VOLITIONRX LTD 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA VOLITIONRX LIMITED Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Index Report of Independent Registered Public Accounting Firm (PCAOB ID: 3627 ) F - 37 Consolidated Balance Sheets F - 38 Consolidated Statements of Operations and Comprehensive Loss F - 39 Consolidated Statements of Stockholders’ Equity F - 40 Consolidated Statements of Cash Flows F - 41 Notes to the Consolidated Financial Statements F - 42 F-36 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of VolitionRx Limited: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of VolitionRx Limited (“the Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph Regarding Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred losses since inception, has negative cash flows from operations, and has minimal revenues, which creates substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. We determined that there are no critical audit matters. /s/ Sadler, Gibb & Associates, LLC We have served as the Company’s auditor since 2011. Draper, UT March 30, 2022 F-37 Table of Contents VOLITIONRX LIMITED Consolidated Balance Sheets (Expressed in United States Dollars, except share numbers) December 31, December 31, 2021 2020 $ $ ASSETS Current Assets Cash and cash equivalents 20,581,313 19,444,737 Accounts Receivable 12,510 7,118 Prepaid expenses 598,367 303,178 Other current assets 786,642 576,660 Total Current Assets 21,978,832 20,331,693 Property and equipment, net 4,911,077 5,171,134 Operating lease right-of-use assets 383,551 326,085 Intangible assets, net 216,876 321,641 Total Assets 27,490,336 26,150,553 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable 1,542,457 1,539,547 Accrued liabilities 3,841,013 3,491,740 Management and directors’ fees payable 71,303 55,174 Current portion of long-term debt 797,855 841,319 Current portion of financing lease liabilities 48,958 59,930 Current portion of operating lease liabilities 171,166 179,624 Current portion of grant repayable 43,100 69,218 Total Current Liabilities 6,515,852 6,236,552 Long-term debt, net of current portion 2,270,767 2,606,885 Finance lease liabilities, net of current portion 511,086 601,967 Operating lease liabilities, net of current portion 217,305 151,828 Grant repayable, net of current portion 253,221 259,603 Total Liabilities 9,768,231 9,856,835 STOCKHOLDERS’ EQUITY Common Stock Authorized: 100,000,000 shares of common stock, at $ 0.001 par value Issued and outstanding: 53,772,261 shares and 48,607,017 shares, respectively 53,772 48,607 Additional paid-in capital 154,730,938 126,526,239 Accumulated other comprehensive income (loss) 148,326 ( 59,978 ) Accumulated deficit ( 136,988,636 ) ( 110,173,971 ) Total VolitionRx Limited Stockholders’ Equity 17,944,400 16,340,897 Non-controlling interest ( 222,295 ) ( 47,179 ) Total Stockholders’ Equity 17,722,105 16,293,718 Total Liabilities and Stockholders’ Equity 27,490,336 26,150,553 (The accompanying notes are an integral part of these consolidated financial statements) F-38 Table of Contents VOLITIONRX LIMITED Consolidated Statements of Operations and Comprehensive Loss (Expressed in United States Dollars, except share numbers) For the year ended December 31, 2021 December 31, 2020 $ $ Revenues Royalty - 2,112 Product 90,035 11,321 Total Revenues 90,035 13,433 Operating Expenses Research and development 15,541,889 14,533,862 General and administrative 8,751,392 5,654,018 Sales and marketing 4,129,833 1,073,368 Total Operating Expenses 28,423,114 21,261,248 Operating Loss ( 28,333,079 ) ( 21,247,815 ) Other Income (Expenses) Grant income 1,522,533 635,513 (Loss)/Gain on disposal of fixed assets ( 26,166 ) 293,312 Interest income 2,734 49,495 Interest expense ( 155,803 ) ( 129,799 ) Total Other Income (Expenses) 1,343,298 848,521 Net Loss ( 26,989,781 ) ( 20,399,294 ) Net Loss attributable to Non-Controlling Interest 175,116 47,179 Net Loss attributable to VolitionRx Limited Stockholders ( 26,814,665 ) ( 20,352,115 ) Other Comprehensive Income (Loss) Foreign currency translation adjustments 208,304 ( 185,648 ) Net Comprehensive Loss ( 26,781,477 ) ( 20,584,942 ) Net Loss Per Share – Basic and Diluted attributable to VolitionRx Limited Stockholders ( 0.51 ) ( 0.45 ) Weighted Average Shares Outstanding – Basic and Diluted 52,655,885 45,278,847 (The accompanying notes are an integral part of these consolidated financial statements) F-39 Table of Contents VOLITIONRX LIMITED Consolidated Statement of Stockholders’ Equity For the Years Ended December 31, 2021 and 2020 (Expressed in United States Dollars, except share numbers) Accumulated Other Common Stock Additional Paid-in Comprehensive Income Accumulated Non Controlling Shares Amount Capital (Loss) Deficit Interest Total # $ $ $ $ $ $ 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 repurchase and retirement ( 11,364 ) ( 11 ) ( 54,423 ) - - - ( 54,434 ) Common stock issued for exercise of stock options 147,268 147 82,353 - - - 82,500 Common stock issued for exercise of warrants 25,000 25 61,725 - - - 61,750 Common stock issued in public offerings, net 7,247,547 7,248 21,045,034 - - - 21,052,282 Tax withholdings paid related to stock-based compensation - - ( 187,465 ) - - - ( 187,465 ) Stock-based compensation - - 1,391,492 - - - 1,391,492 Foreign currency translation - - - ( 185,648 ) - - ( 185,648 ) Net loss for the Year - - - - ( 20,352,115 ) ( 47,179 ) ( 20,399,294 ) 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 cashless exercise of stock options 77,451 77 ( 77 ) - - - - Common stock issued for settlement of RSUs 24,712 25 ( 25 ) - - - - Common stock issued in public offerings, net 5,063,081 5,063 23,214,581 - - - 23,219,644 Tax withholdings paid related to stock-based compensation - - ( 130,426 ) - - - ( 130,426 ) Stock-based compensation - - 2,670,297 - - - 2,670,297 Stock-based compensation in relation to modification of options - - 2,450,349 - - - 2,450,349 Foreign currency translation - - - 208,304 - - 208,304 Net loss for the Year - - - - ( 26,814,665 ) ( 175,116 ) ( 26,989,781 ) Balance, December 31, 2021 53,772,261 53,772 154,730,938 148,326 ( 136,988,636 ) ( 222,295 ) 17,722,105 (The accompanying notes are an integral part of these consolidated financial statements) F-40 Table of Contents VOLITIONRX LIMITED Consolidated Statements of Cash Flows (Expressed in United States Dollars) For the year ended December 31, 2021 December 31, 2020 $ $ Operating Activities: Net loss ( 26,989,781 ) ( 20,399,294 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 945,367 716,181 Amortization of operating lease right-of-use assets 199,793 325,192 Loss (Gain) on disposal of fixed assets 26,166 ( 293,312 ) Stock based compensation 2,670,297 1,391,492 Common stock issued for Director compensation in Volition Germany - 333,969 Stock-based compensation in relation to modification of options 2,450,349 - Changes in operating assets and liabilities: Prepaid expenses ( 295,189 ) ( 35,660 ) Accounts receivable ( 12,510 ) ( 7,118 ) Other current assets ( 202,801 ) ( 254,062 ) Accounts payable and accrued liabilities 534,732 2,052,753 Management and directors’ fees payable 16,129 33,195 Right-of-use assets operating leases liabilities ( 196,471 ) ( 327,580 ) Net Cash Used In Operating Activities ( 20,853,919 ) ( 16,464,244 ) Investing Activities: Purchases of property and equipment ( 973,559 ) (1,941,060 ) Proceeds from sales of property and equipment - 293,312 Net Cash Used In Investing Activities ( 973,559 ) ( 1,647,748 ) Financing Activities: Net proceeds from issuance of common shares 23,219,644 21,196,532 Tax withholdings paid related to stock-based compensation ( 130,426 ) ( 187,465 ) Common stock repurchased - ( 54,434 ) Proceeds from grants repayable 37,631 3,802 Proceeds from long-term debt 592,423 346,465 Payments on long-term debt ( 755,721 ) ( 545,389 ) Payments on grants repayable ( 47,789 ) ( 41,257 ) Payments on financing leases (58,210 ) ( 97,417 ) Net Cash Provided By Financing Activities 22,857,552 20,620,837 Effect of foreign exchange on cash and cash equivalents 106,502 ( 30,276 ) Net Change in Cash and Cash Equivalents 1,136,576 2,478,569 Cash and Cash Equivalents – Beginning of Year 19,444,737 16,966,168 Cash and Cash Equivalents – End of Year 20,581,313 19,444,737 Supplemental Disclosures of Cash Flow Information: Interest paid 155,803 129,799 Income tax paid - - Non-Cash Financing Activities: Common Stock issued on exercises of stock options and warrants and settlement of RSUs 102 118 Loan payable for purchase of manufacturing building - 584,449 Offering costs from issuance of common stock 218,459 1,250,848 (The accompanying notes are an integral part of these consolidated financial statements) F-41 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 1 - Nature of Operations The Company was incorporated under the laws of the State of Delaware on September 24, 1998. On September 22, 2011, the Company filed a Certificate for Renewal and Revival of Charter with the Secretary of State of Delaware. Pursuant to Section 312(1) of the Delaware General Corporation Law, the Company was revived under the new name of “VolitionRX Limited” and the name change became effective on October 11, 2011. On October 7, 2016, the Company amended its Certificate of Incorporation to reflect a name change to “VolitionRx Limited.” On October 6, 2011, the Company entered into a share exchange agreement with Singapore Volition Pte. Limited, a Singapore corporation incorporated on August 5, 2010 (“Singapore Volition”), and the shareholders of Singapore Volition. Pursuant to the terms of the share exchange agreement, the former shareholders of Singapore Volition held 85% of the issued and outstanding common shares of the Company. The issuance was deemed to be a reverse acquisition for accounting purposes and as such, Singapore Volition is regarded as the predecessor of the Company. The number of shares outstanding and per share amounts of the Company have been restated to recognize the foregoing recapitalization. The Company’s principal business objective through its subsidiaries is to develop and bring to market simple, easy to use, cost effective blood tests designed to help diagnose and monitor a range of life-altering diseases, including some cancers and diseases associated with NETosis such as sepsis and COVID-19. The tests are based on the science of Nucleosomics TM , which is the practice of identifying and measuring nucleosomes in the bloodstream or other bodily fluid – an indication that disease is present. The Company has two wholly owned subsidiaries, Volition Global Services SRL (“Volition Global”) which was formed in August 2021 and Singapore Volition. Singapore Volition has one wholly owned subsidiary, Belgian Volition SRL, a Belgium private limited liability company (“Belgian Volition”), which it acquired in September 2010. Belgian Volition has four subsidiaries, Volition Diagnostics UK Limited (“Volition Diagnostics”), which was formed in November 2015, Volition America, Inc. (“Volition America”), which was formed in February 2017, Volition Germany GmbH (“Volition Germany”), which was acquired in January 2020, as well as its majority-owned subsidiary Volition Veterinary Diagnostics Development LLC, (“Volition Vet”), which was formed in June 2019. Following the acquisition of Singapore Volition in 2011, the Company’s fiscal year end was changed from August 31 to December 31. Note 2 - Going Concern The Company’s consolidated financial statements are prepared using accounting principles generally accepted in the United States of America (“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 $ 137 .0 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 at least one year from the date of issuance of these 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 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 and/or distribution rights 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 to eventually attain profitable operations. The accompanying 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. F-42 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 3 - Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP and are expressed in US dollars. The Company’s fiscal year end is December 31. 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 experiences 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. Principles of Consolidation The accompanying consolidated financial statements for the year ended December 31, 2021 include the accounts of the Company and its subsidiaries, Singapore Volition, Belgian Volition, Volition Diagnostics UK Limited, Volition Germany, Volition America, Volition Vet, and Volition Global Services SRL. See Note 10(f) for more information regarding Volition Vet, Volition Germany, Volition America and Singapore Volition. All intercompany balances and transactions have been eliminated in consolidation. Cash and Cash Equivalents The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As of December 31, 2021, and December 31, 2020, the Company had $ 20,581,313 and $ 19,444,737 , respectively, in cash and cash equivalents. As of December 31, 2021, and December 31, 2020, the Company had $ 19,753,877 and $ 18,592,210 , respectively, in its domestic accounts in excess of Federal Deposit insured limits. As of December 31, 2021, and December 31, 2020, the Company had $ 134,134 and $ 831,110 , respectively, in its foreign accounts in excess of the Belgian Deposit insured limits. As of December 31, 2021, and December 31, 2020, the Company had $ 102,514 and $ 282,137 , respectively, in its foreign accounts in excess of the Singapore Deposit insured limits. As of December 31, 2021, and December 31, 2020, the Company had $ 142,410 and $ 186,168 , respectively, in its foreign accounts in excess of the UK Deposit insured limits. Accounts Receivable 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 December 31, 2021, the accounts receivable balance was $ 12,510 and the allowance for doubtful accounts was $nil. Property and Equipment Property and equipment are stated at historical cost and depreciated over the useful life of the asset using the straight-line method. Useful lives are assigned to assets depending on their category. For details regarding property and equipment, refer to Note 4. F-43 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 3 - Summary of Significant Accounting Policies (continued) Basic and Diluted Net Loss Per Share The Company computes net loss per share in accordance with Accounting Standards Codification (“ASC”) 260, “Earnings Per Share,” which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. 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 December 31, 2021, and December 31, 2020, 6,323,268 and 4,556,669 , respectively, of potential common shares equivalents from stock options, RSUs and warrants 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). Financial Instruments Pursuant to ASC 820, “ Fair Value Measurements and Disclosures,” an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value: Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the assets or liabilities such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The Company’s financial instruments consist principally of cash, accounts payable, accrued liabilities, notes payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consists of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations. Other Comprehensive Income (Loss) ASC 220, “ Other Comprehensive Income/(Loss)”, establishes standards for the reporting and display of other comprehensive loss and its components in the financial statements. As of December 31, 2021, the Company had $ 148,326 of accumulated other comprehensive income, relating to foreign currency translation. F-44 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 3 - Summary of Significant Accounting Policies (continued) Income Taxes Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740, “Accounting for Income Taxes” as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these consolidated financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years. Refer to Note 9 for further details. Revenue Recognition The Company adopted 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 services the Company performs for them in its laboratory. Revenues, and their respective treatment for financial reporting purposes under ASC 606, are as follows: Royalty The Company receives royalty revenues on the net sales recognized during the period in which the revenue is earned, and the amount is determinable from the licensee. These are presented under “Royalty” under the consolidated statements of operations. The Company does not have future performance obligations under this revenue stream. In accordance with ASC 606, the Company records these revenues based on estimates of the net sales that occurred during the relevant period from the licensee. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known. Product The Company includes revenue from product sales recognized during the period in which goods are shipped to third parties, and the amount is deemed collectable from the third parties. These are presented in “Product” in the consolidated statements of operations and comprehensive loss. Service The Company includes revenue recognized from laboratory services performed in the Company’s laboratory on behalf of third parties under “Service” under the consolidated statements of operations. For each development and/or commercialization agreement that results in revenues, the Company identifies all performance obligations, aside from those that are immaterial, which may include a license to intellectual property and know-how, development activities and/or transition activities. In order to determine the transaction price, in addition to any upfront payment, the Company estimates the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract. The Company constrains the estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required. F-45 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 3 - Summary of Significant Accounting Policies (continued) Research and Development In accordance with ASC 730, the Company follows the policy of expensing its research and development costs in the period in which they are incurred. The Company incurred research and development expenses of $ 15.5 million and $ 14.5 million during the years ended December 31, 2021 and 2020, respectively. Impairment of Long-Lived Assets In accordance with ASC 360, “Property Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. Impairment losses of $nil and $nil were recognized during the years ended December 31, 2021 and December 31, 2020, 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. Restricted stock units are valued based on the closing stock price on the date of grant. Refer to Note 8 for further details. Leases The Company adopted FASB issued Accounting Standards Update No. 2016-02 – Leases (“Topic 842”) as of January 1, 2019, that requires lessees to record the present value of operating lease payments as right-of-use assets and lease liabilities on the balance sheet. See Note 10(b) for discussion of the guidance and the Company’s accounting policy. Grant Income The Company receives funding from public bodies for a proportion of the costs of specific projects. Funds are received in line with claims submitted for the agreed expenditure. The Company recognizes grant income once claims submitted are approved and funds are received. General working capital funding received at the commencement of a project is treated as deferred income and is recorded in accrued liabilities until it has been utilized for the expenditure claimed. Funding received that is repayable is shown as a liability. Recent Accounting Pronouncements The Company has implemented all new accounting pronouncements that are in effect. The Company does not believe that 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. F-46 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 3 - Summary of Significant Accounting Policies (continued) COVID-19 Pandemic Impact The extent to which the COVID-19 pandemic will impact the Company’s business, financial condition, and results of operations in the future is highly uncertain and will be affected by a number of factors. 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. F-47 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 4 - Property and Equipment The Company’s property and equipment consist of the following amounts as of December 31, 2021 and December 31, 2020: 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 2,128,729 243,750 1,884,979 Building improvements 5 - 15 years 1,293,258 256,309 1,036,949 Land Not amortized 185,430 - 185,430 7,532,896 2,621,819 4,911,077 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 year ended December 31, 2021, the total capital expenditure was $ 1 .0 million, the majority of which were purchases of laboratory equipment of $ 0.7 million. During the years ended December 31, 2021 and December 31, 2020, the Company recognized $ 812,109 and $ 627,555 , respectively, in depreciation expense. During the year ended December 31, 2020, the Company sold laboratory equipment for cash proceeds of $ 293,312 , resulting in a gain on disposal of equipment of $ 293,312 . F-48 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 5 - 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. December 31, 2021 Accumulated Net Carrying Cost Amortization Value $ $ $ Patents 1,178,135 961,259 216,876 December 31, 2020 Accumulated Net Carrying Cost Amortization Value $ $ $ Patents 1,256,064 934,423 321,641 During the years ended December 31, 2021 and December 31, 2020, the Company recognized $ 91,645 and $ 88,626 , respectively, in amortization expense. The Company amortizes the long-lived assets 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 $ 88,545 2023 $ 88,545 2024 $ 39,786 Total Intangible Assets $ 216,876 The Company periodically reviews its long-lived assets to ensure that their carrying value does not exceed their fair market value. The Company carried out such a review in accordance with ASC 360 as of December 31, 2021. The result of this review confirmed that the ongoing value of the patents was not impaired as of December 31, 2021. Note 6 - Related Party Transactions See Note 7 for common stock issued to related parties and Note 8 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 accruals and management and directors’ fees payable (see consolidated balance sheets). F-49 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 7 - Common Stock As of December 31, 2021, the Company was authorized to issue 100 million shares of common stock par value $0.001 per share, of which 53,772,261 and 48,607,017 shares were issued as of December 31, 2021 and December 31, 2020, respectively. 2021 Stock Option Exercises During the year ended December 31, 2021 we issued a total of 77,451 shares of common stock from the cashless exercise of options, as follows: Stock Incentive Stock Options Price Per Share Shares Issued Date Plan # $ # January 13 - March 19, 2021 2011 7,634 3.35 948 February 2, 2021 2011 20,000 3.80 6,181 February 8, 2021 2011 15,000 4.00 5,769 February 8, 2021 2015 100,000 5.00 19,446 February 8 - February 9, 2021 2015 85,000 4.00 26,357 February 8, 2021 2015 50,000 3.25 18,750 277,634 77,451 2020 Stock Option Exercises During the year ended December 31, 2020 we issued a total of 147,268 shares of common stock from the exercise of options, as follows: Stock Incentive Stock Options Price Per Share Shares Issued Proceeds Date Plan # $ # $ February 24 - September 2, 2020 2011 11,599 2.35 2,752 Cashless January 7 - August 17, 2020 2011 307,500 2.50 69,230 Cashless August 12, 2020 2011 15,000 2.50 15,000 37,500 January 7 - August 17, 2020 2011 307,500 3.00 38,800 Cashless August 12, 2020 2011 15,000 3.00 15,000 45,000 January 7, 2020 2011 10,000 4.00 1,853 Cashless January 7, 2020 2015 25,000 4.00 4,633 Cashless 691,599 147,268 82,500 F-50 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 7 - Common Stock (continued) 2021 RSU Settlements During the year ended December 31, 2021 we issued a total of 24,712 shares of common stock from the settlement of RSUs, as follows: Restricted Stock Units Vested Price Settled Per Share Shares Issued Shares Withheld for Tax Date # $ # # January 20, 2021 5,000 4.10 3,000 2,000 April 21, 2021 26,250 3.44 21,712 4,538 2021 Equity Capital Raises On February 10, 2021, the Company entered into an underwriting agreement with Cantor Fitzgerald & Co (“Cantor”), in connection with an underwritten public offering of 3,809,524 shares (the “Firm Shares”) of the Company’s common stock, pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-227248) and related prospectuses. Cantor 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 Cantor an option, exercisable for 30 days, to purchase up to an additional 571,428 shares of common stock at the same price per share as the Firm Shares which option was not exercised. 2020 Equity Capital Raises On May 20, 2020, the Company entered into an underwriting agreement with National Securities Corporation, acting on its own behalf and as representative of the several underwriters, in connection with the public offering, issuance and sale by the Company of 4,365,000 shares of the Company’s common stock, at the public offering price of $ 2.75 per share (less underwriting discounts and commissions), pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-227248) and related prospectuses. Under the terms of the underwriting agreement, the Company granted the underwriters an option, exercisable for 30 days to purchase up to 654,750 additional shares of the Company’s common stock to cover overallotments, if any, at the public offering price of $2.75 per share, less underwriting discounts and commissions. On May 21, 2020, the underwriters exercised the overallotment option in full. As a result of the equity capital raise, the Company issued a total of approximately 5 million shares for aggregate gross proceeds of $ 13.8 million. Additionally, in connection with this transaction, $ 1.1 million was incurred in fees relating to the equity offering, resulting in net proceeds to the Company of $ 12.7 million. F-51 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 7 - Common Stock (continued) 2021 and 2020 Equity Distribution Agreements On September 24, 2021, the Company entered into an equity distribution agreement (the “2021 EDA”) with 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. 333-259783) and related prospectuses, through Cantor and Oppenheimer each acting as the Company’s agent and/or principal. The Company was not obligated to sell any shares under the 2021 EDA. From inception through December 31, 2021, the Company raised aggregate net proceeds (net of broker’s commissions and fees) of approximately $ 0.7 million under the 2021 EDA through the sale of 190,600 shares of its common stock. The 2021 EDA replaced the 2020 EDA effective as of November 8, 2021. See Note 11 for additional details regarding the Company’s equity distribution agreements subsequent to December 31, 2021. On November 10, 2020, the Company entered into an equity distribution agreement (the “2020 EDA”) with Cantor and 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 was not obligated to sell any shares under the 2020 EDA. During the year ended December 31, 2021 (and from inception of the 2020 EDA), the Company raised aggregate net proceeds (net of broker’s commissions and fees) of $ 2.7 million under the 2020 EDA through the sale of 754,348 shares of its common stock. No further sales will be made under the 2020 EDA. 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. From inception through the full utilization of the 2018 EDA during the March 31, 2021 quarter, 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. During the year ended December 31, 2021, the Company raised aggregate net proceeds (net of broker’s commissions and fees) of $ 1.2 million under the 2018 EDA through the sale of 308,609 shares of its common stock. During the year ended December 31, 2020, the Company raised aggregate net proceeds (net of broker’s commissions and fees) of $ 8.5 million under the 2018 EDA through the sale of 2,227,797 shares of its common stock. No further sales will be made under the 2018 EDA. 2020 Issuances Upon Warrant Exercises For the year ended December 31, 2021 no warrants were exercised. During the year ended December 31, 2020 a total of 25,000 warrants were exercised to purchase shares of common stock, as follows: Warrants Exercised Price Per Share Shares Issued Proceeds Date # $ # $ September 18, 2020 25,000 2.47 25,000 61,750 F-52 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 7 - Common Stock (continued) 2020 Stock Issuance for Services On January 9, 2020, 73,263 shares were issued as fully paid shares of common stock valued at $ 333,969 as compensation to a managing director of Volition Germany (see Note 10(f)). 2020 Stock Repurchase On January 12, 2020, the Company purchased from its Chief Medical Officer 11,364 shares of its common stock at $ 4.79 per share, for a total cost to the Company of $54,434. These shares were subsequently retired. F-53 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 8 - Stock-Based Compensation a) Warrants The following table summarizes the changes in warrants outstanding of the Company during the years ended December 31, 2021 and December 31, 2020: Weighted Average Number of Exercise Price Warrants $ Outstanding at December 31, 2019 190,000 2.90 Granted 50,000 3.45 Exercised ( 25,000 ) 2.47 Expired ( 40,000 ) 4.53 Outstanding at December 31, 2020 175,000 2.75 Granted 310,000 4.52 Exercised - - Expired - - Outstanding at December 31, 2021 485,000 3.88 Exercisable at December 31, 2021 175,000 2.75 2021 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 $3.80, exercise price $3.95, 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 $ 4.8 0, exercise price $4.90, 75.03 % volatility, 0.59 % risk free rate, and no forfeiture rate. 2020 Effective February 26, 2020, the vesting criteria of the remaining installment of a warrant originally granted March 20, 2013 to an officer of the Company, and previously amended, was deemed met pursuant to the approval of the Compensation Committee, resulting in the vesting of the Warrant as to 125,000 shares effective February 26, 2020, with an expiration date of February 26, 2023. Effective March 1, 2020, the Company granted warrants to purchase 50,000 shares of common stock to a Company employee for services to the Company. These warrants vest on September 1, 2021 (subject to continued employment through such date) and expire on March 1, 2026, with an exercise price of $ 3.45 per share. The Company has calculated the estimated fair market value of these warrants at $ 86,771 , using the Black-Scholes model and the following assumptions: term 3.75 years, stock price $ 3.44 , exercise price $3.45, 69.03 % volatility, 0.95 % risk free rate, and no forfeiture rate. F-54 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 8 - Stock-based Compensation (continued) a) Warrants (continued) Below is a table summarizing the warrants issued and outstanding as of December 31, 2021. The warrants outstanding have a weighted average price of $3.88 per share and an aggregate weighted average remaining contractual life of 3.96 years. The warrants exercisable have a weighted average price of $2.75 per share. Weighted Average Proceeds to Exercise Remaining Company if Number Number Price Contractual Exercised Outstanding Exercisable $ Life (Years) $ 125,000 125,000 2.47 1.15 308,750 50,000 50,000 3.45 4.17 172,500 125,000 - 3.95 5.01 493,750 185,000 - 4.90 5.09 906,500 485,000 175,000 1,881,500 Stock-based compensation expense related to warrants of $ 701,781 and $ 68,541 was recorded for the years ended December 31, 2021, and December 31, 2020, respectively. Total remaining unrecognized compensation cost related to non-vested warrants is approximately $3 9,013 and is expected to be recognized over a period of 0.09 years. As of December 31, 2021, the total intrinsic value of warrants was $ 83,750 . b) Options The Company currently has options outstanding under both its 2011 Equity Incentive Plan (the “2011 Plan”) (for option issuances prior to 2016,) and its 2015 Stock Incentive Plan (the “2015 Plan”) (for option issuances commencing in 2016). Effective as of January 1, 2016, no additional awards were or may be made under the 2011 Plan. The 2015 Plan was adopted by the Board of Directors on August 18, 2015 and approved by the stockholders at an annual meeting held on October 30, 2015. On August 5, 2016, the Board of Directors adopted an amendment to the 2015 Plan to increase the number of shares of common stock available for issuance under such Plan by 750,000 shares to an aggregate maximum of 1,750,000 shares, which amendment was approved by the stockholders at an annual meeting held on October 7, 2016. On June 13, 2017, the Board of Directors adopted a subsequent amendment to the 2015 Plan to increase the number of shares of common stock available for issuance under such Plan by 750,000 shares to an aggregate maximum of 2,500,000 shares, which amendment was approved by the stockholders at an annual meeting held on September 8, 2017. On June 15, 2018, the Board of Directors adopted a subsequent amendment to the 2015 Plan to increase the number of shares of common stock available for issuance under such Plan by 750,000 shares to an aggregate maximum of 3,250,000 shares, which amendment was approved by the stockholders at an annual meeting held on September 7, 2018. On March 27, 2019, the Board of Directors adopted a subsequent amendment to the 2015 Plan to increase the number of shares of common stock available for issuance under such Plan by 1,000,000 shares to an aggregate maximum of 4,250,000 shares, which amendment was approved by the stockholders at an annual meeting held on June 14, 2019. On March 31, 2021, the Board of Directors adopted a subsequent amendment to the 2015 Plan to increase the number of shares of common stock available for issuance under such Plan by 1,750,000 shares to an aggregate maximum of 6,000,000 shares, which amendment was approved by the stockholders at an annual meeting held on June 17, 2021. F-55 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 8 - Stock-based Compensation (continued) b) Options (continued) The 2015 Plan permits the grant of incentive stock options, non-statutory stock options, restricted stock awards, stock bonus awards, stock appreciation rights, restricted stock units and performance awards. The primary purpose of the 2015 Plan is to enhance the Company’s ability to attract and retain the services of qualified employees, officers, directors, consultants and other service providers upon whose judgment, initiative and efforts the successful conduct and development of the Company’s business largely depends, and to provide additional incentives to such persons or entities to devote their utmost effort and skill to the advancement and betterment of the Company, by providing them an opportunity to participate in the ownership of the Company that is tied to the Company’s performance, thereby giving them an interest in the success and increased value of the Company. The 2015 Plan is administered by the Compensation Committee comprised solely of members of the Board of Directors or by the Board of Directors as a whole. The following table summarizes the changes in options outstanding of the Company during the years ended December 31, 2021 and December 31, 2020: Weighted Average Number of Exercise Price Options $ Outstanding at December 31, 2019 4,169,301 3.88 Granted 845,000 3.60 Exercised ( 691,599 ) 2.81 Expired/Cancelled ( 44,083 ) 4.21 Outstanding at December 31, 2020 4,278,619 4.00 Granted 1,090,000 3.41 Exercised ( 277,634 ) 4.19 Expired/Cancelled ( 63,467 ) 3.64 Outstanding at December 31, 2021 5,027,518 3.87 Exercisable at December 31, 2021 3,937,518 4.00 2021 Effective May 20, 2021, the Company granted stock options to purchase 40,000 shares of common stock to a Company employee in exchange for services provided to the Company. These options vest on May 20, 2022 and were initially scheduled to expire six years after the grant date, with an exercise price of $3.60 per share. The Company extended the expiration date to ten years after the original grant date. The Company has calculated the estimated fair market value of these options at $ 73,641 , using the Black-Scholes model and the following assumptions: term 3.5 years, stock price $ 3.50 , exercise price $3.60, 76.16 % volatility, 0.58 % risk free rate, and no forfeiture rate. F-56 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 8 - Stock-based Compensation (continued) b) Options (continued) During the year ended December 31, 2021, the Company modified a total of 3,342,518 options to extend their expiration dates to ten years from the original dates of grant. This resulted in $ 2,450,349 of expense. The following table summarizes the amendments to the expiration dates of various options approved during the year ended December 31, 2021. Except as otherwise noted, the expiration dates for all options in the table below were extended from six years to ten years from the original date of grant. Amendment Equity Incentive Stock Options Grant New Expiration Option Expense Date Plan # Date Date $ July 14, 2021 (i) 2011 292,000 July 23, 2015 July 23, 2025 442,273 July 14, 2021 2011 6,367 March 20, 2013 March 20, 2023 4,151 July 14, 2021 2011 8,151 September 2, 2013 September 2, 2023 6,009 September 21, 2021 2015 335,000 April 13, 2020 April 13, 2030 163,945 September 21, 2021 (ii) 2015 89,163 January 23, 2018 January 23, 2028 24,194 September 21, 2021 (ii) 2015 308,066 February 13, 2017 February 13, 2027 127,719 November 3, 2021 2015 760,000 April 15, 2016 April 15, 2026 984,511 November 3, 2021 2015 15,000 June 23, 2016 June 23, 2026 19,582 November 3, 2021 2015 50,000 January 1, 2017 January 1, 2027 32,456 November 3, 2021 2015 387,934 March 30, 2017 March 30, 2027 224,901 November 3, 2021 2015 615,837 January 23, 2018 January 23, 2028 213,646 December 8, 2021 2015 425,000 April 13, 2020 April 13, 2030 180,267 December 8, 2021 2015 10,000 December 1, 2020 December 1, 2030 5,209 December 8, 2021 2015 40,000 May 20, 2021 May 20, 2031 21,486 3,342,518 2,450,349 (i) The expiration date of these options were extended from five and a half years to ten years from the original date of grant. (ii) These options were previously amended on December 16, 2019 and amended again on September 21, 2021. F-57 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 8 - Stock-based Compensation (continued) b) Options (continued) Effective August 3, 2021, the Company approved the granting of options under the 2015 Stock Incentive Plan vesting upon achievement of certain corporate goals (see additional details in Note 10(h)). Pursuant to this approval, the Company granted stock options to purchase an aggregate of 926,640 shares of common stock to various personnel (including directors, executives, members of management and employees of the Company and/or its subsidiaries) in exchange for services provided to the Company and/or its subsidiaries. These options vest over two years with options to purchase up to 463,328 shares vesting on August 3, 2022, and options to purchase up to 463,312 shares vesting on August 3, 2023, subject to continued service by the optionee, and expire 10 years from the date of grant with an exercise price of $3.40 per share. The actual number of options that are eligible for the time-based vesting is contingent upon the timely achievement of certain pre-determined corporate goals by the Company and/or its subsidiaries as set forth in the grant documents. The Company has calculated the estimated fair market value of these options at $ 1,811,216 , using the Black-Scholes model and the following assumptions: term 5.5 years, stock price $ 3.31 , exercise price $ 3.40 , 69.13 % volatility, 1.19 % risk free rate, and no forfeiture rate. Effective September 7, 2021, the Company granted stock options to purchase 50,000 shares of common stock to two employees in exchange for services provided to the Company and/or its subsidiaries. These options vest over two years with 25,000 shares vesting on September 7, 2022, and 25,000 shares vesting on September 7, 2023 subject to continued service by the optionee, and expire 10 years from the date of grant with an exercise price of $3.40 per share. The Company has calculated the estimated fair market value of these options at $ 98,322 , using the Black-Scholes model and the following assumptions: term 5.5 years, stock price $ 3.32 , exercise price $ 3.40 , 68.98 % volatility, 1.38 % risk free rate, and no forfeiture rate. Effective October 4, 2021, the Company approved the granting of options under the 2015 Plan vesting upon achievement of certain corporate goals (see additional details in Note 10 (h)). Pursuant to this approval the Company granted stock options to purchase 73,360 shares of common stock to an employee in exchange for services provided to the Company and/or its subsidiaries. These options vest over two years with 36,680 shares vesting on October 4, 2022, and 36,680 shares vesting on October 4, 2023, subject to continued service by the optionee, and expire 10 years from the date of grant with an exercise price of $3.40 per share. The actual number of options that are eligible for the time-based vesting is contingent upon the timely achievement of certain pre-determined corporate goals by the Company and/or its subsidiaries as set forth in the grant documents. The Company has calculated the estimated fair market value of these options at $ 128,003 , using the Black-Scholes model and the following assumptions: term 5.5 years, stock price $ 3.04 , exercise price $ 3.40 , 68.80 % volatility, 1.49 % risk free rate, and no forfeiture rate. 2020 Effective April 13, 2020, the Company granted stock options to purchase 835,000 shares of common stock to various Company personnel (including directors, executives, members of management and employees) in exchange for services provided to the Company. These options vested on April 13, 2021 and were initially scheduled to expire 6 years after the grant date, with an exercise price of $3.60 per share. In 2021, the Company extended the expiration date to ten years after the original grant date for the remaining outstanding options. The Company has calculated the estimated fair market value of these options at $ 1,481,709 , using the Black-Scholes model and the following assumptions: term 3.5 years, stock price $ 3.52 , exercise price $3.60, 72.94 % volatility, 0.54 % risk free rate, and no forfeiture rate. Effective December 1, 2020, the Company granted stock options to purchase 10,000 shares of common stock to a Company employee for services to the Company. These options vested on December 1, 2021 and were initially scheduled to expire 6 years after the grant date, with an exercise price of $3.40 per share. In 2021, the Company extended the expiration date to ten years after the original grant date. The Company has calculated the estimated fair market value of these options at $ 16,315 using the Black-Scholes model and the following assumptions: term 3.5 years, stock price $ 3.30 , exercise price $3.40, 71.60 % volatility, 0.55% risk free rate, and no forfeiture rate. Below is a table summarizing the options issued and outstanding as of December 31, 2021, all of which were issued pursuant to the 2011 Plan (for option issuances prior to 2016) or the 2015 Plan (for option issuances commencing in 2016)and which have a weighted average exercise price of $ 3.87 per share and an aggregate weighted average remaining contractual life of 6.25 years. F-58 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 8 - Stock-Based Compensation (continued) b) Options (continued) Weighted Average Proceeds to Exercise Remaining Company if Number Number Price Contractual Life Exercised Outstanding Exercisable $ (Years) $ 635,000 635,000 3.25 3.12 2,063,750 2,717 2,717 3.35 1.67 9,102 1,060,000 10,000 3.40 9.60 3,604,000 800,000 760,000 3.60 8.35 2,880,000 1,682,837 1,682,837 4.00 4.76 6,731,348 11,801 11,801 4.35 1.44 51,334 89,163 89,163 4.38 6.07 390,534 50,000 50,000 4.80 5.01 240,000 696,000 696,000 5.00 5.24 3,480,000 5,027,518 3,937,518 19,450,068 Stock-based compensation expense related to stock options of $ 1,069,605 and $ 1,220,165 was recorded for the year ended December 31, 2021 and December 31, 2020 respectively. Total remaining unrecognized compensation cost related to non-vested stock options is approximately $ 1,458,282 and is expected to be recognized over a period of 1.76 years. As of December 31, 2021, the total intrinsic value of stock options was $nil. As of December 31, 2021, an aggregate of 374,352 shares of common stock remained available for future issuance under the 2015 Plan. c) Restricted Stock Units (RSUs) Below is a table summarizing the RSUs issued and outstanding as of December 31, 2021, all of which were issued pursuant to the 2015 Stock Incentive Plan. Weighted Average Number of Exercise Price RSUs $ Outstanding at December 31, 2019 - - Granted 67,500 3.47 Outstanding at December 31, 2020 67,500 3.47 Granted 789,500 3.33 Vested ( 31,250 ) 3.55 Cancelled ( 15,000 ) 3.30 Outstanding at December 31, 2021 810,750 3.33 F-59 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 8 - Stock-Based Compensation (continued) c) Restricted Stock Units (RSUs) (continued) 2021 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 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, subject to continued service, 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 Plan upon the resignation of such director prior to vesting. On April 13, 2021, 26,250 RSUs vested and resulted in the issuance of 21,712 shares (the remaining 4,538 shares were withheld for taxes and returned as authorized shares under the 2015 Plan). Effective May 1, 2021, the Company granted RSUs of 150,000 shares of common stock to an employee in exchange for services provided to the Company. These RSUs vest over three years with 50,000 units vesting on each of May 1, 2022, May 1, 2023 and May 1, 2024, respectively, subject to continued service, and will result in total compensation expense of $ 496,500 . Effective August 3, 2021, the Company approved the granting of RSUs under the 2015 Plan vesting upon achievement of certain corporate goals (see additional details in Note 10(h)). Pursuant to this approval, the Company granted RSUs of 460,191 shares of common stock to various personnel (including directors, executives, members of management and employees of the Company and/or its subsidiaries) in exchange for services provided to the Company and/or its subsidiaries. The actual number of RSUs that are eligible for the time-based vesting is contingent based upon the timely achievement of certain pre-determined corporate goals by the Company and/or its subsidiaries as set forth in the grant documents as well as continued service by the participant through the applicable vesting date. The RSUs eligible for vesting shall vest over two years with up to 230,102 units vesting on August 3, 2022, and up to 230,089 units vesting on August 3, 2023 and will result in total compensation expense of $ 1,523,232 . Effective September 7, 2021, the Company granted RSUs of 38,000 shares of common stock to various employees of the Company and/or its subsidiaries in exchange for services provided to the Company and/or its subsidiaries. These RSUs vest over two years with 19,000 units vesting on September 7, 2022, and 19,000 units vesting on September 7, 2023, subject to continued service and will result in total compensation expense of $ 126,160 . Effective October 4, 2021, the Company approved the granting of RSUs under the 2015 Plan vesting upon achievement of certain corporate goals (see additional details in Note 10 (h)). Pursuant to this approval, the Company granted RSUs of 39,809 shares of common stock to an employee of the Company and/or its subsidiaries in exchange for services provided to the Company and/or its subsidiaries. The actual number of RSUs that are eligible for the time-based vesting is contingent based upon the timely achievement of certain pre-determined corporate goals by the Company and/or its subsidiaries as set forth in the grant documents. These RSUs vest over two years with 19,905 units vesting on October 4, 2022, and 19,904 units vesting on October 4, 2023, subject to continued service by the participant through the applicable vesting dates, and will result in total compensation expense of $ 121,019 . Effective November 1, 2021, the Company granted RSUs of 43,500 shares of common stock to an employee of the Company and/or its subsidiaries in exchange for services provided to the Company and/or its subsidiaries. These RSUs vest over two years with 21,750 units vesting on November 1, 2022, and 21,750 units vesting on November 1, 2023, subject to continued service and will result in total compensation expense of $ 152,685 . Effective December 15, 2021, the Company granted RSUs of 23,000 shares of common stock to various employees of the Company and/or its subsidiaries in exchange for services provided to the Company and/or its subsidiaries. These RSUs vest over two years with 11,500 units vesting on December 15, 2022, and 11,500 units vesting on December 15, 2023, subject to continued service and will result in total compensation expense of $ 77,740 . F-60 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 8 - Stock-Based Compensation (continued) c) Restricted Stock Units (RSUs) (continued) 2020 Effective April 13, 2020, the Company granted RSUs of 52,500 shares of common stock to various Company personnel (including a director and an employee) in exchange for services provided to the Company. These RSUs vest over two years, with 50 % vesting on each of April 13, 2021 and April 13, 2022 and will result in total compensation expense of $ 184,800 . Effective December 1, 2020, the Company granted RSUs of 15,000 shares of common stock to a non-executive director of the Company in exchange for services provided to the Company. These RSUs vest over two years, with 50 % vesting on each of December 1, 2021 and December 1, 2022 and will result in total compensation expense of $ 49,500 . Below is a table summarizing the RSUs issued and outstanding as of December 31, 2021 of which the last to vest have a remaining contractual life of 2.33 years. Weighted Average Remaining Number Share Price Contractual Life Outstanding $ (Years) 39,809 3.04 1.26 610,191 3.31 1.10 38,000 3.32 1.18 23,000 3.38 1.46 43,500 3.51 1.34 26,250 3.52 0.28 30,000 3.59 0.73 810,750 1.13 Stock-based compensation expense related to RSUs of $ 898,910 and $ 102,786 was recorded in the year ended December 31, 2021, and December 31, 2020, respectively. Total remaining unrecognized compensation cost related to non-vested RSUs is $ 1,807,140 . As of December 31, 2021, the total intrinsic value of RSUs was $ 3,981 . F-61 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 9 - Income Taxes The Company has estimated net operating losses carry-forward for the years ended December 31, 2021 and 2020 of $ 24.4 million and $ 24.0 million, respectively, available to offset taxable income in future years. The significant components of deferred income taxes and assets as of December 31, 2021 and December 31, 2020 are as follows: December 31, 2021 December 31, 2020 Net Deferred Tax Asset $ $ Excess of tax over book depreciation and amortization ( 8,330 ) ( 966 ) ROU Asset ( 28,657 ) ( 69,407 ) Lease Liability 47,301 73,407 Accrued expenses 1,199 1,154 Unrealized Gain/Loss 103,106 - Stock-based compensation 186,252 21,533 Net Operating Losses carry-forward 24,390,040 24,011,113 Research and development tax credits 606,729 390,666 Gross deferred tax assets 25,297,640 24,427,500 Valuation allowance ( 25,297,640 ) ( 24,427,500 ) Net deferred tax asset - - Change in Valuation Allowance ( 870,140 ) December 31, 2021 December 31, 2020 Summary Rate Reconciliation % % Federal statutory rate 21.0 21.0 State income taxes, net of federal benefit - - Permanent Differences ( 4.8 ) 6.1 Stock based compensation ( 0.6 ) ( 1.3 ) Federal Research & Development Credits 0.5 0.5 Foreign taxes 1.5 7.4 Federal Deferred Rate Decrease ( 14.4 ) - Change in Valuation Allowance ( 3.2 ) ( 33.7 ) Total - - Disclosure Amounts December 31, 2021 $ Net Operating Losses - United States 32,130,715 Net Operating Losses - Foreign 78,460,307 Credit Carryforward - United States - Credit Carryforward - Foreign 606,730 Increase in Valuation Allowance 870,140 F-62 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 10 - Commitments and Contingencies a) Finance Lease Obligations In 2015, the Company entered into an equipment finance lease to purchase three Tecan machines (automated liquid handling robots) for € 550,454 , maturing May 2020. As of December 31, 2021, the balance payable was $nil. In 2016, the Company entered into a real estate capital lease with ING Asset Finance Belgium S.A. (“ING”) to purchase a property located in Belgium for € 1.12 million, maturing May 2031, with implicit interest of 2.62 %. As of December 31, 2021, the balance payable was $ 558,613 . 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 January 2022, with implicit interest of 1.35 %. The leased equipment is amortized on a straight-line basis over 5 years. As of December 31, 2021, the balance payable was $ 1,431 . The following is a schedule showing the future minimum lease payments under financing leases by years and the present value of the minimum payments as of December 31, 2021. 2022 $ 62,620 2023 $ 61,191 2024 $ 61,190 2025 $ 61,190 2026 $ 61,191 Greater than 5 years $ 328,883 Total $ 636,265 Less: Amount representing interest $ ( 76,221 ) Present value of minimum lease payments $ 560,044 b) Operating Lease Right-of-Use Liabilities The Company adopted Topic 842 on January 1, 2019. The Company elected to adopt this standard using the optional modified retrospective transition method and recognized a cumulative-effect adjustment to the consolidated balance sheet on the date of adoption. Comparative periods have not been restated. With the adoption of Topic 842, the Company’s consolidated balance sheet now contains the following line items: Operating lease right-of-use assets, current portion of operating lease liabilities and operating lease liabilities, net of current portion. As all the existing leases subject to the new lease standard 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 we used our incremental borrowing rate as the discount rate. Our weighted average discount rate is 4.50 % and the weighted average remaining lease term is 29 months. As of December 31, 2021, operating lease right-of-use assets and liabilities arising from operating leases were $ 383,551 and $ 388,471 , respectively. During the year ended December 31, 2021, cash paid for amounts included for the measurement of lease liabilities was $ 195,753 and the Company recorded operating lease expense of $ 199,793 . F-63 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 10 – Commitments and Contingencies (continued) b) Operating Lease Right-of-Use Liabilities (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 December 31, 2021. 2022 $ 178,721 2023 $ 161,071 2024 $ 55,331 2025 $ 5,200 Total Operating Lease Obligations $ 400,323 Less: Amount representing interest $ ( 11,852 ) Present Value of minimum lease payments $ 388,471 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 year ended December 31, 2021, $ 79,623 was recognized in short-term lease costs associated with the office space lease in Singapore. The annual payments remaining for such short-term office leases were as follows: 2022 $ 38,129 Total Operating Lease Liabilities $ 38,129 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 € 1,048,020 . 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. The Company has recorded the balance of € 733,614 to other income in previous years as there is no obligation to repay this amount. 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 twice the amount of funding received. As of December 31, 2021, the grant balance repayable was $ 62,571 . 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 instalments 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 December 31, 2021, the grant balance repayable was $ 122,116 . 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 December 31, 2021, the grant balance repayable was $ 58,800 . F-64 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 10 – 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 €929,433. Per the terms of the agreement, €278,830 of the grant is to be repaid by instalments 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 December 31, 2021, the grant balance repayable was $ 52,834 . As of December 31, 2021, the balance repayable was $ 296,321 and the annual payments remaining were as follows: 2022 $ 44,289 2023 $ 42,589 2024 $ 18,482 2025 $ 20,344 2026 $ 26,741 Greater than 5 years $ 143,876 Total Grants Repayable $ 296,321 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 December 2023. As of December 31, 2021, the principal balance payable was $ 171,102 . 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 December 2031. As of December 31, 2021, the principal balance payable was $ 219,303 . In 2017, the Company entered into a 4-year loan agreement with Namur Invest for € 350,000 with a fixed interest rate of 4.00 %, maturing June 2021. As of December 31, 2021, the principal balance payable was $ 0 . 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 September 2024. As of December 31, 2021, €1 million has been drawn down under this agreement and the principal balance payable was $ 739,473 . In 2018, the Company entered into a 4-year loan agreement with Namur Innovation and Growth for € 500,000 with fixed interest rate of 4.00 %, maturing June 2022. As of December 31, 2021, the principal balance payable was $ 86,208 . In 2019, the Company entered into a 4 -year loan agreement with Namur Innovation and Growth for € 500,000 with fixed interest rate of 4.80 %, maturing September 2024. As of December 31, 2021, the principal balance payable was $ 454,832 . 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 2021. As of December 31, 2021, the amount that has been drawn down under this agreement was € 778,588 , representing a principal balance payable of $ 885,761 . 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 December 31, 2021, the amount that has been drawn down under this agreement was € 450,000 , representing a principal balance payable of $ 511,943 . F-65 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 10 – Commitments and Contingencies (continued) d) Long-Term Debt (continued) As of December 31, 2021, the total balance for long-term debt payable was $3,068,622 and the payments remaining were as follows: 2022 $ 926,743 2023 $ 839,657 2024 $ 686,782 2025 $ 226,822 2026 $ 139,914 Greater than 5 years $ 613,532 Total $ 3,433,450 Less: Amount representing interest $ ( 364,828 ) Total Long-Term Debt $ 3,068,622 e) Collaborative Agreement Obligations In 2016, the Company entered into a research co-operation agreement with DKFZ, in Germany for a 5 -year period for € 400,000 . As of December 31, 2021, $ 227,530 is still to be paid by the Company under this agreement. In 2017, the Company entered into a clinical study research agreement with the University of Michigan for a 3 -year period for up to $ 3 million. This agreement was amended in February 2020 to redefine a new clinical study. Pursuant to the terms of the amendment, the parties acknowledged that, although not fully completed, the requirements of the original clinical study had been satisfied, including any and all payment obligations by Volition America. Further, the Amendment provided that a new clinical study would be undertaken at no additional cost to Volition America. As of December 31, 2021, $nil 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 3-year period for a cost to the Company of up to $2.55 million payable over such period. As of December 31, 2021, $ 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 5 -year period for a cost to the Company of up to $ 400,000 payable over such period. As of December 31, 2021, $ 58,775 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 6 months for a cost to the Company of € 54,879 . As of December 31, 2021, $ 17,196 is still to be paid by the Company under this agreement. As of December 31, 2021, the total amount to be paid for future research and collaboration commitments was approximately $ 813,501 and the annual payments remaining were as follows: 2022 $ 813,501 Total Collaborative Agreement Obligation $ 813,501 F-66 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 10 – 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 December 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) to be paid after the holdback period of 9 months following the closing (subject to offset for breaches of representations and warranties). During the three months ended March 31, 2021, an amount of €43,152 was paid in full settlement of the amount due. The Company has no further financial obligations under the transaction agreement. F-67 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 10 – Commitments and Contingencies (continued) f) Other Commitments (continued) In connection with the transaction agreement, the Company also entered into a 2-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 2-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 during the year 2020, as a result of cash paid, holdback liability, stock issued and assumption of expenses. As of December 31, 2021, $nil is still to be paid by the Company under the Managing Director’s agreement, $ 229 is currently payable under the 6 % royalty agreement on sales to date (towards the Company’s aggregate minimum royalty obligation of $ 134,217 ). The holdback liability of $ 55,404 (€50,000) outstanding at December 31, 2020, was settled during the year ended December 31, 2021 by an amount of € 43,152 in full settlement of the amount due. The Company has no further financial obligations under the Managing Director’s agreement, but has a continuing obligation under the 6% royalty agreement. 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 December 31, 2021, $13,738 is currently payable by Company under this agreement. Singapore Volition On November 10, 2020, the Company entered into a consulting services agreement through a related party transaction between its wholly owned subsidiary, Singapore Volition and PB Commodities Pte Ltd (“PB Commodities”). This agreement is effective December 1, 2020 and provides for consultancy services to be rendered by Cameron Reynolds through PB Commodities to Singapore Volition. Singapore Volition will also make available the services of Mr. Reynolds, as Group Chief Executive Officer, to the Company and its subsidiaries, pursuant to services agreements entered into by and between Singapore Volition and the Company or its subsidiaries. The term of the agreement is perpetual, commencing on December 1, 2020 until terminated upon six months’ prior notice. The agreement includes a six-month non-compete following termination of the agreement. PB Commodities will receive a monthly fee of $ 35,650 in exchange for the services provided by Mr. Reynolds. 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, an incentive plan was authorized by the Compensation Committee of the Board of Directors in order to provide company personnel with an element of performance-based compensation tied to the timely achievement of certain corporate goals focused around product development and commercialization. Effective August 3, 2021, the Company approved an incentive plan to issue equity-based awards and cash bonuses, vesting upon achievement of certain corporate goals, to various personnel including directors, executives, members of management, consultants and employees of the Company and/or its subsidiaries. Conditional upon the achievement by December 31, 2021 of a specified corporate goal as set forth in the minutes of the Compensation Committee dated August 3, 2021, 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 shall pay a cash bonus to such award recipient). The Company estimates the total compensation expense based on current recipients to be $330,788. As of December 31, 2021, the Company has accrued compensation expense of $330,788 based on the probable outcomes related to the prescribed performance targets. Conditional upon the achievement by July 1, 2022 of all specified corporate goals as set forth in the minutes of the Compensation Committee dated August 3, 2021, 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 an additional cash bonus to such award recipient. The Company estimates the total compensation expense based on current recipients to be $182,131. As of the December 31, 2021, the Company has accrued compensation expense of $90,403 based on the probable outcomes related to the prescribed performance targets. As discussed in detail in Note 8, in August and October 2021, a total of 1,000,000 stock options were issued under this plan and 500,000 RSUs were issued under this plan. As of the December 31, 2021, the Company has recognized compensation expense of $584,044 in relation to stock options and $513,651 in relation to RSUs, based on the probable outcomes related to the prescribed performance targets on the outstanding awards. F-68 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2021 and 2020 ($ expressed in United States Dollars) Note 11 - Subsequent Events Common Stock Issuances, Option Exercises and RSU Grants Effective February 8, 2022, the Company granted RSUs of 8,000 shares of common stock to an employee of the Company in exchange for services provided to the Company. These RSUs vest over 2 years, with 50% vesting on each of February 8, 2023, and February 8, 2024, subject to continued service by the employee, and will result in total compensation expense of $ 22,640 . Effective March 1, 2022, the Company granted RSUs of 30,000 shares of common stock to various employees of the Company in exchange for services provided to the Company. These RSUs vest over 2 years, with 50% vesting on each of March 1, 2023, and March 1, 2024, subject to continued service by the employee, and will result in total compensation expense of $ 84,300 . Equity Distribution Agreements From January 1, 2022 to March 10, 2022, the Company raised aggregate net proceeds (net of broker’s commissions and fees) of approximately $ 9,468 under the 2021 Equity Distribution Agreement through the sale of 3,000 shares of its common stock. Other Commitments Effective January 13, 2022, the Company entered into a lease agreement with Aro Partners, a California Limited Partnership for a property of 6,645 square foot industrial building located at Corte el Cedro, Carlsbad, California for a term of five years and two months commencing February 1, 2022. The total amount payable under the lease is $ 471,556 . Other Information On March 28, 2022, Belgian Volition entered into a License and Supply Agreement (the “License Agreement”) with Heska Corporation (“Heska”), pursuant to which Belgian Volition granted Heska worldwide exclusive rights to sell the NuQ ® Vet Cancer Screening Test for companion animals, including dogs and cats, at the point of care (“POC”) and non-exclusive rights to sell its NuQ ® Vet Cancer Screening Test through Heska’s central reference laboratories (“Central Lab”). Under the terms of the License Agreement, Belgian Volition will receive an upfront payment of $ 10 million, and is eligible to receive up to an additional $ 18 million upon the achievement of certain near and mid-term milestones. Belgian Volition will supply kits for the Central Lab and will receive a pre-agreed price per test of approximately $ 10 , adjusted annually for inflation, which is a discounted price to reflect Heska’s upfront payment. The price per test for POC key components (“Key Components”) is also discounted to reflect the lower cost to Belgian Volition and additional assembly costs for Heska, as well as consideration for Heska’s upfront and milestone payments. Heska will assemble the Key Components into a cartridge for use on Heska’s proprietary Element i+ Immunodiagnostic Analyzer, a POC platform. Heska is responsible for marketing and distribution efforts and related costs. The License Agreement may be terminated by either party for a material breach by the other party, subject to notice and cure provisions, or in the event of the other party’s insolvency. Heska also has the option to terminate if it is unable to complete validation of the POC cartridge on any platform. Unless earlier terminated, the License Agreement will continue in effect for an initial term of 22 years for POC and 5 years for Central Lab, with the Central Lab term then continuing on a rolling one-year basis for the POC term. END NOTES TO FINANCIALS F-69 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.