-year period for a cost to the Company of up to $400,000 payable over such period. As of June 30, 2022, $18,994 is still to be paid by the Company under this agreement.
On September 16, 2020, the Company entered into a research agreement for the bioinformatic analysis of cell-free DNA fragments from whole-genome sequencing with the Hebrew University of Jerusalem for six months for a cost to the Company of €54,879. Subsequently the parties entered into an amendment to the agreement with an additional cost to the Company of €100,236. In the three months ended June 30, 2022, the parties entered into agreements for an additional cost to the Company of €39,000. As of June 30, 2022, $46,170 is still to be paid by the Company under the amended agreement.
As of June 30, 2022, the total amount to be paid for future research and collaboration commitments was approximately $ 784,479 and the payments remaining were as follows:
2022 - remaining | | $ | 784,479 | |
2022 - 2026 | | $ | - | |
Total Collaborative Agreement Obligations | | $ | 784,479 | |
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 8 – Commitments and Contingencies (continued)
f) Other Commitments
Volition Vet
On October 25, 2019, the Company entered into an agreement with TAMU for provision of in kind services of personnel, animal samples and laboratory equipment in exchange for a non-controlling interest of 7.5% in Volition Vet with an additional 5%, vesting in a year from the date of the agreement, giving TAMU in aggregate, a 12.5% equity interest as of such date. As of June 30, 2022, TAMU has a 12.5% equity interest in Volition Vet.
Volition Germany
On January 10, 2020, the Company, through its wholly-owned subsidiary Belgian Volition, acquired an epigenetic reagent company, Octamer GmbH (“Octamer”), based in Munich, Germany, and hired its founder for his expertise and knowledge to be passed to Company personnel. On March 9, 2020, Octamer was renamed to Volition Germany GmbH (or “Volition Germany”).
In connection with the transaction agreement, the Company entered into a royalty agreement with the founder providing for the payment of royalties in the amount of 6% of net sales of Volition Germany’s nucleosomes as reagents to pharmaceutical companies for use in the development, manufacture and screening of molecules for use as therapeutic drugs for a period of five years post-closing.
As of June 30, 2022, $217 is payable under the 6% royalty agreement on sales to date towards the Company’s aggregate minimum royalty obligation of $134,217.
Volition America
On November 3, 2020, the Company entered into a professional services master agreement with Diagnostic Oncology CRO, LLC ("DXOCRO") to conduct a pivotal clinical trial and provide regulatory submission and reimbursement related services. Under the terms of the agreement DXOCRO will provide ad hoc consulting assistance on a project-by-project basis related to the review and assessment of existing data and information to prepare recommended intended use claims and coverage/reimbursement plans to support the preparation of FDA pre-submissions, clinical trial protocol development and study administration, and potential 510k regulatory marketing submissions of the Company’s diagnostic tests, including those proposed for use as an adjunct diagnostic tool for common and aggressive forms of non-Hodgkin’s lymphoma. The initial projects contemplated by the agreement relating to non-Hodgkin’s lymphoma obligate the Company to pay in aggregate of up to $2.9 million over a period of 22 months. Such payment obligations are on a project-by-project basis as deliverables are executed and subject to certain terms and conditions. Additionally, the Company may terminate the agreement or any project with or without cause upon at least 30 days’ prior written notice. Unless earlier terminated, the term of the agreement is until December 31, 2025 or such later date as when all projects have been completed. As of June 30, 2022, $4,375 is payable by Company for services rendered under the agreement.
g) Legal Proceedings
There are no legal proceedings which the Company believes will have a material adverse effect on its financial position.
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 8 – Commitments and Contingencies (continued)
h) Commitments in Respect of Corporate Goals and Performance-Based Awards
In August 2021 and October 2021 the Compensation Committee of the Board of Directors approved the granting of equity-based awards under the 2015 Stock Incentive Plan as well as cash bonuses, vesting upon achievement of certain corporate goals focused around product development and commercialization, to various personnel including directors, executives, members of management, consultants and employees of the Company and/or its subsidiaries.
Conditional upon the achievement by July 1, 2022 of all specified corporate goals as set forth in the minutes of the Compensation Committee, as well as continued service by the award recipient, the Company at the sole discretion of the Chief Executive Officer and the Chief Financial Officer would pay a cash bonus to such award recipient. As of June 30, 2022, the Company has accrued compensation expense of $737,137 based on the actual outcomes related to the prescribed performance targets.
As discussed in detail in Note 8, - Stock-Based Compensation, of the notes to consolidated financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 2021, an aggregate of 1,000,000 stock options and 500,000 RSUs were issued under the 2015 Stock Incentive Plan in connection with the August and October 2021 grants.
On June 23, 2022, the Compensation Committee of the Board of Directors approved the achievement of all of the remaining outstanding corporate goals resulting in the payment of the cash bonus awards and the vesting of the rights to the equity-based awards, which equity-based awards remain subject to time-based vesting in equal installments on each of August 3, 2022 and August 3, 2023 (with the exception of October 4, 2022 and October 4, 2023 for one award) and the continuous service of the award recipient through the applicable vesting date.
As of June 30, 2022, the Company has recognized compensation expense of $1,303,627 in relation to such stock options and $1,113,059 in relation to such RSUs, based on the probable outcomes related to the prescribed performance targets on the outstanding awards.
As of June 30, 2022, the Company has unrecognized compensation expense of $635,526 in relation to such stock options and $541,337 in relation to such RSUs, based on the probable outcomes related to the prescribed performance targets on the outstanding awards.
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 9 – Subsequent Events
Equity Capital Raise
On July 29, 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Newbridge Securities Corporation (the “Underwriter”) in connection with an underwritten public offering (the “Offering”) of 3,450,000 shares (the “Shares”) of the Company’s common stock, $0.001 par value per share (“Common Stock”) pursuant to the Company’s shelf registration statement on Form S-3 (declared effective by the SEC on November 8, 2021, File No. 333-259783). The Underwriter purchased the Shares from the Company at a price of $2.00 per share on August 2, 2022. The net proceeds received by the Company for the sale and issuance of the Shares were approximately $6.4 million, before deducting offering expenses payable by the Company.
Non-Dilutive Funding from Namur Invest
In July 2022, Volition was awarded a $1.5 million (€1.5 million) loan by Namur Invest Capital Risk to fund an early access program for its Nu.Q® product portfolio at key sites across the EU, UK, and US. The loan bears interest at a rate of 6.00% per year and is repayable over four years with a maturity date of July 31, 2026.
Restricted Stock Units (RSUs)
On August 3, 2022, 230,102 RSUs vested and will result in the issuance of 191,992 shares of common stock and the remaining 38,110 shares of common stock will be withheld for taxes and returned as authorized shares under the 2015 Stock Incentive Plan.
Amendment to Agreement with DXOCRO
On August 8, 2022, Volition entered into an amendment to the agreement with DXOCRO to undertake additional clinical studies in the U.S. Pursuant to the agreement, as amended, DXOCRO will conduct large-scale finding studies across multiple sites in the U.S. using Volition's Nu.Q® NETs and Nu.Q® Cancer tests to determine clinical utility in sepsis and cancer. Under the revised agreement, the cost of the studies is estimated at up to $4.2 million, including the original project contemplated by the agreement, and is expected to be completed within the next 12 months. The amendment expands the scope of the agreement referred to under Note 8(f), Commitments and Contingencies - Other Commitments.