What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-11 compared with 2020-11-12 · 95 added, 123 removed, 87 unchanged (71% of the section changed)

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

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020, 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.

This Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, 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, any predictions of earnings, revenues, expenses or other financial items;

plans or expectations with respect to our development activities or business strategy;

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,” “plans,” “forecasts,” “goal,” “aim,” “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).

In particular, forward-looking statements contained in this Report relate to, among other things, any predictions of earnings, revenues, expenses or other financial items;

plans or expectations with respect to our development activities or business strategy, including commercialization and market acceptance;

statements concerning clinical studies and results;

statements concerning industry trends;

statements regarding anticipated demand for our products, or the products of our competitors;

statements relating to manufacturing forecasts, and the potential impact of our relationship with contract manufacturers and original equipment manufacturers on our business;

statements relating to the commercialization of our products, assumptions regarding the future cost and potential benefits of our research and development efforts;

statements concerning industry trends and industry size;

statements regarding anticipated demand for our products and market opportunity, or the products of our competitors, statements relating to manufacturing forecasts, and the potential impact of our relationship with contract manufacturers and original equipment manufacturers on our business;

assumptions regarding the future cost and potential benefits of our research and development efforts;

forecasts of our liquidity position or available cash resources;

statements relating to the impact of pending litigation;

statements regarding the anticipated impact of the COVID-19 pandemic 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.

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Other risks and uncertainties include those associated with the COVID-19 pandemic;

our failure to obtain necessary regulatory clearances or approvals to distribute and market future products in the veterinary or clinical in-vitro diagnostics, or IVD, market;

our failure to obtain necessary regulatory clearances or approvals to distribute and market future products in the clinical in-vitro diagnostics, or IVD, or veterinary markets;

a failure by the marketplace to accept the products in our development pipeline or any other diagnostic products we might develop;

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For these reasons, readers are cautioned not to place undue reliance on any forward-looking statements.

You should read this Report in its entirety, together with our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed with the SEC on February 20, 2020, or our Annual Report, the documents that we file as exhibits to this Report and the documents that we incorporate by reference into this Report, with the understanding that our future results may be materially different from what we currently expect.

You should read this Report in its entirety, together with our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 , as filed with the SEC on March 22, 2021 , or our Annual Report, the documents that we file as exhibits to this Report and the documents that we incorporate by reference into this Report, with the understanding that our future results may be materially different from what we currently expect.

The forward-looking statements we make speak only as of the date on which they are made.

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If we do update or correct any forward-looking statements, readers should not conclude that we will make additional updates or corrections.

Company Overview

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the interim consolidated financial statements and related condensed notes thereto, which are included in Part I of this Report.

Our tests are based on the science of Nucleosomics TM , which is the practice of identifying and measuring nucleosomes in the bloodstream or other bodily fluid - since changes in these parameters are an indication that disease is present.

Our approach is to investigate the epigenetic structure of chromatin and nucleosomes rather than investigating only the DNA sequence.

VolitionRx is a multi-national epigenetics company that applies its Nucleosomics TM platform through its subsidiaries to develop simple, easy to use, cost-effective blood tests to help diagnose a range of cancers and some other diseases, including sepsis and COVID-19, that are associated with the presence in the blood of networks of fibers released from activated neutrophils, a phenomenon known as NETosis.

We hope that through earlier diagnosis we can help save and improve the quality of human and animals’ lives throughout the world.

Our assays are based on the science of Nucleosomics TM , which is the practice of identifying and measuring nucleosomes in the bloodstream or other bodily fluid, since changes in these parameters are an indication that disease is present.

Volition’s approach is to investigate the epigenetic structure of chromatin and nucleosomes rather than investigating only the DNA sequence.

We are continuously developing new technologies including:

· A suite of low cost Nu.Q TM immunoassays that can accurately measure nucleosomes containing numerous epigenetic signals or structure.

· Nu.Q TM Capture technology to isolate or enrich nucleosomes containing particular epigenetic signals or structures for a wide range of potential scientific and medical applications, such as the enrichment of nucleosomes of tumor origin in blood samples taken from cancer patients.

· We plan to develop an ability to produce synthetic (recombinant) nucleosomes containing exact defined epigenetic signals and structures.

These are used to ensure exquisite accuracy of Nu.Q TM immunoassay tests but also have many other applications including as tools in epigenetic drug development.

In addition to human diagnostics we are also developing the use of the Nu.Q TM technology in veterinary applications and are planning the launch of the Nu.Q TM Vet Cancer Screening Test in late 2020.

Further studies are ongoing or planned to extend the range of cancers detected in dogs and then in other animals.

Our extensive intellectual property portfolio includes coverage of veterinary applications.

· A suite of low cost Nu.Q ® immunoassays that can accurately measure nucleosomes containing numerous epigenetic signals or structures, now being developed on a range of different enzyme-linked immunosorbent assay, or ELISA, platforms.

· Nu.Q ® Capture technology to isolate or enrich nucleosomes containing particular epigenetic signals or structures for a wide range of potential scientific and medical applications.

For example, the enrichment of nucleosomes of tumor origin in blood samples taken from cancer patients.

· The production of synthetic (recombinant) nucleosomes, containing exact defined epigenetic signals and structures, is now in-house.

These nucleosomes are used to ensure maximal accuracy of Nu.Q ® immunoassay tests but also have many other applications including Research Use Only, or RUO, kits and as tools in epigenetic drug development.

Volition has also developed the use of the Nu.Q ® technology in veterinary applications and launched its first product, the Nu.Q ® Vet Cancer Screening Test, in the fourth quarter of 2020.

We are in the process of developing additional veterinary products, including a treatment monitoring test, a disease recurrence test and a point-of-care platform.

Our extensive intellectual property portfolio includes the coverage of veterinary applications.

Commercialization Strategy

Volition believes that given the global prevalence of cancer and diseases associated with NETosis, and the low-cost, accessible and routine nature of our tests, Nu.Q ® could potentially be used throughout the world.

We plan to work with partners to commercialize Nu.Q ® worldwide.

Commercialization will take multiple forms in various markets and opportunities including, but not limited to:

· Direct sales of the Nu.Q ® Vet Cancer Screening Test.

· Sales of veterinary clinical products utilizing Nu.Q ® Vet assays and/or Nu.Q ® Capture reagents through distributor networks.

· Licensing of intellectual property, or IP, for clinical products utilizing Nu.Q ® assays and/or Nu.Q ® Capture reagents.

· Sales of clinical products utilizing Nu.Q ® assays and/or Nu.Q ® Capture reagents through distributor networks.

· Licensing of IP for RUO kit sales of Nu.Q ® assays and/or Nu.Q ® Capture reagents.

· Licensing of IP for laboratory developed patient testing services utilizing Nu.Q ® assays and/or Nu.Q ® Capture reagents.

· Provision of direct research services in the processing of samples using Nu.Q ® RUO assays and/or Nu.Q ® Capture.

Developments - COVID-19 Pandemic

On March 11, 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus known as COVID-19 as a global pandemic.

Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including, but not limited to, shelter-in-place orders, quarantines, significant restrictions on travel, as well as restrictions that prohibit many employees from going to work.

Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including, but not limited to, implementing shelter-in-place orders and significant restrictions on travel, as well as restrictions and guidelines that prohibit many employees from going to work.

Uncertainty with respect to the economic effects of the pandemic has introduced significant volatility in the financial markets.

During the first nine months of 2020, we implemented contingency planning to protect the health and well-being of our employees, with most employees working remotely where possible.

We have implemented travel restrictions as well as visitor protocols and we are following social distancing practices.

We did not observe significant impacts on our business or results of operations for the quarter ended September 30, 2020 due to the global emergence of COVID-19 or the mitigation actions taken to slow its spread.

To the extent the pandemic worsens, we cannot predict the effects it may have on our business, in particular with respect to demand for our services, our strategy, and our prospects, or the impact on our financial results.

During the year ended December 31, 2020 and through the first quarter of 2021, we have implemented contingency planning to protect the health and well-being of our employees, with the majority of our employees working remotely where possible.

We have implemented travel restrictions as well as protocols limiting visitor access to our facilities, and we are following social distancing practices.

As a result of the COVID-19 pandemic, we have experienced and may continue to experience disruptions that could impact our clinical trials, including:

· delays in enrolling patients in clinical trials;

· delays in sample collection;

· diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as clinical trial sites and hospital staff supporting the conduct of our clinical trials.

Plan of Operations

We have identified the main processes and resources required to achieve the near and medium-term objectives of our business plan, including personnel, facilities, equipment, research and testing materials including antibodies and clinical samples, and the protection of intellectual property.

To date, operations have proceeded satisfactorily in relation to our business plan, which we continue to evolve.

However, it is possible that some resources will not readily become available in a suitable form or on a timely basis or at an acceptable cost.

It is also possible that the results of some processes may not be as expected, and that modifications of procedures and materials may be required.

Such events could result in delays to the achievement of the near and medium-term objectives of our business plan, in particular the progression of clinical validation studies and regulatory approval processes for the purpose of bringing products to the IVD and veterinary markets.

Our future as an operating business will depend on our ability to obtain sufficient capital contributions, financing and/or generate revenues as may be required to sustain our operations.

Management plans to address the above as needed by:

(a) securing additional grant funds;

(b) obtaining additional equity or debt financing;

and (d) developing and commercializing our products on an accelerated timeline.

Management continues to exercise tight cost controls to conserve cash.

Our ability to continue as a going concern is dependent upon our 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 we are unable to continue as a going concern.

If we are unable to obtain adequate capital, we could be forced to cease operations.

Liquidity and Capital Resources

We have financed our operations since inception primarily through private placements and public offerings of our common stock.

As of September 30, 2020, we had cash and cash equivalents of approximately $20.9 million.

Net cash used in operating activities was $13.7 million and $10.1 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

The increase in cash used in operating activities for the period ended September 30, 2020 when compared to same period in 2019 was primarily due to increased expenditures on antibodies, sample purchases, stage payment to a collaborator partner and common stock issued for services.

Net cash used in investing activities was $0.6 million and $0.4 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

The increase was primarily due to purchases of laboratory equipment.

Net cash provided by financing activities was $18.5 million and $16.4 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

The increase in cash provided by financing activities for the period ended September 30, 2020 when compared to same period in 2019 was primarily due to $12.7 million in net cash received from the issuance of shares of common stock in a registered public offering in May 2020 and $6.5 million in net cash received from the issuance of shares of common stock pursuant to the Equity Distribution Agreement.

The following table summarizes our approximate contractual payments due by year as of September 30, 2020.

As of March 31, 2021, we had cash and cash equivalents of approximately $33.1 million.

Net cash used in operating activities was $6.2 million and $4.8 million for the three months ended March 31, 2021 and March 31, 2020, respectively.

The increase in cash used in operating activities for the period ended March 31, 2021 when compared to same period in 2020 was primarily due to higher payroll costs, an increase in prepaid expenditures due to higher director and officer insurance and higher amounts paid to suppliers during the period.

Net cash used in investing activities was $0.5 million and $0.3 million for the three months ended March 31, 2021 and March 31, 2020, respectively.

The increase was primarily due to additional purchases of laboratory equipment for our manufacturing facility in Belgium.

Net cash provided by financing activities was $20.2 million for the three months ended March 31, 2021 and net cash used by financing activities was $0.2 million for the comparable period ended March 31, 2020.

The increase in cash provided by financing activities for the period ended March 31, 2021 when compared to same period in 2020 was primarily due to $18.9 million in net cash received from the issuance of shares of common stock in a registered public offering in February 2021 and $1.5 million in net cash received from the issuance of shares of common stock under our ATM facility.

The following table summarizes our approximate contractual payments due by year as of March 31, 2021.

Approximate Payments (Including Interest) Due by Year

2020 (Remaining)

Finance Lease Obligations

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Collaborative Agreements Obligations

We intend to use our cash reserves to predominantly fund further research and development activities.

We do not currently have any substantial source of revenues and expect to rely on additional future financing, through the sale of equity or debt securities, or the sale of licensing rights, to provide sufficient funding to execute our strategic plan.

We intend to use our cash reserves to fund further research and development activities and launch new products.

We do not currently have significant revenues and expect to rely on additional future financing, through the sale of equity or debt securities, or the sale of licensing rights, to provide sufficient funding to execute our strategic plan.

There is no assurance that we will be successful in raising further funds.

In the event that additional financing is delayed, we will prioritize the maintenance of our research and development personnel and facilities, primarily in Belgium, and the maintenance of our patent rights.

In such instance, the completion of clinical validation studies and regulatory approval processes for the purpose of bringing products to the IVD and veterinary market would be delayed.

In such instance, the completion of clinical validation studies and regulatory approval processes for the purpose of bringing products to the IVD markets would be delayed.

In the event of an ongoing lack of financing, it may be necessary to discontinue operations, which will adversely affect the value of our common stock.

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive activities.

For these reasons, our auditors stated in their report on our audited financial statements for the year ended December 31, 2019 an explanatory paragraph regarding factors that raise substantial doubt that we will be able to continue as a going concern.

For these reasons, our auditors stated in their report on our audited financial statements for the fiscal year ended December 31, 2020 an explanatory paragraph regarding factors that raise substantial doubt that we will be able to continue as a going concern.

Results of Operations

Comparison of the Three Months Ended September 30, 2020 and September 30, 2019

The following table sets forth our results of operations for the three months ended on September 30, 2020 and September 30, 2019, respectively:

Three Months ended September 30,

Percentage Increase

Total Revenues

Research and development

General and administrative

Sales and marketing

Total Operating Expenses

Gain on disposal of fixed assets

Interest income

Interest expense

Other expenses

Total Other Income (Expenses)

Our operations are still predominantly in the research and development stage and we had limited revenues of $575 and $17,096 during the three months ended September 30, 2020 and September 30, 2019, respectively.

Operating Expenses

Total operating expenses increased to $4.5 million from $4.2 million for the three months ended September 30, 2020 and September 30, 2019, respectively, as a result of the factors described below.

Research and Development Expenses

Research and development expenses increased to $3.2 million from $2.6 million for the three months ended September 30, 2020 and September 30, 2019, respectively.

This increase was primarily related to higher antibody costs, sample costs, laboratory expenses and personnel expenses during the period.

Three Months ended

September 30,

Personnel expenses

Stock-based compensation

Direct research and development expenses

Other research and development

Depreciation and amortization

Total research and development expenses

General and Administrative Expenses

General and administrative expenses decreased to $1.1 million from $1.4 million for the three months ended September 30, 2020 and September 30, 2019, respectively.

This was primarily due to lower personnel costs offset by higher professional fees in respect of financing activities during the period.

Three Months ended

September 30,

Personnel expenses

Stock-based compensation

Legal and professional fees

Other general and administrative

Depreciation and amortization

Total general and administrative expenses

Sales and Marketing Expenses

Sales and marketing expenses were at the same level of $0.2 million for the three months ended September 30, 2020 and September 30, 2019, respectively.

There was an increase in direct marketing professional fees offset by lower travel and personnel costs during the period.

Three Months ended

September 30,

Personnel expenses

Stock-based compensation

Direct marketing and professional fees

Total sales and marketing expenses

Other Income (Expenses)

For the three months ended September 30, 2020, the Company’s other income was $168,472 compared to other expenses of $4,658 for the three months ended September 30, 2019.

The increase in other income was due to a gain on disposal of a fixed asset, offset by less interest received from cash deposited in an overnight money market deposit account.

For the three months ended September 30, 2020, the Company’s net loss was $4.3 million in comparison to a net loss of $4.2 million for the three months ended September 30, 2019.

The change was a result of the factors described above.

Comparison of the Nine Months Ended September 30, 2020 and September 30, 2019

The following table sets forth our results of operations for the nine months ended on September 30, 2020 and September 30, 2019, respectively:

Nine Months Ended

September 30,

Percentage Increase

Comparison of the Three Months Ended March 31, 2021 and March 31, 2020 .

The following table sets forth our results of operations for the three months ended on March 31, 2021, and March 31, 2020, respectively.

Three Months Ended March 31,

Total Revenues

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Total Operating Expenses

Gain on disposal of fixed assets

Interest income

Interest expense

Other expenses

Total Other Income (Expenses)

Our operations are still predominantly in the research and development stage and we had limited revenues of $6,313 and $17,096 during the nine months ended September 30, 2020 and September 30, 2019, respectively.

Our operations are still predominantly in the research and development stage and we had limited revenues during the three months ended March 31, 2021 and March 31, 2020, respectively.

The main source of revenues during the three months ended March 31, 2021 was direct sales of the Nu.Q ® Vet Cancer Screening Test via the Gastrointestinal Laboratory at Texas A&M University.

Operating Expenses

Total operating expenses increased to $15.6 million from $12.3 million for the nine months ended September 30, 2020 and September 30, 2019, respectively as a result of the factors described below.

Total operating expenses increased to $6.1 million for the three months ended March 31, 2021 from $5.9 million for the three months ended March 31, 2020, as a result of the factors described below.

Research and Development Expenses

Research and development expenses increased to $10.6 million for the nine months ended September 30, 2020, from $7.6 million for the nine months ended September 30, 2019.

This increase in overall research and development expenditures was primarily related to higher antibody costs, higher sample costs, laboratory expenses and personnel expenses during the 2020 period.

Nine Months Ended

September 30,

Research and development expenses were flat at $3.9 million for the three months ended March 31, 2021 and $3.9 million for the three months ended March 31, 2020.

Increased personnel expenses, laboratory expenses, and research and collaboration costs were offset by lower antibody costs and lower costs related to the purchase of Octamer (Volition Germany) in the prior year comparative period.

Three Months Ended March 31,

Personnel expenses

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General and Administrative Expenses

General and administrative expenses increased to $4.3 million from $4.0 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

This increase was primarily due to higher professional fees in respect of financing activities, offset by lower personnel expenses and stock-based compensation charges during the 2020 period.

Nine Months Ended

September 30,

General and administrative expenses increased to $1.8 million for the three months ended March 31, 2021, from $1.7 million for the three months ended March 31, 2020.

This increase in overall general and administrative expenditures was primarily due to increased personnel costs, stock-based compensation costs and legal expenses from capital raises during the period, partly offset by lower foreign exchange differences.

Three Months Ended March 31,

Personnel expenses

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Sales and Marketing Expenses

Sales and marketing expenses were at the same level of $0.7 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

There was an increase in direct marketing professional fees offset by lower stock-based compensation costs and travel costs during the 2020 period.

Nine Months Ended

September 30,

Sales and marketing expenses increased to $0.4 million for the three months ended March 31, 2021, from $0.3 million for the three months ended March 31, 2020.

The increase in costs was primarily due to higher personnel costs and stock-based compensation costs as a result of hiring additional employees.

Three Months Ended March 31,

Personnel expenses

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Other Income (Expenses)

For the nine months ended September 30, 2020, the Company’s other income was $350,316 compared to other expenses of $223,808 for the nine months ended September 30, 2019.

This increase in other income was primarily due to gain on disposal of fixed assets, and grant income received, offset by other expenses related to the amendment to outstanding warrants which resulted in a $196,957 expense in the same period in 2019.

For the nine months ended September 30, 2020, the Company’s net loss was $15.2 million in comparison to a net loss of $12.5 million for the nine months ended September 30, 2019.

For the three months ended March 31, 2021, the Company’s other expenses were $40,460 compared to other income of $12,559 for the three months ended March 31, 2020.

This decrease in other income was primarily related to the decrease in interest earned during the period.

For the three months ended March 31, 2021, the Company’s net loss was $6.1 million, an increase of approximately $0.2 million in comparison to a net loss of $5.9 million for the three months ended March 31, 2020.

The change was a result of the factors described above.

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We may seek to obtain additional capital through the sale of debt or equity securities, if we deem it desirable or necessary.

These sales may include the sale of equity securities from time to time through our “at the market offering program” with Cantor Fitzgerald & Co.

and Oppenheimer & Co.

under the Equity Distribution Agreement dated November 10, 2020 (see Note 6 of the notes to the condensed consolidated financial statements).

However, we may be unable to obtain such additional capital when needed, or on terms favorable to us or our stockholders, if at all.

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Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles, or U.S.

Our interim consolidated financial statements and related condensed notes have been prepared in accordance with United States generally accepted accounting principles, or U.S.

GAAP, applied on a consistent basis.

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We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements.

A complete summary of these policies is included in the notes to our financial statements.

In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances.

Actual results could differ from those estimates made by management.

A summary of these policies is included in the notes to our financial statements.

In general, management's estimates are based on current facts, historical experiences, information from third party professionals and various other factors that it believes to be reasonable under the circumstances.

Actual results could differ materially and adversely from those estimates made by management.

To the extent there are material differences between the estimates and the actual results, future results of operations could be affected.

Recently Issued Accounting Pronouncements

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

We are a smaller reporting company and are not required to disclose this information.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis