November 14, 2022 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

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, 2022

☐ 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)

+1 (646) 650-1351

(Registrant’s telephone number, including area code)

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, 2022, there were 57,521,369 shares of the registrant’s $0.001 par value common stock issued and outstanding.

VOLITIONRX LIMITED

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022

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	29

Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	37

Item 4.	CONTROLS AND PROCEDURES	37

PART II	OTHER INFORMATION

Item 1.	LEGAL PROCEEDINGS	39

Item 1A.	RISK FACTORS	39

Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	39

Item 3.	DEFAULTS UPON SENIOR SECURITIES	39

Item 4.	MINE SAFETY DISCLOSURES	39

Item 5.	OTHER INFORMATION	39

Item 6.	EXHIBITS	40

SIGNATURES		41

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.

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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022, 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, predictions of earnings, revenues, expenses or other financial items; plans or expectations with respect to our development activities or business strategy; statements concerning clinical studies and results; statements concerning industry trends; statements regarding anticipated demand for our products, or the products of our competitors; statements relating to manufacturing forecasts, and the potential impact of our relationship with contract manufacturers and original equipment manufacturers on our business; statements relating to the commercialization of our products, assumptions regarding the future cost and potential benefits of our research and development efforts; forecasts of our liquidity position or available cash resources; statements relating to the impact of pending litigation; statements regarding the anticipated impact of the COVID-19 pandemic; and statements relating to the assumptions underlying any of the foregoing. Throughout this Report, we have attempted to identify forward-looking statements by using words such as “may,” “believe,” “will,” “could,” “project,” “anticipate,” “expect,” “estimate,” “should,” “continue,” “potential,” “plan,” “forecasts,” “goal,” “seek,” “intend,” other forms of these words or similar words or expressions or the negative thereof (although not all forward-looking statements contain these words).

We have based our forward-looking statements on our current expectations and projections about trends affecting our business and industry and other future events. 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, research and sales and marketing capabilities could give rise to difficulties in managing our growth;
	·	Our limited experience with direct sales and marketing;
	·	The material weaknesses in our internal control over financial reporting that we have identified;
	·	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 cancer diagnostics market;
	·	Our reliance on third parties to manufacture and supply our intended products, and such manufacturers’ dependence on third-party suppliers;
	·	Our dependence on third-party distributors;
	·	Protection of our patents, intellectual property and trade secrets;
	·	Business disruptions and economic and other uncertainties surrounding the COVID-19 pandemic; and
	·	Other risks identified elsewhere in this Report, as well as in our other filings with the Securities and Exchange Commission, or the SEC.

In addition, actual results may differ as a result of additional risks and uncertainties of which we are currently unaware or which we do not currently view as material to our business. For these reasons, readers are cautioned not to place undue reliance on any forward-looking statements. 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, 2021, as filed with the SEC on March 30, 2022, 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.

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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	7
Condensed Consolidated Statements of Cash Flows	9
Notes to the Condensed Consolidated Financial Statements	10

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VOLITIONRX LIMITED

Condensed Consolidated Balance Sheets

(Expressed in United States Dollars, except share numbers)

	September 30,			December 31,
	2022			2021
	$			$
ASSETS	(UNAUDITED)
Current Assets
Cash and cash equivalents		16,416,069			20,581,313
Accounts receivable		5,492			12,510
Prepaid expenses		825,748			598,367
Other current assets		426,228			786,642
Total Current Assets		17,673,537			21,978,832

Property and equipment, net		4,880,663			4,911,077
Operating lease right-of-use assets		657,557			383,551
Intangible assets, net		129,600			216,876
Total Assets		23,341,357			27,490,336

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable		2,467,672			1,542,457
Accrued liabilities		3,069,288			3,828,501
Deferred revenue		10,000,000			12,512
Management and directors’ fees payable		71,642			71,303
Current portion of long-term debt		1,064,741			797,855
Current portion of finance lease liabilities		41,693			48,958
Current portion of operating lease liabilities		232,161			171,166
Current portion of grant repayable		30,908			43,100
Total Current Liabilities		16,978,105			6,515,852

Long-term debt, net of current portion		2,275,045			2,270,767
Finance lease liabilities, net of current portion		408,344			511,086
Operating lease liabilities, net of current portion		449,326			217,305
Grant repayable, net of current portion		390,709			253,221
Total Liabilities		20,501,529			9,768,231

Stockholders’ Equity
Common Stock
Authorized: 100,000,000 shares of common stock, at $0.001 par value
Issued and outstanding: 57,496,003 shares and 53,772,261 shares, respectively		57,496			53,772
Additional paid-in capital		162,939,998			154,730,938
Accumulated other comprehensive income		315,546			148,326
Accumulated deficit		(160,015,333	)		(136,988,636	)
Total VolitionRx Limited Stockholders' Equity		3,297,707			17,944,400
Non-controlling interest		(457,879	)		(222,295	)
Total Stockholders’ Equity		2,839,828			17,722,105

Total Liabilities and Stockholders’ Equity		23,341,357			27,490,336

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

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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,
	2022			2021			2022			2021
	$			$			$			$
Revenues
Services		9,881			-			80,181			-
Royalty		2,911			-			2,911			-
Product		19,922			25,483			103,585			75,795
Total Revenues		32,714			25,483			186,677			75,795

Operating Expenses
Research and development		3,737,516			3,611,528			10,606,892			9,723,154
General and administrative		2,763,202			3,139,592			8,451,194			7,993,682
Sales and marketing		1,524,952			836,655			4,897,999			1,907,017
Total Operating Expenses		8,025,670			7,587,775			23,956,085			19,623,853

Operating Loss		(7,992,956	)		(7,562,292	)		(23,769,408	)		(19,548,058	)

Other Income (Expenses)
Grant income		171,439			419,271			564,879			810,803
Loss on disposal of fixed assets		-			-			-			(26,167	)
Interest income		46,945			290			58,108			2,503
Interest expense		(37,699	)		(38,767	)		(115,860	)		(120,636	)

Total Other Income		180,685			380,794			507,127			666,503

Net Loss		(7,812,271	)		(7,181,498	)		(23,262,281	)		(18,881,555	)
Net Loss Attributable to Non-Controlling Interest		69,305			45,065			235,584			102,028
Net Loss Attributable to VolitionRx Limited Stockholders		(7,742,966	)		(7,136,433	)		(23,026,697	)		(18,779,527	)

Other Comprehensive Income (Loss)
Foreign currency translation adjustments		71,027			(20,875	)		167,220			68,710
Net Comprehensive Loss		(7,741,244	)		(7,202,373	)		(23,095,061	)		(18,812,845	)

Net Loss Per Share - Basic and Diluted Attributable to VolitionRx Limited		(0.14	)		(0.13	)		(0.42	)		(0.36	)

Weighted Average Shares Outstanding
- Basic and Diluted		56,120,079			53,166,781			54,603,929			52,355,681

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

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VOLITIONRX LIMITED

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(Expressed in United States Dollars, except share numbers)

For the Nine Months Ended September 30, 2022 and September 30, 2021
								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		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)

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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, 2020		48,607,017		48,607		126,526,239			(59,978	)		(110,173,971	)		(47,179	)		16,293,718
Common stock issued for cash		4,183,533		4,184		20,324,744			-			-			-			20,328,928
Common stock issued for cashless exercise of stock options and settlement of RSUs		80,451		80		(80	)		-			-			-			-
Stock-based compensation		-		-		555,342			-			-			-			555,342
Tax withholdings paid related to stock-based compensation		-		-		(23,758	)		-			-			-			(23,758	)
Foreign currency translation		-		-		-			134,133			-			-			134,133
Net loss for the period		-		-		-			-			(6,116,146	)		(9,424	)		(6,125,570	)
Balance, March 31, 2021		52,871,001		52,871		147,382,487			74,155			(116,290,117	)		(56,603	)		31,162,793

Common stock issued for cash		251,369		251		854,460			-			-			-			854,711
Common stock issued for settlement of RSUs		21,712		22		(22	)		-			-			-			-
Stock-based compensation		-		-		337,744			-			-			-			337,744
Tax withholdings paid related to stock-based compensation		-		-		(106,668	)		-			-			-			(106,668	)
Foreign currency translation		-		-		-			(44,548	)		-			-			(44,548	)
Net loss for the period		-		-		-			-			(5,526,948	)		(47,539	)		(5,574,487	)
Balance, June 30, 2021		53,144,082		53,144		148,468,001			29,607			(121,817,065	)		(104,142	)		26,629,545

Common stock issued for cash		79,679		80		252,852			-			-			-			252,932
Stock-based compensation		-		-		732,191			-			-			-			732,191
Stock-based compensation in relation to modification of options		-		-		768,291			-			-			-			768,291
Foreign currency translation		-		-		-			(20,875	)		-			-			(20,875	)
Net loss for the period		-		-		-			-			(7,136,433	)		(45,065	)		(7,181,498	)
Balance, September 30, 2021		53,223,761		53,224		150,221,335			8,732			(128,953,498	)		(149,207	)		21,180,586

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

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VOLITIONRX LIMITED

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Expressed in United States Dollars)

	Nine Months Ended September 30,
	2022			2021
	$			$
Operating Activities
Net Loss		(23,262,281	)		(18,881,555	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		687,116			708,520
Amortization of operating lease right-of-use assets		193,444			148,075
Loss on disposal of fixed assets		-			26,167
Stock-based compensation		2,408,410			2,393,568
Changes in operating assets and liabilities:
Prepaid expenses		(227,381	)		(595,008	)
Accounts receivable		6,960			(12,416	)
Other current assets		360,414			(20,010	)
Deferred Revenue, current and non-current		9,987,488			-
Accounts payable and accrued liabilities		(75,283	)		(27,183	)
Management and directors’ fees payable		339			(36,749	)
Right-of-use assets operating leases liabilities		(173,830	)		(147,924	)
Net Cash Used In Operating Activities		(10,094,604	)		(16,444,515	)

Investing Activities
Purchases of property and equipment		(991,430	)		(844,987	)
Net Cash Used In Investing Activities		(991,430	)		(844,987	)

Financing Activities
Net proceeds from issuances of common stock		5,954,650			21,436,571
Tax withholdings paid related to stock-based compensation		(150,276	)		(130,426	)
Proceeds from grants repayable		210,603			37,631
Proceeds from long-term debt		1,632,384			79,614
Payments on long-term debt		(941,857	)		(571,616	)
Payments on grants repayable		(37,824	)		(47,789	)
Payments on finance lease obligations		(35,063	)		(43,881	)
Net Cash Provided By Financing Activities		6,632,617			20,760,104

Effect of foreign exchange on cash		288,173			(13,555	)

Net Change in Cash and Cash Equivalents		(4,165,244	)		3,457,047
Cash and cash equivalents - Beginning of Period		20,581,313			19,444,737
Cash and cash equivalents - End of Period		16,416,069			22,901,784

Supplemental Disclosures of Cash Flow Information
Interest paid		115,860			120,636
Non-Cash Financing Activities
Common stock issued on cashless exercises of stock options and settlement of vested RSUs		271			102
Offering costs from issuance of common stock		420,819			125,494

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

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VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies

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, 2022 and September 30, 2021, respectively, 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, 2022, and its results of operations and cash flows for the periods ended September 30, 2022 and September 30, 2021, respectively. The results of operations for the periods ended September 30, 2022 and September 30, 2021, respectively, 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, 2021, which was filed with the Securities and Exchange Commission (the "SEC") on March 30, 2022 (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 the COVID-19 pandemic, as well as 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, 2022 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 Volition Vet and Volition Germany. All intercompany balances and transactions have been eliminated in consolidation.

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, 2022, cash and cash equivalents totaled approximately $16.4 million, of which $10.2 million was held in an overnight money market account.

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VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (continued)

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, 2022, the accounts receivable balance was $5,492 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 revenues from the sale of its Nu.Q^® Vet Cancer Screening 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 Nu.Q^®Discover 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 in “Royalty” in 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. The relevant period estimates of these royalties are based on preliminary gross sales data provided by customers and analysis of historical gross-to-net adjustments. 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.

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VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (continued)

Services

The Company includes revenue recognized from laboratory services performed in the Company’s laboratory on behalf of third parties in “Services” in the condensed consolidated statements of operations and comprehensive loss.

For each development and /or commercialization agreement that results in revenue, 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 reassessed each reporting period as required.

Licensing

The Company includes revenue recognized from the licensing of certain rights to third parties in “Licensing” in the 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 (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 reassessed each reporting period as required.

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, 2022, the Company recorded $10.0 million as deferred revenue in respect of a non-refundable payment received in relation to a licensing and product supply agreement with Heska Corporation.

Contract assets include costs and services incurred on contracts with open performance obligations. These contract assets were immaterial as of September 30, 2022.

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VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (continued)

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, 2022, 6,302,138 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.

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).

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 $10.6 million and $9.7 million during the nine-months ended September 30, 2022, and September 30, 2021, respectively.

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. 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 quarter ended September 30, 2022. Certain reclassifications have been made to the prior years’ financial statements in relation to Research and Development expenses, General and Administrative expenses and Sales and Marketing expenses to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations.

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.

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VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (continued)

COVID-19 Pandemic Impact

As of the date of this filing, there continue to be widespread concerns regarding the ongoing impacts and disruptions caused by the COVID-19 pandemic in the regions in which the Company operates. As a result of the impacts of the COVID-19 pandemic, the Company has experienced and may continue to experience disruptions to its clinical trials, including patient enrollment and sample collection delays.

Although the Company has taken steps to mitigate the impacts of the COVID-19 pandemic, the extent to which the pandemic will impact its business, financial condition, and results of operations in future periods is highly uncertain and will be affected by a number of factors outside of the Company’s control. These include the duration and extent of the COVID-19 pandemic, the development of new variants of the COVID-19 virus that may be more contagious or virulent than previous versions, the scope of mandated or recommended containment and mitigation measures, the effect of government stabilization and recovery efforts, and the success of vaccine distribution programs.

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 $160.0 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.

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VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 3 - Property and Equipment

The Company’s property and equipment consisted of the following amounts as of September 30, 2022 and December 31, 2021:

						September 30,
						2022
				Accumulated		Net Carrying
		Cost		Depreciation		Value
	Useful Life	$		$		$
Computer hardware and software	3 years		585,691		433,718		151,973
Laboratory equipment	5 years		3,633,518		1,639,545		1,993,973
Office furniture and equipment	5 years		316,956		210,685		106,271
Buildings	30 years		1,873,543		256,530		1,617,013
Building improvements	5-15 years		1,171,604		277,625		893,979
Land	Not amortized		117,454		-		117,454
			7,698,766		2,818,103		4,880,663

						December 31,
						2021
				Accumulated		Net Carrying
		Cost		Depreciation		Value
	Useful Life		$	$		$
Computer hardware and software	3 years		599,944		474,169		125,775
Laboratory equipment	5 years		3,032,108		1,434,347		1,597,761
Office furniture and equipment	5 years		293,427		213,244		80,183
Buildings	30 years		2,177,641		243,750		1,933,891
Building improvements	5-15 years		1,293,258		256,309		1,036,949
Land	Not amortized		136,518		-		136,518
			7,532,896		2,621,819		4,911,077

During the nine-month periods ended September 30, 2022 and September 30, 2021, the Company recognized $624,830 and $639,091, respectively, in depreciation expense.

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VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 4 - Intangible Assets

The Company’s intangible assets consist of patents, mainly acquired in the acquisition of Belgian Volition. The patents are being amortized over the assets’ estimated useful lives, which range from 8 to 20 years.

					September 30,
					2022
			Accumulated		Net Carrying
	Cost		Amortization		Value
	$		$		$
Patents		1,021,459		891,859		129,600

					December 31,
					2021
			Accumulated		Net Carrying
	Cost		Amortization		Value
	$		$		$
Patents		1,178,135		961,259		216,876

During the nine-month periods ended September 30, 2022 and September 30, 2021, the Company recognized $62,286 and $69,410, 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:

2022	$	16,122
2023	$	77,852
2024	$	35,626
Total Intangible Assets	$	129,600

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, 2021. The result of this review confirmed that the ongoing value of the patents was not impaired as of December 31, 2021.

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).

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VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 6 - Common Stock

As of September 30, 2022, the Company was authorized to issue 100 million shares of common stock, par value $0.001 per share, of which 57,496,003 and 53,772,261 shares were issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.

Stock Option Exercises and RSU Settlements

On March 28, 2022, 15,000 RSUs vested and resulted in the issuance of 15,000 shares of common stock.

On April 19, 2022, 26,250 RSUs vested, resulting in the issuance of 21,712 shares of common stock and the withholding of 4,538 shares of common stock for taxes, which were returned as authorized shares to the Company’s 2015 Stock Incentive Plan, as amended (the “2015 Stock Incentive Plan”).

On May 1, 2022, 50,000 RSUs vested, resulting in the issuance of 35,000 shares of common stock and the withholding of 15,000 shares of common stock for taxes, which were returned as authorized shares to the 2015 Stock Incentive Plan.

On August 3, 2022, 230,102 RSUs vested, resulting in the issuance of 191,992 shares of common stock and the withholding of 38,110 shares of common stock for taxes which were returned as authorized shares under the 2015 Stock Incentive Plan.

On September 7, 2022, 12,000 RSUs vested resulting in the issuance of 7,038 shares of common stock and the withholding of 4,962 shares of common stock for taxes, which were returned as authorized shares under the 2015 Stock Incentive Plan.

Equity Capital Raise

On July 29, 2022, the Company entered into an underwriting agreement with Newbridge Securities Corporation (the “Underwriter”) in connection with an underwritten public offering of 3,450,000 shares (the “Shares”) of the Company’s common stock, $0.001 par value per share 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) (the “Effective Form S-3”). The Underwriter purchased the Shares from the Company at a price of $2.00 per share on August 2, 2022. The net proceeds received by the Company for the sale and issuance of the Shares were approximately $6.4 million, before deducting offering expenses of $0.4 million paid by the Company.

Equity Distribution Agreements

On September 24, 2021, the Company entered into an equity distribution agreement (the “2021 EDA”) with Cantor Fitzgerald & Co. Inc. (“Cantor”) and Oppenheimer & Co. Inc. (“Oppenheimer”), to sell shares of its common stock having an aggregate offering price of up to $25.0 million from time-to-time, through an “at the market offering program” pursuant to the Company’s Effective Form S-3 and related prospectuses, through Cantor and Oppenheimer each acting as the Company’s agent and/or principal. Effective May 7, 2022, the Company terminated its 2021 EDA and no further sales of the Company’s common stock will be made under the 2021 EDA. From inception through termination on May 7, 2022, the Company raised aggregate net proceeds (net of brokers’ commissions and fees) of approximately $0.7 million under the 2021 EDA through the sale of 193,600 shares of its common stock.

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, having an aggregate offering price of up to $25.0 million from time to time, through an “at the market” offering program pursuant to the Company’s Effective Form S-3 and related prospectuses, through Jefferies acting as the Company’s agent and/or principal. The Company is not obligated to sell any shares under the 2022 EDA. The 2022 EDA replaces the 2021 EDA. As of September 30, 2022, no shares of common stock have been sold under the 2022 EDA.

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VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 7 - Stock-Based Compensation

a) Warrants

The following table summarizes the changes in warrants outstanding of the Company during the nine-month period ended September 30, 2022:

	Number of		Weighted Average
	Warrants		Exercise Price ($)
Outstanding at December 31, 2021		485,000		3.88
Granted		54,000		3.05
Outstanding at September 30, 2022		539,000		3.80

Exercisable at September 30, 2022		485,000		3.88

Below is a table summarizing the warrants issued and outstanding as of September 30, 2022, which have an aggregate weighted average remaining contractual life of 3.49 years.

						Weighted Average
						Remaining		Proceeds to
Number		Number		Exercise		Contractual		Company if
Outstanding		Exercisable		Price ($)		Life (Years)		Exercised ($)
	125,000		125,000		2.47		0.41		308,750
	54,000		-		3.05		6.02		164,700
	50,000		50,000		3.45		3.42		172,500
	125,000		125,000		3.95		4.26		493,750
	185,000		185,000		4.90		4.34		906,500
	539,000		485,000						2,046,200

Effective April 4, 2022, the Company granted a warrant to purchase 54,000 shares of common stock to a Company employee for services to the Company and/or its subsidiaries. This warrant shall vest in two equal installments at 12 months and 24 months from the grant date, subject to continued service and expire on April 4, 2028 and April 4, 2029, respectively, with an exercise price of $3.05 per share. The Company has calculated the estimated fair market value of this warrant at $80,901, using the Black-Scholes model and the following assumptions: term 3.5 years, stock price $2.95, exercise price $3.05, 71.07% volatility, 2.53% risk-free rate, and no forfeiture rate.

Stock-based compensation expense related to warrants of $68,852 and $524,780 was recorded in the nine months ended September 30, 2022 and September 30, 2021, respectively. Total remaining unrecognized compensation cost related to non-vested warrants is $51,063 and is expected to be recognized over a period of 1.51 years. As of September 30, 2022, the total intrinsic value of warrants outstanding was $nil.

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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, 2022:

	Number of			Weighted Average
	Options			Exercise Price ($)
Outstanding at December 31, 2021		5,027,518			3.87
Granted		-			-
Exercised		-			-
Expired/Cancelled		(2,515	)		3.40
Outstanding at September 30, 2022		5,025,003			3.87

Exercisable at September 30, 2022		4,465,846			3.93

Below is a table summarizing the options issued and outstanding as of September 30, 2022, all of which were issued pursuant to the Company’s 2011 Equity Incentive Plan (for option issuances prior to 2016) or the 2015 Stock Incentive Plan (for option issuances commencing in 2016) and which have an aggregate weighted average remaining contractual life of 5.50 years. As of September 30, 2022, an aggregate of 7,750,000 shares of common stock were authorized for issuance under the 2015 Stock Incentive Plan, of which 1,928,740 shares of common stock remained available for future issuance thereunder.

			Weighted Average
			Remaining	Proceeds to
Number	Number	Exercise	Contractual	Company if
Outstanding	Exercisable	Price ($)	Life (Years)	Exercised ($)
635,000	635,000	3.25	2.37	2,063,750
2,717	2,717	3.35	0.92	9,102
1,057,485	498,328	3.40	8.85	3,595,449
800,000	800,000	3.60	7.60	2,880,000
1,682,837	1,682,837	4.00	4.01	6,731,348
11,801	11,801	4.35	0.70	51,334
89,163	89,163	4.38	5.32	390,534
50,000	50,000	4.80	4.26	240,000
696,000	696,000	5.00	4.49	3,480,000
5,025,003	4,465,846			19,441,517

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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 $1,021,938 and $664,819 was recorded in the nine months ended September 30, 2022 and September 30, 2021, respectively. Total remaining unrecognized compensation cost related to non-vested stock options is $436,344 and is expected to be recognized over a period of 1.01 years. As of September 30, 2022, 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, 2022, all of which were issued pursuant to the 2015 Stock Incentive Plan.

	Number of			Weighted Average
	RSUs			Share Price ($)
Outstanding at December 31, 2021		810,750			3.33
Granted		295,102			2.57
Vested/Settled		(333,352	)		3.34
Cancelled		(34,365	)		3.35
Outstanding at September 30, 2022		738,135			3.02

Effective February 8, 2022, the Company granted aggregate RSUs of 8,000 shares of common stock to an employee in exchange for services provided to the Company. These RSUs vest over 24 months, with 50% vesting on each of February 8, 2023 and February 8, 2024, subject to continued service, and will result in total compensation expense of $22,640.

Effective March 1, 2022, the Company granted aggregate RSUs of 30,000 shares of common stock to various employees in exchange for services provided to the Company. These RSUs vest over 24 months, with 50% vesting on each of March 1, 2023 and March 1, 2024, subject to continued service, and will result in total compensation expense of $84,300.

On March 28, 2022, 15,000 RSUs vested and resulted in the issuance of 15,000 shares of common stock.

Effective April 4, 2022, the Company granted aggregate RSUs of 32,000 shares of common stock to employees of the Company and /or its subsidiaries in exchange for services provided to the Company and /or its subsidiaries. The RSUs shall vest in two equal installments at 12 months and 24 months from the grant date, subject to continued service, and will result in total compensation expense of $94,400.

Effective April 4, 2022, the Company granted aggregate RSUs of 104,000 shares of common stock to employees of the Company and /or its subsidiaries in exchange for services provided to the Company and /or its subsidiaries. The RSUs shall vest in three equal installments at 12 months, 24 months and 36 months from the grant date, subject to continued service, and will result in total compensation expense of $306,800.

On April 19, 2022, 26,250 RSUs vested and resulted in the issuance of 21,712 shares of common stock and the remaining 4,538 shares of common stock were withheld for taxes and returned as authorized shares under the 2015 Stock Incentive Plan.

On May 1, 2022, 50,000 RSUs vested and resulted in the issuance of 35,000 shares of common stock and the remaining 15,000 shares of common stock were withheld for taxes and returned as authorized shares under the 2015 Stock Incentive Plan.

On May 31, 2022, an aggregate of 33,000 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.

Effective June 1, 2022, the Company granted aggregate RSUs of 33,000 shares of common stock to various employees in exchange for services provided to the Company. These RSUs vest over two years, with 50% vesting on each of June 1, 2023 and June 1, 2024, subject to continued service, and will result in total compensation expense of $80,850.

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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)

On August 3, 2022, 230,102 RSUs vested and resulted in the issuance of 191,992 shares of common stock and the remaining 38,110 shares of common stock were withheld for taxes and returned as authorized shares under the 2015 Stock Incentive Plan.

Effective August 15, 2022, the Company granted aggregate RSUs of 63,102 shares of common stock to various employees in exchange for services provided to the Company. These RSUs vest over two years, with 50% vesting on each of August 15, 2023 and August 15, 2024, subject to continued service, and will result in total compensation expense of $126,835.

On August 18 2022, 1,365 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 September 7, 2022, 12,000 RSUs vested and resulted in the issuance of 7,038 shares of common stock and the remaining 4,962 shares of common stock were withheld for taxes and returned as authorized shares under the 2015 Stock Incentive Plan.

Effective September 21, 2022, the Company granted aggregate RSUs of 25,000 shares of common stock to various employees in exchange for services provided to the Company. These RSUs vest over two years, with 50% vesting on each of September 21, 2023 and September 21, 2024, subject to continued service, and will result in total compensation expense of $42,250.

Below is a table summarizing the RSUs issued and outstanding as of September 30, 2022 and which have an aggregate weighted average remaining contractual life of 1.02 years.

		Weighted
		Average
		Remaining
Number	Share	Contractual
Outstanding	Price ($)	Life (Years)
25,000	1.69	1.48
63,102	2.01	1.33
33,000	2.45	1.17
30,000	2.81	0.92
8,000	2.83	0.86
136,000	2.95	1.23
39,809	3.04	0.51
328,724	3.31	0.86
12,000	3.32	0.94
4,000	3.38	0.71
43,500	3.51	0.59
15,000	3.59	0.48
738,135

Stock-based compensation expense related to RSUs of $1,317,620 and $435,678 was recorded in the nine months ended September 30, 2022 and September 30, 2021, respectively. Total remaining unrecognized compensation cost related to non-vested RSUs is $1,120,983.

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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, 2022, the balance payable was $450,037.

In 2018, the Company entered into a capital lease with BNP Paribas leasing solutions to purchase a freezer for the Belgium facility for €25,000, that matured in January 2022 with implicit interest of 1.35%. The leased equipment is amortized on a straight-line basis over 5 years. As of September 30, 2022, the balance payable was $nil.

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, 2022.

2022	$	13,161
2023	$	52,645
2024	$	52,644
2025	$	52,645
2026	$	52,646
Greater than 5 years	$	282,957
Total	$	506,698
Less: Amount representing interest	$	(56,661	)
Present value of minimum lease payments	$	450,037

b) Operating Lease Right-of-Use Obligations

As all the existing leases subject to the new lease standard ASC 842, “Leases,” were previously classified as operating leases by the Company, they were similarly classified as operating leases under the new standard. The Company has determined that the identified operating leases did not contain non-lease components and require no further allocation of the total lease cost. Additionally, the agreements in place did not contain information to determine the rate implicit in the leases, so the Company used its incremental borrowing rate as the discount rate. The Company’s weighted average discount rate is 2.40% and the weighted average remaining lease term is 28 months.

During the nine months ended September 30, 2022, the Company entered into a new lease agreement. The lease is initially for 62 months and the initial rent is $7,642 a month. In connection with the new lease agreement the Company recorded $461,341 of right of use assets in exchange for right of use liabilities.

As of September 30, 2022, operating lease right-of-use assets and liabilities arising from operating leases were $716,208 and $681,487, respectively. During the nine months ended September 30, 2022, cash paid for amounts included for the measurement of lease liabilities was $142,171 and the Company recorded operating lease expense of $162,189.

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VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 8 - Commitments and Contingencies (continued)

b) Operating Lease Right-of-Use Obligations (continued)

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, 2022.

2022	$	60,784
2023	$	251,092
2024	$	158,384
2025	$	118,449
2026	$	120,400
Total Operating Lease Obligations	$	709,109
Less: Amount representing interest	$	(27,622	)
Present Value of minimum lease payments	$	681,487

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, 2022, the Company recognized $53,895 in short-term lease costs associated with office space leases. The annual payments remaining for short-term office leases were as follows:

2022	$	12,203
2023	$	21,812
2024	$	-
Total Operating Lease Liabilities	$	34,015

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, 2022, the grant balance repayable was $24,470.

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, 2022, the grant balance repayable was $97,838.

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, 2022, the grant balance repayable was $210,119.

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VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 8 - Commitments and Contingencies (continued)

c) Grants Repayable (continued)

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, 2022, the grant balance repayable was $89,190.

As of September 30, 2022, the total grant balance repayable was $421,617 and the payments remaining were as follows:

2022	$	-
2023	$	44,945
2024	$	24,205
2025	$	31,537
2026	$	38,328
Greater than 5 years	$	282,602
Total Grants Repayable	$	421,617

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, 2022, the principal balance payable was $99,713.

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, 2022, the principal balance payable was $176,358.

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, 2022, €1 million had been drawn down under this agreement and the principal balance payable was $489,391.

In 2018, the Company entered into a 4-year loan agreement with Namur Innovation and Growth for €500,000 with a fixed interest rate of 4.00%, maturing in June 2022. As of September 30, 2022, the principal balance payable was $0.

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, 2022, the principal balance payable was $301,131.

On October 13, 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, 2022, the principal balance payable was $716,058.

On November 23, 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, 2022, the principal balance payable was $440,452.

On February 5, 2022, the Company entered into a 9-month loan agreement with First Insurance Funding for a maximum of $620,549 with fixed interest rate of 3.57%, maturing November 2022. As of September 30, 2022, the maximum has been drawn down under this agreement and the principal balance payable was $137,900.

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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 (continued)

In July 2022, Volition was awarded a €1.5 million loan facility by Namur Invest Capital Risk to fund an early access program for its Nu.Q® product portfolio at key sites across the EU, UK, and US. On August 16, 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 6.0%, maturing in August 2026. As of September 30, 2022, €1.0 million has been drawn down under this agreement and the principal balance payable was $978,783. The remaining €0.5 million remains available for future drawdown.

As of September 30, 2022, the total balance for long-term debt payable was $3,339,786 and the payments remaining were as follows:

2022	$	464,780
2023	$	1,012,234
2024	$	901,615
2025	$	505,886
2026	$	301,640
Greater than 5 years	$	527,857
Total	$	3,714,012
Less: Amount representing interest	$	(374,226	)
Total Long-Term Debt	$	3,339,786

e) Collaborative Agreement Obligations

In 2016, the Company entered into a research co-operation agreement with DKFZ in Germany for a five-year period for €400,000. As of September 30, 2022, $195,757 is still to be paid by the Company under this agreement.

In 2018, the Company entered into a research collaboration agreement with the University of Taiwan for a three-year period for a cost to the Company of up to $2.55 million payable over such period. As of September 30, 2022, $510,000 is still to be paid by the Company under this agreement.

In 2019, the Company entered into a funded sponsored research agreement with the Texas A&M University (“TAMU”) in consideration for the license granted to the Company for a five-year period for a cost to the Company of up to $400,000 payable over such period. As of September 30, 2022, $0 is still to be paid by the Company under this agreement.

On September 16, 2020, the Company entered into a research agreement for the bioinformatic analysis of cell-free DNA fragments from whole-genome sequencing with the Hebrew University of Jerusalem for six months for a cost to the Company of €54,879. Subsequently the parties entered into an amendment to the agreement with an additional cost to the Company of $117,711 (€100,236). In the nine-months ended September 30, 2022, the parties entered into agreements for an additional cost to the Company of $40,918 (€39,000). As of September 30, 2022, $20,992 is still to be paid by the Company under the amended agreement.

On August 10, 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 $346,787. As of September 30, 2022, $346,787 is still to be paid by the Company under this agreement.

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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 (continued)

As of September 30, 2022, the total amount to be paid for future research and collaboration commitments was approximately $1,073,536 and the payments remaining were as follows:

2022 - remaining	$	138,095
2023 - 2026	$	935,441
Total Collaborative Agreement Obligations	$	1,073,536

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, 2022, 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 (“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, 2022, $191 is payable under the 6% royalty agreement on sales to date towards the Company’s aggregate minimum royalty obligation of $107,666.

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 third 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, 2022, $119,035 is payable under the A&R Master Agreement, and up to $ 3,817,118 maybe payable by Company in future periods for services rendered.

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VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 8 - Commitments and Contingencies (continued)

g) Legal Proceedings

There are 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 Stock Incentive Plan as well as cash bonuses, vesting 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.

Conditional upon the achievement by July 1, 2022 of all specified corporate goals as set forth in the minutes of the Compensation Committee, as well as continued service by the award recipient, the Company at the sole discretion of the Chief Executive Officer and the Chief Financial Officer, would pay a cash bonus to such award recipient. As of September 30, 2022, the Company has paid compensation expense of $737,137 based on the actual outcomes related to the prescribed performance targets and no further amounts are due.

As discussed in detail in Note 8, - Stock-Based Compensation, of the notes to condensed consolidated financial statements contained in the Annual Report an aggregate of 1,000,000 stock options and 500,000 RSUs were issued under the 2015 Stock Incentive Plan in connection with the August and October 2021 grants.

On June 23, 2022, the Compensation Committee of the Board of Directors approved the achievement of all of the remaining outstanding corporate goals resulting in the payment of the cash bonus awards and the vesting of the 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.

As of September 30, 2022, the Company has recognized compensation expense of $687,919 in relation to such stock options and $561,860 in relation to such RSUs, based on the outcomes related to the prescribed performance targets on the outstanding awards.

As of September 30, 2022, the Company has unrecognized compensation expense of $413,343 in relation to such stock options and $349,157 in relation to such RSUs, based on the outcomes related to the prescribed performance targets on the outstanding awards.

In September 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 recipient, the Company at the sole discretion of the Chief Executive Officer and the Chief Financial Officer would pay a cash bonus to such award recipient. As of September 30, 2022, the Company accrued compensation expense of $408,520 based on the actual outcomes related to the prescribed performance targets.

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VOLITIONRX LIMITED

Notes to the Condensed Consolidated Financial Statements (Unaudited)

($ expressed in United States Dollars)

Note 9 - Subsequent Events

Restricted Stock Units

Effective October 4, 2022, the Company granted aggregate RSUs of 1,144,000 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 achievement of corporate goals focused around product development and commercialization with further time-based vesting over three years, with one-third vesting on each of October 4, 2023, October 4, 2024 and October 4, 2025, subject to continued service of the award recipient to the Company through the applicable vesting dates, and will result in total compensation expense of $1,670,240. On October 13, 2022, the Compensation Committee of the Board of Directors approved the satisfactory achievement of two of the corporate goals, which will result in the vesting of the rights to 17.5% of the RSUs, or 200,200 RSUs, subject to the foregoing time-based vesting and conditioned upon the recipient’s continued service through the applicable vesting date.

Effective October 4, 2022, 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 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. 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 4, 2022, 19,905 RSUs vested and resulted in the issuance of 13,022 shares of common stock. An aggregate 6,883 shares of common stock were withheld as taxes and returned as authorized shares to the Company’s 2015 Stock Incentive Plan.

On November 1, 2022, 21,750 RSUs vested and resulted in the issuance of 12,344 shares of common stock. An aggregate 9,406 shares of common stock were withheld as taxes and returned as authorized shares to the Company’s 2015 Stock Incentive Plan.

Distributor Agreement

Effective October 7, 2022, the Company entered into a global supply agreement with a market leader in pet healthcare (the "Distributor"). Through Volition's supply agreement, the Distributor is engaged as a worldwide provider of the Nu.Q® Vet Cancer Test through its reference laboratory network for cancer indications in animal health.

END NOTES TO FINANCIALS

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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 in 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, including those related to the anticipated impact on our business from, and our response to, the COVID-19 pandemic. 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 that applies its Nucleosomics™ platform through its subsidiaries to develop simple, easy to use, cost-effective blood tests to help diagnose and monitor a range of life-altering diseases, including certain cancers and diseases associated with NETosis, such as sepsis and COVID-19. Our mission is to save lives and improve outcomes for millions of people and animals worldwide. Early diagnosis and monitoring have the potential to not only prolong the life of patients, but also to improve their quality of life.

Our blood tests are based on the science of Nucleosomics™, which is the practice of identifying and measuring nucleosomes in the bloodstream or other bodily fluids, since changes in these parameters are an indication that disease is present. While we are primarily focused on human diagnostics and monitoring, we also have a subsidiary focused on animal diagnostics and monitoring.

We have five key pillars of focus, all of which use the same proprietary Nu.Q^® platform to commercialize in different areas.

	·	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
	·	Nu.Q^® - detecting cancer early to save lives
	·	Nu.Q^® Capture - capturing and concentrating samples for more accurate diagnosis
	·	Nu.Q^® Discover - a complete solution to profiling nucleosomes

Our research and development activities are centered in Belgium, with an innovation laboratory 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 believe, given the global prevalence of cancer and diseases associated with NETosis, and the low-cost, accessible and routine nature of our tests, Nu.Q^® could potentially be used throughout the world.

We have developed and are continuing to develop a large portfolio of intellectual property, or IP, centered around the science of identifying and measuring nucleosomes in the bloodstream. We call this science Nucleosomics™. Our technologies have a large range of applications, both in humans and animals, to screen, diagnose, and risk stratify patients, as well as to monitor treatments, disease progression and potential remissions. While we initially focused our technology on cancer screening, we have since broadened the range of indications our blood tests can detect to include several diseases associated with NETosis, including sepsis, COVID-19 and thrombosis.

We aim to remain an IP powerhouse in the Nucleosomics™ space and expect to monetize our IP and technologies through licensing and distribution contracts with companies that have established distribution networks on a worldwide or regional basis, in both human and animal care.

To this end, on March 28, 2022, Volition entered into a master license and product supply agreement with Heska Corporation, or 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.

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

	·	a canine cancer monitoring test;
	·	NETosis related screening and monitoring tests for use in sepsis and COVID-19; and
	·	cancer tests for humans in non-Hodgkin’s lymphoma, colorectal cancer and lung cancer.

Our Nucleosomics™ technology is transferable to multiple platforms including ELISA 96-well plates and, bead-based chemiluminescent. We are currently working on transferring our technology to the widely-utilized homogeneous immunoassay platforms and several point of care platforms to enable rapid turnaround of results both in-clinic and at 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, or 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. This information could enable cancer diagnosis to identify the tissue of origin of a particular cancer.

Developments - COVID-19 Pandemic

Due to the continued evolution of the COVID-19 pandemic since March 2020, we cannot precisely determine or quantify the impacts the pandemic will have on our business, financial conditions or results of operations. For example, although we have worked with clinical trial sites impacted by the pandemic to ensure study continuity, we have experienced and may in the future experience disruptions that could impact our clinical trials, including delays in enrolling patients in clinical trials or in sample collection, and diversion of healthcare resources from the conduct of our clinical trials.

The extent of the impact of the COVID-19 pandemic on our business remains uncertain and subject to change. If there is a subsequent outbreak of COVID-19 in the future, we may experience significant delays in our clinical development timelines, which would adversely affect our business, financial condition, and results of operations.

Liquidity and Capital Resources

We have financed our operations since inception primarily through private placements and public offerings of our common stock. As of September 30, 2022, we had cash and cash equivalents of approximately $16.4 million.

Net cash used in operating activities was approximately $10.1 million for the nine months ended September 30, 2022 and $16.4 million for the nine months ended September 30, 2021. The decrease in net cash used in operating activities for the period ended September 30, 2022 when compared to same period in 2021 was primarily due to a $10.0 million payment received pursuant to our master license and product supply agreement with Heska, partly offset by higher payroll costs, and higher amounts paid to suppliers during the period.

Net cash used in investing activities was approximately $1.0 million for the nine months ended September 30, 2022 and $0.8 million for the nine months ended September 30, 2021. This was primarily related to purchases of laboratory equipment.

Net cash provided by financing activities was approximately $6.6 million for the nine months ended September 30, 2022 and net cash provided by financing activities was $20.8 million for the comparable period ended September 30, 2021. The decrease in net cash provided by financing activities for the period ended September 30, 2022 when compared to same period in 2021 was primarily due to $18.9 million in net cash received from the issuance of shares of common stock in a registered public offering in February 2021 and $2.4 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, 2021. This compares with $6.4 million in net cash received from the issuance of 3.5 million shares of common stock in a registered public offering in August 2022 before deducting offering expenses of $0.4 million paid by the Company and a €1.0 million loan received in August 2022 from Namur Invest.

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The following table summarizes our approximate contractual payments due by year as of September 30, 2022.

Approximate Payments (Including Interest) Due by Year

	Total		2022 (Remaining)		2023 - 2026		2027 +
Description	$		$		$		$
Finance Lease Obligations1,000,000		506,698		13,161		210,580		282,957
Operating Lease Obligations		743,124		72,987		670,137		-
Grants Repayable		421,617		-		139,015		282,602
Long-Term Debt		3,714,012		464,780		2,721,375		527,857
Collaborative Agreements Obligations		1,073,536		138,095		935,441		-
Total		6,458,987		689,023		4,676,548		1,093,416

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 and expect to rely on financing our operations in future periods, primarily 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 that additional financing is delayed, we will prioritize the maintenance of our research and development personnel and facilities, primarily in Belgium, and the maintenance of our patent rights. In such instance, the completion of clinical validation studies and regulatory approval processes for the purpose of bringing products to the in vitro diagnostics markets would be delayed. In the event of an ongoing lack of financing, it may be necessary to discontinue operations, which will adversely affect the value of our common stock.

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive activities. For these reasons, our auditors included in their report on our audited financial statements for the fiscal year ended December 31, 2021 an explanatory paragraph regarding factors that raise substantial doubt that we will be able to continue as a going concern.

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Results of Operations

Comparison of the Three Months Ended September 30, 2022 and September 30, 2021

The following table sets forth our results of operations for the three months ended September 30, 2022 and September 30, 2021, respectively:

	Three Months Ended September 30,						Increase			Increase
	2022			2021			(Decrease)			(Decrease)
	$			$			$			$

Services		9,881			-			9,881			>100	%
Royalty		2,911			-			2,911			>100	%
Product		19,922			25,483			(5,561	)	(22)		%
Total Revenues		32,714			25,483			7,231			28	%

Research and development		3,737,516			3,611,528			125,988			3	%
General and administrative		2,763,202			3,139,592			(376,390	)	(12)		%
Sales and marketing		1,524,952			836,655			688,297			82	%
Total Operating Expenses		8,025,670			7,587,775			437,895			6	%

Grant income		171,439			419,271			(247,832	)	(59)		%
Loss on disposal of fixed assets		-			-			-		(100)		%
Interest income		46,945			290			46,655			>100	%
Interest expense		(37,699	)		(38,767	)		1,068		(3)		%
Total Other Income		180,685			380,794			(200,109	)	(53)		%

Net Loss		(7,812,271	)		(7,181,498	)		630,773			9	%

Revenues

Our operations are still transitioning from a research and development stage to a commercialization stage. Revenues during the three-months ended September 30, 2022 were $32,714, compared with $25,483 for the three-months ended September 30, 2021. The main source of revenues during the three-months ended September 30, 2022 was product sales of the Nu.Q® Vet Cancer Screening Test and services revenue from our Nu.Q^® Discover offering. The primary source of revenue during the three-months ended September 30, 2021 was direct sales of the Nu.Q^®Vet Cancer Screening Test through the Gastrointestinal Laboratory at Texas A&M University.

Operating Expenses

Total operating expenses increased to $8.0 million from $7.6 million during the three months ended September 30, 2022 and September 30, 2021, respectively, as a result of the factors described below.

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Research and Development Expenses

Research and development expenses increased to $3.7 million for the three months ended September 30, 2022 from $3.6 million for the three months ended September 30, 2021. The increase was primarily related to higher personnel expenses partly offset by lower stock-based compensation, relating to modification of options in the prior year and a research and development tax credit in respect of other research and development received in the current period. The full time equivalent, or FTE personnel numbers increased by 17 to 64 compared to the prior year period.

	Three Months Ended September 30,
	2022			2021		Change
	$			$		$
Personnel expenses		1,981,242			1,435,161		546,081
Stock-based compensation		165,569			413,940		(248,371	)
Direct research and development expenses		1,500,506			1,575,253		(74,747	)
Other research and development		(100,900	)		42,810		(143,710	)
Depreciation and amortization		191,099			144,364		46,735
Total research and development expenses		3,737,516			3,611,528		125,988

General and Administrative Expenses

General and administrative expenses decreased to $2.8 million from $3.1 million for the three months ended September 30, 2022 and September 30, 2021, respectively. This decrease was primarily due to lower stock-based compensation, relating to modification of options in the prior year, partly offset by higher personnel expenses during the period. The FTE personnel number increased by two to 23 compared to the prior year period.

	Three Months Ended September 30,
	2022		2021		Change
	$		$		$
Personnel expenses		1,336,790		1,210,031		126,759
Stock-based compensation		248,138		885,674		(637,536	)
Legal and professional fees		656,903		609,373		47,530
Other general and administrative		427,435		293,091		134,344
Depreciation and amortization		93,936		141,423		(47,487	)
Total general and administrative expenses		2,763,202		3,139,592		(376,390	)

Sales and Marketing Expenses

Sales and marketing expenses increased to $1.5 million from $0.8 million for the three months ended September 30, 2022 and September 30, 2021, respectively. This increase was primarily due to higher personnel expenses and direct marketing and professional fees during the period. The FTE personnel number increased by 11 to 20 compared to the prior year period.

	Three Months Ended September 30,
	2022		2021		Change
	$		$		$
Personnel expenses		1,076,939		490,133		586,806
Stock-based compensation		225,367		200,868		24,499
Direct marketing and professional fees		210,059		145,654		64,405
Depreciation and amortization		12,587		-		12,587
Total sales and marketing expenses		1,524,952		836,655		688,297

Other Income

For the three months ended September 30, 2022, the Company’s other income was $180,685 compared to other income of $380,794 for the three months ended September 30, 2021. These amounts primarily consisted of grant income. The decrease in other income was mainly due to a reduction in grant income earned in the period.

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Net Loss

For the three months ended September 30, 2022, the Company’s net loss was approximately $7.8 million in comparison to a net loss of $7.2 million for the three months ended September 30, 2021. The change was primarily a result of the factors described above.

Comparison of the Nine Months Ended September 30, 2022 and September 30, 2021

The following table sets forth our results of operations for the nine months ended September 30, 2022 and September 30, 2021:

	Nine Months Ended September 30,						Increase			Percentage Increase
	2022			2021			(Decrease)			(Decrease)
	$			$			$			$
Service		80,181			-			80,181			>100	%
Royalty		2,911			-			2,911			>100	%
Product		103,585			75,795			27,790			37	%
Total Revenues		186,677			75,795			110,882			>100	%

Research and development		10,606,892			9,723,154			883,738			9	%
General and administrative		8,451,194			7,993,682			457,512			6	%
Sales and marketing		4,897,999			1,907,017			2,990,982			>100	%
Total Operating Expenses		23,956,085			19,623,853			4,332,232			22	%

Grant income		564,879			810,803			(245,924	)	(30)		%
Loss on disposal of fixed assets		-			(26,167	)		26,167		(100)		%
Interest income		58,108			2,503			55,605			>100	%
Interest expense		(115,860	)		(120,636	)		4,776		(4)		%
Total Other Income		507,127			666,503			(159,376	)	(24)		%

Net Loss		(23,262,281	)		(18,881,555	)		4,380,726			23	%

Revenues

Our operations are still transitioning from a research and development stage to a commercialization stage. Revenues during the nine-months ended September 30, 2022 were $186,677, compared with $75,795 for the nine-months ended September 30, 2021. The main source of revenues during the nine-months ended September 30, 2022 was product sales of the Nu.Q® Vet Cancer Screening Test and services revenue from our Nu.Q^® Discover offering. The primary source of revenue during the nine-months ended September 30, 2021 was direct sales of the Nu.Q^®Vet Cancer Screening Test through the Gastrointestinal Laboratory at Texas A&M University.

Operating Expenses

Total operating expenses increased to $24.0 million from $19.6 million for the nine months ended September 30, 2022 and September 30, 2021, respectively, as a result of the factors described below.

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Research and Development Expenses

Research and development expenses increased to $10.6 million for the nine months ended September 30, 2022, from $9.7 million for the nine months ended September 30, 2021. This increase in overall research and development expenditures was primarily related to increased personnel expenses. The FTE personnel number increased by 17 to 64 compared to the prior year period.

	Nine Months Ended September 30,
	2022		2021		Change
	$		$		$
Personnel expenses		5,342,531		3,883,400		1,459,131
Stock-based compensation		512,517		529,414		(16,897	)
Direct research and development expenses		4,098,535		4,818,854		(720,319	)
Other research and development		142,733		72,409		70,324
Depreciation and amortization		510,576		419,077		91,499
Total research and development expenses		10,606,892		9,723,154		883,738

General and Administrative Expenses

General and administrative expenses increased to $8.5 million from $8.0 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. This increase was primarily due to higher personnel expenses during the period, partly offset by stock-based compensation, relating to modification of options in the prior year. The FTE personnel number increased by two to 23 compared to the prior year period.

	Nine Months Ended September 30,
	2022		2021		Change
	$		$		$
Personnel expenses		3,793,292		3,009,742		783,550
Stock-based compensation		1,080,841		1,460,395		(379,554	)
Legal and professional fees		1,976,484		2,039,854		(63,370	)
Other general and administrative		1,267,890		1,046,173		221,717
Depreciation and amortization		332,687		437,518		(104,831	)
Total general and administrative expenses		8,451,194		7,993,682		457,512

Sales and Marketing Expenses

Sales and marketing expenses increased to $4.9 million from $1.9 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. This increase was primarily due to higher personnel expenses, stock-based compensation and direct marketing and professional fees during the period. The FTE personnel number increased by 11 to 20 compared to the prior year period.

	Nine Months Ended September 30,
	2022		2021		Change
	$		$		$
Personnel expenses		3,264,104		1,080,313		2,183,791
Stock-based compensation		815,052		403,759		411,293
Direct marketing and professional fees		781,519		422,945		358,574
Depreciation and amortization		37,324		-		37,324
Total sales and marketing expenses		4,897,999		1,907,017		2,990,982

Other Income

For the nine months ended September 30, 2022, the Company’s other income was $507,127 compared to other income of $666,503 for the nine months ended September 30, 2021. These amounts primarily consisted of grant income. The decrease in other income was mainly due a reduction in grant income earned in the period.

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Net Loss

For the nine months ended September 30, 2022, the Company’s net loss was approximately $23.3 million in comparison to a net loss of $18.9 million for the nine months ended September 30, 2021. The change was a result of the factors described above.

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

Our interim condensed consolidated financial statements and related condensed notes have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP, applied on a consistent basis. 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 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. In general, management's estimates are based on current facts, historical experiences, information from third party professionals and various other factors that it believes to be reasonable under the circumstances. Actual results could differ materially and adversely from those estimates made by management. To the extent there are material differences between the estimates and the actual results, future results of operations could be affected.

Recently Issued Accounting Pronouncements

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.

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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, 2021, that our disclosure controls and procedures were not effective as of September 30, 2022, 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.

In our Annual Report, the deficiencies identified involved the segregation of duties in some areas of finance.

We have already taken steps towards remediating such deficiencies including:

	·	hired an additional full-time business controller in Belgium with an appropriate level of experience;
	·	hired an experienced financial planning and analysis manager to implement forecasting and budgeting processes;
	·	hired a specialist in human resources to recommend and implement relevant policies and processes that will strengthen the control environment;
	·	hired additional information technology resources to assist in the preparation of risk-control matrices to identify key risks and develop and document policies to mitigate those risks;
	·	engaged additional resources to help us assess, document, design and implement control activities related to internal control over financial reporting;
	·	changed organizational reporting lines and reallocated certain responsibilities to improve segregation of duties; and
	·	implemented additional review procedures at each month end close.

We will continue 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 by further bolstering our internal processes and reviews, including formal documentation thereof.

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.

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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 fiscal quarter ended September 30, 2022, 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.

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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

Recent Sales of Unregistered Securities

None

Repurchase of Equity Securities

No equity securities were repurchased during the third quarter of 2022.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Incorporated by Reference

Exhibit Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Filed Herewith

1.1

Underwriting Agreement, dated July 29, 2022, by and between VolitionRx Limited and Newbridge Securities Corporation.

8-K

001-36833

1.1

08/02/22

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)

#	Indicates a management contract or compensatory plan or arrangement.

*	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.

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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.

	VOLITIONRX LIMITED


Dated: November 14, 2022	By:	/s/ Cameron Reynolds
		Cameron Reynolds
		President and Chief Executive Officer (Authorized Signatory and Principal Executive Officer)


Dated: November 14, 2022	By:	/s/ Terig Hughes
		Terig Hughes
		Chief Financial Officer and Treasurer (Authorized Signatory and Principal Financial and Accounting Officer)

Form: 10-Q

Documents