10-Q 1 vnrx_10q.htm FORM 10-Q vnrx_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to                 

 

Commission File Number: 001-36833

 

VOLITIONRX LIMITED

(Exact name of registrant as specified in its charter)

 

Delaware

 

91-1949078

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1489 West Warm Springs Road, Suite 110

Henderson, Nevada 89014 

(Address of principal executive offices) (Zip Code)

 

+1 (646) 650–1351 

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, par value $0.001 per share

VNRX

NYSE American, LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes     ☒ No

 

As of November 7, 2023, there were 78,685,873 shares of the registrant’s $0.001 par value common stock issued and outstanding.

 

 

 

 

VOLITIONRX LIMITED

 

QUARTERLY REPORT ON FORM 10-Q

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023

 

TABLE OF CONTENTS

 

PART I

FINANCIAL INFORMATION

 

PAGE

 

 

 

 

 

 

Item 1.

FINANCIAL STATEMENTS (UNAUDITED)

 

4

 

 

 

 

 

 

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

38

 

 

 

 

 

 

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

46

 

 

 

 

 

 

Item 4.

CONTROLS AND PROCEDURES

 

46

 

 

 

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

 

 

 

 

Item 1.

LEGAL PROCEEDINGS

 

48

 

 

 

 

 

 

Item 1A.

RISK FACTORS

 

48

 

 

 

 

 

 

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

48

 

 

 

 

 

 

Item 3.

DEFAULTS UPON SENIOR SECURITIES

 

48

 

 

 

 

 

 

Item 4.

MINE SAFETY DISCLOSURES

 

48

 

 

 

 

 

 

Item 5.

OTHER INFORMATION

 

48

 

 

 

 

 

 

Item 6.

EXHIBITS

 

49

 

 

 

 

 

 

SIGNATURES

 

50

 

 

 

Use of Terms

 

Except as otherwise indicated by the context, references in this Quarterly Report on Form 10-Q to the “Company,” “VolitionRx,” “Volition,” “we,” “us,” and “our” are references to VolitionRx Limited and its wholly owned subsidiaries, Volition Global Services SRL, Singapore Volition Pte. Limited, Belgian Volition SRL, Volition Diagnostics UK Limited, Volition America, Inc., Volition Germany GmbH, and its majority-owned subsidiary, Volition Veterinary Diagnostics Development LLC. Additionally, unless otherwise specified, all references to “$” refer to the legal currency of the United States of America.

 

NucleosomicsTM,, Nu.Q® and their respective logos are trademarks and/or service marks of VolitionRx and its subsidiaries. All other trademarks, service marks and trade names referred to herein are the property of their respective owners.

 

 
2

Table of Contents

 

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, or this Report, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Report or incorporated by reference into this Report are forward-looking statements. These statements include, among other things, statements regarding predictions of earnings, revenues, expenses or other financial items; plans or expectations with respect to our development activities or business strategy; clinical studies and results; industry trends; anticipated demand for our products, or the products of our competitors; manufacturing forecasts, and the potential impact of our relationship with contract manufacturers and original equipment manufacturers on our business; the commercialization of our products and the relationships and anticipated outcome of our engagements with our licensors; the future cost and potential benefits of our research and development efforts; forecasts of our liquidity position or available cash resources; our anticipated use of our cash reserves; the impact of pending litigation; and statements relating to the assumptions underlying any of the foregoing. Throughout this Report, we have attempted to identify forward-looking statements by using words such as “may,” “believe,” “will,” “could,” “project,” “anticipate,” “expect,” “estimate,” “should,” “continue,” “potential,” “plan,” “forecasts,” “goal,” “seek,” “intend,” other forms of these words or similar words or expressions or the negative thereof (although not all forward-looking statements contain these words).

 

We have based our forward-looking statements on our current expectations and projections about trends affecting our business and industry and other future events. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Forward-looking statements are subject to substantial risks and uncertainties that could cause our future business, financial condition, results of operations or performance, to differ materially from our historical results or those expressed or implied in any forward-looking statement contained in this Report.

 

Some significant factors that may impact our estimates and forward-looking statements include, but are not limited to:

 

·

Our inability to generate any significant revenue or achieve profitability;

·

Our need to raise additional capital in the future;

·

Our expectations to expand our product development and sales and marketing capabilities could give rise to difficulties in managing our growth;

·

Our dependence on third-party distributors;

·

Our limited experience with sales and marketing;

·

The possibility that we may not be able to continue to operate, as indicated by the “going concern” opinion from our auditors;

·

Our ability to successfully develop, manufacture, market, and sell our future products;

·

Our ability to timely obtain necessary regulatory clearances or approvals to distribute and market our future products;

·

The acceptance by the marketplace of our future products;

·

The highly competitive and rapidly changing nature of the diagnostics market;

·

Protection of our patents, intellectual property and trade secrets;

·

Our reliance on third parties to manufacture and supply our intended products, and such manufacturers’ dependence on third-party suppliers;

·

The material weaknesses in our internal control over financial reporting that we have identified;

·

Business disruptions and economic and other uncertainties; and

·

Other risks identified elsewhere in this Report, as well as in our other filings with the Securities and Exchange Commission (the “SEC”).

 

In addition, actual results may differ as a result of additional risks and uncertainties of which we are currently unaware or which we do not currently view as material to our business. For these reasons, readers are cautioned not to place undue reliance on any forward-looking statements. Our actual financial condition and results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” within this Report, as well as in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on March 15, 2023,  or our Annual Report, in the documents that we file as exhibits to this Report and the documents that we incorporate by reference into this Report, with the understanding that our future results may be materially different from what we currently expect. The forward-looking statements we make speak only as of the date on which they are made. Except as required by law or the listing rules of the NYSE American Market, we expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof. If we do update or correct any forward-looking statements, readers should not conclude that we will make additional updates or corrections. We qualify all of our forward-looking statements with these cautionary statements.

 

 
3

Table of Contents

 

PART I FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

 

 

Page

 

 

Condensed Consolidated Balance Sheets

5

Condensed Consolidated Statements of Operations and Comprehensive Loss

6

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

7

Condensed Consolidated Statements of Cash Flows

9

Notes to the Condensed Consolidated Financial Statements

10

 

 
4

Table of Contents

 

VOLITIONRX LIMITED

Condensed Consolidated Balance Sheets

(Expressed in United States Dollars, except share numbers)

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

$

 

 

 $

 

ASSETS

 

(UNAUDITED)

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

 

10,808,747

 

 

 

10,867,050

 

Accounts receivable

 

 

34,441

 

 

 

72,609

 

Prepaid expenses

 

 

860,780

 

 

 

784,920

 

Other current assets

 

 

493,351

 

 

 

447,566

 

Total Current Assets

 

 

12,197,319

 

 

 

12,172,145

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

5,304,805

 

 

 

5,393,012

 

Operating lease right-of-use assets

 

 

490,468

 

 

 

619,392

 

Intangible assets, net

 

 

48,276

 

 

 

110,505

 

Total Assets

 

 

18,040,868

 

 

 

18,295,054

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

 

3,059,844

 

 

 

3,043,008

 

Accrued liabilities

 

 

2,867,610

 

 

 

2,872,247

 

Deferred revenue

 

 

10,000,000

 

 

 

10,000,000

 

Management and directors’ fees payable

 

 

59,982

 

 

 

71,119

 

Current portion of long-term debt

 

 

1,258,193

 

 

 

1,066,700

 

Current portion of finance lease liabilities

 

 

46,279

 

 

 

46,014

 

Current portion of operating lease liabilities

 

 

194,772

 

 

 

245,163

 

Current portion of grant repayable

 

 

50,349

 

 

 

41,836

 

Warrant liability

 

 

117,115

 

 

 

-

 

Total Current Liabilities

 

 

17,654,144

 

 

 

17,386,087

 

 

 

 

 

 

 

 

 

 

Long-term debt, net of current portion

 

 

2,086,200

 

 

 

2,779,240

 

Finance lease liabilities, net of current portion

 

 

395,390

 

 

 

436,132

 

Operating lease liabilities, net of current portion

 

 

323,957

 

 

 

400,091

 

Grant repayable, net of current portion

 

 

432,486

 

 

 

420,466

 

Total Long-Term Liabilities

 

 

3,238,033

 

 

 

4,035,929

 

Total Liabilities

 

 

20,892,177

 

 

 

21,422,016

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity (Deficit)

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

Authorized: 100,000,000 shares of common stock, at $0.001 par value per share

 

 

 

 

 

 

 

 

Issued and outstanding: 78,342,417 shares and 57,873,379 shares, respectively

 

 

78,343

 

 

 

57,873

 

Additional paid-in capital

 

 

191,517,500

 

 

 

164,397,468

 

Accumulated other comprehensive income

 

 

239,622

 

 

 

227,097

 

Accumulated deficit

 

 

(193,878,257)

 

 

(167,257,429)

Total VolitionRx Limited Stockholders' Equity (Deficit)

 

 

(2,042,792)

 

 

(2,574,991)

   Non-controlling interest

 

 

(808,517)

 

 

(551,971)

Total Stockholders’ Equity (Deficit)

 

 

(2,851,309)

 

 

(3,126,962)

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Equity (Deficit)

 

 

18,040,868

 

 

 

18,295,054

 

 

 

 

 

 

 

 

 

 

(The accompanying notes are an integral part of these condensed consolidated financial statements)

 

 
5

Table of Contents

 

VOLITIONRX LIMITED

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(Expressed in United States Dollars, except share numbers)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2023

$

 

 

2022

$

 

 

2023

$

 

 

2022

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Services

 

 

37,688

 

 

 

9,881

 

 

 

93,207

 

 

 

80,181

 

Royalty

 

 

-

 

 

 

2,911

 

 

 

-

 

 

 

2,911

 

Product

 

 

127,523

 

 

 

19,922

 

 

 

438,122

 

 

 

103,585

 

Total Revenues

 

 

165,211

 

 

 

32,714

 

 

 

531,329

 

 

 

186,677

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

4,650,658

 

 

 

4,002,212

 

 

 

15,007,623

 

 

 

11,202,902

 

General and administrative

 

 

2,599,908

 

 

 

2,498,506

 

 

 

7,826,568

 

 

 

7,855,184

 

Sales and marketing

 

 

1,567,700

 

 

 

1,524,952

 

 

 

4,944,259

 

 

 

4,897,999

 

Total Operating Expenses

 

 

8,818,266

 

 

 

8,025,670

 

 

 

27,778,450

 

 

 

23,956,085

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Loss

 

 

(8,653,055)

 

 

(7,992,956)

 

 

(27,247,121)

 

 

(23,769,408)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grant income

 

 

48,656

 

 

 

171,439

 

 

 

214,451

 

 

 

564,879

 

Loss on disposal of fixed assets

 

 

(15,913)

 

 

-

 

 

 

(15,913)

 

 

-

 

Interest income

 

 

230

 

 

 

46,945

 

 

 

84,987

 

 

 

58,108

 

Interest expense

 

 

(53,980)

 

 

(37,699)

 

 

(163,623)

 

 

(115,860)

Gain on change in fair value of warrant liability

 

 

220,874

 

 

 

-

 

 

 

249,845

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Other Income

 

 

199,867

 

 

 

180,685

 

 

 

369,747

 

 

 

507,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

(8,453,188)

 

 

(7,812,271)

 

 

(26,877,374)

 

 

(23,262,281)

Net Loss Attributable to Non-Controlling Interest

 

 

82,887

 

 

 

69,305

 

 

 

256,546

 

 

 

235,584

 

Net Loss Attributable to VolitionRx Limited Stockholders

 

 

(8,370,301)

 

 

(7,742,966)

 

 

(26,620,828)

 

 

(23,026,697)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

31,291

 

 

 

71,027

 

 

 

12,525

 

 

 

167,220

 

Net Comprehensive Loss

 

 

(8,421,897)

 

 

(7,741,244)

 

 

(26,864,849)

 

 

(23,095,061)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Per Share – Basic and Diluted Attributable to VolitionRx Limited

 

 

(0.11)

 

 

(0.14)

 

 

(0.39)

 

 

(0.42)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

– Basic and Diluted

 

 

78,176,859

 

 

 

56,120,079

 

 

 

68,494,766

 

 

 

54,603,929

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(The accompanying notes are an integral part of these condensed consolidated financial statements)

 

 
6

Table of Contents

 

VOLITIONRX LIMITED

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited)

(Expressed in United States Dollars, except share numbers)

 

 For the Nine Months Ended September 30, 2023 and September 30, 2022

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

Non -

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Controlling

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Interest

 

 

Total

 

 

 

#

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Balance, December 31, 2022

 

 

57,873,379

 

 

 

57,873

 

 

 

164,397,468

 

 

 

227,097

 

 

 

(167,257,429)

 

 

(551,971)

 

 

(3,126,962)

Common stock issued for cash, net of issuance costs

 

 

5,224,703

 

 

 

5,225

 

 

 

8,422,430

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,427,655

 

Common stock issued for settlement of RSUs

 

 

26,978

 

 

 

27

 

 

 

(27)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Common stock repurchased

 

 

(13,294)

 

 

(13)

 

 

(31,759)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(31,772)

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

693,657

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

693,657

 

Tax withholdings paid related to stock-based compensation

 

 

-

 

 

 

-

 

 

 

(14,336)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(14,336)

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(56,478)

 

 

-

 

 

 

-

 

 

 

(56,478)

Net loss for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,779,548)

 

 

(93,361)

 

 

(8,872,909)

Balance, March 31, 2023

 

 

63,111,766

 

 

 

63,112

 

 

 

173,467,433

 

 

 

170,619

 

 

 

(176,036,977)

 

 

(645,332)

 

 

(2,981,145)

Common stock issued for cash, net of issuance costs and allocation to warrant liability

 

 

14,950,000

 

 

 

14,950

 

 

 

17,071,656

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17,086,606

 

Common stock issued for settlement of RSUs

 

 

74,598

 

 

 

75

 

 

 

(75)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

592,174

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

592,174

 

Tax withholdings paid related to stock-based compensation

 

 

-

 

 

 

-

 

 

 

(65,895)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(65,895)

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

37,712

 

 

 

-

 

 

 

-

 

 

 

37,712

 

Net loss for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,470,979)

 

 

(80,298)

 

 

(9,551,277)

Balance, June 30, 2023

 

 

78,136,364

 

 

 

78,137

 

 

 

191,065,293

 

 

 

208,331

 

 

 

(185,507,956)

 

 

(725,630)

 

 

5,118,175

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance costs

 

 

-

 

 

 

-

 

 

 

(12,501)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(12,501)

Common stock issued for settlement of RSUs

 

 

206,053

 

 

 

206

 

 

 

(206)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

537,980

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

537,980

 

Tax withholdings paid related to stock-based compensation

 

 

-

 

 

 

-

 

 

 

(73,066)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(73,066)

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

31,291

 

 

 

-

 

 

 

-

 

 

 

31,291

 

Net loss for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,370,301)

 

 

(82,887)

 

 

(8,453,188)

Balance, September 30, 2023

 

 

78,342,417

 

 

 

78,343

 

 

 

191,517,500

 

 

 

239,622

 

 

 

(193,878,257)

 

 

(808,517)

 

 

(2,851,309)

 

 
7

Table of Contents

 

VOLITIONRX LIMITED

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(Expressed in United States Dollars, except share numbers)

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Non -

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Controlling

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Interest

 

 

Total

 

 

 

#

 

 

$

 

 

$

 

 

$

 

 

 $

 

 

$

 

$

Balance, December 31, 2021

 

 

53,772,261

 

 

 

53,772

 

 

 

154,730,938

 

 

 

148,326

 

 

 

(136,988,636)

 

 

(222,295)

 

 

17,722,105

 

Common stock issued for cash, net of issuance costs

 

 

3,000

 

 

 

3

 

 

 

9,464

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9,467

 

Common stock issued for settlement of RSUs

 

 

15,000

 

 

 

15

 

 

 

(15)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

915,031

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

915,031

 

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(117,904)

 

 

-

 

 

 

-

 

 

 

(117,904)

Net loss for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,634,030)

 

 

(83,977)

 

 

(7,718,007)

Balance, March 31, 2022

 

 

53,790,261

 

 

 

53,790

 

 

 

155,655,418

 

 

 

30,422

 

 

 

(144,622,666)

 

 

(306,272)

 

 

10,810,692

 

Common stock issued for settlement of RSUs

 

 

56,712

 

 

 

57

 

 

 

(57)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

854,304

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

854,304

 

Tax withholdings paid related to stock-based compensation

 

 

-

 

 

 

-

 

 

 

(67,988)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(67,988)

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

214,097

 

 

 

-

 

 

 

-

 

 

 

214,097

 

Net loss for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,649,701)

 

 

(82,302)

 

 

(7,732,003)

Balance, June 30, 2022

 

 

53,846,973

 

 

 

53,847

 

 

 

156,441,677

 

 

 

244,519

 

 

 

(152,272,367)

 

 

(388,574)

 

 

4,079,102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for cash

 

 

3,450,000

 

 

 

3,450

 

 

 

5,941,733

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,945,183

 

Common stock issued for settlement of RSUs

 

 

199,030

 

 

 

199

 

 

 

(199)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

639,075

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

639,075

 

Tax withholdings paid related to stock-based compensation

 

 

-

 

 

 

-

 

 

 

(82,288)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(82,288)

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

71,027

 

 

 

-

 

 

 

-

 

 

 

71,027

 

Net loss for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,742,966)

 

 

(69,305)

 

 

(7,812,271)

Balance, September 30, 2022

 

 

57,496,003

 

 

 

57,496

 

 

 

162,939,998

 

 

 

315,546

 

 

 

(160,015,333)

 

 

(457,879)

 

 

2,839,828

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (The accompanying notes are an integral part of these condensed consolidated financial statements)

 

 
8

Table of Contents

 

VOLITIONRX LIMITED

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Expressed in United States Dollars)

 

 

 

Nine Months Ended

September 30,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

$$

 

Operating Activities

 

 

 

 

 

 

Net loss

 

 

(26,877,374)

 

 

(23,262,281)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

855,947

 

 

 

687,116

 

Amortization of operating lease right-of-use assets

 

 

194,036

 

 

 

193,444

 

Loss on disposal of fixed assets

 

 

15,913

 

 

 

-

 

Stock-based compensation

 

 

1,823,811

 

 

 

2,408,410

 

Gain on change in fair value of warrant liability

 

 

(249,845)

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

(2,402)

 

 

(227,381)

Accounts receivable

 

 

(34,441)

 

 

6,960

 

Other current assets

 

 

(45,785)

 

 

360,414

 

Deferred revenue, current and non-current

 

 

-

 

 

 

9,987,488

 

Accounts payable and accrued liabilities

 

 

12,128

 

 

 

545,266

 

Management and directors’ fees payable

 

 

(11,137)

 

 

339

 

Right-of-use assets operating leases liabilities

 

 

(191,586)

 

 

(173,830)

Net Cash Used In Operating Activities

 

 

(24,510,735)

 

 

(9,474,055)

Investing Activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(775,027)

 

 

(991,430)

Net Cash Used In Investing Activities

 

 

(775,027)

 

 

(991,430)

Financing Activities

 

 

 

 

 

 

 

 

Net proceeds from issuances of common stock

 

 

25,868,720

 

 

 

5,954,650

 

Tax withholdings paid related to stock-based compensation

 

 

(153,297)

 

 

(150,276)

Common stock repurchased

 

 

(31,772)

 

 

-

 

Proceeds from grants repayable

 

 

-

 

 

 

210,603

 

Proceeds from long-term debt

 

 

216,908

 

 

 

1,011,835

 

Payments on long-term debt

 

 

(680,325)

 

 

(941,857)

Payments on grants repayable

 

 

27,052

 

 

 

(37,824)

Payments on finance lease obligations

 

 

(35,071)

 

 

(35,063)

Net Cash Provided By Financing Activities

 

 

25,212,215

 

 

 

6,012,068

 

Effect of foreign exchange on cash

 

 

15,244

 

 

 

288,173

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(58,303)

 

 

(4,165,244)

Cash and cash equivalents – beginning of the period

 

 

10,867,050

 

 

 

20,581,313

 

Cash and cash equivalents – End of Period

 

 

10,808,747

 

 

 

16,416,069

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information

 

 

 

 

 

 

 

 

Interest paid

 

 

163,623

 

 

 

115,860

 

Offering costs from issuance of common stock

 

 

239,772

 

 

 

420,819

 

Non-Cash Financing Activities

 

 

 

 

 

 

 

 

Common stock issued for settlement of vested RSUs

 

 

308

 

 

 

271

 

Fair value of warrants issued in connection with public offering

 

 

366,960

 

 

 

-

 

Non-cash note payable

 

 

356,258

 

 

 

620,549

 

 

 

 

 

 

 

 

 

 

(The accompanying notes are an integral part of these condensed consolidated financial statements)

 

 
9

Table of Contents

  

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

 

Basis of Presentation

 

The interim condensed consolidated financial statements of VolitionRx Limited (the “Company” or “VolitionRx”) for the three and nine months ended September 30, 2023 and September 30, 2022, 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 condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position as of September 30, 2023, and its results of operations and cash flows for the periods ended September 30, 2023 and September 30, 2022. The results of operations for the periods ended September 30, 2023 and September 30, 2022, are not necessarily indicative of the results for a full-year period. These interim condensed 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, 2022, which was filed with the Securities and Exchange Commission (the "SEC") on March 15, 2023 (the “Annual Report”).

 

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. In addition, the Company has considered the potential impact of certain economic factors, including inflation, rising interest rates, and recessionary pressures, on its business and operations. Although the full impact of these factors is unknown and cannot be reasonably estimated, the Company believes it has made appropriate accounting estimates and assumptions based on the facts and circumstances available as of the reporting date. However, the Company’s actual results may differ materially and adversely from these estimates and assumptions, which may result in material effects on the Company’s financial condition, results of operations, and liquidity. To the extent there are material differences between the estimates and the actual results, the Company’s condensed consolidated financial statements could be materially affected.

 

Principles of Consolidation

 

The accompanying condensed consolidated financial statements for the period ended September 30, 2023 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 VolitionRx, Volition Vet, Volition Germany and Volition America. All intercompany balances and transactions have been eliminated in consolidation.

 

 
10

Table of Contents

 

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)

 

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 September 30, 2023, cash and cash equivalents totaled approximately $10.8 million, of which $nil was held in an overnight money market account.

 

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 September 30, 2023, the accounts receivable balance was $34,441 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 and royalty revenues from the sale of its Nu.Q® Vet Cancer 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 services the Company performs for them in its laboratory.

 

Revenues, and their respective treatment for financial reporting purposes under ASC 606, are as follows:

 

Royalty

 

The Company receives royalty revenues on the net sales recognized during the period in which the revenue is earned, and the amount is determinable from the licensee. These are presented under “Royalty” under the condensed consolidated statements of operations and comprehensive loss. The Company does not have future performance obligations under this revenue stream. In accordance with ASC 606, the Company records these revenues based on estimates of the net sales that occurred during the relevant period from the licensee. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known.

 

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 condensed consolidated statements of operations and comprehensive loss.

 

 
11

Table of Contents

 

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)

 

Service

 

The Company includes revenue recognized from laboratory services performed in the Company’s laboratory on behalf of third parties under “Service” under the condensed 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 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.

 

Licensing

 

The Company includes revenue recognized from the licensing of certain rights to third parties in “Licensing” in the condensed consolidated statements of operations and comprehensive loss. For each licensing, 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.

 

Revenue from Heska Agreement

 

On March 28, 2022, Belgian Volition entered into a Master License and Supply Agreement (the “License Agreement”) with Heska Corporation (“Heska”), pursuant to which Belgian Volition granted Heska worldwide exclusive rights to sell the Nu.Q® Vet Cancer Test at the point of care (“POC”) initially for the screening of lymphoma and hemangiosarcoma in dogs (“Canine Lymphoma & HSA”), and non-exclusive rights to sell its Nu.Q® Vet Cancer Test in kit format (“Kits”) through Heska’s network of central reference laboratories (“Central Lab”) initially for Canine Lymphoma & HSA.

 

Under and subject to the terms of the License Agreement, Belgian Volition received an upfront payment of $10.0 million in 2022, and is eligible to receive further milestone payments of (i) $6.5 million upon the first commercial sale by or on behalf of Heska of a POC screening test for Canine Lymphoma & HSA, (ii) $6.5 million upon the first commercial sale by or on behalf of Heska of a POC monitoring test for the same conditions, and (iii) $5.0 million upon the first commercial sale by or on behalf of Heska of a screening or monitoring test for lymphoma in felines. The License Agreement also contains time-based triggers that could accelerate Heska’s obligation to remit one or more of the foregoing payments prior to the achievement of the specified commercial milestones. Any further expansion of the License Agreement to cover other cancer and non-cancer indications is subject to negotiation between the parties.

 

Belgian Volition will also supply Central Lab Kits and will receive a pre-agreed price per test, adjusted annually for inflation. The price per test for POC key components (“Key Components”) is also discounted to reflect the lower cost to Belgian Volition and additional assembly costs for Heska, as well as consideration for Heska’s upfront and milestone payments. Heska will assemble the Key Components for use at the POC, and is responsible for marketing and distribution efforts and related costs.

 

 
12

Table of Contents

 

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)

 

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 of September 30, 2023, the Company recorded $10.0 million as deferred revenue in respect of the non-refundable payment received in 2022 in relation to the Heska License Agreement.

 

Contract assets include costs and services incurred on contracts with open performance obligations. These contract assets were immaterial as of September 30, 2023.

 

Leases

 

The Company accounts for leases in accordance with ASC Topic 842, “Leases.” The Company determines whether a contract is a lease at contract inception or for a modified contract at the modification date. At inception or modification, the Company recognizes right-of-use assets (“ROU”) and related lease liabilities on the balance sheet for all leases greater than one year in duration. Lease liabilities and their corresponding ROU assets are initially measured at the present value of the unpaid lease payments as of the lease commencement date. If the lease contains a renewal and/or termination option, the exercise of the option is included in the term of the lease if the Company is reasonably certain that a renewal or termination option will be exercised. As the Company’s leases do not provide an implicit rate, the Company uses an estimated incremental borrowing rate (“IBR”) based on the information available at the commencement date of the respective lease to determine the present value of future payments. The IBR is determined by estimating what it would cost the Company to borrow a collateralized amount equal to the total lease payments over the lease term based on the contractual terms of the lease and the location of the leased asset.

 

Operating lease payments are recognized as an expense on a straight-line basis over the lease term in equal amounts of rent expense attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in later years. The difference between rent expense recognized and actual rental payments is typically represented as the spread between the ROU asset and lease liability.

 

When calculating the present value of minimum lease payments, we account for leases as one single lease component if a lease has both lease and non-lease fixed cost components. Variable lease and non-lease cost components are expensed as incurred.

 

The Company does not recognize ROU assets and lease liabilities for short-term leases that have an initial lease term of 12 months or less. It recognizes the lease payments associated with short-term leases as an expense on a straight-line basis over the lease term.

 

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 September 30, 2023, 9,151,605 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.

 

 

 
13

Table of Contents

 

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)

 

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).

 

Fair Value Measurements

 

Pursuant to ASC 820, “Fair Value Measurements and Disclosures,” an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the assets or liabilities such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The financial instruments of the Company consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, debt, and a warrant liability. These items are considered Level 1 due to their short-term nature and their market interest rates, except for the warrant liability, which is considered Level 2 and is recorded at fair value at the end of each reporting period.

 

Included in the following table are the Company’s major categories of assets and liabilities measured at fair value on a recurring basis as of September 30, 2023.

 

Fair Value Measurements at September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Description

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

$

 

 

$

 

 

$

 

 

$

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

 

-

 

 

 

117,115

 

 

 

-

 

 

 

117,115

 

 

 
14

Table of Contents

 

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)

 

Fair Value Measurements (continued)

 

As of December 31, 2022, there was no warrant liability. The following table provides a roll-forward of the warrant liability measured at fair value on a recurring basis for the nine months ended September 30, 2023, as follows:

 

Warrant Liability

 

 

 

 

$

 

Balance at December 31, 2022

 

 

-

 

Fair value of warrant liability, at issuance

 

 

366,960

 

Gain on change in fair value of warrant liability

 

 

(249,845)

Balance at September 30, 2023

 

 

117,115

 

 

Research and Development

 

In accordance with ASC 730, “Research and Development,” 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 $15.0 million and $11.2 million during the nine-months ended September 30, 2023, and September 30, 2022, respectively.

 

Warrants Liability

 

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815-40, “Contracts in Entity’s Own Equity”. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815-40, including whether the warrants are indexed to the Company’s own stock and whether the events where holders of the warrants could potentially require net cash settlement are within the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

 

 

 
15

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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)

 

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. The estimated fair value of RSUs that include a market vesting condition will be measured on the grant date using a Monte Carlo Simulation Model. 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 three and nine months ended September 30, 2023. A previously classified loan note has been recategorized as accounts payable balance in the condensed consolidated statements of cash flows.

 

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.

 

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 $193.9 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.

 

 
16

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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 September 30, 2023 and December 31, 2022:

 

 

 

 

 

 

 

 

September 30,

2023

 

 

 

Useful Life

 

Cost $

 

 

Accumulated

Depreciation $

 

 

Net Carrying

Value $

 

Computer hardware and software

 

3 years

 

 

695,883

 

 

 

565,533

 

 

 

130,350

 

Laboratory equipment

 

5 years

 

 

4,533,961

 

 

 

2,207,479

 

 

 

2,326,482

 

Office furniture and equipment

 

5 years

 

 

361,911

 

 

 

261,056

 

 

 

100,855

 

Buildings

 

30 years

 

 

2,026,448

 

 

 

344,987

 

 

 

1,681,461

 

Building improvements

 

5-15 years

 

 

1,326,435

 

 

 

387,818

 

 

 

938,617

 

Land

 

Not amortized

 

 

127,040

 

 

 

-

 

 

 

127,040

 

 

 

 

 

 

9,071,678

 

 

 

3,766,873

 

 

 

5,304,805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

2022

 

 

 

Useful Life

 

Cost $

 

 

Accumulated

Depreciation $

 

 

Net Carrying

Value $

 

Computer hardware and software

 

3 years

 

 

656,759

 

 

 

497,306

 

 

 

159,453

 

Laboratory equipment

 

5 years

 

 

4,190,289

 

 

 

1,951,387

 

 

 

2,238,902

 

Office furniture and equipment

 

5 years

 

 

358,575

 

 

 

239,436

 

 

 

119,139

 

Buildings

 

30 years

 

 

2,054,332

 

 

 

298,397

 

 

 

1,755,935

 

Building improvements

 

5-15 years

 

 

1,317,132

 

 

 

326,337

 

 

 

990,795

 

Land

 

Not amortized

 

 

128,788

 

 

 

-

 

 

 

128,788

 

 

 

 

 

 

8,705,875

 

 

 

3,312,863

 

 

 

5,393,012

 

 

During the nine-month periods ended September 30, 2023 and September 30, 2022, the Company recognized $792,232 and $624,830, respectively, in depreciation expense.

 

 
17

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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.

 

 

 

 

 

 

 

September 30,

2023

 

 

 

Cost $

 

 

Accumulated

Amortization $

 

 

Net Carrying

Value $

 

Patents

 

 

1,091,356

 

 

 

1,043,080

 

 

 

48,276

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

2022

 

 

 

Cost $

 

 

Accumulated

Amortization $

 

 

Net Carrying

Value $

 

Patents

 

 

1,104,103

 

 

 

993,598

 

 

 

110,505

 

 

During the nine-month periods ended September 30, 2023 and September 30, 2022, the Company recognized $63,715 and $62,286, 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:

 

2023

 

$19,630

 

2024

 

$28,646

 

Total Intangible Assets

 

$48,276

 

 

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 “Property, Plant and Equipment,” as of December 31, 2022. The result of this review confirmed that the ongoing value of the patents was not impaired as of December 31, 2022.

  

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).

 

 
18

Table of Contents

 

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

 

Note 6 - Common Stock

 

As of September 30, 2023, the Company was authorized to issue 100 million shares of common stock, par value $0.001 per share, of which 78,342,417 and 57,873,379 shares were issued and outstanding as of September 30, 2023 and December 31, 2022, respectively.

 

Stock Option Exercises

 

During the nine months ended September 30, 2023, no shares of common stock were issued pursuant to the exercise of stock options.

 

Stock Options Expired / Cancelled

 

The table below summarizes the stock options granted under the Company’s 2015 Stock Incentive Plan (the “2015 Plan”) or the 2011 Equity Incentive Plan (the “2011 Plan”), as indicated, that expired or were cancelled during the nine months ended September 30, 2023.

 

Equity Incentive Plan

 

Options (#)

 

 

Grant Date

 

Options

Cancelled (#)

 

 

Grant

Price ($)

 

 

Cancellation Date

 

2015

 

 

25,000

 

 

 Apr 15, 2016

 

 

25,000

 

 

 

4.00

 

 

 Feb 18, 2023

 

2015

 

 

55,000

 

 

 Apr 13, 2020

 

 

55,000

 

 

 

3.60

 

 

 Feb 18, 2023

 

2015

 

 

50,000

 

 

 Mar 30, 2017

 

 

50,000

 

 

 

5.00

 

 

 Feb 18, 2023

 

2015

 

 

50,000

 

 

 Feb 11, 2019

 

 

50,000

 

 

 

3.25

 

 

 Feb 18, 2023

 

2015

 

 

50,000

 

 

 Jan 23, 2018

 

 

50,000

 

 

 

4.00

 

 

 Feb 18, 2023

 

2015

 

 

32,383

 

 

 Aug 3, 2021

 

 

32,383

 

 

 

3.40

 

 

 Feb 18, 2023

 

2011

 

 

5,267

 

 

 Mar 20, 2013

 

 

5,267

 

 

 

4.35

 

 

 Mar 20, 2023

 

2011

 

 

1,100

 

 

 Mar 20, 2013

 

 

1,100

 

 

 

4.35

 

 

 Mar 20, 2023

 

2015

 

 

4,317

 

 

 Aug 3, 2021

 

 

4,317

 

 

 

3.40

 

 

 Jun 28, 2023

 

2011

 

 

550

 

 

 Sep 2, 2013

 

 

550

 

 

 

3.35

 

 

 Sep 2, 2023

 

2011

 

 

550

 

 

 Sep 2, 2013

 

 

550

 

 

 

4.35

 

 

 Sep 2, 2023

 

2011

 

 

550

 

 

 Sep 2, 2013

 

 

550

 

 

 

4.35

 

 

 Sep 2, 2023

 

2011

 

 

2,167

 

 

 Sep 2, 2013

 

 

2,167

 

 

 

3.35

 

 

 Sep 2, 2023

 

2011

 

 

2,167

 

 

 Sep 2, 2013

 

 

2,167

 

 

 

4.35

 

 

 Sep 2, 2023

 

2011

 

 

2,167

 

 

 Sep 2, 2013

 

 

2,167

 

 

 

4.35

 

 

 Sep 2, 2023

 

2015

 

 

4,318

 

 

 Aug 3, 2021

 

 

4,318

 

 

 

3.40

 

 

 Sep 28, 2023

 

 

 

 

285,536

 

 

 

 

 

285,536

 

 

 

 

 

 

 

 

 

 
19

Table of Contents

 

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

 

Note 6 - Common Stock (continued)

 

RSU Settlements

 

Below is a table summarizing the RSUs vested and settled during the nine months ended September 30, 2023, all of which were issued pursuant to the 2015 Plan.

 

Equity Incentive Plan

 

RSUs

Vested (#)

 

 

Vest Date

 

Shares

issued (#)

 

 

Shares

Withheld

for

Taxes (#)

 

2015

 

 

4,000

 

 

 Feb 8, 2023

 

 

2,369

 

 

 

1,631

 

2015

 

 

15,000

 

 

 Mar 1, 2023

 

 

9,609

 

 

 

5,391

 

2015

 

 

15,000

 

 

 Mar 25, 2023

 

 

15,000

 

 

 

-

 

2015

 

 

2,500

 

 

 Apr 4, 2023

 

 

1,759

 

 

 

741

 

2015

 

 

13,500

 

 

 Apr 4, 2023

 

 

7,995

 

 

 

5,505

 

2015

 

 

35,000

 

 

 Apr 4, 2023

 

 

22,610

 

 

 

12,390

 

2015

 

 

50,000

 

 

 May 1, 2023

 

 

35,707

 

 

 

14,293

 

2015

 

 

4,000

 

 

 Jun 1, 2023

 

 

2,270

 

 

 

1,730

 

2015

 

 

7,500

 

 

 Jun 1, 2023

 

 

4,257

 

 

 

3,243

 

2015

 

 

208,809

 

 

 Aug 3, 2023

 

 

167,809

 

 

 

41,000

 

2015

 

 

34,102

 

 

 Aug 15, 2023

 

 

23,764

 

 

 

10,338

 

2015

 

 

12,000

 

 

 Sep 7, 2023

 

 

7,046

 

 

 

4,954

 

2015

 

 

12,500

 

 

 Sep 21, 2023

 

 

7,434

 

 

 

5,066

 

 

 

 

413,911

 

 

 

 

 

307,629

 

 

 

106,282

 

 

Warrant Expiration

 

Effective February 26, 2023, a warrant to purchase 125,000 shares of common stock expired unexercised.

 

Equity Capital Raises

 

On February 17, 2023, the Company entered into an underwriting agreement with Newbridge Securities Corporation (“Newbridge”) in connection with an underwritten public offering of 4,945,000 shares of the Company’s common stock, which includes Newbridge’s exercise in full of its overallotment option, 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) (as amended and supplemented from time to time, the “2021 Form S-3”). The public offering price was $1.75 per share. The underwriter purchased the shares from the Company at a price of $1.6275 per share on February 22, 2023, after taking into account the underwriting discounts and commissions. The net proceeds received by the Company for the sale and issuance of the shares were approximately $8.0 million, before deducting offering expenses of $0.2 million paid by the Company.

 

 
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VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

 

Note 6 - Common Stock (continued)

 

Equity Capital Raises (continued)

 

On June 1, 2023, the Company entered into an underwriting agreement with Prime Executions, Inc. dba Freedom Capital Markets (“Freedom”) acting as the book-running manager of the offering and Bancroft Capital, LLC acting as co-manager in connection with an underwritten public offering of 14,950,000 shares of the Company’s common stock, which includes Freedom’s exercise in full of its overallotment option, pursuant to the 2021 Form S-3. The underwriter purchased 13,000,000 shares and 1,950,000 shares from the Company on June 5 and June 23, 2023 respectively. The public offering price was $1.27 per share. The underwriter purchased the shares from the Company at a price of $1.1811 per share. The net proceeds received by the Company for the sale and issuance of the shares were approximately $17.6 million, before deducting offering expenses of $0.1 million paid by the Company.  In addition, the Company issued warrants to purchase an aggregate of 448,500 shares of Company common stock to Freedom, at an exercise price of $2.00 per share.

 

The Company evaluated the warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in ASC 480 and ASC 815-40. The Company determined the warrants issued in the Freedom offering failed the indexation guidance under ASC 815-40, specifically, the warrants provide for a Black-Scholes value calculation in the event of certain transactions (“Fundamental Transactions”), which includes a floor on volatility utilized in the value calculation at 100% or greater. The Company has determined that this provision introduces leverage to the holders of the warrants that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares. Accordingly, pursuant to ASC 815-40, the Company has classified the fair value of the warrants as a liability upon issuance and marked to market each reporting period in the Company’s consolidated statement of operations until their exercise or expiration.

 

The fair value of the warrants as of June 1, 2023, the issuance date, and September 30, 2023, were $366,960 and $117,115, respectively. The warrant liability was estimated using the Black-Scholes pricing model with the following assumptions.

 

 

 

 

 

(At Issuance)

 

 

 

September 30,

2023

 

 

 June 1,

2023

 

 

 

 

 

 

 

 

Risk-free interest rate

 

 

4.6%

 

 

3.7%

Expected volatility

 

 

72.34%

 

 

71.56%

Expected life (years)

 

 

4.72

 

 

 

5.03

 

Expected dividend yield

 

 

-

 

 

 

-

 

Total fair value

 

$117,115

 

 

$366,960

 

 

The fair value of the warrants deemed to be a liability, due to certain contingent put features, was determined using the Black-Scholes option pricing model, which was deemed to be an appropriate model due to the terms of the warrants issued, including a fixed term and exercise price.

 

 
21

Table of Contents

 

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

 

Note 6 - Common Stock (continued)

 

Equity Distribution Agreement

 

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, with an aggregate offering price of up to $25.0 million, from time to time through an “at the market” offering pursuant to the Company’s 2021 Form S-3 through Jefferies acting as the Company’s agent and/or principal. The Company is not obligated to sell any shares under the 2022 EDA. 

 

During the three months ended September 30, 2023, the Company did not sell any shares of its common stock under the 2022 EDA. During the nine months ended September 30, 2023, the Company raised aggregate net proceeds (net of broker commissions and fees) of approximately $0.7 million under the 2022 EDA through the sale of 279,703 shares of its common stock. As of September 30, 2023, the Company has raised aggregate net proceeds (net of broker commissions and fees) of approximately $1.5 million under the 2022 EDA through the sale of 630,532 shares of its common stock.

 

 
22

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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 nine-month period ended September 30, 2023.

 

 

 

Number of Warrants

 

 

Weighted

Average

Exercise

Price ($)

 

Outstanding at December 31, 2022

 

 

539,000

 

 

 

3.80

 

Granted

 

 

448,500

 

 

 

2.00

 

Expired/Cancelled

 

 

(125,000)

 

 

2.47

 

Outstanding at September 30, 2023

 

 

862,500

 

 

 

3.05

 

 

 

 

 

 

 

 

 

 

Exercisable at September 30, 2023

 

 

387,000

 

 

 

4.28

 

 

Below is a table summarizing the warrants issued and outstanding as of September 30, 2023, which have an aggregate weighted average remaining contractual life of 4.08 years.

 

Number Outstanding

 

 

Number

Exercisable

 

 

Exercise

Price ($)

 

 

Weighted

Average

Remaining

Contractual

Life

(Years)

 

 

Proceeds to

Company if

Exercised ($)

 

 

448,500

 

 

 

-

 

 

 

2.00

 

 

 

4.71

 

 

 

897,000

 

 

54,000

 

 

 

27,000

 

 

 

3.05

 

 

 

5.02

 

 

 

164,700

 

 

50,000

 

 

 

50,000

 

 

 

3.45

 

 

 

2.42

 

 

 

172,500

 

 

125,000

 

 

 

125,000

 

 

 

3.95

 

 

 

3.26

 

 

 

493,750

 

 

185,000

 

 

 

185,000

 

 

 

4.90

 

 

 

3.34

 

 

 

906,500

 

 

862,500

 

 

 

387,000

 

 

 

 

 

 

 

 

 

 

 

2,634,450

 

 

Stock-based compensation expense related to warrants of $25,447 and $68,852 was recorded in the nine months ended September 30, 2023 and September 30, 2022, respectively. Total remaining unrecognized compensation cost related to non-vested warrants is $10,365 and is expected to be recognized over a period of 0.51 years. As of September 30, 2023, the total intrinsic value of warrants outstanding was $nil.

 

 
23

Table of Contents

 

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

 

Note 7 – Stock-Based Compensation (continued)

 

b) Options

 

The following table summarizes the changes in options outstanding of the Company during the nine-month period ended September 30, 2023.