VOLITIONRX LTD 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) Page Condensed Consolidated Balance Sheets 4 Condensed Consolidated Statements of Operations and Comprehensive Loss 5 Condensed Consolidated Statements of Stockholders’ Equity 6 Condensed Consolidated Statements of Cash Flows 7 Notes to the Condensed Consolidated Financial Statements 8 3 VOLITIONRX LIMITED Condensed Consolidated Balance Sheets (Expressed in United States Dollars, except share numbers) March 31, December 31, 2021 2020 $ $ ASSETS (UNAUDITED) Current Assets Cash and cash equivalents 33,061,711 19,444,737 Accounts receivable 14,238 7,118 Prepaid expenses 1,095,971 303,178 Other current assets 496,902 576,660 Total Current Assets 34,668,822 20,331,693 Property and equipment, net 5,249,398 5,171,134 Operating lease right-of-use assets 303,548 326,085 Intangible assets, net 288,003 321,641 Total Assets 40,509,771 26,150,553 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable 1,463,963 1,539,547 Accrued liabilities 3,365,696 3,491,740 Management and directors’ fees payable 39,484 55,174 Current portion of long-term debt 840,556 841,319 Current portion of finance lease liabilities 56,941 59,930 Current portion of operating lease liabilities 167,364 179,624 Current portion of grant repayable 66,475 69,218 Total Current Liabilities 6,000,479 6,236,552 Long-term debt, net of current portion 2,390,687 2,606,885 Finance lease liabilities, net of current portion 564,484 601,967 Operating lease liabilities, net of current portion 142,015 151,828 Grant repayable, net of current portion 249,313 259,603 Total Liabilities 9,346,978 9,856,835 STOCKHOLDERS’ EQUITY Common Stock Authorized: 100,000,000 shares of common stock, at $0.001 par value Issued and outstanding: 52,871,001 shares and 48,607,017 shares, respectively 52,871 48,607 Additional paid-in capital 147,382,487 126,526,239 Accumulated other comprehensive income 74,155 (59,978) Accumulated deficit (116,290,117) (110,173,971) Total VolitionRx Limited Stockholders' Equity 31,219,396 16,340,897 Non-controlling interest (56,603) (47,179) Total Stockholders’ Equity 31,162,793 16,293,718 Total Liabilities and Stockholders’ Equity 40,509,771 26,150,553 (The accompanying notes are an integral part of these condensed consolidated financial statements) 4 VOLITIONRX LIMITED Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (Expressed in United States Dollars, except share numbers) Three Months Ended March 31, 2021 2020 $ $ Revenues Royalty - 240 Product 25,530 304 Total Revenues 25,530 544 Operating Expenses Research and development 3,873,079 3,894,966 General and administrative 1,810,160 1,703,522 Sales and marketing 427,401 273,954 Total Operating Expenses 6,110,640 5,872,442 Operating Loss (6,085,110) (5,871,898) Other Income (Expenses) Grant income - 7,924 Interest income 1,721 38,414 Interest expense (42,181) (33,779) Total Other Income (Expenses) (40,460) 12,559 Net Loss (6,125,570) (5,859,339) Net Loss attributable to Non-Controlling Interest 9,424 9,567 Net Loss attributable to VolitionRx Limited Stockholders (6,116,146) (5,849,772) Other Comprehensive Income (Loss) Foreign currency translation adjustments 134,133 373,926 Net Comprehensive Loss (5,991,437) (5,485,413) Net Loss Per Share – Basic and Diluted (0.12) (0.14) Weighted Average Shares Outstanding – Basic and Diluted 50,928,742 41,197,125 (The accompanying notes are an integral part of these condensed consolidated financial statements) 5 VOLITIONRX LIMITED Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (Expressed in United States Dollars, except share numbers) For the Three Months Ended March 31, 2021 and March 31, 2020 Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Non Controlling Interest Total Common Stock Shares Amount # $ $ $ $ $ $ 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 Balance, December 31, 2019 41,125,303 41,125 103,853,627 125,670 (89,821,856) - 14,198,566 Common stock issued for Director compensation in Volition Germany 73,263 73 333,896 - - - 333,969 Common stock issued in exercise of stock options 19,430 20 (20) - - - - Common stock repurchase and retirement (11,364) (11) (54,423) - - - (54,434) Stock-based compensation - - 192,669 - - - 192,669 Foreign currency translation - - - 373,926 - - 373,926 Net loss for the period - - - - (5,849,772) (9,567) (5,859,339) Balance, March 31, 2020 41,206,632 41,207 104,325,749 499,596 (95,671,628) (9,567) 9,185,357 (The accompanying notes are an integral part of these condensed consolidated financial statements) 6 VOLITIONRX LIMITED Condensed Consolidated Statements of Cash Flows (Unaudited) (Expressed in United States Dollars) Three Months Ended March 31, 2021 2020 $ $ Operating Activities Net loss (6,125,570) (5,859,339) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 227,342 180,188 Amortization of operating lease right-of-use assets 50,046 63,025 Stock-based compensation 555,342 192,669 Common stock issued for Director compensation in Volition Germany - 333,969 Changes in operating assets and liabilities: Prepaid expenses (792,793) (485,529) Accounts receivable (14,238) (242) Other current assets 86,907 (55,182) Accounts payable and accrued liabilities (87,002) 859,478 Management and directors’ fees payable (15,690) 33,681 Right-of-use assets operating leases liabilities (49,485) (61,614) Net Cash Used In Operating Activities (6,165,141) (4,798,896) Investing Activities: Purchases of property and equipment (483,940) (330,691) Net Cash Used In Investing Activities (483,940) (330,691) Financing Activities: Net proceeds from issuances of common shares 20,328,928 - Tax withholdings paid related to stock-based compensation (23,758) - Common stock repurchased - (54,434) Proceeds from grants repayable - 3,802 Proceeds from long-term debt 79,590 - Payments on long-term debt (161,727) (115,884) Payments on finance lease obligations (14,722) (35,575) Net Cash Provided By (Used In) Financing Activities 20,208,311 (202,091) Effect of foreign exchange on cash 57,744 335,727 Net Change in Cash 13,616,974 (4,995,951) Cash and cash equivalents – Beginning of Period 19,444,737 16,966,168 Cash and cash equivalents – End of Period 33,061,711 11,970,217 Supplemental Disclosures of Cash Flow Information: Interest paid 42,181 33,779 Non-Cash Financing Activities: Common stock issued on cashless exercises of stock options 80 20 Offering costs from issuance of common stock 119,029 - (The accompanying notes are an integral part of these condensed consolidated financial statements) 7 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 consolidated financial statements of VolitionRx Limited (the “Company”, "VolitionRx," "we" or "us") for the three months ended March 31, 2021 and March 31, 2020, respectively, are not audited. Our 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 our management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of our financial position as of March 31, 2021, and our results of operations and cash flows for the periods ended March 31, 2021 and March 31, 2020, respectively. The results of operations for the periods ended March 31, 2021 and March 31, 2020, respectively, are not necessarily indicative of the results for a full-year period. These interim consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission (the "SEC") on March 22, 2021. U se o f E s ti m a t es 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. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations could be affected. P ri n ci p les o f Con s o li d a ti o n The accompanying condensed consolidated financial statements for the period ended March 31, 2021 include the accounts of the Company and its subsidiaries. The Company has one wholly owned subsidiary, Singapore Volition Pte. Limited (“Singapore Volition”). 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) 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 March 31, 2021, cash and cash equivalents totaled approximately $33.1 million, of which $20.2 million was held in an overnight money market account. 8 VOLITIONRX LIMITED Notes to the Condensed Consolidated Financial Statements (Unaudited) ($ 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 March 31, 2021, the accounts receivable balance was $14,238 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 pursuant to its license agreement with Active Motif, Inc. (“Active Motif”) from which the Company receives royalties. In addition, revenue is received from external third parties for services the Company performs for them in its laboratory. Revenues, and their respective treatment for financial reporting purposes under ASC 606, are as follows: Royalty The Company receives royalty revenues on the net sales recognized during the period in which the revenue is earned, and the amount is determinable from the licensee. These are presented in “Royalty” in the 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 Active Motif 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 consolidated statements of operations and comprehensive loss. 9 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 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 re-assessed each reporting period as required. B asic a n d D il u ted N et Lo ss P er Sh are 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 March 31, 2021, 4,568,485 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. 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 in the statement of stockholders’ equity and cash flows to be consistent with the current year classification. 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. 10 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 On March 11, 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus known as COVID-19 as a global pandemic. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including, but not limited to, implementing shelter-in-place orders, significant restrictions on travel, as well as restrictions and guidelines that prohibit many employees from going to work. Uncertainty with respect to the economic impacts of the pandemic has introduced significant volatility in the financial markets. The Company did not observe significant impacts on its business or results of operations for the three months ended March 31, 2021 and March 31, 2020 due to the global emergence of COVID-19. While the extent to which COVID-19 impacts the Company’s future results will depend on future developments, the pandemic and associated economic impacts could result in a material impact to the Company’s future financial condition, results of operations and cash flows . 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 $116.3 million, has negative cash flows from operations, and has minimal revenues, which creates substantial doubt about its ability to continue as a going concern for a period of at least one year from the date of issuance of these condensed consolidated financial statements. The future of the Company as an operating business will depend on its ability to obtain sufficient capital contributions, financing and/or to generate revenues as may be required to sustain its operations. Management plans to address the above as needed by (a) securing additional grant funds, (b) obtaining additional financing through debt or equity transactions, (c) granting licenses to third parties in exchange for specified up-front and/or back-end payments and (d) developing and commercializing its products on an accelerated timeline. Management continues to exercise tight cost controls to conserve cash. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually attain profitable operations. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. If the Company is unable to obtain adequate capital, it could be forced to cease operations. 11 VOLITIONRX LIMITED Notes to the Condensed Consolidated Financial Statements (Unaudited) ($ expressed in United States Dollars) Note 3 - Property and Equipment The Company’s property and equipment consisted of the following amounts as of March 31, 2021 and December 31, 2020: March 31, 2021 Accumulated Net Carrying Cost Depreciation Value Useful Life $ $ $ Computer hardware and software 3 years 552,493 426,996 125,497 Laboratory equipment 5 years 2,865,730 1,139,320 1,726,410 Office furniture and equipment 5 years 280,690 177,367 103,323 Buildings 30 years 2,270,508 218,222 2,052,286 Building improvements 5-15 years 1,298,124 199,101 1,099,023 Land Not amortized 142,859 - 142,859 7,410,404 2,161,006 5,249,398 December 31, 2020 Accumulated Net Carrying Cost Depreciation Value Useful Life $ $ $ Computer hardware and software 3 years 550,254 412,805 137,449 Laboratory equipment 5 years 2,586,997 1,060,153 1,526,844 Office furniture and equipment 5 years 271,656 171,247 100,409 Buildings 30 years 2,366,236 207,111 2,159,125 Building improvements 5-15 years 1,285,383 184,813 1,100,570 Land Not amortized 146,737 - 146,737 7,207,263 2,036,129 5,171,134 During the three months ended March 31, 2021 and March 31, 2020, the Company recognized $204,049 and $158,768, respectively, in depreciation expense. 12 VOLITIONRX LIMITED Notes to the Condensed Consolidated Financial Statements (Unaudited) ($ 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 eight to 20 years. March 31, 2021 Accumulated Net Carrying Cost Amortization Value $ $ $ Patents 1,210,241 922,238 288,003 December 31, 2020 Accumulated Net Carrying Cost Amortization Value $ $ $ Patents 1,256,064 934,423 321,641 During the three months ended March 31, 2021 and March 31, 2020, the Company recognized $23,293 and $21,420, respectively, in amortization expense. The Company amortizes the patents on a straight-line basis with terms ranging from eight to 20 years. The annual estimated amortization schedule over the next five years is as follows: 2021 - remaining $ 68,261 2022 $ 91,015 2023 $ 91,015 2024 $ 37,712 2025 $ - Total Intangible Assets $ 288,003 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 Topic “ Property, Plant and Equipment ” as of December 31, 2020. The result of this review confirmed that the ongoing value of the patents was not impaired as of December 31, 2020. Note 5 - Related Party Transactions See Note 6 for common stock issued to related parties and Note 7 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). 13 VOLITIONRX LIMITED Notes to the Condensed Consolidated Financial Statements (Unaudited) ($ expressed in United States Dollars) Note 6 - Common Stock As of March 31, 2021, the Company was authorized to issue 100 million shares of common stock par value $0.001 per share, of which 52,871,001 and 48,607,017 shares were issued and outstanding as of March 31, 2021 and December 31, 2020, respectively. Stock Option Exercises and RSU Settlements From January 13, 2021 to March 19, 2021, 7,634 stock options were exercised to purchase shares of common stock at $3.35 per share in cashless exercises that resulted in the issuance of 948 shares of common stock. On January 20, 2021, 5,000 RSUs were settled net of tax withholdings at $4.10 per share that resulted in the issuance of 3,000 shares of common stock. On February 2, 2021, 20,000 stock options were exercised to purchase shares of common stock at $3.80 per share in a cashless exercise that resulted in the issuance of 6,181 shares of common stock. On February 8, 2021, 100,000 stock options were exercised to purchase shares of common stock at $5.00 per share in a cashless exercise that resulted in the issuance of 19,446 shares of common stock. From February 8, 2021 to February 9, 2021, 100,000 stock options were exercised to purchase shares of common stock at $4.00 per share in cashless exercises that resulted in the issuance of 32,126 shares of common stock. On February 8, 2021, 50,000 stock options were exercised to purchase shares of common stock at $3.25 per share in a cashless exercise that resulted in the issuance of 18,750 shares of common stock. Equity Capital Raise On February 10, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Cantor Fitzgerald & Co. (the “Underwriter”) in connection with an underwritten public offering (the “Offering”) of 3,809,524 shares (the “Firm Shares”) of the Company’s common stock, $0.001 par value per share (“Common Stock”) pursuant to the Company’s shelf registration statement on Form S-3 (declared effective by the SEC on September 28, 2018, File No. 333-227248). The Underwriter purchased the Firm Shares from the Company at a price of $4.9533 per share on February 12, 2021. The net proceeds received by the Company for the sale and issuance of the Firm Shares were approximately $18.9 million. Under the terms of the Underwriting Agreement, the Company granted the Underwriter an option, exercisable for 30 days, to purchase up to an additional 571,428 shares of Common Stock (the “Option Shares”) at the same price per share as the Firm Shares which option was not exercised. Equity Distribution Agreements On November 10, 2020, the Company entered into an equity distribution agreement (the “2020 EDA”) with Cantor Fitzgerald & Co. (“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 “shelf” registration statement on Form S-3 (File No. 333-227248) and related prospectuses, through Cantor and Oppenheimer each acting as the Company’s agent and/or principal. The Company is not obligated to sell any shares under the 2020 EDA. From inception through March 31, 2021, the Company raised aggregate net proceeds (net of broker’s commissions and fees) of $343,957 under the 2020 EDA through the sale of 65,400 shares of its common stock, all of which occurred during the first quarter of 2021. 14 VOLITIONRX LIMITED Notes to the Condensed Consolidated Financial Statements (Unaudited) ($ expressed in United States Dollars) Note 6 - Common Stock (continued) On September 7, 2018, the Company entered into an equity distribution agreement (as amended, the “2018 EDA”) with Oppenheimer to sell shares of common stock having an aggregate offering price of up to $10.0 million from time-to-time, through an “at the market offering program” pursuant to the Company’s effective “shelf” registration statement on Form S-3 (File No 333-227248) and related prospectuses, through Oppenheimer acting as the Company’s agent and/or principal. During the first quarter of 2021, the Company raised aggregate net proceeds (net of broker’s commissions and fees) of approximately $1.2 million under the 2018 EDA through the sale of 308,609 shares of its common stock. From inception through March 31, 2021, the Company raised aggregate net proceeds (net of broker’s commissions and fees) of approximately $9.7 million under the 2018 EDA through the sale of 2,539,606 shares of its common stock and fully utilized the availability under the 2018 EDA. No further sales will be made under the 2018 EDA. Note 7 – Stock-Based Compensation a) Warrants The following table summarizes the changes in warrants outstanding of the Company during the three months ended March 31, 2021: Number of Weighted Average Warrants Exercise Price ($) Outstanding at December 31, 2020 175,000 2.75 Granted 310,000 4.52 Outstanding at March 31, 2021 485,000 3.88 Exercisable at March 31, 2021 125,000 2.47 Effective January 1, 2021, the Company granted warrants to purchase 125,000 shares of common stock to a Company employee for services to the Company. These warrants vest on January 1, 2022 (subject to continued employment through such date) and expire on January 1, 2027, with an exercise price of $3.95 per share. The Company has calculated the estimated fair market value of these warrants at $242,877, using the Black-Scholes model and the following assumptions: term 3.5 years, stock price $3.95, exercise price $3.80, 74.53% volatility, 0.50% risk-free rate, and no forfeiture rate. Effective February 1, 2021, the Company granted warrants to purchase 185,000 shares of common stock to a Company employee for services to the Company. These warrants vest on February 1, 2022 (subject to continued employment through such date) and expire on February 1, 2027, with an exercise price of $4.90 per share. The Company has calculated the estimated fair market value of these warrants at $459,352, using the Black-Scholes model and the following assumptions: term 3.5 years, stock price $4.90, exercise price $4.80, 75.03% volatility, 0.59% risk-free rate, and no forfeiture rate . 15 VOLITIONRX LIMITED Notes to the Condensed Consolidated Financial Statements (Unaudited) ($ expressed in United States Dollars) Note 7 – Stock-Based Compensation (continued) a) Warrants (continued) Below is a table summarizing the warrants issued and outstanding as of March 31, 2021, which have an aggregate weighted average remaining contractual life of 4.71 years. Weighted Average Remaining Proceeds to Number Number Exercise Contractual Company if Outstanding Exercisable Price ($) Life (Years) Exercised ($) 125,000 125,000 2.47 0.95 308,750 50,000 - 3.45 4.92 172,500 185,000 - 4.90 5.84 906,500 125,000 - 3.95 5.76 493,750 485,000 125,000 1,881,500 Stock-based compensation expense related to warrants of $148,364 and $27,205 was recorded in the three months ended March 31, 2021 and March 31, 2020, respectively. Total remaining unrecognized compensation cost related to non-vested warrants is $592,341 and is expected to be recognized over a period of 0.84 years. As of March 31, 2021, the total intrinsic value of warrants outstanding was $180,250. b) Options The following table summarizes the changes in options outstanding of the Company during the three months ended March 31, 2021: Number of Weighted Average Options Exercise Price ($) Outstanding at December 31, 2020 4,278,619 3.88 Exercised (277,634) 4.19 Outstanding at March 31, 2021 4,000,985 3.99 Exercisable at March 31, 2021 3,170,985 4.09 16 VOLITIONRX LIMITED Notes to the Condensed Consolidated Financial Statements (Unaudited) ($ expressed in United States Dollars) Note 7 – Stock-Based Compensation (continued) b) Options (continued) Below is a table summarizing the options issued and outstanding as of March 31, 2021, all of which were issued pursuant to the 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 2.75 years . As of March 31, 2021, an aggregate of 4,250,000 shares of common stock were authorized for issuance under the 2015 Stock Incentive Plan, of which 404,314 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 3.87 2,063,750 2,717 2,717 3.35 0.12 9,102 10,000 - 3.40 5.67 34,000 820,000 - 3.60 5.04 2,952,000 1,682,837 1,682,837 4.00 1.56 6,731,348 15,268 15,268 4.35 0.90 66,416 89,163 89,163 4.38 2.82 390,534 50,000 50,000 4.80 1.76 240,000 696,000 696,000 5.00 1.99 3,480,000 4,000,985 3,170,985 15,967,150 Stock-based compensation expense related to stock options of $355,076 and $165,464 was recorded in the three months ended March 31, 2021 and March 31, 2020, respectively. Total remaining unrecognized compensation cost related to non-vested stock options is $71,854. As of March 31, 2021, the total intrinsic value of stock options outstanding was $489,118. c) Restricted Stock Units (RSUs) Below is a table summarizing the RSUs issued and outstanding as of March 31, 2021, all of which were issued pursuant to the 2015 Stock Incentive Plan. Number of RSUs Share Price ($) Outstanding at December 31, 2020 67,500 3.47 Granted 35,000 3.66 Vested (5,000) 4.10 Cancelled (15,000) 3.30 Outstanding at March 31, 2021 82,500 3.55 17 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 (RSUs) (continued) Effective January 1, 2021, the Company granted RSUs of 5,000 shares of common stock to a Company employee in exchange for services provided to the Company. These RSUs vested immediately on January 1, 2021, and resulted in the issuance of 3,000 shares (the remaining 2,000 shares were withheld for taxes and returned as authorized shares under the 2015 Stock Incentive Plan) and total compensation expense of $19,450. Effective March 25, 2021, the Company granted aggregate RSUs of 30,000 shares of common stock to two non-executive directors in exchange for services provided to the Company. These RSUs vest over two years, with 50% vesting on each of March 25, 2022 and March 25, 2023 and will result in total compensation expense of $107,700. On March 25, 2021, 15,000 RSUs previously granted to a non-executive director were cancelled and returned as authorized shares under the 2015 Stock Incentive Plan upon the resignation of such director prior to vesting. Below is a table summarizing the RSUs issued and outstanding as of March 31, 2021 and which have an aggregate weighted average remaining contractual life of 0.88 years. Weighted Average Remaining Number Share Contractual Outstanding Price ($) Life (Years) 52,500 3.52 0.54 30,000 3.59 1.48 82,500 Stock-based compensation expense related to RSUs of $51,902 and $nil was recorded in the three months ended March 31, 2021 and March 31, 2020, respectively. Total remaining unrecognized compensation cost related to non-vested RSUs is $157,509. As of March 31, 2021, the total intrinsic value of the RSUs outstanding was $19,350. Note 8 – Commitments and Contingencies a) Finance Lease Obligations In 2016, the Company entered into a real estate finance 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 March 31, 2021, the balance payable was $612,599. 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, maturing in January 2022 with implicit interest of 1.35%. The leased equipment is amortized on a straight-line basis over five years. As of March 31, 2021, the balance payable was $8,826. 18 VOLITIONRX LIMITED Notes to the Condensed Consolidated Financial Statements (Unaudited) ($ expressed in United States Dollars) Note 8 – Commitments and Contingencies (continued) 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 March 31, 2021. 2021 - remaining $ 54,872 2022 $ 64,640 2023 $ 63,165 2024 $ 63,163 2025 $ 63,163 Greater than five years $ 402,652 Total $ 711,655 Less: Amount representing interest $ (90,230) Present Value of Minimum Lease Payments $ 621,425 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 4.49% and the weighted average remaining lease term is 29 months. As of March 31, 2021, operating lease right-of-use assets and liabilities arising from operating leases were $303,548 and $309,379, respectively. During the three months ended March 31, 2021, cash paid for amounts included for the measurement of lease liabilities was $21,562 and the Company recorded operating lease expense of $21,488. 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 March 31, 2021. 2021 - remaining $ 142,623 2022 $ 85,019 2023 $ 59,828 2024 $ 33,674 2025 $ 726 Total Operating Lease Obligations $ 321,870 Less: Amount representing interest $ (12,491) Present Value of Minimum Lease Payments $ 309,379 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 three months ended March 31, 2021, $15,647 was recognized in short-term lease costs associated with office space leases. The annual payments remaining for short-term office leases were as follows: 2021 – remaining $ 19,232 Total Operating Lease Liabilities $ 19,232 19 VOLITIONRX LIMITED Notes to the Condensed Consolidated Financial Statements (Unaudited) ($ expressed in United States Dollars) Note 8 – Commitments and Contingencies (continued) c) Grants Repayable In 2010, the Company entered into an agreement with the Walloon Region government in Belgium for a colorectal cancer research grant for €1.05 million. Per the terms of the agreement, €314,406 of the grant is to be repaid, by installments over the period from June 30, 2014 to June 30, 2023. In the event that the Company receives revenue from products or services as defined in the agreement, it is due to pay a 6% royalty on such revenue to the Walloon Region. The maximum amount payable to the Walloon Region, in respect of the aggregate of the amount repayable of €314,406 and the 6% royalty on revenue, is equal to twice the amount of funding received. As of March 31, 2021, the grant balance repayable was $102,645. 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 March 31, 2021, the grant balance repayable was $213,143. As of March 31, 2021, the total grant balance repayable was $315,788 and the payments remaining were as follows: 2021 - remaining $ 66,475 2022 $ 49,440 2023 $ 50,664 2024 $ 21,314 2025 $ 28,419 Greater than 5 years $ 99,476 Total Grants Repayable $ 315,788 d) Long-Term Debt In 2016, the Company entered into a seven-year loan agreement with Namur Invest for €440,000 with a fixed interest rate of 4.85%, maturing in December 2023. As of March 31, 2021, the principal balance payable was $238,568. 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 March 31, 2021, the principal balance payable was $240,838. In 2017, the Company entered into a four-year loan agreement with Namur Invest for €350,000 with a fixed interest rate of 4.00%, maturing in June 2021. As of March 31, 2021, the principal balance payable was $31,302. In 2017, the Company entered into a seven-year loan agreement with SOFINEX for up to €1 million with a fixed interest rate of 4.50%, maturing in September 2024. As of March 31, 2021, €1 million has been drawn down under this agreement and the principal balance payable was $939,474. In 2018, the Company entered into a four-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 March 31, 2021, the principal balance payable was $219,184. In 2019, the Company entered into a four-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 March 31, 2021, the principal balance payable was $587,171. On October 13, 2020, the Company entered into a ten-year loan agreement with Namur Invest for a maximum of €830,000 with fixed interest rate of 4.00%, maturing March 2031. During the quarter ended March 31, 2021, the Company borrowed €65,453 under the loan agreement. As of March 31, 2021, the maximum of €830,000 had been drawn down under this agreement, representing a principal balance payable of $974,706. 20 VOLITIONRX LIMITED Notes to the Condensed Consolidated Financial Statements (Unaudited) ($ expressed in United States Dollars) Note 8 – Commitments and Contingencies (continued) d) Long-Term Debt (continued) As of March 31, 2021, the total balance for long-term debt payable was $3,231,243 and the payments remaining were as follows: 2021 - remaining $ 754,622 2022 $ 772,491 2023 $ 671,892 2024 $ 522,858 2025 $ 144,427 Greater than 5 years $ 777,748 Total $ 3,644,038 Less: Amount representing interest $ (412,795) Total Long-Term Debt $ 3,231,243 e) Collaborative Agreement Obligations In 2016, the Company entered into a research cooperation agreement with DKFZ in Germany for a five-year period for €400,000. As of March 31, 2021, $234,869 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 March 31, 2021, $510,000 is still to be paid by the Company under this agreement. In 2019, the Company entered into a research collaboration agreement with the University of Taiwan for a two-year period to collect a total of 1,200 samples for a cost to the Company of up to $320,000 payable over such period. As of March 31, 2021, $96,000 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 March 31, 2021, $235,036 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. As of March 31, 2021, $21,482 is still to be paid by the Company under this agreement. As of March 31, 2021, the total amount to be paid for future research and collaboration commitments was approximately $1.1 million and the payments remaining were as follows: 2021 - remaining $ 982,387 2022 - 2025 $ 115,000 Total Collaborative Agreement Obligations $ 1,097,387 21 VOLITIONRX LIMITED Notes to the Condensed Consolidated Financial Statements (Unaudited) ($ expressed in United States Dollars) Note 8 – Commitments and Contingencies (continued) 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 March 31, 2021, TAMU has a 12.5% equity interest in Volition Vet. Volition Germany On January 10, 2020, the Company, through its wholly owned subsidiary Belgian Volition, acquired an epigenetic reagent company, Octamer GmbH (“Octamer”), based in Munich, Germany, and hired its founder for his expertise and knowledge to be passed to Company personnel. On March 9, 2020, Octamer was renamed to Volition Germany GmbH (or “Volition Germany”). Upon considering the definition of a business, as defined in ASC 805, “ Business Combinations ,” paragraph 805 - 10-20, which is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return, the Company has determined that this did not constitute a business. This is primarily due to the fact that additional inputs are needed in the form of training personnel further to produce outputs. Accordingly, the Company has treated this transaction as the hiring of a member of management, described below, rather than accounting for the transaction as a business combination. The Company agreed to terms of the transaction on December 13, 2019 and closed on January 10, 2020. Pursuant to the transaction agreement, the Company purchased all outstanding shares of Octamer. In exchange, the Company agreed to issue 73,263 newly-issued restricted shares of Company common stock valued at $333,969 (based on the $4.56 per share volume weighted trading price for the five days prior to December 13, 2019), committed to pay approximately €350,000, subject to adjustments, and agreed to pay off certain Octamer expenses leading up to the agreement (representing net liabilities of $6,535). At closing, the Company issued 73,263 restricted shares of Company common stock, paid an adjusted amount of approximately $357,000 (€321,736) and recorded a holdback liability of $55,404 (€50,000). During the three months ended March 31, 2021, an amount of €43,152 was paid in full settlement of the amount due. In connection with the transaction agreement, the Company also entered into a two-year Managing Director’s agreement with the founder of Octamer to continue to manage Volition Germany for a payment of €288,000 payable in equal monthly installments over such two-year period and 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 5 years post-closing. The Company recorded approximately $753,000 in compensation expense as a result of cash paid, holdback liability, stock issued and assumption of expenses. As of March 31, 2021, $126,829 is still to be paid by the Company under the Managing Director’s agreement and $229 is payable under the 6% royalty agreement. 22 VOLITIONRX LIMITED Notes to the Condensed Consolidated Financial Statements (Unaudited) ($ expressed in United States Dollars) Note 8 – Commitments and Contingencies (continued) f) Other Commitments (continued) Volition America On November 3, 2020, the Company entered into a professional services master agreement with Diagnostic Oncology CRO, LLC to conduct a pivotal clinical trial and provide regulatory submission and reimbursement related services. Under the terms of the agreement Diagnostic Oncology CRO, LLC will provide ad hoc consulting assistance on a project-by-project basis related to the review and assessment of existing data and information to prepare recommended intended use claims and coverage/reimbursement plans to support the preparation of FDA pre-submissions, clinical trial protocol development and study administration, and potential 510k regulatory marketing submissions of the Company’s diagnostic tests, including those proposed for use as an adjunct diagnostic tool for common and aggressive forms of Non-Hodgkin’s Lymphoma. The initial projects contemplated by the agreement relating to Non-Hodgkin’s Lymphoma obligate the Company to pay in aggregate of up to $2.9 million over a period of 22 months. Such payment obligations are on a project-by-project basis as deliverables are executed and subject to certain terms and conditions. Additionally, the Company may terminate the agreement or any project with or without cause upon at least 30 days’ prior written notice. Unless earlier terminated, the term of the agreement is until December 31, 2025 or such later date as when all projects have been completed. As of March 31, 2021, $nil is payable by Company for services rendered under the agreement. g) Legal Proceedings There are no legal proceedings which the Company believes will have a material adverse effect on its financial position. Note 9 – Subsequent Events On April 13, 2021, 20,625 RSUs were settled net of tax withholdings at $3.44 per share that resulted in the issuance of 16,087 shares of common stock. On April 13, 2021, 5,625 RSUs were settled at $3.44 per share that resulted in the issuance of 5,625 shares of common stock. Effective May 1, 2021, the Company granted RSUs of 150,000 shares of common stock to a Company employee in exchange for services provided to the Company. These RSUs vest as follows: one-third after 12 months, one-third after 24 months, and the remaining one-third after 36 months and will result in total compensation expense of $496,500. END NOTES TO FINANCIALS 23