SECURITIES AND EXCHANGE COMMISSION
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018
[ ] 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
(Exact name of registrant as specified in its charter)
Delaware |
| 91-1949078 |
(State or other jurisdiction of incorporation |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
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. [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). [X] Yes [ ] No
Large accelerated filer |
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| Accelerated filer | [ ] |
Non-accelerated filer |
| [ ] (Do not check if a smaller reporting company) |
| Smaller reporting company | [X] |
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| 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 [X] No
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018
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PART I |
| FINANCIAL INFORMATION |
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ITEM 1. |
| FINANCIAL STATEMENTS |
| 3 |
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ITEM 2. |
| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
| 17 |
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ITEM 3. |
| QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
| 25 |
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ITEM 4. |
| CONTROLS AND PROCEDURES |
| 25 |
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PART II |
| OTHER INFORMATION |
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ITEM 1. |
| LEGAL PROCEEDINGS |
| 26 |
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ITEM 1A. |
| RISK FACTORS |
| 26 |
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ITEM 2. |
| UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
| 26 |
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ITEM 3. |
| DEFAULTS UPON SENIOR SECURITIES |
| 26 |
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ITEM 4. |
| MINE SAFETY DISCLOSURES |
| 26 |
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ITEM 5. |
| OTHER INFORMATION |
| 26 |
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ITEM 6. |
| EXHIBITS |
| 27 |
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SIGNATURES |
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| 28 |
2
PART I - FINANCIAL INFORMATION
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4 | |
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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) | 5 |
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6 | |
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Notes to the Condensed Consolidated Financial Statements (Unaudited) | 7 |
3
Condensed Consolidated Balance Sheets
(Expressed in United States Dollars, except share numbers)
| June 30, 2018 $ |
| December 31, 2017 $ |
| (UNAUDITED) |
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11,894,166 |
| 10,116,263 | |
Prepaid expenses | 425,613 |
| 248,661 |
Other current assets | 200,629 |
| 202,295 |
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Total Current Assets | 12,520,408 |
| 10,567,219 |
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Property and equipment, net | 3,257,434 |
| 3,480,782 |
Intangible assets, net | 519,910 |
| 576,397 |
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Total Assets | 16,297,752 |
| 14,624,398 |
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LIABILITIES |
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Accounts payable | 1,155,949 |
| 351,735 |
Accrued liabilities | 1,701,614 |
| 1,278,428 |
Management and directors’ fees payable | 26,708 |
| 35,397 |
Current portion of long-term debt | 282,159 |
| 443,908 |
Current portion of capital lease liabilities | 137,455 |
| 139,084 |
Current portion of grant repayable | 40,917 |
| 41,930 |
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3,344,802 |
| 2,290,482 | |
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Long-term debt, net of current portion | 1,976,389 |
| 1,312,785 |
Capital lease liabilities, net of current portion | 784,364 |
| 874,684 |
Grant repayable, net of current portion | 143,100 |
| 188,579 |
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Total Liabilities | 6,248,655 |
| 4,666,530 |
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STOCKHOLDERS’ EQUITY |
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Common Stock |
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Authorized: 100,000,000 shares of common stock, at $0.001 par value |
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Issued and outstanding: 30,031,225 shares and 26,519,394 shares, respectively | 30,031 |
| 26,519 |
Additional paid-in capital | 74,959,980 |
| 65,774,870 |
Accumulated other comprehensive income(loss) | 17,761 |
| (129,343) |
Accumulated deficit | (64,958,675) |
| (55,714,178) |
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Total Stockholders’ Equity | 10,049,097 |
| 9,957,868 |
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Total Liabilities and Stockholders’ Equity | 16,297,752 |
| 14,624,398 |
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(The accompanying notes are an integral part of these condensed consolidated financial statements)
4
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
(Expressed in United States Dollars, except share numbers)
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| Three-Months Ended June 30, |
| Six-Months Ended June 30, | ||||
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| 2018 $ |
| 2017 $ |
| 2018 $ |
| 2017 $ |
Revenue |
| – |
| – |
| – |
| – |
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Operating Expenses |
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Research and development |
| 2,686,473 |
| 1,807,636 |
| 5,109,675 |
| 3,480,987 |
General and administrative |
| 1,643,681 |
| 1,427,875 |
| 3,485,774 |
| 2,823,594 |
Sales and marketing |
| 235,366 |
| 207,042 |
| 599,510 |
| 476,450 |
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Total Operating Expenses |
| 4,565,520 |
| 3,442,553 |
| 9,194,959 |
| 6,781,031 |
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Operating Loss |
| (4,565,520) |
| (3,442,553) |
| (9,194,959) |
| (6,781,031) |
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Other Expenses |
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Interest expense |
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Net Loss |
| (4,592,076) |
| (3,462,988) |
| (9,244,497) |
| (6,813,671) |
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Other Comprehensive Loss |
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Foreign currency translation adjustments |
| 132,157 |
| 61,309 |
| 147,104 |
| 92,814 |
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Net Comprehensive Loss |
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| (3,401,679) |
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| (6,720,857) | ||
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| (0.13) |
| (0.32) |
| (0.26) | ||
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Weighted Average Shares Outstanding – Basic and Diluted |
| 30,027,260 |
| 26,383,228 |
| 28,655,711 |
| 26,137,241 |
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(The accompanying notes are an integral part of these condensed consolidated financial statements)
5
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Expressed in United States Dollars)
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| 2018 |
| 2017 |
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Operating Activities |
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Net loss |
| (9,244,497) |
| (6,813,671) |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
| 317,981 |
| 225,740 |
| (41) |
| 1,929 | |
Stock options issued for services |
| 1,388,295 |
| 1,220,798 |
Warrants issued for services |
| 4,326 |
| 28,482 |
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Changes in operating assets and liabilities: |
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Prepaid expenses |
| (174,504) |
| (131,526) |
Other current assets |
| (188,285) |
| 31,560 |
Accounts payable and accrued liabilities |
| 1,406,197 |
| (46,685) |
Net Cash Used in Operating Activities |
| (6,490,528) |
| (5,483,373) |
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Investing Activities: |
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Purchases of property and equipment |
| (125,513) |
| (1,234,892) |
Net Cash Used in Investing Activities |
| (125,513) |
| (1,234,892) |
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Financing Activities: |
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Net proceeds from issuance of common shares |
| 7,796,001 |
| 879,412 |
Proceeds from debt payable |
| 875,652 |
| 664,573 |
Payments on debt payable |
| (332,856) |
| – |
Payments on grants repayable |
| (40,863) |
| (38,487) |
Payments on capital lease obligations |
| (72,524) |
| (60,874) |
Net Cash Provided by Financing Activities |
| 8,225,410 |
| 1,444,624 |
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Effect of foreign exchange on cash |
| 168,534 |
| 100,117 |
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Net change in cash and cash equivalents |
| 1,777,903 |
| (5,173,524) |
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Cash and cash equivalents – Beginning of Period |
| 10,116,263 |
| 21,678,734 |
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Cash and cash equivalents – End of Period |
| 11,894,166 |
| 16,505,210 |
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Supplemental Disclosures of Cash Flow Information: |
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Interest paid |
| 49,737 |
| 32,639 |
Income tax paid |
| – |
| – |
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Non-Cash Investing and Financing Activities: |
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Common stock issued on cashless exercises of stock options and warrants |
| 12 |
| – |
Offering costs from issuance of common stock |
| 604,000 |
| – |
(The accompanying notes are an integral part of these condensed consolidated financial statements)
6
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 1 - Condensed Financial Statements
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, for the fiscal year ended December 31, 2017, as filed with the Securities and Exchange Commission on March 1, 2018. The results of operations for theperiods ended June 30, 2018 and 2017 are not necessarily indicative of the operating results for the full years.
Note 3 - Summary of Significant Accounting Policies
7
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 3 - Summary of Significant Accounting Policies (continued)
The accompanying condensed consolidated financial statements for theperiods ended June 30, 2018 include the accounts of the Company and its wholly-owned subsidiaries, Singapore Volition Pte. Limited, Belgian Volition SPRL (“Belgian Volition”), Hypergenomics Pte. Limited, Volition America, Inc. (“Volition America”), and Volition Diagnostics UK Limited (“Volition Diagnostics”). All significant intercompany balances and transactions have been eliminated in consolidation.
Basic and Diluted Loss Per Share
Recent Accounting Pronouncements
8
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 4 - Property and Equipment
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| June 30, |
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| 2018 |
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| Accumulated |
| Net Carrying |
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| Cost |
| Depreciation |
| Value |
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| Useful Life |
| $ |
| $ |
| $ |
Computer hardware and software |
| 3 years |
| 300,781 |
| 128,425 |
| 172,356 |
Laboratory equipment |
| 5 years |
| 1,573,407 |
| 791,058 |
| 782,349 |
Office furniture and equipment |
| 5 years |
| 200,205 |
| 56,001 |
| 144,204 |
Buildings |
| 30 years |
| 1,533,006 |
| 68,123 |
| 1,464,883 |
Building improvements |
| 5-15 years |
| 656,875 |
| 56,758 |
| 600,117 |
Land |
| Not amortized |
| 93,525 |
| – |
| 93,525 |
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| 4,357,799 |
| 1,100,365 |
| 3,257,434 |
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| December 31, |
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| 2017 |
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| Accumulated |
| Net Carrying |
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| Cost |
| Depreciation |
| Value |
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| Useful Life |
| $ |
| $ |
| $ |
Computer hardware and software |
| 3 years |
| 239,133 |
| 93,422 |
| 145,711 |
Laboratory equipment |
| 5 years |
| 1,575,354 |
| 653,636 |
| 921,718 |
Office furniture and equipment |
| 5 years |
| 207,208 |
| 54,479 |
| 152,729 |
Buildings |
| 30 years |
| 1,571,004 |
| 43,632 |
| 1,527,372 |
Building improvements |
| 5-15 years |
| 673,157 |
| 35,748 |
| 637,409 |
Land |
| Not amortized |
| 95,843 |
| – |
| 95,843 |
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| 4,361,699 |
| 880,917 |
| 3,480,782 |
9
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
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| June 30, |
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| 2018 |
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| Accumulated |
| Net Carrying |
| Cost |
| Amortization |
| Value |
| $ |
| $ |
| $ |
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Patents | 1,187,959 |
| 668,049 |
| 519,910 |
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| December 31, |
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| 2017 |
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| Accumulated |
| Net Carrying |
| Cost |
| Amortization |
| Value |
| $ |
| $ |
| $ |
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Patents | 1,213,314 |
| 636,917 |
| 576,397 |
The Company amortizesits intangible assets on a straight-line basis with terms of 8 to 20 years. The annual estimated amortization schedule over the next five years is as follows:
2018- remaining |
| $ | 43,719 |
2019 |
| $ | 90,660 |
2020 |
| $ | 90,660 |
2021 |
| $ | 90,660 |
2022 |
| $ | 90,660 |
Thereafter |
| $ | 113,551 |
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Total |
| $ | 519,910 |
The Company periodically reviews its long-lived assets to ensure that their carrying value does not exceed their fair market value. The Company carried out such a review in accordance with ASC 360 as of December 31, 2017. The result of this review confirmed that the ongoing value of the patents was not impaired as of December 31, 2017.
10
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 6 - Related Party Transactions
During the six-monthperiod ended June 30, 2018, 29,375 warrants were exercised to purchase shares of common stock at a price of $2.00 per share in cashless exercises that resulted in the issuance of 11,831 shares of common stock.
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| Number of Warrants |
| Weighted Average Exercise Price ($) |
Outstanding at December 31, 2017 |
| 1,731,680 |
| 2.36 |
Granted |
| – |
| – |
Exercised |
| (29,375) |
| 2.00 |
Expired |
| (375) |
| 2.00 |
Outstanding at June 30, 2018 |
| 1,701,930 |
| 2.37 |
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Exercisable at June 30, 2018 |
| 1,576,930 |
| 2.36 |
11
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 8 – Warrants and Options (continued)
Number Outstanding |
| Number Exercisable |
| Exercise Price ($) |
| Weighted Average Remaining Contractual Life (Years) |
| Proceeds to Company if Exercised ($) |
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948,475 |
| 948,475 |
| 2.20 |
| 0.37 |
| 2,086,645 |
520,455 |
| 520,455 |
| 2.40 |
| 0.13 |
| 1,249,092 |
150,000 |
| 25,000 |
| 2.47 |
| 0.39 |
| 370,500 |
24,000 |
| 24,000 |
| 3.00 |
| 0.00 |
| 72,000 |
19,000 |
| 19,000 |
| 3.75 |
| 0.00 |
| 71,250 |
40,000 |
| 40,000 |
| 4.53 |
| 0.06 |
| 181,200 |
1,701,930 |
| 1,576,930 |
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| 0.95 |
| 4,030,687 |
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| Number of Options |
| Weighted Average Exercise Price ($) |
Outstanding at December 31, 2017 |
| 2,939,134 |
| 4.09 |
Granted |
| 780,000 |
| 4.00 |
Exercised |
| – |
| – |
Expired/Cancelled |
| (120,167) |
| 4.99 |
Outstanding at June 30, 2018 |
| 3,598,967 |
| 4.04 |
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Exercisable at June 30, 2018 |
| 2,808,967 |
| 4.05 |
12
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 8 – Warrants and Options (continued)
Number Outstanding |
| Number Exercisable |
| Exercise Price ($) |
| Weighted Average Remaining Contractual Life (Years) |
| Proceeds to Company if Exercised ($) |
17,766 |
| 17,766 |
| 2.35 |
| 0.01 |
| 41,750 |
322,500 |
| 322,500 |
| 2.50 |
| 0.06 |
| 806,250 |
322,500 |
| 322,500 |
| 3.00 |
| 0.14 |
| 967,500 |
17,767 |
| 17,767 |
| 3.35 |
| 0.01 |
| 59,519 |
20,000 |
| 20,000 |
| 3.80 |
| 0.01 |
| 76,000 |
1,895,333 |
| 1,115,333 |
| 4.00 |
| 2.18 |
| 7,581,332 |
17,767 |
| 17,767 |
| 4.35 |
| 0.02 |
| 77,286 |
50,000 |
| 50,000 |
| 4.80 |
| 0.06 |
| 240,000 |
930,334 |
| 920,334 |
| 5.00 |
| 1.10 |
| 4,651,670 |
5,000 |
| 5,000 |
| 6.31 |
| 0.00 |
| 31,550 |
3,598,967 |
| 2,808,967 |
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| 3.59 |
| 14,532,857 |
13
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 9 – Commitments and Contingencies
In 2016, the Company entered into a real estate capital lease with ING Asset Finance Belgium S.A. (“ING”) to purchase a property located in Belgium for €1.12 million Euros. As of June 30, 2018, the balance payable was $735,350.
The following is a schedule showing the future minimum lease payments under capital leases by years and the present value of the minimum payments as of June 30, 2018:
2018- remaining | $ | 79,577 |
2019 | $ | 159,155 |
2020 | $ | 109,429 |
2021 | $ | 62,880 |
2022 | $ | 62,879 |
Greater than 5 years | $ | 589,480 |
Total minimum lease payments | $ | 1,063,400 |
Less: Amount representing interest | $ | (141,581) |
Present value of minimum lease payments | $ | 921,819 |
2018- remaining | $ | 110,157 |
2019 | $ | 66,264 |
2020 | $ | 53,240 |
2021 | $ | 14,426 |
Total Operating Lease Obligations | $ | 244,087 |
2018- remaining | $ | – |
2019 | $ | 40,917 |
2020 | $ | 40,917 |
2021 | $ | 37,885 |
2022 | $ | 35,072 |
Greater than 5 years | $ | 29,226 |
Total Grants Repayable | $ | 184,017 |
14
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 9 – Commitments and Contingencies (continued)
In 2016, the Company entered into a 15-year loan agreement with ING for €270,000 Euros with a fixed interest rate of 2.62%. As of June 30, 2018, the principal balance payable was $289,930.
In 2017, the Company entered into a 4-year loan agreement with Namur Invest for €350,000 Euros with a fixed interest rate of 4.00%. As of June 30, 2018, the principal balance payable was $354,162.
In 2017, the Company entered into a 7-year loan agreement with SOFINEX for up to €1 million Euros with a fixed interest rate of 4.50%. As of June 30, 2018, €500,000 Euros has been drawn down under this agreement and the principal balance payable was $584,532.
On June 27, 2018, the Company entered into a 4-year loan agreement with Namur Innovation andGrowth for €500,000 Euros with a fixed interest rate of 4.00%. As of June 30, 2018, the principal balance payable was $584,532.
As of June 30, 2018, the total balance for long-term debt payable was $2,258,548 and the annual payments remaining were as follows:
2018- remaining | $ | 133,680 |
2019 | $ | 494,751 |
2020 | $ | 702,996 |
2021 | $ | 629,598 |
2022 | $ | 273,525 |
Greater than 5 years | $ | 325,428 |
Total | $ | 2,559,978 |
Less: Amount representing interest | $ | (301,430) |
Total Long-Term Debt | $ | 2,258,548 |
e)Collaborative Agreement Obligations
In 2015, the Company entered into a research sponsorship agreement with DKFZ, in Germany for a 3-year period for €338,984 Euros. As of June 30, 2018, $87,680 is still to be paidby the Companyunder this agreement.
In 2016, the Company entered into a research co-operation agreement with DKFZ, in Germany for a 5-year period for €400,000 Euros. As of June 30, 2018, $261,230 is still to be paid by the Company under this agreement.
In 2016, the Company entered into a collaborative research agreement with Munich University, in Germany for a 3-year period for €360,000 Euros. As of June 30, 2018, $177,096 is still to be paid by the Company under this agreement.
In 2016, the Company entered into a phase one clinical research agreement with Hvidovre Hospital, University of Copenhagen in Denmark for a 2-year period for DKK 15 million Danish Kroner. As of June 30, 2018, $727,170 is still to be paid by the Company under this agreement.
15
VOLITIONRX LIMITED
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ expressed in United States Dollars)
Note 9 – Commitments and Contingencies (continued)
In 2017, the Company entered into a research collaboration agreement with National University Hospital of Singapore for a 2-year period for $48,000. As of June 30, 2018, $9,600 is still to be paid by the Company under this agreement.
In 2017, the Company entered into a clinical study research agreement with the Regents of the University of Michigan (the “University of Michigan”) for a 3-year period for up to $3 million. As of June 30, 2018, up to $2.25 million is still to be paid by the Company under this agreement.
As of June 30, 2018, the total amount to be paid for future research and collaboration commitments was $3,641,359 and the annual payments remaining were as follows:
2018- remaining | $ | 1,893,518 |
2019 | $ | 1,140,288 |
2020 | $ | 607,553 |
Total Collaborative Agreement Obligations | $ | 3,641,359 |
On July 9, 2018, the Company entered into a research collaboration agreement with the University of Taiwan for a 3-year period for a cost to the Company of up to$2.55 million payable over such period.
On August 10, 2018, the Company issued to Cotterford Company Limited in a private placement offering (PIPE) 5 million shares of common stock at a purchase price of $1.80 per share, as well as a warrant to purchase up to an additional 5 million shares of common stock at an exercise price of $3.00 per share payable in cash, for aggregate gross proceeds, before the deduction of offering expenses, of $9 million (excluding the proceeds from any exercise of the warrant). The warrant has an expiration date of August 10, 2019 and is exercisable for a period of 6 months commencing on February 10, 2019.
16
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
Cautionary Note Regarding Forward-Looking Statements
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. For instance, if we fail to develop and commercialize diagnostic products, we may be unable to execute our plan of operations. Other risks and uncertainties include our failure to obtain necessary regulatory clearances or approvals to distribute and market future products in the clinical in-vitro diagnostics, or IVD market; a failure by the marketplace to accept the products in our development pipeline or any other diagnostic products we might develop; we will face fierce competition and our intended products may become obsolete due to the highly competitive nature of the diagnostics market and its rapid technological change; and other risks identified elsewhere in this Report, as well as in our other filings with the Securities and Exchange Commission, or 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.
You should read this Report in its entirety, together with our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed with the SEC on March 1, 2018, 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. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations. If we do update or correct any forward-looking statements, readers should not conclude that we will make additional updates or corrections.
17
Our tests are based mainly on the science of Nucleosomics, which is the practice of identifying and measuring nucleosomes in the bloodstream or other bodily fluid - an indication that disease is present. We have developed a novel suite of blood assays for epigenetically altered circulating nucleosomes as biomarkers in cancer. Nu.Qproducts are simple, low-cost, ELISA platform tests and can incorporate other off patent, low cost ELISA tests in our panels (e.g. CEA, PSA, and CA125) for higher accuracy.
Our diagnostic target in the blood includes the same tumor chromosome fragment as targeted by ctDNA tests, but our approach is to test for chromosome protein and nucleic acid changes in intact chromosome fragments by ELISA, rather than chemically extracting, amplifying, and sequencing the ctDNA and discarding the rest of the nucleosome. ELISA is possible because the targets of our tests occur globally across all nucleosomes within a tumor cell, whereas individual ctDNA changes must be identified within the three billion base-pair genomes. This means that the targets of our tests are exponentially more prevalent in circulating blood, and detectable using simple laboratory methods.
We are developing blood-based diagnostics for the most prevalent cancers, beginning with colorectal cancer, or CRC. Following CRC, we anticipate focusing on lung cancer, prostate and pancreatic cancer, using our Nucleosomics biomarker discovery platform. Our development pipeline includes assays to be used for symptomatic patients or asymptomatic (screening) populations. The platform employs a range of simpleNu.Qimmunoassays on an industry standard ELISA format, which allows rapid quantification of epigenetic changes in biofluids (whole blood, plasma, serum, sputum, urine, etc.) compared to other more complicated and expensive approaches such as bisulfite conversion and polymerase chain reaction. Our Nu.Q biomarkers can be used alone, or in combination to generate profiles related to specific conditions.
We are developing forty-eight Nu.QTM blood-based assays to detect specific biomarkers that can be used individually or in combination to generate a profile which forms the basis of a product for a particular cancer or disease. We are also looking at a range of additional low cost orthogonal ELISA markers that may add to the test accuracy while maintaining our aim of providing a low-cost test that requires only a small amount of blood.
We anticipate that because of their ease of use and cost efficiency, our tests have the potential to become the first method of choice for cancer diagnostics, allowing detection of a range of cancers at an earlier stage. We anticipate the initial use will be for the testing of individuals who, for reasons such as time, cost, or aversion to current methods, are not currently screened, or are not up to date with their screening.
We intend to commercialize our products in the future through various channels within the European Union, the United States and throughout the rest of the world, beginning with Asia. Patient compliance is critical for asymptomatic CRC population screening programs; however, current CRC screening programs have poor compliance. For example, in the United States there are several recommended CRC screening test options, including: colonoscopy, fecal tests and computed tomography colonoscopy; however, the participation rate as of 2014 was just 65.7% of the eligible patient population. The UK, like many European countries, employs a front-line fecal test for screening that also has a low compliance rate of between 59% and 67%. These figures indicate that about one-third of the populations of the United States and the UK are unscreened. The unscreened populations of many other countries are much higher. This low level of screening participation is a serious issue as it often leads to the late diagnosis of cancer when it is much harder to treat.
We believe that the only viable option to achieve high levels of compliance will come from affordable blood tests that use a small amount of blood taken as part of the patient’s normal health check procedure. We aim to launch such a front-line CRC population screening test for asymptomatic people who are non-compliant with current screening methods in Europe in 2019 and in Asia soon after. This product will require a small amount of blood and will use the same established, robust, low-cost ELISA methodology employed in the PSA test for prostate cancer.
18
Overview of Plan of Operations
Liquidity and Capital Resources
Net cash used in operating activities was $6.5 million and $5.5 million for the six-months ended June 30, 2018 and June 30, 2017, respectively. The increase in cash used in operating activities for the period ended June 30, 2018 when compared to same period in 2017 was primarily due to increased expenditures on research and development activities, general and administrative activities, including increases to stock-based compensation.
Net cash provided by financing activities was $8.2 million and $1.4 million for the six-months ended June 30, 2018 and June 30, 2017, respectively. The increase in cash provided by financing activities for the period ended June 30, 2018 when compared to same period in 2017 was primarily the result of $7.8 million in net cash proceeds raised in March 2018 through the sale and issuance of 3.5 million shares of common stock in a public offering.
19
Approximate Payments (Including Interest) Due by Year
| Total |
| 2018 (Remaining) |
| 2019 - 2022 |
| 2023 + | |
Description |
| $ |
| $ |
| $ |
| $ |
Capital Lease Obligations |
| 1,063,400 |
| 79,577 |
| 394,343 |
| 589,480 |
Operating Lease Obligations |
| 244,087 |
| 110,157 |
| 133,930 |
| – |
Grants Repayable |
| 184,017 |
| – |
| 154,791 |
| 29,226 |
Long-Term Debt(1) |
| 3,180,722 |
| 133,680 |
| 2,294,059 |
| 752,983 |
Collaborative Agreements Obligations |
| 3,641,359 |
| 1,893,518 |
| 1,747,841 |
| – |
Total |
| 8,313,585 |
| 2,216,932 |
| 4,724,964 |
| 1,371,689 |
(1)Long-term debt includes the total value of the SOFINEX loan of €1.0 million Euros although only €500,000 Euros had been drawn down as of June 30, 2018. See Note 9(d) to theCondensed Consolidated Financial Statements for further details.
Comparison of the Three-Months Ended June 30, 2018 and June 30, 2017.
|
|
|
|
|
|
|
| Percentage |
|
| Three-Months Ended June 30, |
| Increase |
| Increase | ||
|
| 2018 |
| 2017 |
| (Decrease) |
| (Decrease) |
|
| $ |
| $ |
| $ |
| % |
Revenues |
| – |
| – |
| – |
| – |
|
|
|
|
|
|
|
|
|
Research and development |
| (2,686,473) |
| (1,807,636) |
| 878,837 |
| 49% |
| (1,643,681) |
| (1,427,875) |
| 215,806 |
| 15% | |
Sales and marketing |
| (235,366) |
| (207,042) |
| 28,324 |
| 14% |
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
| (4,565,520) |
| (3,442,553) |
| 1,122,967 |
| 33% |
|
|
|
|
|
|
|
|
|
Interest expense |
| (26,556) |
| (20,435) |
| 6,121 |
| |
|
|
|
|
|
|
|
|
|
Net Loss |
| (4,592,076) |
| (3,462,988) |
| 1,129,088 |
| 33% |
|
|
|
|
|
|
|
|
|
| (0.15) |
| (0.13) |
| 0.02 |
| 15% | |
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding - Basic and Diluted |
| 30,027,260 |
| 26,383,228 |
| 3,644,032 |
| 14% |
20
Our operations are still predominantly in the research and development stage and we had no revenues during the three-months ended June 30, 2018 and June 30, 2017, respectively.
Total operating expenses increased to $4.6 million for the three-months ended June 30, 2018 from $3.4 million forthe three-months ended June 30, 2017.
Research and Development Expenses
Research and development expenses increased to $2.7 million for the three-months ended June 30, 2018 from $1.8 million for the three-months ended June 30, 2017. This increase in overall research and development expenditures was primarily related to our participation in the trial with the University of Michigan and increased headcountduring the period.
| Three-Months Ended June 30, |
|
| ||
| 2018 |
| 2017 |
| Change |
| $ |
| $ |
| $ |
Personnel expenses | 867,114 |
| 782,258 |
| 84,856 |
Stock-based compensation | 125,522 |
| 156,018 |
| (30,496) |
Direct research and development expenses | 1,626,742 |
| 487,852 |
| 1,138,890 |
Other research and development | (80,603) |
| 257,080 |
| (337,683) |
Depreciation and amortization | 147,698 |
| 124,428 |
| 23,270 |
Total Research and Development expenses | 2,686,473 |
| 1,807,636 |
| 878,837 |
General and Administrative Expenses
| Three-Months Ended June 30, |
|
| ||
2018 |
| 2017 |
| Change | |
| $ |
| $ |
| $ |
523,224 |
| 479,432 |
| 43,792 | |
Stock-based compensation | 330,986 |
| 464,561 |
| (133,575) |
Legal and professional fees | 261,819 |
| 318,487 |
| (56,668) |
Other general and administrative | 518,527 |
| 165,100 |
| 353,427 |
Depreciation and amortization | 9,125 |
| 295 |
| 8,830 |
Total General and Administrative expenses | 1,643,681 |
| 1,427,875 |
| 215,806 |
21
Sales and marketing expenses increased to $235,366 for the three-months ended June 30,2018 from$207,042 for the three-months ended June 30, 2017. This increase in overall sales and marketing expenditures was primarily related to increased staff costs during the period.
| Three-Months Ended June 30, |
|
| ||
| 2018 |
| 2017 |
| Change |
| $ |
| $ |
| $ |
Personnel expenses | 166,475 |
| 124,505 |
| 41,970 |
Stock-based compensation | 38,688 |
| 34,496 |
| 4,192 |
Direct marketing and professional fees | 30,203 |
| 48,041 |
| (17,838) |
Total Sales and Marketingexpenses | 235,366 |
| 207,042 |
| 28,324 |
For the three-months ended June 30, 2018, the Company’s other expenses, comprised of interest expense, were $26,556 compared to $20,435 for the three-months ended June 30, 2017.
Comparison of the Six-Months Ended June 30, 2018 and June 30, 2017.
|
|
|
|
|
|
|
| Percentage |
|
| Six-Months Ended June 30, |
| Increase |
| Increase | ||
|
| 2018 |
| 2017 |
| (Decrease) |
| (Decrease) |
|
| $ |
| $ |
| $ |
| % |
Revenues |
| – |
| – |
| – |
| – |
|
|
|
|
|
|
|
|
|
Research and development |
| (5,109,675) |
| (3,480,987) |
| 1,628,688 |
| 47% |
General and administrative |
| (3,485,774) |
| (2,823,594) |
| 662,180 |
| 23% |
Sales and marketing |
| (599,510) |
| (476,450) |
| 123,060 |
| 26% |
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
| (9,194,959) |
| (6,781,031) |
| 2,413,928 |
| 36% |
|
|
|
|
|
|
|
|
|
Interest expense |
| (49,538) |
| (32,640) |
| 16,898 |
| 52% |
|
|
|
|
|
|
|
|
|
Net Loss |
| (9,244,497) |
| (6,813,671) |
| 2,430,826 |
| 36% |
|
|
|
|
|
|
|
|
|
Net Loss Per Share – Basic and Diluted |
| (0.32) |
| (0.26) |
| 0.06 |
| 23% |
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding - Basic and Diluted |
| 28,655,711 |
| 26,137,241 |
| 2,518,470 |
| 10% |
22
Research and Development Expenses
| Six-Months Ended June 30, |
|
| ||
| 2018 |
| 2017 |
| Change |
| $ |
| $ |
| $ |
Personnel expenses | 1,829,454 |
| 1,301,937 |
| 527,517 |
Stock-based compensation | 340,029 |
| 348,389 |
| (8,360) |
Direct research and development expenses | 2,558,177 |
| 1,109,224 |
| 1,448,953 |
Other research and development | 82,035 |
| 503,374 |
| (421,339) |
Depreciation and amortization | 299,980 |
| 218,063 |
| 81,917 |
Total Research and Development expenses | 5,109,675 |
| 3,480,987 |
| 1,628,688 |
General and Administrative Expenses
| Six-Months Ended June 30, |
|
| ||
| 2018 |
| 2017 |
| Change |
| $ |
| $ |
| $ |
Personnel expenses | 1,068,308 |
| 1,001,570 |
| 66,738 |
Stock-based compensation | 950,481 |
| 866,016 |
| 84,465 |
Legal and professional fees | 838,072 |
| 592,739 |
| 245,333 |
Other general and administrative | 610,683 |
| 362,974 |
| 247,709 |
Depreciation and amortization | 18,230 |
| 295 |
| 17,935 |
Total General and Administrative expenses | 3,485,774 |
| 2,823,594 |
| 662,180 |
23
Sales and marketing expenses increased to $599,510 for the six-months ended June 30, 2018, from the $476,450 for the six-months ended June 30, 2017. This increase in overall sales and marketing expenditures was primarily related to increased marketing and professional fees during the period.
| Six-Months Ended June 30, |
|
| ||
| 2018 |
| 2017 |
| Change |
| $ |
| $ |
| $ |
Personnel expenses | 321,392 |
| 356,629 |
| (35,237) |
Stock-based compensation | 102,111 |
| 34,875 |
| 67,236 |
Direct marketing and professional fees | 176,007 |
| 84,946 |
| 91,061 |
Total Sales and Marketingexpenses | 599,510 |
| 476,450 |
| 123,060 |
For the six-months ended June 30, 2018, the Company’s other expenses, comprised of interest expense, were $49,538 compared to $32,640 for the six-months ended June 30, 2017.
Off-Balance Sheet Arrangements
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.
Recently Issued Accounting Pronouncements
24
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our Principal Executive and Principal Financial Officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our management carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded, as they previously concluded as of December 31, 2017, that our disclosure controls and procedures continuenot to be effective as of June 30, 2018, because of material weaknesses in our internal control over financial reporting, as described below and in detail in our Annual Report.
Changes in Internal Control over Financial Reporting
As of June 30, 2018, we did not maintain sufficient internal controls over financial reporting:
due to a lack of adequate segregation of duties in some areas of Finance; and
25
Limitations of the Effectiveness of Disclosure Controls and Internal Controls
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURES
26
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| Incorporated by Reference |
| |||||||||
Exhibit Number |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing Date |
| Filed Herewith | ||
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| Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended. |
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| X | |||
| Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended. |
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| X | |||
32.1* |
| Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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| X | ||
101.INS |
| XBRL Instance Document. |
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| X | ||
101.SCH |
| XBRL Taxonomy Extension Schema Document. |
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| X | ||
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document. |
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| X | ||
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document. |
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| X | ||
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document. |
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| X | ||
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document. |
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| X |
27
|
| VOLITIONRX LIMITED |
|
|
|
|
|
|
DatedAugust 13, 2018 |
| By:/s/ Cameron Reynolds |
|
| Cameron Reynolds |
|
| President and Chief Executive Officer (Authorized Signatory and Principal Executive Officer) |
|
|
|
|
|
|
DatedAugust 13, 2018 |
| By:/s/ David Vanston |
|
| David Vanston |
|
| Chief Financial Officer and Treasurer (Authorized Signatory and Principal Financial and Accounting Officer) |
28