(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 March 31, 2018, 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, 2017 as filed with the Securities and Exchange Commission on March 1, 2018. The results of operations for the three month periods ended March 31, 2018 and 2017 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 $60,366,599, has negative cash flows from operations, and currently has no revenues, which creates substantial doubt about its ability to continue as a going concern for a period of one year from the date of issuance of these financial statements.
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 equity or debt financing; (c) granting licenses to third parties in exchange for specified up-front and/or back end 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 accomplishment of the plans described in the preceding paragraph and eventually to 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 March 31, 2018 include the accounts of the Company and its wholly-owned subsidiaries, Singapore Volition Pte. Limited, Belgian Volition SPRL (“Belgian Volition”), Hypergenomics Pte. Limited, Volition America, Inc., and Volition Diagnostics UK Limited. All significant intercompany balances and transactions have been eliminated in consolidation.
Basic and Diluted Loss Per Share
The Company computes 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 March 31, 2018, 1,962,547 dilutive warrants and options were excluded from the diluted EPS calculation as their effect is anti-dilutive. As of March 31, 2017, 1,386,887 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.
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 March 31, 2018 and December 31, 2017:
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
Accumulated
|
|
Net Carrying
|
|
|
|
|
Cost
|
|
Depreciation
|
|
Value
|
|
|
Useful Life
|
|
$
|
|
$
|
|
$
|
Computer hardware and software
|
|
3 years
|
|
266,155
|
|
115,265
|
|
150,890
|
Laboratory equipment
|
|
5 years
|
|
1,659,015
|
|
751,751
|
|
907,264
|
Office furniture and equipment
|
|
5 years
|
|
199,995
|
|
48,689
|
|
151,306
|
Buildings
|
|
30 years
|
|
1,616,415
|
|
58,362
|
|
1,558,053
|
Building improvements
|
|
5-15 years
|
|
692,614
|
|
48,315
|
|
644,299
|
Land
|
|
Not amortized
|
|
98,614
|
|
-
|
|
98,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,532,808
|
|
1,022,382
|
|
3,510,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
Accumulated
|
|
Net Carrying
|
|
|
|
|
Cost
|
|
Depreciation
|
|
Value
|
|
|
Useful Life
|
|
$
|
|
$
|
|
$
|
Computer hardware and software
|
|
3 years
|
|
239,133
|
|
93,422
|
|
145,711
|
Laboratory equipment
|
|
5 years
|
|
1,575,354
|
|
653,636
|
|
921,718
|
Office furniture and equipment
|
|
5 years
|
|
207,208
|
|
54,479
|
|
152,729
|
Buildings
|
|
30 years
|
|
1,571,004
|
|
43,632
|
|
1,527,372
|
Building improvements
|
|
5-15 years
|
|
673,157
|
|
35,748
|
|
637,409
|
Land
|
|
Not amortized
|
|
95,843
|
|
-
|
|
95,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,361,699
|
|
880,917
|
|
3,480,782
|
During the three-month periods ended March 31, 2018 and March 31, 2017, the Company recognized $137,705 and $72,357, respectively, in depreciation expense.
9
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ 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
$
|
|
March 31,
2018
Net Carrying
Value
$
|
|
|
|
|
|
|
|
|
|
|
Patents
|
1,243,616
|
|
677,488
|
|
566,128
|
|
|
|
|
|
|
|
Cost
$
|
|
Accumulated
Amortization
$
|
|
December 31,
2017
Net Carrying
Value
$
|
|
|
|
|
|
|
Patents
|
1,213,314
|
|
636,917
|
|
576,397
|
During the three-month periods ended March 31, 2018 and March 31, 2017, the Company recognized $23,682 and $20,920, respectively, in amortization expense.
The Company amortizes the long-lived assets on a straight-line basis with terms of 8 to 20 years. The annual estimated amortization schedule over the next five years is as follows:
2018- remaining
|
|
$
|
71,259
|
2019
|
|
$
|
94,941
|
2020
|
|
$
|
94,941
|
2021
|
|
$
|
94,941
|
2022
|
|
$
|
94,941
|
Thereafter
|
|
$
|
115,105
|
|
|
|
|
Total
|
|
$
|
566,128
|
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 as of December 31, 2017. The result of this review confirmed that the ongoing value of the patents was not impaired as of December 31, 2017.
Note 6 - Related Party Transactions
The Company has agreements with related parties for consultancy services, stock options and warrants.
10
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 7 - Common Stock
As of March 31, 2018, the Company was authorized to issue 100 million shares of common stock par value $0.001 per share, of which 30,030,793 and 26,519,394 shares were issued outstanding as of March 31, 2018 and December 31, 2017, respectively.
On March 13, 2018, the Company issued 3.5 million shares of common stock
in a registered public offering at a price of $2.40 per share, for
aggregate gross proceeds
of $8.4
million. In connection with the transaction
, $0.6 million was incurred for legal and underwriting fees resulting
in net proceeds of $7.8 million. Pursuant to this
offering, the underwriters had the
option to purchase up to an additional 525,000 shares
of common stock for 30
days following the pricing of the initial closing, which option was not exercised.
During the period ended March 31, 2018, 26,400 warrants were exercised to purchase shares of common stock at a price of $2.00 per share in a cashless exercise that resulted in the issuance of 11,399 shares of common stock.
Note 8 – Warrants and Options
a) Warrants
The following table summarizes the changes in warrants outstanding of the Company during the three-month period ended March 31, 2018:
|
|
Number of Warrants
|
|
Weighted
Average
Exercise Price
($)
|
Outstanding at December 31, 2017
|
|
1,731,680
|
|
2.36
|
Granted
|
|
-
|
|
-
|
Exercised
|
|
(26,400)
|
|
2.00
|
Expired
|
|
-
|
|
-
|
Outstanding at March 31, 2018
|
|
1,705,280
|
|
2.37
|
|
|
|
|
|
Exercisable at March 31, 2018
|
|
1,580,280
|
|
2.36
|
11
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 8 – Warrants and Options (continued)
Below is a table summarizing the warrants issued and outstanding as of March 31, 2018, which have a weighted average exercise price of $2.37 per share and an aggregate weighted average remaining contractual life of 1.20 years.
Number
Outstanding
|
|
Number
Exercisable
|
|
Exercise
Price ($)
|
|
Weighted
Average
Remaining
Contractual
Life
(Years)
|
|
Proceeds to
Company if
Exercised ($)
|
3,350
|
|
3,350
|
|
2.00
|
|
0.00
|
|
6,700
|
948,475
|
|
948,475
|
|
2.20
|
|
0.51
|
|
2,086,645
|
520,455
|
|
520,455
|
|
2.40
|
|
0.20
|
|
1,249,092
|
150,000
|
|
25,000
|
|
2.47
|
|
0.41
|
|
370,500
|
24,000
|
|
24,000
|
|
3.00
|
|
0.01
|
|
72,000
|
19,000
|
|
19,000
|
|
3.75
|
|
0.01
|
|
71,250
|
40,000
|
|
40,000
|
|
4.53
|
|
0.06
|
|
181,200
|
1,705,280
|
|
1,580,280
|
|
|
|
1.20
|
|
4,037,387
|
Warrant expense of $2,199 and $9,945 was recorded in the three-months ended March 31, 2018 and March 31, 2017, respectively. Total remaining unrecognized compensation cost related to non-vested warrants is approximately $23,391 and is expected to be recognized over a period of 2.8 years. As of March 31, 2018, the total intrinsic value of warrants was $191,034.
b) Options
The following table summarizes the changes in options outstanding of the Company during the three-month period ended March 31, 2018:
|
|
Number of
Options
|
|
Weighted
Average
Exercise
Price ($)
|
Outstanding at December 31, 2017
|
|
2,939,134
|
|
4.09
|
Granted
|
|
780,000
|
|
4.00
|
Exercised
|
|
-
|
|
-
|
Expired/Cancelled
|
|
(15,000)
|
|
5.44
|
Outstanding at March 31, 2018
|
|
3,704,134
|
|
4.06
|
|
|
|
|
|
Exercisable at March 31, 2018
|
|
2,814,134
|
|
4.04
|
Effective January 23, 2018, the Company granted stock options to purchase 780,000 shares of common stock. These options vest on January 23, 2019 and expire 5 years after the vesting date, with an exercise price of $4.00 per share. The Company has calculated the estimated fair market value of these options at $1,930,265, using the Black-Scholes model and the following assumptions: term 6 years, stock price $3.75, exercise price $4.00, 75.4% volatility, 2.55% risk free rate, and no forfeiture rate.
12
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 8 – Warrants and Options (continued)
Below is a table summarizing the options issued and outstanding as of March 31, 2018, all of which were issued pursuant to the 2011 Equity Incentive Plan (for option issuances prior to 2016) or the 2015 Stock Incentive Plan (the “2015 Plan”) (for option issuances commencing in 2016)
and
which have a weighted average exercise price of $4.06 per share and a weighted average remaining contractual life of 3.74 years
. As of March 31, 2018, an aggregate of 59,000 shares of common stock remained
available for future issuance
under the 2015 Plan
.
Number
Outstanding
|
|
Number
Exercisable
|
|
Exercise
Price ($)
|
|
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
|
|
0.08
|
|
806,250
|
326,667
|
|
326,667
|
|
3.00
|
|
0.16
|
|
980,001
|
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
|
|
2.25
|
|
7,581,332
|
17,767
|
|
17,767
|
|
4.35
|
|
0.02
|
|
77,286
|
50,000
|
|
50,000
|
|
4.80
|
|
0.06
|
|
240,000
|
1,031,334
|
|
921,334
|
|
5.00
|
|
1.14
|
|
5,156,670
|
5,000
|
|
5,000
|
|
6.31
|
|
0.00
|
|
31,550
|
3,704,134
|
|
2,814,134
|
|
|
|
3.74
|
|
15,050,358
|
Stock option expense of $895,226 and $584,261 was recorded in the three-months ended March 31, 2018 and March 31, 2017, respectively. Total remaining unrecognized compensation cost related to non-vested stock options is approximately $1,588,446 and is expected to be recognized over a period of 0.8 years. As of March 31, 2018, the total intrinsic value of stock options was $888.
13
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 9 – Commitments and Contingencies
a)
Capital Lease Obligations
In 2015, the Company entered into an equipment capital lease to purchase three Tecan machines (automated liquid handling robots) for €550,454 Euros. As of March 31, 2018, the balance payable was $220,707.
In 2016, the Company entered into a real estate capital lease with ING Asset Finance Belgium S.A. (“ING”) to purchase a property located in Belgium for €1.12 million Euros. As of March 31, 2018, the balance payable was $786,928.
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 March 31, 2018.
2018- remaining
|
$
|
125,862
|
2019
|
$
|
167,814
|
2020
|
$
|
115,383
|
2021
|
$
|
66,302
|
2022
|
$
|
66,302
|
Greater than 5 years
|
$
|
621,552
|
Total minimum lease payments
|
$
|
1,163,215
|
Less: Amount representing interest
|
$
|
(155,580)
|
|
|
|
Present value of minimum lease payments
|
$
|
1,007,635
|
b) Operating Lease Obligations
The Company also leases premises and facilities under operating leases with terms ranging from 12 months to 60 months. As of March 31, 2018, the annual non-cancelable operating lease payments on these leases are as follows:
2018- remaining
|
$
|
164,704
|
2019
|
$
|
66,241
|
2020
|
$
|
52,514
|
2021
|
$
|
14,404
|
Total Operating Lease Obligations
|
$
|
297,863
|
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 Euros. Per the terms of the agreement, €314,406 Euros of the grant is to be repaid. As of March 31, 2018, the balance repayable was $237,173 and the annual payments remaining were as follows:
2018- remaining
|
$
|
43,143
|
2019
|
$
|
43,143
|
2020
|
$
|
43,143
|
2021
|
$
|
39,946
|
2022
|
$
|
36,980
|
Greater than 5 years
|
$
|
30,818
|
Total Grants Repayable
|
$
|
237,173
|
14
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 9 – Commitments and Contingencies (continued)
d) Long-Term Debt
In 2016, the Company entered into a 7-year loan agreement with Namur Invest for €440,000 Euros with a fixed interest rate of 4.85%. As of March 31, 2018, the principal balance payable was $494,267.
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 March 31, 2018, the principal balance payable was $310,307.
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 March 31, 2018, the principal balance payable was $412,228.
In 2017, the Company entered into an 11-month loan agreement with ING for €200,000 Euros with a rolling interest rate of the Euribor rate + 2.00%. As of March 31, 2018, the principal balance payable was $246,534.
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 March 31, 2018, €250,000 Euros has been drawn down under this agreement and the principal balance payable was $308,167.
As of March 31, 2018, the total balance for long-term debt payable was $1,771,503 and the annual payments remaining were as follows:
2018- remaining
|
$
|
461,570
|
2019
|
$
|
332,667
|
2020
|
$
|
552,240
|
2021
|
$
|
190,901
|
2022
|
$
|
124,750
|
Greater than 5 years
|
$
|
343,132
|
Total
|
$
|
2,005,260
|
Less: Amount representing interest
|
$
|
(233,757)
|
|
|
|
Total Long-Term Debt
|
$
|
1,771,503
|
15
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 9 – Commitments and Contingencies (continued)
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 March 31, 2018, $92,450 is still to be paid
by the Company under 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 March 31, 2018, $246,534 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 March 31, 2018, $234,207 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 for a 2-year period for DKK 15 million Danish Kroner. As of March 31, 2018, $708,639 is still to be paid by the Company under this agreement.
In 2017, the Company entered into a research collaboration agreement with National University of Singapore for a 2-year period for $48,000. As of March 31, 2018, $9,600 is still to be paid by the Company under this agreement.
In 2017, the Company entered into a clinical study research agreement with
the Regents of the
University
of Michigan (the “University of Michigan”) for a 3-year period for
up to $3 million. As of March 31, 2018,
up to $2.5 million is still to be paid
by the Company under this agreement.
As of March 31, 2018, the total amount to be paid for future research
and collaboration commitments was $3,791,430 and the annual payments remaining were as follows:
2018- remaining
|
$
|
2,228,334
|
2019
|
$
|
1,063,096
|
2020
|
$
|
500,000
|
Total Collaborative Agreement Obligations
|
$
|
3,791,430
|
f) Legal Proceedings
There are no legal proceedings which the Company believes will have a material adverse effect on its financial position.
Note 10 – Subsequent Events
None.
END NOTES TO FINANCIALS
16