(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 - Condensed Financial Statements
The accompanying financial statements have been prepared by VolitionRx without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at September 30, 2017, and for all periods presented herein, have been made.
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’s Annual Report on Form 10-K, for the fiscal year ended December 31, 2016 as filed with the Securities and Exchange Commission on March 10, 2017. The results of operations for the periods ended September 30, 2017 and 2016 are not necessarily indicative of the operating results for the full years.
Note 2 - Going Concern
The Company’s 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 $51,651,296, has negative cash flows from operations, and currently has no revenues, which creates substantial doubt about its ability to continue as a going concern.
The future of the Company as an operating business will depend on its ability to obtain sufficient capital contributions, financing and/or 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 financing, (c) up front sales of licensing rights 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 secure other sources of financing and attain profitable operations. The accompanying 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.
Note 3 - Summary of Significant Accounting Policies
Basis of Presentation
The financial statements of the Company have been prepared in accordance with U.S. GAAP and are expressed in United States Dollars. The Company’s fiscal year end is December 31.
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.
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 will be affected.
7
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 3 - Summary of Significant Accounting Policies (continued)
Principles of Consolidation
The accompanying condensed consolidated financial statements for the period ended September 30, 2017 include the accounts of the Company and its wholly-owned subsidiaries, Singapore Volition Pte. Ltd, Belgian Volition SPRL (“Belgian Volition”), Hypergenomics Pte. Ltd, , 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
The Company computes net loss per share in accordance with Accounting Standards Codification (“ASC”) 260, “Earnings Per Share,” which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (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 and convertible preferred stock using the if-converted 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 September 30, 2017, 850,151 dilutive warrants and options and 2,283,582 potentially dilutive warrants and options were excluded from the diluted EPS calculation as their effect is anti-dilutive.
Reclassification
Certain balances in previously issued financial statements have been reclassified to be consistent with the current period presentation.
Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements issued since the last audit of our consolidated financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s consolidated financial statements. However, the following pronouncement has been adopted by the Company:
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
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 4 - Property and Equipment
The Company’s property and equipment consist of the following amounts as of September 30, 2017 and December 31, 2016:
|
|
|
|
Cost
$
|
|
Accumulated
Depreciation
$
|
|
September 30,
2017
Net Carrying
Value
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful Life
|
|
|
|
Computer hardware and software
|
|
3 years
|
|
267,773
|
|
110,888
|
|
156,885
|
Laboratory equipment
|
|
5 years
|
|
817,851
|
|
262,517
|
|
555,334
|
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
|
Buildings
|
|
30 years
|
|
1,549,446
|
|
30,096
|
|
1,519,350
|
Building improvements
|
|
5 -15 years
|
|
683,820
|
|
26,158
|
|
657,662
|
Land
|
|
Not amortized
|
|
94,528
|
|
-
|
|
94,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,275,219
|
|
764,864
|
|
3,510,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2016
Net Carrying
Value
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Depreciation
$
|
|
|
|
|
|
Cost
$
|
|
|
|
|
Useful Life
|
|
|
|
Computer hardware and software
|
|
3 years
|
|
155,870
|
|
67,097
|
|
88,773
|
Laboratory equipment
|
|
5 years
|
|
313,655
|
|
151,541
|
|
162,114
|
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
|
Buildings
|
|
30 years
|
|
1,378,911
|
|
-
|
|
1,378,911
|
Building improvements
|
|
5 -15 years
|
|
-
|
|
-
|
|
-
|
Land
|
|
Not amortized
|
|
84,124
|
|
-
|
|
84,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,544,322
|
|
425,295
|
|
2,119,027
|
During the nine-month period ended September 30, 2017 and the nine-month period ended September 30, 2016, the Company recognized $306,180 and $165,293 respectively, in depreciation expense.
9
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 5 - Intangible Assets
The Company’s intangible assets consist of intellectual property and patents, mainly acquired in the acquisition of Belgian Volition (formerly ValiBio SA). The patents and intellectual property are being amortized over the assets’ estimated useful lives, which range from 8 to 20 years.
|
|
Cost
$
|
|
|
Accumulated
Amortization
$
|
|
September 30,
2017
Net Carrying
Value
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents
|
|
1,198,930
|
|
|
606,054
|
|
592,876
|
|
|
|
|
|
|
|
|
|
|
1,198,930
|
|
|
606,054
|
|
592,876
|
|
|
|
|
|
|
|
|
|
|
Cost
$
|
|
|
Accumulated
Amortization
$
|
|
December 31,
2016
Net Carrying
Value
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents
|
|
1,085,133
|
|
|
482,940
|
|
602,193
|
|
|
1,085,133
|
|
|
482,940
|
|
602,193
|
During the nine-month period ended September 30, 2017, and the nine-month period ended September 30, 2016, the Company recognized $65,182 and $65,313, respectively, in amortization expense.
The Company amortizes the long-lived assets 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:
2017 - remaining
|
$26,321
|
2018
|
$91,504
|
2019
|
$91,504
|
2020
|
$91,504
|
2021
|
$91,504
|
The Company reviews its long-lived assets on an annual basis, to ensure that their carrying value does not exceed their fair market value. The Company carried out such a review in accordance with ASC 360 as of December 31, 2016. The result of this review confirmed that the fair value of the patents exceeded their carrying value as of December 31, 2016.
10
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 6 - Related Party Transactions
The Company has agreements with related parties for consultancy services, stock options and warrants. See Notes 8 (a), 8(b) and 9(b), for further details concerning these agreements.
Note 7 - Common Stock
Issuances Upon Warrant Exercises
On January 26, 2017, 2,000 warrants were exercised at a price of $2.40 per share, for net cash proceeds to the Company of $4,800. As a result, a total of 2,000 shares of common stock were issued.
From March 13, 2017 through April 3, 2017, 27,500 warrants were exercised at a price of $2.20 per share, for net cash proceeds to the Company of $60,500. As a result, a total of 27,500 shares of common stock were issued.
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 $108,000. As a result, a total of 45,000 shares of common stock were issued.
Note 8 – Warrants and Options
a) Warrants
See Note 7.
The following table summarizes the changes in warrants outstanding of the Company during the nine-month period ended September 30, 2017:
|
|
Number of Warrants
|
|
Weighted Average
Exercise Price ($)
|
Outstanding at December 31, 2016
|
|
2,162,638
|
|
2.40
|
Granted
|
|
-
|
|
-
|
Exercised
|
|
(392,651)
|
|
(2.38)
|
Expired
|
|
(38,307)
|
|
(2.40)
|
Outstanding at September 30, 2017
|
|
1,731,680
|
|
2.36
|
|
|
|
|
|
Exercisable at September 30, 2017
|
|
1,606,680
|
|
2.35
|
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: $2.47, 55.65% volatility, 0.66% risk free rate.
11
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ 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.
Below is a table summarizing the warrants issued and outstanding as of September 30, 2017, which have a weighted average exercise price of $2.36 per share and an aggregate weighted average remaining contractual life of 1.55 years.
Date Issued
|
|
Number Outstanding
|
|
Number Exercisable
|
|
Exercise Price ($)
|
|
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
|
Total remaining unrecognized compensation cost related to non-vested warrants is approximately $41,324 and is expected to be recognized over a period of 1.3 years. As of September 30, 2017, the total intrinsic value of warrants was $570,291.
12
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 8 – Warrants and Options (continued)
b) Options
The following table summarizes the changes in options outstanding of the Company during the nine-month period ended September
30, 2017:
|
|
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
|
Effective January 1, 2017, the Company granted stock options to purchase 50,000 shares of common stock. These options vest on January 1, 2018 and expire 5 years after the vesting date, with an exercise price of $4.80 per share. The Company has calculated the estimated fair market value of these options at $157,890, using the Black-Scholes model and the following assumptions: term 6 years, stock price $4.57, exercise price $4.80, 80.70% volatility, 2.26% risk free rate.
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 $5.00, 78.41% volatility, 2.16% risk free rate.
Effective August 14, 2017, the Company amended the expiry period of stock options to purchase 37,000 shares of common stock, which options were originally granted on March 20, 2013 and amended on June 27, 2016. The expiration period was extended from four to six years, with the outside expiration date of March 20, 2022, after vesting for all 37,000 stock options. The Company recalculated the estimated fair market value of these options using the Black-Scholes model, but the result was deemed to be immaterially different to the original calculation and the financial statements were not adjusted.
13
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ 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.
Below is a table summarizing the options issued and outstanding as of September 30, 2017, all of which were issued pursuant to the 2011 Equity Incentive Plan (for option issuances prior to 2016) or the 2015 Plan (for option issuances commencing in 2016) and which have a weighted average exercise price of $4.08 per share and an aggregate weighted average remaining contractual life of 3.56 years.
Date
Issued
|
|
Number
Outstanding
|
|
Number
Exercisable
|
|
Exercise
Price ($)
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total remaining unrecognized compensation cost related to non-vested stock options is approximately $1,160,892 and is expected to be recognized over a period of 1.0 years. As of September 30, 2017, the total intrinsic value of stock options was $46,900.
14
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 9 – Commitments and Contingencies
a) Walloon Region Grant
On March 16, 2010, the Company entered into an agreement with the Walloon Region government in Belgium wherein the Walloon Region would fund up to a maximum of $1,238,340 (€1,048,020) to help the research endeavors of the Company in the area of colorectal cancer (“CRC”). The Company had received the entirety of these funds in respect of approved expenditures as of June 30, 2014. Under the terms of the agreement, the Company is due to repay $371,502 (€314,406) of this amount by installments over the period from June 30, 2014 to June 30, 2023. The Company has recorded the balance of $866,838 (€733,614) to other income in previous years as there is no obligation to repay this amount. 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 $371,502 (€314,406) and the 6% royalty on revenue, is twice the amount of funding received. As at September 30, 2017, $227,347 (€192,406) was outstanding to be repaid to the Walloon Region under this agreement.
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 leases three Tecan machines (automated liquid handling robots) under a lease classified as a capital lease. The total cost 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 to the income statement, related to 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 Volition entered into a Real Estate Capital Lease Agreement (the “Capital Lease Agreement”) with ING Asset Finance Belgium S.A. (“ING”). The Capital Lease Agreement became 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 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 Price 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 $nil (€nil) for the nine months ended September 30, 2016.
15
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ 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 September 30, 2017.
2017
|
|
$
|
40,216
|
2018
|
|
$
|
160,860
|
2019
|
|
$
|
160,862
|
2020
|
|
$
|
110,603
|
2021
|
|
$
|
63,555
|
Thereafter
|
|
$
|
659,357
|
|
|
|
|
Total minimum lease payments
|
|
$
|
1,195,453
|
Less: Amount representing interest
|
|
$
|
(161,843)
|
|
|
|
|
Present value of minimum lease payments
|
|
$
|
1,033,610
|
|
|
|
|
Made up of:
|
|
|
|
Current portion
|
|
$
|
136,307
|
Long term portion
|
|
$
|
897,303
|
|
|
|
|
Present value of minimum lease payments
|
|
$
|
1,033,610
|
The Company also leases premises and facilities under operating leases with terms ranging from 12 months to 60 months. The annual non-cancelable operating lease payments on these leases are as follows:
2017
|
$
|
204,965
|
2018
|
$
|
221,240
|
2019
|
$
|
85,088
|
2020
|
$
|
50,333
|
2021
|
$
|
13,803
|
Total
|
$
|
575,429
|
d)
Hvidovre Hospital, Denmark Agreement
On November 2, 2016, the Company entered into a clinical research agreement with Hvidovre Hospital, University of Copenhagen in Denmark, relating to a program of samples testing associated with CRC and other diseases. The first phase of the agreement will expire on September 30, 2018 and the Company may participate in additional phases upon its election (and payment of required amounts). Total payments (inclusive of local taxes) to be made by the Company under the agreement for the first phase are $2,382,995 (DKR 15,000,000).
16
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ 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. for 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.Q
TM
Colorectal Cancer Screening Triage Test.
f) Long Term Debt: ING Loan Agreement
On October 25, 2016, Belgian Volition entered into a secured loan agreement with ING for an amount up to $319,032 (€270,000) (the “Supplemental Loan”). The Supplemental Loan provides for a 15-year term commencing on March 31, 2017, a fixed interest rate at 2.96%, and quarterly repayments of $6,542 (€5,536), commencing on April 28, 2017. The maximum amount of the loan facility had been drawn down by Belgian Volition by the loan commencement date of March 31, 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 America entered into a Clinical Study 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 a clinical study (the “University of Michigan Clinical Study Agreement”) involving approximately 13,500 samples. The enrollment period and sample collection is anticipated to take 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 $1,200,000 (€1,000,000) (the “SOFINEX Loan Agreement”). The SOFINEX Loan Agreement provides for a 7-year repayment term, with a grace period for principal payments until December 31, 2019, and a fixed interest rate of 4.5%. As of September 30, 2017, no cash has been drawn down under this agreement.
j) Legal Proceedings
There are no legal proceedings which the Company believes will have a material adverse effect on its financial position.
17
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 10 – Subsequent Events
None.
END NOTES TO FINANCIALS
18