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.

Nucleosomics^TM,, 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.

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.

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

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)

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)

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	)

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)

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)

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.

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.

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.

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.

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

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.

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)

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.

Table of Contents

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.

Table of Contents

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).

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

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.

Table of Contents

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.

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.

Table of Contents

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.

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.

	Number of Options			Weighted Average Exercise Price ($)
Outstanding at December 31, 2022		4,985,105			3.87
Expired/Cancelled		(285,536	)		3.89
Outstanding at September 30, 2023		4,699,569			3.87

Exercisable at September 30, 2023		4,662,889			3.88

Below is a table summarizing the options issued and outstanding as of September 30, 2023, all of which were issued pursuant to the Company’s 2011 Plan (for option issuances prior to 2016) or the 2015 Plan (for option and RSU issuances commencing in 2016)and which have an aggregate weighted average remaining contractual life of 4.49 years. As of September 30, 2023, an aggregate of 9,700,000 shares of common stock were authorized for issuance under the 2015 Plan, of which 1,004,079 shares of common stock remained available for future issuance thereunder.

Number Outstanding		Number Exercisable		Exercise Price ($)		Weighted Average Remaining Contractual Life (Years)		Proceeds to Company if Exercised ($)
	585,000		585,000		3.25		1.37		1,901,250
	981,569		944,889		3.40		7.85		3,337,335
	740,000		740,000		3.60		6.61		2,664,000
	1,607,837		1,607,837		4.00		2.99		6,431,348
	89,163		89,163		4.38		4.32		390,534
	50,000		50,000		4.80		3.26		240,000
	646,000		646,000		5.00		3.49		3,230,000
	4,699,569		4,662,889						18,194,467

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 (continued)

Stock-based compensation expense related to stock options of $287,013 and $1,021,938 was recorded in the nine months ended September 30, 2023 and September 30, 2022, respectively. Total remaining unrecognized compensation cost related to non-vested stock options is $350 and is expected to be recognized over a period of 0.01 years. As of September 30, 2023, the total intrinsic value of stock options outstanding was $nil.

c) Restricted Stock Units

Below is a table summarizing the RSUs issued and outstanding as of September 30, 2023, all of which were issued pursuant to the 2015 Plan.

	Number of RSUs			Weighted Average Share Price ($)
Outstanding at December 31, 2022		2,262,908			1.77
Granted		1,827,882			0.82
Vested/Settled		(413,911	)		3.07
Cancelled / Forfeited		(87,343	)		1.82
Outstanding at September 30, 2023		3,589,536			1.13

Below is a table summarizing the RSUs granted during the nine months ended September 30, 2023, all of which were issued pursuant to the 2015 Stock Incentive Plan. The RSUs vest equally over periods stated on the dates noted, subject to continued service, and will result in the RSU compensation expense stated.

Equity Incentive Plan

RSUs (#)

Grant Date

Vesting Period

First Vesting Date

Second Vesting Date

Third Vesting Date

RSU Expense $

2015

57,000

Mar 27, 2023

36 Months

Mar 27, 2024

Mar 27, 2025

Mar 27, 2026

98,040

2015

50,000

Mar 27, 2023

24 Months

Mar 27, 2024

Mar 27, 2025

N/A

86,000

2015

5,325

Mar 27, 2023

12 Months

Mar 27, 2024

N/A

9,159

2015

47,000

Jun 15, 2023

36 Months

Jun 15, 2024

Jun 15, 2025

Jun 15, 2026

74,260

2015

8,392

Jun 15, 2023

12 Months

Jun 15, 2024

N/A

13,260

2015

43,165

Jul 13, 2023

6 Months

Oct 13, 2023

Jan 13, 2024

N/A

56,978

2015

14,000

Jul 13, 2023

36 Months

Jul 13, 2024

Jul 13, 2025

Jul 13, 2026

18,479

2015

34,000

Sep 11, 2023

36 Months

Sep 11, 2024

Sep 11, 2025

Sep 11, 2026

44,540

2015

1,569,000

Sep 28, 2023

36 Months

Sep 28, 2024

Sep 28, 2025

Sep 28, 2026

1,098,300

1,827,882

1,499,016

Table of Contents

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 7 – Stock-Based Compensation (continued)

c) Restricted Stock Units (continued)

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

Table of Contents

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 7 – Stock-Based Compensation (continued)

c) Restricted Stock Units (continued)

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

Equity Incentive Plan	RSUs (#)		Cancellation Date	Vest Date	RSUs Cancelled (#)
2015		5,000	Apr 30, 2023	Jun 1, 2024		5,000
2015		4,334	Apr 30, 2023	Oct 4, 2023		4,334
2015		4,333	Apr 30, 2023	Oct 4, 2024		4,333
2015		4,333	Apr 30, 2023	Oct 4, 2025		4,333
2015		5,000	Apr 30, 2023	Jun 1, 2023		5,000
2015		5,000	May 5, 2023	Oct 4, 2023		5,000
2015		5,000	May 5, 2023	Oct 4, 2024		5,000
2015		5,000	May 5, 2023	Oct 4, 2025		5,000
2015		6,000	May 5, 2023	Mar 1, 2024		6,000
2015		667	Jun 15, 2023	Nov 29, 2023		667
2015		667	Jun 15, 2023	Nov 29, 2024		667
2015		666	Jun 15, 2023	Nov 29, 2025		666
2015		5,000	Jun 28, 2023	Oct 4, 2023		5,000
2015		5,000	Jun 28, 2023	Oct 4, 2024		5,000
2015		5,000	Jun 28, 2023	Oct 4, 2025		5,000
2015		2,343	Jun 28, 2023	Aug 3, 2023		2,343
2015		3,334	Jul 28, 2023	Oct 4, 2023		3,334
2015		3,333	Jul 28, 2023	Oct 4, 2024		3,333
2015		3,333	Jul 28, 2023	Oct 4, 2025		3,333
2015		4,000	Jul 28, 2023	Feb 8, 2024		4,000
2015		3,334	Sep 22, 2023	Mar 27, 2024		3,334
2015		3,333	Sep 22, 2023	Mar 27, 2025		3,333
2015		3,333	Sep 22, 2023	Mar 27, 2026		3,333
		87,343				87,343

Table of Contents

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 7 – Stock-Based Compensation (continued)

c) Restricted Stock Units (continued)

Below is a table summarizing the RSUs issued and outstanding as of September 30, 2023 and which have an aggregate weighted average remaining contractual life of 1.62 years.

Number Outstanding		Weighted Average Grant date Fair Value Share Price ($)		Weighted Average Remaining Contractual Life (Years)
	450,000		0.69		2.51
	1,569,000		0.70		2.00
	34,000		1.31		1.95
	57,165		1.32		1.38
	1,080,000		1.46		1.01
	55,392		1.58		1.50
	12,500		1.69		0.98
	102,325		1.72		1.26
	29,000		2.01		0.88
	1,000		2.15		1.17
	11,500		2.45		0.67
	9,000		2.81		0.42
	85,000		2.95		0.76
	19,904		3.04		0.01
	50,000		3.31		0.59
	2,000		3.38		0.21
	21,750		3.51		0.09
	3,589,536

Stock-based compensation expense related to RSUs of $1,511,351 and $1,317,620 was recorded in the nine months ended September 30, 2023 and September 30, 2022, respectively. Total remaining unrecognized compensation cost related to non-vested RSUs is $2,316,272.

Table of Contents

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 8 – Commitments and Contingencies

a) Finance Lease Obligations

In 2016, the Company entered into a capital lease with ING Asset Finance Belgium S.A. (“ING”) to purchase a property located in Belgium for €1.12 million, maturing in May 2031 with implicit interest of 2.62%. As of September 30, 2023, the balance payable was $441,669.

The following is a schedule showing the future minimum lease payments under finance leases by years and the present value of the minimum payments as of September 30, 2023.

2023	$	14,236
2024	$	56,941
2025	$	56,941
2026	$	56,942
2027	$	56,943
Greater than 5 years	$	249,107
Total	$	491,110
Less: Amount representing interest	$	(49,441	)
Present value of minimum lease payments	$	441,669

b) Operating Lease Right-of-Use Obligations

As of September 30, 2023, operating lease right-of-use assets and liabilities arising from operating leases were $490,468 and $518,729, respectively. During the nine months ended September 30, 2023, cash paid for amounts included for the measurement of lease liabilities was $190,825 and the Company recorded operating lease expense of $192,030. The Company’s weighted average discount rate is 2.63% and the weighted average remaining lease term is 24 months.

The following is a schedule showing the future minimum lease payments under operating leases by years and the present value of the minimum payments as of September 30, 2023.

2023	$	73,862
2024	$	178,601
2025	$	136,305
2026	$	109,110
2027	$	40,943
2028	$	5,042
Total Operating Lease Obligations	$	543,863
Less: Amount representing interest	$	(25,134	)
Present Value of minimum lease payments	$	518,729

The Company’s office space leases are short-term and the Company has elected under the short-term recognition exemption not to recognize them on the balance sheet. During the nine months ended September 30, 2023, the Company recognized $53,077 in short-term lease costs associated with office space leases. The annual payments remaining for short-term office leases were as follows:

2023	$	18,415
2024	$	32,376
Total Operating Lease Liabilities	$	50,791

Table of Contents

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 8 – Commitments and Contingencies (continued)

c) Grants Repayable

In 2010, the Company entered into an agreement with the Walloon Region government in Belgium for a colorectal cancer research grant for €1.05 million. Per the terms of the agreement, €314,406 of the grant is to be repaid, by installments over the period from June 30, 2014 to June 30, 2023. In the event that the Company receives revenue from products or services as defined in the agreement, it is due to pay a 6% royalty on such revenue to the Walloon Region. The maximum amount payable to the Walloon Region, in respect of the aggregate of the amount repayable of €314,406 and the 6.00% royalty on revenue, is equal to twice the amount of funding received. As of September 30, 2023, the grant balance repayable was $26,467.

In 2018, the Company entered into an agreement with the Walloon Region government in Belgium for a colorectal cancer research grant for €605,000. Per the terms of the agreement, €181,500 of the grant is to be repaid by installments over 12 years commencing in 2020. In the event that the Company receives revenue from products or services as defined in the agreement, it is due to pay a 3.53% royalty on such revenue to the Walloon Region. The maximum amount payable to the Walloon Region, in respect of the aggregate of the amount repayable of €181,500 and the 3.53% royalty on revenue, is equal to the amount of funding received. As of September 30, 2023, the grant balance repayable was $105,823.

In 2020, the Company entered into an agreement with the Walloon Region government in Belgium for a research grant for €929,433. Per the terms of the agreement, €278,830 of the grant is to be repaid by installments over 15 years commencing in 2022. In the event that the Company receives revenue from products or services as defined in the agreement, it is due to pay a 4.34% royalty on such revenue to the Walloon Region. The maximum amount payable to the Walloon Region, in respect of the aggregate of the amount repayable of €278,830 and the 4.34% royalty on revenue, is equal to the amount of funding received. As of September 30, 2023, the grant balance repayable was $253,345.

In 2020, the Company entered into an agreement with the Walloon Region government in Belgium for a research grant for €495,000. Per the terms of the agreement, €148,500 of the grant is to be repaid by installments over 10 years commencing in 2023. In the event that the Company receives revenue from products or services as defined in the agreement, it is due to pay a 2.89% royalty on such revenue to the Walloon Region. The maximum amount payable to the Walloon Region, in respect of the aggregate of the amount repayable of €148,500 and the 2.89% royalty on revenue, is equal to the amount of funding received. As of September 30, 2023, the grant balance repayable was $97,200.

As of September 30, 2023, the total grant balance repayable was $482,835 and the payments remaining were as follows:

2023	$	50,349
2024	$	27,100
2025	$	35,902
2026	$	43,271
2027	$	48,039
Greater than 5 years	$	278,174
Total Grants Repayable	$	482,835

Table of Contents

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 8 – Commitments and Contingencies (continued)

d) Long-Term Debt

In 2016, the Company entered into a 7-year loan agreement with Namur Invest for €440,000 with a fixed interest rate of 4.85%, maturing in December 2023. As of September 30, 2023, the principal balance payable was $27,619.

In 2016, the Company entered into a 15-year loan agreement with ING for €270,000 with a fixed interest rate of 2.62%, maturing in December 2031. As of September 30, 2023, the principal balance payable was $172,523.

In 2017, the Company entered into a 7-year loan agreement with SOFINEX for up to €1 million with a fixed interest rate of 4.50%, maturing in September 2024. As of September 30, 2023, €1 million had been drawn down under this agreement and the principal balance payable was $317,599.

In 2019, the Company entered into a 4-year loan agreement with Namur Innovation and Growth for €500,000 with a fixed interest rate of 4.80%, maturing in September 2024. As of September 30, 2023, the principal balance payable was $173,421.

In 2020, the Company entered into a 10-year loan agreement with Namur Invest for a maximum of €830,000 with fixed interest rate of 4.00%, maturing March 2031. As of September 30, 2023, the principal balance payable was $697,313.

In 2021, the Company entered into a 3 ½ year loan agreement with SOFINEX for a maximum of €450,000 with fixed interest rate of 5.00%, maturing June 2025. As of September 30, 2023, the principal balance payable was $317,599.

In 2022, the Company entered into a 4 year loan agreement with Namur Invest for a maximum of €1.0 million with fixed interest rate of 6.00%, maturing in July 2026. As of September 30, 2023, the principal balance payable was $897,254.

In 2022, the Company entered into a 4-year loan agreement with Namur Invest for a maximum of €500,000 with fixed interest rate of 5.45%, maturing December 2027. As of September 30, 2023, the principal balance payable was $529,332.

In June 2023, the Company entered into a 4-year loan agreement with Namur Invest for a maximum of €400,000 with fixed interest rate of 7.00%, maturing June 2027. As of September 30, 2023, €200,000 had been drawn down under this agreement and the principal balance payable was $211,733.

As of September 30, 2023, the total balance for long-term debt payable was $3,344,393 and the payments remaining were as follows:

2023	$	467,217
2024	$	1,191,157
2025	$	763,132
2026	$	542,217
2027	$	294,892
Greater than 5 years	$	440,735
Total	$	3,699,350
Less: Amount representing interest	$	(354,957	)
Total Long-Term Debt	$	3,344,393

Table of Contents

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 8 – Commitments and Contingencies (continued)

e) Collaborative Agreement Obligations

In 2018, the Company entered into a research collaboration agreement with the University of Taiwan for a three-year research period for a cost to the Company of up to $2.55 million payable over such period. As of September 30, 2023, $510,000 is still to be paid by the Company under this agreement.

In 2022, the Company entered into a sponsored research agreement with The University of Texas MD Anderson Cancer Center to evaluate the role of neutrophil extracellular traps ("NETs") in cancer patients with sepsis for a cost to the Company of $582,135. As of September 30, 2023, $nil is due by the Company under this agreement.

In August 2023, the Company entered into a project research agreement with Guy’s and St Thomas’ NHS Foundation Trust to evaluate the practical clinical utility of the NuQ^® H3.1 nucleosome levels in adult patients with sepsis to facilitate early diagnosis and prognostication for a cost to the Company of $198,042. As of September 30, 2023, $nil is due by the Company under this agreement.

As of September 30, 2023, the total amount to be paid for future research and collaboration commitments was approximately $ 1,290,177 and the payments remaining were as follows:

2023	$	671,388
2024 - 2027	$	618,789
Total Collaborative Agreement Obligations	$	1,290,177

f) Other Commitments

Volition Vet

On October 25, 2019, the Company entered into an agreement with TAMU for provision of in kind services of personnel, animal samples and laboratory equipment in exchange for a non-controlling interest of 7.5% in Volition Vet with an additional 5%, vesting in a year from the date of the agreement, giving TAMU in aggregate, a 12.5% equity interest as of such date. As of September 30, 2023, TAMU has a 12.5% equity interest in Volition Vet.

Volition Germany

On January 10, 2020, the Company, through its wholly-owned subsidiary Belgian Volition, acquired an epigenetic reagent company, Octamer GmbH (“Octamer”), based in Munich, Germany, and hired its founder for his expertise and knowledge to be passed to Company personnel. On March 9, 2020, Octamer was renamed to Volition Germany GmbH (or “Volition Germany”).

In connection with the transaction agreement, the Company entered into a royalty agreement with the founder providing for the payment of royalties in the amount of 6% of net sales of Volition Germany’s nucleosomes as reagents to pharmaceutical companies for use in the development, manufacture and screening of molecules for use as therapeutic drugs for a period of five years post-closing.

As of September 30, 2023, $207 is payable under the 6% royalty agreement on sales to date towards the Company’s aggregate minimum royalty obligation of $116,453.

Table of Contents

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 8 – Commitments and Contingencies (continued)

f) Other Commitments (continued)

Volition America

On November 3, 2020, the Company entered into a professional services master agreement (the “Master Agreement”) with Diagnostic Oncology CRO, LLC (“DXOCRO”) to conduct a pivotal clinical trial and provide regulatory submission and reimbursement related services. On August 8, 2022, the Company and DXOCRO amended and restated the Master Agreement to expand the scope of DXOCRO’s consultant services provided thereunder (the “A&R Master Agreement”). The A&R Master Agreement requires DXOCRO to support development and clinical validation studies for the Company’s Nu.Q® product portfolio in the United States, including by conducting large-scale finding studies across multiple sites in the U.S. using Nu.Q® NETs and Nu.Q® Cancer tests to determine clinical utility in sepsis and non-Hodgkin’s lymphoma. The Company anticipates DXOCRO’s services under the agreement will be completed by the end of the fourth quarter 2023 at a total cost to the Company of up to $4.2 million. The Company’s payment obligations accrue upon delivery of projects under the agreement. The Company may terminate the agreement or any project thereunder upon at least 30 days’ prior written notice. Unless earlier terminated, the A&R Master Agreement terminates on the later of December 31, 2025 or the date upon which all services have been completed. As of September 30, 2023, $428,669 is payable under the A&R Master Agreement, and up to $354,850 may be payable by Company in future periods for services rendered.

VolitionRx

On February 27, 2023, the Company entered into a 9-month loan agreement with First Insurance Funding for a maximum of $356,258 with fixed interest rate of 7.42%, maturing November 2023. As of September 30, 2023, the maximum has been drawn down under this agreement and the principal balance payable was $79,168.

g) Legal Proceedings

In the ordinary course of business, the Company may be subject to claims, counter claims, lawsuits and other litigation of the type that generally arise from the conduct of its business. The Company knows of no legal proceedings which the Company believes will have a material adverse effect on its financial position.

h) Commitments in Respect of Corporate Goals and Performance-Based Awards

In August 2021 and October 2021 the Compensation Committee of the Board of Directors approved the granting of equity-based awards under the 2015 Plan as well as cash bonuses, each of which vests upon achievement of certain corporate goals focused around product development and commercialization, to various personnel including directors, executives, members of management, consultants and employees of the Company and/or its subsidiaries.

On June 23, 2022, the Compensation Committee of the Board of Directors approved the achievement of all of the remaining outstanding corporate goals related to the August 2021 and October 2021 awards, resulting in the payment of the cash bonus awards and the vesting of the remaining rights to the equity-based awards, which equity-based awards remain subject to time-based vesting in equal installments on each of August 3, 2022 and August 3, 2023 (with the exception of October 4, 2022 and October 4, 2023 for one award) and the continuous service of the award recipient through the applicable vesting date.

In October 2022, the Compensation Committee of the Board of Directors approved the granting of RSUs under the 2015 Plan to various employees in exchange for services provided to the Company. These RSUs vest upon the achievement of certain corporate goals focused around product development and commercialization with further time based vesting over three years, and subject to continued service.

In October 2022, the Compensation Committee of the Board of Directors approved the granting of RSUs under the 2015 Plan to various employees in exchange for services provided to the Company. These RSUs vest upon the share price closing above $5.00 per share for a minimum of ten consecutive trading days within a period of three years from the date of grant, with further time-based vesting in a single installment six months after the timely achievement of the target, if at all, and subject to continued service.

Table of Contents

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 8 – Commitments and Contingencies (continued)

h) Commitments in Respect of Corporate Goals and Performance-Based Awards (continued)

In October 2022 the Compensation Committee of the Board of Directors approved the granting of cash bonuses, payable upon achievement of various corporate goals focused around product development, manufacturing, financing and commercialization, to various personnel including directors, executives, members of management, consultants and employees of the Company and/or its subsidiaries. Conditional upon the achievement by January 1, 2023 and July 1, 2023 of all specified corporate goals as set forth in the minutes of the Compensation Committee, as well as continued service by the award recipients, the Company at the sole discretion of the Chief Executive Officer and the Chief Financial Officer paid a cash bonus to such award recipients.

An aggregate of 1,144,000 RSUs were issued under the 2015 Plan in connection with the October 2022 grants and an aggregate of 1,000,000 stock options and 500,000 RSUs were issued under the 2015 Plan in connection with the August 2021 and October 2021 grants.

As of September 30, 2023, the Company has recognized compensation expense of $901,059 in relation to the options from the 2021 grants that have vested in 2023. The Company has unrecognized compensation expense of $350 in relation to such stock options, based on the outcomes related to the prescribed performance targets on the outstanding awards.

Total		Amortized		Amortized		Amortized		Un-Amortized
Award		2023		2022		2021		2023
$		$		$		$		$
	969,593		-		580,412		389,181		-
	901,409		270,196		450,090		180,773		350

As of September 30, 2023, the Company has recognized compensation expense of $758,708 in relation to RSUs from the 2021 grants that have vested in 2023. The Company has unrecognized compensation expense of $331 in relation to such RSUs, based on the outcomes related to the prescribed performance targets on the outstanding awards.

Total		Amortized		Amortized		Amortized		Un-Amortized
Award		2023		2022		2021		2023
$		$		$		$		$
	822,149		-		493,207		328,942		-
	759,039		227,778		379,191		151,739		331

Table of Contents

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 8 – Commitments and Contingencies (continued)

h) Commitments in Respect of Corporate Goals and Performance-Based Awards (continued)

As of September 30, 2023, the Company has recognized total compensation expense of $961,535 of which $522,195 is in relation to RSUs from the 2022 grants that will vest in 2023, $260,249 is in relation to RSUs from such grants that will vest in 2024, and $179,091 is in relation to RSUs from such grants that will vest in 2025. The Company has unrecognized compensation expense of $623,561 in relation to such RSUs, based on the outcomes related to the prescribed performance targets on the outstanding awards.

Total		Vesting	Amortized		Amortized		Un-Amortized
Award		Year	2023		2022
$			$		$		$
	527,940	2023		388,108		134,087		5,745
	521,493	2024		195,161		65,088		261,244
	535,663	2025		132,405		46,686		356,572
	1,585,096			715,674		245,861		623,561

In September 2023, the Compensation Committee of the Board of Directors approved the granting of cash bonuses, payable upon achievement of various corporate goals focused around revenue, operations and regulatory, to various personnel including directors, executives, members of management, consultants and employees of the Company and/or its subsidiaries. Conditional upon the achievement by December 31, 2023 and June 30, 2024 of specified corporate goals as set forth in the minutes of the Compensation Committee, as well as continued service by the award recipients, the Company at the sole discretion of the Chief Executive Officer and the Chief Financial Officer would pay a cash bonus to such award recipients. As of September 30, 2023, the Company has accrued compensation expense of $603,465 in relation to the cash bonuses to be paid upon achievement of the specified corporate goals based on the expected outcomes related to the prescribed performance targets.

In September 2023, the Compensation Committee of the Board of Directors approved the granting of an aggregate of 1,569,000 RSUs under the 2015 Plan to various personnel including directors, executives, members of management, consultants and employees of the Company and/or its subsidiaries in exchange for services provided to the Company. These RSUs vest upon the achievement of certain corporate goals focused around revenue, operations and regulatory targets as of December 31, 2023 and June 30, 2024, as set forth in the minutes of the Compensation Committee, with further time based vesting over three years, and subject to continued service by the award recipient. The achievement of the corporate goals is to be determined by the Compensation Committee in its sole discretion.

In September 2023, the Compensation Committee of the Board of Directors approved the granting of an aggregate of 450,000 RSUs under the 2015 Plan to various employees in exchange for services provided to the Company. These RSUs have an effective date of grant of October 19, 2023, vest upon the share price closing above $5.00 per share for a minimum of 30 consecutive trading days within a period of three years from the effective date of grant and ending October 19, 2026, with further time-based vesting in a single installment six months after the timely achievement of the target, if at all, and subject to continued service by the award recipients. The estimated fair value of the RSUs that include a market vesting condition will be measured on the grant date using a Monte Carlo Simulation of a Geometric Brownian Motion stock path model and incorporating the probability of vesting occurring. The estimated fair value of these awards will be recognized over the derived service period (as determined by the valuation model), with such recognition occurring regardless of whether the market condition is met.

Table of Contents

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 8 – Commitments and Contingencies (continued)

h) Commitments in Respect of Corporate Goals and Performance-Based Awards (continued)

As of September 30, 2023, the Company had recognized total compensation expense of $5,494. The Company has unrecognized compensation expense of $1,092,806 in relation to the RSUs from the 2023 grants, of which $363,120 in relation to RSUs that will vest in 2024, $364,601 in relation to RSUs that will vest in 2025, and $365,085 in relation to RSUs that will vest in 2026. based on the outcomes related to the prescribed performance targets on the outstanding awards.

Total		Vesting	Amortized		Un-Amortized
Award		Year	2023
$			$		$
	366,113	2024		2,993		363,120
	366,101	2025		1,500		364,601
	366,086	2026		1,001		365,085
	1,098,300			5,494		1,092,806

Table of Contents

VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 9 – Subsequent Events

Restricted Stock Units

On October 4, 2023 377,250 RSUs vested and resulted in the issuance of 300,123 shares of common stock, 9,668 RSUs remain unsettled and the remaining 67,459 shares of common stock were withheld for taxes and returned as authorised shares under the 2015 Stock Incentive Plan.

On October 4 2023, 2,667 RSUs previously granted to an employee were cancelled by mutual consent and returned as authorized shares under the 2015 Stock Incentive Plan.

On October 13, 2023, 21,583 RSUs vested and resulted in the issuance of 21,583 shares of common stock.

Effective October 19, 2023, the Company granted aggregate RSUs of 450,000 shares of common stock under the Company’s 2015 Stock Incentive Plan to various employees in exchange for services provided to the Company. These RSUs vest upon the share price closing above $5.00 per share for a minimum of thirty consecutive trading days within a period of three years from the date of grant, with further time-based vesting in a single installment six months after the timely achievement of the target, if at all, and subject to continued service. The estimated fair value of the RSUs that include a market vesting condition will be measured on the grant date using a Monte Carlo Simulation of a Geometric Brownian Motion stock path model and incorporating the probability of vesting occurring. The estimated fair value of these awards will be recognized over the derived service period (as determined by the valuation model), with such recognition occurring regardless of whether the market condition is met.

On October 20 2023, 19,000 RSUs previously granted to employees were cancelled and returned as authorized shares under the 2015 Stock Incentive Plan upon the resignation of such employees prior to vesting.

On November 1, 2023, 21,750 RSUs vested and resulted in the issuance of 21,750 shares of common stock.

END NOTES TO FINANCIALS

Table of Contents

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

The following discussion and analysis of our financial condition and results of operations should be read together with our Unaudited Condensed Consolidated Financial Statements and the related notes included elsewhere in this Report and our Annual Report. This discussion and analysis contains forward-looking statements that are based on our current expectations and reflect our plans, estimates and anticipated future financial performance. These statements involve numerous risks and uncertainties. Our actual results may differ materially from those expressed or implied by these forward-looking statements as a result of many factors, including those set forth in the section entitled “Risk Factors” in this Report and in our Annual Report, as well as our other public filings with the SEC. Please refer to the section of this Report entitled “Cautionary Note Regarding Forward-Looking Statements” for additional information.

Company Overview

Volition is a multi-national epigenetics company focused on advancing the science of epigenetics and exploiting these advances in human health with the ambition of saving and improving lives through the earlier detection of and improvement in monitoring the progress of life-altering diseases. This has been our mission since our founding, and it is coming to fruition at the very heart of epigenetics.

Through its subsidiaries, Volition is developing and commercializing simple, easy to use, cost-effective blood tests to help diagnose and monitor a range of life-altering diseases, including some cancers and diseases associated with NETosis, such as sepsis. Early diagnosis and monitoring have the potential to not only prolong the life of patients, but also improve their quality of life.

Cancer is associated with a loss of normal chromosomal epigenetic regulation and Volition is working to detect these epigenetic changes in chromosome fragments which circulate in the blood. The most common of these are nucleosomes and we investigate these through our Nucleosomics™ technology platform Nu.Q^®. We also investigate epigenetic changes in transcription factor binding, in particular CCCTC-binding factor (“CTCF”), and on October 21, 2023, published our first data relating to this novel detection method.

We have five key pillars of focus, to commercialize in different areas.

	·	Cancer - detecting and monitoring human cancer through both our Nu.Q^® and CTCF technologies.
	·	Nu.Q^® Vet - cost-effective, easy-to-use cancer screening blood test for dogs and other animals.
	·	Nu.Q^® NETs - monitoring the immune system to save lives in both humans and animals.
	·	Nu.Q^® Capture - capturing and concentrating samples for more accurate diagnosis.
	·	Nu.Q^® Discover - a complete solution to profiling nucleosomes.

Our research, product development and manufacturing activities are centered in Belgium, with innovation and U.S. regulatory operations in California, and additional offices in Nevada, London, and Singapore, where we focus on bringing our diagnostic and disease monitoring products to market.

Commercialization Strategy

We are guided by three underlying principles to our commercialization strategy – ensuring our products:

	·	Result in low capital expenditures for licensors and end users and low operating expenses for Volition,
	·	Are affordable, and
	·	Are accessible worldwide.

We believe, given the global prevalence of cancer and diseases associated with NETosis, and the low-cost, accessible and routine nature of our tests, they could be used throughout the world.

We aim to remain an intellectual property (“IP”) powerhouse in the epigenetic space and plan to monetize our IP and technologies through licensing, development, commercialization and distribution contracts with companies that have established distribution networks and expertise on a worldwide or regional basis, in both human and animal care across platforms (centralized labs and point-of-care).

Table of Contents

To this end, on March 28, 2022, Volition entered into a master license and product supply agreement with Heska Corporation (“Heska”), a leading global provider of advanced veterinary diagnostics. In exchange for granting Heska exclusive worldwide rights to sell our Nu.Q^® Vet Cancer Test at the point of care for companion animals, Volition received a $10.0 million upfront payment upon signing and is eligible to receive up to an additional $18.0 million based upon the achievement of certain near and mid-term milestones. In addition, Volition has granted Heska non-exclusive rights to sell the Nu.Q^® Vet Cancer Test in kit format for companion animals through Heska’s network of central reference laboratories. In February 2023, Heska commenced pre-orders of the Nu.Q^® Canine Cancer Screen and Monitor Test for veterinarians in Heska’s network at the point of care.

We also entered into a licensing and supply agreement with IDEXX Laboratories, Inc. (“IDEXX”), a global leader in pet healthcare innovation, in October 2022. This contract provides worldwide customer reach through IDEXX’s global reference laboratory network as we continue to commercialize our transformational Nu.Q^® technology within the companion animal healthcare sector and capitalize on the significant opportunities available. IDEXX launched the IDEXX Nu.Q^® Canine Cancer Screen in the United States in January 2023.

Further, we engaged DNAtech, Portugal, and, through our agreement with Heska, Scil Lab Europe, to launch the Nu.Q^® Vet Cancer Test to customers in Europe commencing in November 2022. Subsequent to the quarter ended, September 30, 2023, we have launched the Nu.Q^® Vet Cancer Test in the UK through two distributors, VPG (Veterinary Pathology Group) and Nationwide.

Following the roll-out of our Nu.Q^® Vet Cancer Test and Nu.Q^®Discover, the next series of products we anticipate launching are as follows:

	·	a canine cancer monitoring claim;
	·	NETosis related screening and monitoring tests for use in human sepsis, and coagulation; and
	·	cancer tests for humans.

Our Nucleosomics™ technology is transferable to multiple platforms including ELISA 96-well plates and, bead-based chemiluminescent and we are currently working on transferring our technology to the widely-utilized homogeneous immunoassay platform and several point of care platforms to enable rapid turnaround of results in–clinic and in the doctor’s office.

Additionally, we are working on complete nucleosome analysis with our Nu.Q^® Capture technology. The goal of this project is to investigate ways to specifically target circulating tumor DNA (“ctDNA”). The ability to enrich ctDNA will allow us to use mass spectrometry to analyze histone and DNA modifications, and to sequence DNA present around nucleosomes.

The use of Nu.Q^®Capture technology in the field of transcription factors has led to the successful isolation of tumor derived transcription factor-DNA complexes from blood samples obtained from cancer patients. Subsequent to the quarter end September 30, 2023, at the European Society for Medical Oncology conference in Madrid, Spain in October 2023, we demonstrated what we believe to be an entirely new method for the early detection of cancer. We believe that this novel CTCF-ChIP/qPCR method developed by Volition shows enormous promise for the accurate, rapid, low-cost detection of early-stage cancer.

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, 2023, we had cash and cash equivalents of approximately $10.8 million.

Net cash used in operating activities was $24.5 million for the nine months ended September 30, 2023 and $9.5 million for the nine months ended September 30, 2022. The increase in cash used in operating activities for the period ended September 30, 2023 when compared to same period in 2022 was primarily due to a $10.0 million payment received pursuant to our license and supply agreement with Heska in the period ended September 30, 2022 and increased spending on clinical trials activities in 2023 in furtherance of our commercialization strategy.

Net cash used in investing activities was $0.8 million and $1.0 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. The decrease was primarily due to lower purchases of laboratory equipment.

Net cash provided by financing activities was $25.2 million for the nine months ended September 30, 2023 and net cash provided by financing activities was $6.0 million for the comparable period ended September 30, 2022. The increase in cash provided by financing activities for the period ended September 30, 2023 when compared to same period in 2022 was due to $17.6 million in net cash received from the issuance of shares of common stock in a registered public offering in June 2023, $8.0 million in net cash received from the issuance of shares of common stock in a registered public offering in February 2023 and $0.7 million in net cash received from the issuance of shares of common stock under our “at-the-market” facilities during the period ended September 30, 2023.

Table of Contents

The following table summarizes our approximate contractual payments due by year as of September 30, 2023.

Approximate Payments (Including Interest) Due by Year

	Total		2023		2024 - 2027		2028 +
Description	$		$		$		$
Financing lease liabilities		491,110		14,236		227,767		249,107
Operating lease liabilities and short-term lease		594,654		92,277		497,335		5,042
Grants repayable		482,835		50,349		154,312		278,174
Long-term debt		3,699,350		467,217		2,791,398		440,735
Collaborative agreements obligations		1,290,177		671,388		618,789		-
Total		6,558,126		1,295,467		4,289,601		973,058

We intend to use our cash reserves to fund further research and development activities and launch new products. We do not currently have sufficient revenues to cover our annual expenses, including our contractual obligations, and expect to rely on financing our operations in future periods, mainly through the sale of equity or debt securities, and licensing rights, to provide sufficient funding to execute our strategic plan. However, there can be no assurance that we will be successful in raising additional funds, or that we will be able to do so on terms that are satisfactory to us.

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 on an ongoing basis 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 fiscal year ended December 31, 2022 an explanatory paragraph regarding factors that raise substantial doubt that we will be able to continue as a going concern.

Table of Contents

Results of Operations

Comparison of the Three Months Ended September 30, 2023 and September 30, 2022

The following table sets forth our results of operations for the three months ended September 30, 2023 and September 30, 2022.

	Three Months Ended September 30,						Increase			Increase
	2023			2022			(Decrease)			(Decrease)
	$			$			$			%
Service		37,688			9,881			27,807			>100	%
Royalty		-			2,911			(2,911	)	(100		%)
Product		127,523			19,922			107,601			>100	%
Total Revenues		165,211			32,714			132,497			>100	%

Research and development		4,650,658			4,002,212			648,446			16	%
General and administrative		2,599,908			2,498,506			101,402			4	%
Sales and marketing		1,567,700			1,524,952			42,748			3	%
Total Operating Expenses		8,818,266			8,025,670			792,596			10	%

Grant income		48,656			171,439			(122,783	)	(72		%)
Loss on disposal of fixed assets		(15,913	)		-			(15,913	)		>100	%
Interest income		230			46,945			(46,715	)	(100		%)
Interest expense		(53,980	)		(37,699	)		(16,281	)		43	%
Gain on change in fair value of warrant liability		220,874			-			220,874			>100	%
Total Other Income		199,867			180,685			19,182			11	%

Net Loss		(8,453,188	)		(7,812,271	)		640,917			8	%

Revenues

Our operations are transitioning from a research and development focused stage to a commercialization stage. Revenues during the three-months ended September 30, 2023 were $165,211 compared with $32,714 for the three-months ended September 30, 2022. The main source of revenue during the three months ended September 30, 2023 was product revenues from sales of the Nu.Q^®Vet Cancer Test and services revenues from our Nu.Q^®Discover offering. The primary source of revenue during the three-months ended September 30, 2022 was product revenues from sales of the Nu.Q^®Vet Cancer Test and H3.1 kits under the Volition Nu.Q^®Discover offering.

Operating Expenses

Total operating expenses increased to $8.8 million for the three months ended September 30, 2023 from $8.0 million for the three months ended September 30, 2022, as a result of the factors described below.

Table of Contents

Research and Development Expenses

Research and development expenses increased to $4.7 million from $4.0 million for the three-months ended September 30, 2023, and September 30, 2022 respectively. This increase was primarily related to increased direct research and development expenses as a result of the clinical trials with DXOCRO, and higher personnel expenses. The number of full-time equivalent (“FTE”) personnel we employed in this division increased by 7 to 71 compared to the prior year period.

	Three Months Ended September 30,
	2023		2022		Change
	$		$		$
Personnel expenses		2,373,968		1,981,242		392,726
Stock-based compensation		162,651		165,569		(2,918	)
Direct research and development expenses		1,677,977		1,500,506		177,471
Other research and development		148,033		163,796		(15,763	)
Depreciation and amortization		288,029		191,099		96,930
Total research and development expenses		4,650,658		4,002,212		648,446

General and Administrative Expenses

General and administrative expenses increased to $2.6 million from $2.5 million for the three-months ended September 30, 2023, and September 30, 2022, respectively. This increase was primarily due to higher personnel costs and legal and professional fees. The FTE personnel number within this division decreased by 1 to 22 compared to the prior year period.

	Three Months Ended September 30,
	2023		2022		Change
	$		$		$
Personnel expenses		1,437,615		1,336,790		100,825
Stock-based compensation		214,833		248,138		(33,305	)
Legal and professional fees		517,955		391,315		126,640
Other general and administrative		368,047		428,327		(60,280	)
Depreciation and amortization		61,458		93,936		(32,478	)
Total general and administrative expenses		2,599,908		2,498,506		101,402

Sales and Marketing Expenses

Sales and marketing expenses increased to $1.6 million from $1.5 million for the three-months ended September 30, 2023, and September 30, 2022, respectively. This increase was primarily due to higher personnel expenses partly offset by a reduction in stock-based compensation and direct marketing and professional fees during the period. The FTE personnel number within this division increased by 1 to 21 compared to the prior year period.

	Three Months Ended September 30,
	2023		2022		Change
	$		$		$
Personnel expenses		1,237,449		1,076,939		160,510
Stock-based compensation		160,496		225,367		(64,871	)
Direct marketing and professional fees		156,775		210,059		(53,284	)
Depreciation and amortization		12,980		12,587		393
Total sales and marketing expenses		1,567,700		1,524,952		42,748

Table of Contents

Other Income (Expense)

For the three months ended September 30, 2023, the Company’s other income was $199,867 compared to other income of $180,685 for the three months ended September 30, 2022. These prior year amounts primarily consisted of grant income. The increase in other income was due to the change in fair value of the warrant liability partly offset by reduced grant income earned during the period.

Net Loss

For the three months ended September 30, 2023, the Company’s net loss was approximately $8.5 million in comparison to a net loss of $7.8 million for the three months ended September 30, 2022. The change was primarily a result of increased clinical trial and personnel costs.

Comparison of the Nine Months Ended September 30, 2023 and September 30, 2022

The following table sets forth our results of operations for the nine months ended September 30, 2023 and September 30, 2022:

	Nine Months Ended September 30,						Increase			Percentage Increase
	2023			2022			(Decrease)			(Decrease)
	$			$			$			%
Service		93,207			80,181			13,026			16	%
Royalty		-			2,911			(2,911	)	(100		%)
Product		438,122			103,585			334,537			>100	%
Total Revenues		531,329			186,677			344,652			>100	%

Research and development		15,007,623			11,202,902			3,804,721			34	%
General and administrative		7,826,568			7,855,184			(28,616	)	(0		%)
Sales and marketing		4,944,259			4,897,999			46,260			1	%
Total Operating Expenses		27,778,450			23,956,085			3,822,365			16	%

Grant income		214,451			564,879			(350,428	)	(62		%)
Loss on disposal of fixed assets		(15,913	)		-			(15,913	)		>100	%
Interest income		84,987			58,108			26,879			46	%
Interest expense		(163,623	)		(115,860	)		(47,763	)		41	%
Gain on change in fair value of warrant liability		249,845			-			249,845			>100	%
Total Other Income		369,747			507,127			(137,380	)	(27		%)

Net Loss		(26,877,374	)		(23,262,281	)		3,615,093			16	%

Revenues

Our operations are still transitioning from a research and development stage to a commercialization stage. Revenues during the nine-months ended September 30, 2023 were $531,329, compared with $186,677 for the nine-months ended September 30, 2022. The main source of revenues during the nine-months ended September 30, 2023 was product sales of the Nu.Q® Vet Cancer Test and services revenue from our Nu.Q^® Discover offering. The primary source of revenue during the nine-months ended September 30, 2022 was product sales of the Nu.Q® Vet Cancer Test and services revenue from our Nu.Q^® Discover offering.

Operating Expenses

Total operating expenses increased to $27.8 million from $24.0 million for the nine months ended September 30, 2023 and September 30, 2022, respectively, as a result of the factors described below.

Table of Contents

Research and Development Expenses

Research and development expenses increased to $15.0 million for the nine months ended September 30, 2023, from $11.2 million for the nine months ended September 30, 2022. This increase was primarily related to increased direct research and development expenses as a result of the clinical trials with DXOCRO, higher personnel expenses and depreciation. The FTE personnel number increased by 7 to 71 compared to the prior year period.

	Nine Months Ended September 30,
	2023		2022		Change
	$		$		$
Personnel expenses		6,783,623		5,342,531		1,441,092
Stock-based compensation		455,125		512,517		(57,392	)
Direct research and development expenses		6,240,312		4,098,535		2,141,777
Other research and development		700,654		738,743		(38,089	)
Depreciation and amortization		827,909		510,576		317,333
Total research and development expenses		15,007,623		11,202,902		3,804,721

General and Administrative Expenses

General and administrative expenses decreased to $7.8 million from $7.9 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. This decrease was primarily due to lower stock-based compensation costs, general and administrative costs and depreciation partly offset by higher personnel expenses and legal and professional fees during the period. The FTE personnel number decreased by 1 to 22 compared to the prior year period.

	Nine Months Ended September 30,
	2023		2022		Change
	$		$		$
Personnel expenses		4,105,660		3,793,292		312,368
Stock-based compensation		777,482		1,080,840		(303,358	)
Legal and professional fees		1,674,613		1,380,191		294,422
Other general and administrative		1,087,346		1,268,174		(180,828	)
Depreciation and amortization		181,467		332,687		(151,220	)
Total general and administrative expenses		7,826,568		7,855,184		(28,616	)

Sales and Marketing Expenses

Sales and marketing expenses remained flat at $4.9 million compared to $4.9 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. Higher personnel expenses were offset by reduced stock-based compensation and direct marketing and professional fees during the period. The FTE personnel number increased by 1 to 21 compared to the prior year period.

	Nine Months Ended September 30,
	2023		2022		Change
	$		$		$
Personnel expenses		3,674,191		3,264,104		410,087
Stock-based compensation		591,204		815,052		(223,848	)
Direct marketing and professional fees		639,528		781,519		(141,991	)
Depreciation and amortization		39,336		37,324		2,012
Total sales and marketing expenses		4,944,259		4,897,999		46,260

Other Income (Expense)

For the nine months ended September 30, 2023, the Company’s other income was $369,747 compared to other income of $507,127 for the nine months ended September 30, 2022. These amounts primarily consisted of grant income. The decrease in other income was mainly due a reduction in grant income earned in the period.

Table of Contents

Net Loss

For the nine months ended September 30, 2023, the Company’s net loss was approximately $26.9 million in comparison to a net loss of $23.3 million for the nine months ended September 30, 2022. The change was primarily a result of increased clinical trial and personnel costs.

Going Concern

We have not attained profitable operations and are dependent upon obtaining external financing to continue to pursue our operational and strategic plans. For these reasons, management has determined that there is substantial doubt that the business will be able to continue as a going concern without further financing.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Future Financings

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 Jefferies LLC under the Equity Distribution Agreement dated May 20, 2022 (see Note 6, Common Stock, of the notes to the interim 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. If we raise additional funds by issuing equity securities, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or such equity securities may provide for rights, preferences or privileges senior to those of the holders of our common stock. If additional funds are raised through the issuance of debt securities, the terms of such securities may place restrictions on our ability to operate our business.

Critical Accounting Policies and Estimates

Our interim condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP, applied on a consistent basis. 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 periods.

We also regularly evaluate 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.

We base our estimates and assumptions on current facts, historical experiences, information from third party professionals 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. Actual results may differ materially and adversely from our estimates. To the extent there are differences between the estimates and the actual results, future results of operations could be materially affected.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A summary of these policies is included in the notes to our financial statements.

Recently Issued Accounting Pronouncements

The Company has implemented all applicable new accounting pronouncements that are in effect. The Company does not believe that there are any other applicable new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

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 (as defined in 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, 2022, that our disclosure controls and procedures were not effective as of September 30, 2023, because of material weaknesses in our internal control over financial reporting, as referenced below and described in detail in our Annual Report.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

During the year ended December 31, 2022, our management, with oversight from our audit committee, implemented the following remediation steps to address and mitigate the underlying deficiencies which gave rise to the material weaknesses and to improve our internal control over financial reporting:

	·	hired specialists in human resources and information technology to recommend and implement relevant policies and processes that will strengthen the control environment;
	·	changed organizational reporting lines and reallocated certain responsibilities to improve segregation of duties around payroll;
	·	engaged additional resources to help us assess, document, design and implement control activities related to internal control over financial reporting; and
	·	implemented additional review procedures at each month end close.

During 2023, we intend to take additional measures to strengthen certain processes we have identified which we believe once implemented in conjunction with the completed actions above will mitigate and remedy this weakness.

We also intend to take additional steps to continue to strengthen the control environment. Such measures include but may not be limited to:

	·	hiring additional finance resources:
	·	strengthening our internal processes and reviews, including formal documentation thereof; and
	·	preparation of risk-control matrices to identify key risks and develop and document policies to mitigate those risks.

As we continue to evaluate and test the remediation plan outlined above, we may also identify additional measures to address the material weaknesses or modify certain of the remediation procedures described above. We also may implement additional changes to our internal control over financial reporting as may be appropriate in the course of remediating the material weakness. Management, with the oversight of our audit committee, will continue to take steps necessary to remedy the material weakness to reinforce the overall design and capability of our control environment.

Table of Contents

Changes in Internal Control over Financial Reporting

Except for the ongoing remediation of the material weaknesses in internal controls over financial reporting noted above, no changes in our internal control over financial reporting were made during the three months ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations of the Effectiveness of Disclosure Controls and Internal Controls

Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Table of Contents

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of business, we may be subject to claims, counter claims, lawsuits and other litigation of the type that generally arise from the conduct of our business. We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our directors, officers or any affiliates, or any registered or beneficial stockholders, is an adverse party or has a material interest adverse to our interest.

ITEM 1A. RISK FACTORS

There have been no material changes in our assessment of risk factors affecting our business since those presented in Part I, Item 1A of our Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

Table of Contents

ITEM 6. EXHIBITS

Incorporated by Reference

Exhibit

Number

Exhibit Description

Form

File No.

Exhibit

Filing

Date

Filed

Herewith

3.1

Second Amended and Restated Certificate of Incorporation, as currently in effect.

8-K

001-36833

3.1

10/11/16

3.2

Amended and Restated Bylaws, as currently in effect.

S-8

333-208512

4.2

12/11/15

4.1

Description of Capital Stock.

10-K

001-36833

4.1

2/20/20

31.1

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.

31.2

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.

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.

101.INS

Inline XBRL Instance Document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

The certifications attached as Exhibit 32.1 accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the registrant for purposes of Section 18 of the Exchange Act and are not to be incorporated by reference into any of the registrant’s filings under the Securities Act or the Exchange Act, irrespective of any general incorporation language contained in any such filing.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Chief Financial Officer and Treasurer

(Authorized Signatory and Principal

Financial and Accounting Officer)