VOLITIONRX LTD 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA VOLITIONRX LIMITED Consolidated Financial Statements For the Years Ended December 31, 2022 and 2021 Index Report of Independent Registered Public Accounting Firm (PCAOB ID: 3627 ) F - 36 Consolidated Balance Sheets F - 38 Consolidated Statements of Operations and Comprehensive Loss F - 39 Consolidated Statements of Stockholders’ Equity (Deficit) F - 40 Consolidated Statements of Cash Flows F - 41 Notes to the Consolidated Financial Statements F - 42 F-35 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, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2022 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, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, 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 suffered recurring losses from operations and has a net capital deficiency that raise 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. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. License and Supply Agreement with Heska As discussed in Note 3 to the consolidated financial statements, in March 2022, the Company entered into a license and supply agreement with Heska Corporation (“Heska”). Under the terms of the agreement, the Company granted Heska worldwide exclusive rights to the Nu.Q Vet Cancer Screening Test at the point of care, initially for the screening of lymphoma and hemangiosarcoma in dogs and non-exclusive rights to sell its Nu.Q Vet Cancer Screening Test in kit format through Heska’s network of central reference laboratories. In addition, the agreement requires the Company to supply required components for point of care testing and for kits used in central laboratories. The Company received an upfront payment of $10 million during 2022 and is eligible to receive additional milestone payments upon certain commercial targets being met. In addition, the Company is eligible to receive per unit consideration for kits and components supplied under this agreement. F-36 Table of Contents We have identified the performance obligations, including understanding the nature and significance of the contractual obligations, under the Heska license and supply agreement as a critical audit matter. Determining the distinct performance obligation included in the agreement required management to make judgements with respect to the appropriate application of relevant authoritative accounting guidance. Auditing these management judgements and the resulting impacts on the accounting and deferred revenue recognition for the Heska license and supply agreement required increased auditor effort. The primary procedures we performed to address this critical audit matter included: · Reading the license and supply agreement with Heska to gain an understanding of the contractual terms and conditions and the commitments being made in the agreement. · Assessing the key terms in the supply and license agreement under the relevant authoritative accounting guidance to evaluate management’s conclusion that contractual promises made in the license and supply agreement should constitute a single performance obligation. · Professionals with specialized skill and knowledge were utilized by the Firm to assist in the evaluation of management’s conclusions with respect to the performance obligation identified. /s/ Sadler, Gibb & Associates, LLC We have served as the Company’s auditor since 2011. Draper, UT March 15, 2023 F-37 Table of Contents VOL ITIONRX LIMITED Consolidated Balance Sheets (Expressed in United States Dollars, except share numbers) December 31, December 31, 2022 $ 2021 $ ASSETS Current Assets Cash and cash equivalents 10,867,050 20,581,313 Accounts Receivable 72,609 12,510 Prepaid expenses 784,920 598,367 Other current assets 447,566 786,642 Total Current Assets 12,172,145 21,978,832 Property and equipment, net 5,393,012 4,911,077 Operating lease right-of-use assets 619,392 383,551 Intangible assets, net 110,505 216,876 Total Assets 18,295,054 27,490,336 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current Liabilities Accounts payable 3,043,008 1,542,457 Accrued liabilities 2,872,247 3,828,501 Deferred revenue 10,000,000 12,512 Management and directors’ fees payable 71,119 71,303 Current portion of long-term debt 1,066,700 797,855 Current portion of financing lease liabilities 46,014 48,958 Current portion of operating lease liabilities 245,163 171,166 Current portion of grant repayable 41,836 43,100 Total Current Liabilities 17,386,087 6,515,852 Long-term debt, net of current portion 2,779,240 2,270,767 Finance lease liabilities, net of current portion 436,132 511,086 Operating lease liabilities, net of current portion 400,091 217,305 Grant repayable, net of current portion 420,466 253,221 Total Liabilities 21,422,016 9,768,231 STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock Authorized: 100,000,000 shares of common stock, at $ 0.001 par value; Issued and outstanding: 57,873,379 shares and 53,772,261 shares, respectively 57,873 53,772 Additional paid-in capital 164,397,468 154,730,938 Accumulated other comprehensive income 227,097 148,326 Accumulated deficit ( 167,257,429 ) ( 136,988,636 ) Total VolitionRx Limited Stockholders’ Equity (Deficit) ( 2,574,991 ) 17,944,400 Non-controlling interest ( 551,971 ) ( 222,295 ) Total Stockholders’ Equity (Deficit) ( 3,126,962 ) 17,722,105 Total Liabilities and Stockholders’ Equity (Deficit) 18,295,054 27,490,336 (The accompanying notes are an integral part of these consolidated financial statements) F-38 Table of Contents VOL ITIONRX LIMITED Consolidated Statements of Operations and Comprehensive Loss (Expressed in United States Dollars, except share numbers) For the year ended December 31, 2022 $ December 31, 2021 $ Revenues Royalty 2,911 - Service 92,488 - Product 210,993 90,035 Total Revenues 306,392 90,035 Operating Expenses Research and development 14,572,532 13,022,411 General and administrative 10,937,686 11,676,446 Sales and marketing 6,576,246 3,724,257 Total Operating Expenses 32,086,464 28,423,114 Operating Loss ( 31,780,072 ) ( 28,333,079 ) Other Income (Expenses) Grant income 1,229,425 1,522,533 Loss on disposal of fixed assets - ( 26,166 ) Interest income 125,265 2,734 Interest expense ( 173,087 ) (155,803 ) Total Other Income 1,181,603 1,343,298 Net Loss ( 30,598,469 ) ( 26,989,781 ) Net Loss attributable to Non-Controlling Interest 329,676 175,116 Net Loss attributable to VolitionRx Limited Stockholders ( 30,268,793 ) ( 26,814,665 ) Other Comprehensive Income (Loss) Foreign currency translation adjustments 78,771 208,304 Net Comprehensive Loss ( 30,519,698 ) ( 26,781,477 ) Net Loss Per Share – Basic and Diluted attributable to VolitionRx Limited Stockholders ( 0.55 ) ( 0.51 ) Weighted Average Shares Outstanding – Basic and Diluted 55,350,401 52,655,885 (The accompanying notes are an integral part of these consolidated financial statements) F-39 Table of Contents VOL ITIONRX LIMITED Consolidated Statement of Stockholders’ Equity (Deficit) For the Years Ended December 31, 2022 and 2021 (Expressed in United States Dollars, except share numbers) Additional Accumulated Other Non Common Stock Paid-in Comprehensive Accumulated Controlling Shares # Amount $ Capital $ Income (Loss) $ Deficit $ Interest $ Total $ Balance, December 31, 2020 48,607,017 48,607 126,526,239 ( 59,978 ) ( 110,173,971 ) ( 47,179 ) 16,293,718 Common stock issued for 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 Common stock issued for settlement of RSUs 297,289 297 ( 297 ) - - - - Common stock issued in public offerings, net 3,803,829 3,804 6,732,640 - - - 6,736,444 Tax withholdings paid related to stock-based compensation - - ( 180,472 ) - - - ( 180,472 ) Stock-based compensation - - 3,114,659 - - - 3,114,659 Foreign currency translation - - - 78,771 - - 78,771 Net loss for the Year - - - - ( 30,268,793 ) ( 329,676 ) ( 30,598,469 ) Balance, December 31, 2022 57,873,379 57,873 164,397,468 227,097 ( 167,257,429 ) ( 551,971 ) ( 3,126,962 ) (The accompanying notes are an integral part of these consolidated financial statements) F-40 Table of Contents VOL ITIONRX LIMITED Consolidated Statements of Cash Flows (Expressed in United States Dollars) For the year ended December 31, 2022 $ December 31, 2021 $ Operating Activities: Net loss ( 30,598,469 ) ( 26,989,781 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 936,084 945,367 Amortization of operating lease right-of-use assets 253,864 199,793 Loss on disposal of fixed assets - 26,166 Stock based compensation 3,114,659 2,670,297 Stock-based compensation in relation to modification of options - 2,450,349 Changes in operating assets and liabilities: Prepaid expenses 433,995 ( 295,189 ) Accounts receivable ( 72,609 ) ( 12,510 ) Other current assets 351,514 ( 202,801 ) Deferred revenue 9,987,488 12,512 Accounts payable and accrued liabilities 548,611 522,220 Management and directors’ fees payable ( 184 ) 16,129 Operating lease liabilities ( 232,695 ) ( 196,471 ) Net Cash Used In Operating Activities ( 15,277,742 ) ( 20,853,919 ) Investing Activities: Purchases of property and equipment ( 1,570,182 ) ( 973,559 ) Net Cash Used In Investing Activities ( 1,570,182 ) ( 973,559 ) Financing Activities: Net proceeds from issuance of common shares 6,736,444 23,219,644 Tax withholdings paid related to stock-based compensation ( 180,472 ) ( 130,426 ) Proceeds from grants repayable 218,445 37,631 Proceeds from long-term debt 1,523,098 592,423 Payments on long-term debt ( 1,268,386 ) ( 755,721 ) Payments on grants repayable ( 45,664 ) ( 47,789 ) Payments on financing leases ( 45,433 ) ( 58,210 ) Net Cash Provided By Financing Activities 6,938,032 22,857,552 Effect of foreign exchange on cash and cash equivalents 195,629 106,502 Net Change in Cash and Cash Equivalents ( 9,714,263 ) 1,136,576 Cash and Cash Equivalents – Beginning of Year 20,581,313 19,444,737 Cash and Cash Equivalents – End of Year 10,867,050 20,581,313 Supplemental Disclosures of Cash Flow Information: Interest paid 173,087 155,803 Income tax paid - - Non-Cash Financing Activities: Common Stock issued on exercises of stock options and warrants and settlement of RSUs 297 102 Offering costs from issuance of common stock 427,443 218,459 Non-cash Note Payable 620,549 - (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, 2022 and 2021 ($ 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. No te 2 – Liquidity and Go ing Concern Assessment 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 $ 167.3 million, has negative cash flows from operations, and has minimal revenues, which creates substantial doubt about its ability to continue as a going concern for a period 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, 2022 and 2021 ($ 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, 2022 include the accounts of the Company and its subsidiaries. The Company has two wholly owned subsidiaries, Singapore Volition Pte. Limited and Volition Global Services SRL. Singapore Volition has one wholly owned subsidiary, Belgian Volition SRL. Belgian Volition has four subsidiaries, Volition Diagnostics UK Limited, Volition America, Inc, Volition Germany GmbH, and its one majority owned subsidiary Volition Veterinary Diagnostics Development LLC. See Note 10 (f), Commitments and Contingencies – Other Commitments , for more information regarding Volition Vet, Volition Germany and Volition America. All intercompany balances and transactions have been eliminated in consolidation. Reclassification Certain amounts presented in previously issued financial statements have been reclassified to be consistent with the current period presentation. In the statement of operations and comprehensive loss, the Company has reclassified the prior year comparative amounts of research and development, sales and marketing and general and administrative expenses to be consistent with the current year classification. 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, 2022, and December 31, 2021, the Company had $ 10,867,050 and $ 20,581,313 , respectively, in cash and cash equivalents. As of December 31, 2022, and December 31, 2021, the Company had $ 10,079,089 and $ 19,753,878 , respectively, in its domestic accounts in excess of Federal Deposit insured limits. As of December 31, 2022, and December 31, 2021, the Company had $ 1,725,981 and $ 134,134 , respectively, in its foreign accounts in excess of the Belgian Deposit insured limits. As of December 31, 2022, and December 31, 2021, the Company had $ 100,601 and $ 102,514 , respectively, in its foreign accounts in excess of the Singapore Deposit insured limits. As of December 31, 2022, and December 31, 2021, the Company had $ 326,631 and $ 142,410 , 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, 2022, the accounts receivable balance was $ 72,609 and the allowance for doubtful accounts was $nil. F-43 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 3 - Summary of Significant Accounting Policies (continued) 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. 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, 2022, and December 31, 2021, 7,787,013 and 6,323,268 , 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). Fair Value Measurements Pursuant to ASC 820, “ Fair Value Measurements and Disclosures,” an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value: Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the assets or liabilities such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The 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. F-44 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 3 - Summary of Significant Accounting Policies (continued) 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, 2022, the Company had $ 227,097 of accumulated other comprehensive income, relating to foreign currency translation. 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 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. F-45 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 3 - Summary of Significant Accounting Policies (continued) Revenue Recognition (continued) Service The Company includes revenue recognized from laboratory services performed in the Company’s laboratory on behalf of third parties under “Service” under the 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. Licensing The Company includes revenue recognized from the licensing of certain rights to third parties in “Licensing” in the consolidated statements of operations and comprehensive loss. For each development and/or commercialization agreement that results in revenues, the Company identifies all performance obligations, aside from those that are immaterial, which may include a license to intellectual property and know-how, development activities and/or transition activities. In order to determine the transaction price, in addition to any upfront payment, the Company estimates the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract. The Company constrains (reduces) the estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required. Revenue from Heska License Agreement On March 28, 2022, Belgian Volition entered into a Master License and Supply Agreement (the “License Agreement”) with Heska Corporation (“Heska”), pursuant to which Belgian Volition granted Heska worldwide exclusive rights to sell the Nu.Q® Vet Cancer Test at the point of care (“POC”) initially for the screening of lymphoma and hemangiosarcoma in dogs (“Canine Lymphoma & HSA”), and non-exclusive rights to sell its Nu.Q® Vet Cancer Test in kit format (“Kits”) through Heska’s network of central reference laboratories (“Central Lab”) initially for Canine Lymphoma & HSA. Under and subject to the terms of the License Agreement, Belgian Volition received an upfront payment of $10.0 million in 2022, and is eligible to receive further milestone payments of (i) $6.5 million upon the first commercial sale by or on behalf of Heska of a POC screening test for Canine Lymphoma & HSA, (ii) $6.5 million upon the first commercial sale by or on behalf of Heska of a POC monitoring test for the same conditions, and (iii) $5.0 million upon the first commercial sale by or on behalf of Heska of a screening or monitoring test for lymphoma in felines . The License Agreement contains additional time-based triggers for the payment of the above-described milestones as well. Any further expansion of the License Agreement to cover other cancer and non-cancer indications is subject to negotiation between the parties. Belgian Volition will also supply Central Lab Kits and will receive a pre-agreed price per test, adjusted annually for inflation. The price per test for POC key components (“Key Components”) is also discounted to reflect the lower cost to Belgian Volition and additional assembly costs for Heska, as well as consideration for Heska’s upfront and milestone payments. Heska will assemble the Key Components for use at the POC, and is additionally responsible for marketing and distribution efforts and related costs. F-46 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 3 - Summary of Significant Accounting Policies (continued) Revenue Recognition (continued) 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 adapt the Key Components for use on a POC 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. According to ASC Topic 606, “ Revenue from Contracts with Customers ”, a performance obligation is a commitment to provide a distinct good or service or a series of distinct goods or services. Goods and services that are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created. A good or service promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. In conjunction with the License Agreement, the Company evaluated whether or not the performance obligations granted under the License Agreement were distinct and concluded that they were not distinct as Heska could not benefit from the license without the supply (manufacturing) services. The supply services are highly specialized and are dependent on the supply of the product from the Company. As such, the performance obligations granted under the License Agreement were combined to constitute a single performance obligation and the Company accounts for them as a single contract. During the first quarter of 2022, the Company received a $ 10.0 million upfront payment under the License Agreement, which is included as deferred revenue on the accompanying consolidated balance sheet as of December 31, 2022. The Company allocated the upfront payment and any milestone payments that were not constrained to the single performance obligation in the contract. The Company expects to recognize the $10.0 million upfront payment and any milestone amounts not constrained under the License Agreement over time using an output method based on Key Components and Kits supplied to Heska. As of December 31, 2022, the remaining $ 18.0 million in milestone payments under the License Agreement remains constrained and will not begin to be recognized until such amount becomes unconstrained. In determining the transaction price, the Company analyzed the variable consideration and whether or not such variable consideration was constrained. The Company will reassess this variable consideration at each reporting period and adjust the transaction price, if necessary. The total Key Components and Kits that the Company expects to manufacture for Heska over the life of the contract will be a significant judgment in recognizing revenue once the Company begins to supply product to Heska. Deferred Revenue (Contract Liabilities) and Contract Assets Deferred revenue consists of amounts for which the Company has an unconditional right to bill, and/or amounts for which payment has been received (including non-refundable amounts) but have not been recognized as revenue because the related performance obligations are deemed incomplete. As of December 31, 2022, the Company recorded $ 10.0 million as deferred revenue in respect of a non-refundable payment received in relation to a licensing and product supply agreement with Heska Corporation. As of December 31, 2021, the Company recorded $ 12,512 as deferred revenue. Contract assets include costs and services incurred on contracts with open performance obligations. These contract assets were immaterial as of December 31, 2022. 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 $ 14.6 million and $ 13.0 million during the years ended December 31, 2022 and 2021, respectively. F-47 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 3 - Summary of Significant Accounting Policies (continued) 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, 2022 and December 31, 2021, respectively. Stock-Based Compensation The Company records stock-based compensation in accordance with ASC 718, “ Compensation – Stock Compensation” . Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized over the employee’s requisite service period, which is generally the vesting period. The fair value of our stock options and warrants is estimated using a Black-Scholes option valuation model. Restricted stock units are valued based on the closing stock price on the date of grant. The estimated fair value of RSUs that include a market vesting condition will be measured on the grant date using a Monte Carlo Simulation model. Refer to Note 8 for further details. Leases The Company accounts for leases in accordance with ASC Topic 842, “Leases.” The Company determines whether a contract is a lease at contract inception or for a modified contract at the modification date. At inception or modification, the Company recognizes right-of-use assets (“ROU”) and related lease liabilities on the balance sheet for all leases greater than one year in duration. Lease liabilities and their corresponding ROU assets are initially measured at the present value of the unpaid lease payments as of the lease commencement date. If the lease contains a renewal and/or termination option, the exercise of the option is included in the term of the lease if the Company is reasonably certain that a renewal or termination option will be exercised. As the Company’s leases do not provide an implicit rate, the Company uses an estimated incremental borrowing rate (“IBR”) based on the information available at the commencement date of the respective lease to determine the present value of future payments. The IBR is determined by estimating what it would cost the Company to borrow a collateralized amount equal to the total lease payments over the lease term based on the contractual terms of the lease and the location of the leased asset. Operating lease payments are recognized as an expense on a straight-line basis over the lease term in equal amounts of rent expense attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in later years. The difference between rent expense recognized and actual rental payments is typically represented as the spread between the ROU asset and lease liability. When calculating the present value of minimum lease payments, we account for leases as one single lease component if a lease has both lease and non-lease fixed cost components. Variable lease and non-lease cost components are expensed as incurred. We do not recognize ROU assets and lease liabilities for short-term leases that have an initial lease term of 12 months or less. We recognize the lease payments associated with short-term leases as an expense on a straight-line basis over the lease term. F-48 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 3 - Summary of Significant Accounting Policies (continued) 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. 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. COVID-19 Pandemic Impact As of the date of this filing, there continue to be widespread concerns regarding the ongoing impacts and disruptions caused by the COVID-19 pandemic in the regions in which the Company operates. As a result of the impacts of the COVID-19 pandemic, the Company has experienced and may continue to experience disruptions to its clinical trials, including patient enrollment and sample collection delays. Although the Company has taken steps to mitigate the impacts of the COVID-19 pandemic, the extent to which the pandemic will impact its business, financial condition, and results of operations in future periods is highly uncertain and will be affected by a number of factors outside of the Company’s control. These include the duration and extent of the COVID-19 pandemic, the development of new variants of the COVID-19 virus that may be more contagious or virulent than previous versions, the scope of mandated or recommended containment and mitigation measures, the effect of government stabilization and recovery efforts, and the success of vaccine distribution programs. Recent Accounting Pronouncements In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business combinations. The standard is effective for the Company's fiscal year beginning January 1, 2023, with early adoption permitted. The adoption of this standard is not expected to have a material effect on our financial position, results of operations, or cash flows. F-49 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ 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, 2022 and December 31, 2021: December 31, 2022 Accumulated Net Carrying Cost Depreciation Value Useful Life $ $ $ Computer hardware and software 3 years 656,759 497,306 159,453 Laboratory equipment 5 years 4,190,289 1,951,387 2,238,902 Office furniture and equipment 5 years 358,575 239,436 119,139 Buildings 30 years 2,054,332 298,397 1,755,935 Building improvements 5 - 15 years 1,317,132 326,337 990,795 Land Not amortized 128,788 - 128,788 8,705,875 3,312,863 5,393,012 December 31, 2021 Accumulated Net Carrying Cost Depreciation Value Useful Life $ $ $ Computer hardware and software 3 years 599,944 474,169 125,775 Laboratory equipment 5 years 3,032,108 1,434,347 1,597,761 Office furniture and equipment 5 years 293,427 213,244 80,183 Buildings 30 years 2,177,641 243,750 1,933,891 Building improvements 5 - 15 years 1,293,258 256,309 1,036,949 Land Not amortized 136,518 - 136,518 7,532,896 2,621,819 4,911,077 During the years ended December 31, 2022 and December 31, 2021, the total capital expenditure was $ 1.6 million and $ 1.1 million, respectively, the majority of which was from purchases of laboratory equipment. For further details refer to Note 10 (a) for Finance Leases included in Property, Plant and Equipment. During the years ended December 31, 2022 and December 31, 2021, the Company recognized $ 865,262 and $ 812,109 , respectively, in depreciation expense. F-50 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ 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, 2022 Accumulated Net Carrying Cost Amortization Value $ $ $ Patents 1,104,103 993,598 110,505 December 31, 2021 Accumulated Net Carrying Cost Amortization Value $ $ $ Patents 1,178,135 961,259 216,876 During the years ended December 31, 2022 and December 31, 2021, the Company recognized $ 75,558 and $ 91,645 , 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: Remaining Remaining Life Amortization 2023 $ 85,636 2024 $ 24,869 Total Intangible Assets $ 110,505 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, 2022. The result of this review confirmed that the ongoing value of the patents was not impaired as of December 31, 2022. 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-51 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 7 - Common Stock As of December 31, 2022, the Company was authorized to issue 100 million shares of common stock par value $ 0.001 per share, of which 57,873,379 and 53,772,261 shares were issued as of December 31, 2022 and December 31, 2021, respectively. 2022 Stock Option Exercises During the year ended December 31, 2022 no shares of common stock were issued pursuant to the exercise of stock options. 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: Date Stock Incentive Plan Stock Options Price Per Share Shares Issued # $ # 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 F-52 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 7 - Common Stock (continued) RSU Settlements 2022 During the year ended December 31, 2022 we issued a total of 297,289 shares of common stock from the settlement of RSUs, as follows: Date Restricted Stock Units Vested Price Settled Per Share Shares Issued Shares Withheld for Tax # $ # # March 25, 2022 15,000 3.01 15,000 - April 13, 2022 26,250 2.95 21,712 4,538 May 1, 2022 50,000 2.79 35,000 15,000 August 3, 2022 230,102 1.97 191,992 38,110 September 7, 2022 12,000 1.65 7,038 4,962 October 4, 2022 19,905 1.46 13,022 6,883 November 1, 2022 21,750 1.97 12,344 9,406 December 15, 2022 2,000 1.97 1,181 819 377,007 297,289 79,718 2021 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: Date Restricted Stock Units Vested Price Settled Per Share Shares Issued Shares Withheld for Tax # $ # # January 20, 2021 5,000 4.10 3,000 2,000 April 21, 2021 26,250 3.44 21,712 4,538 31,250 24,712 6,538 Equity Capital Raises 2022 On July 29, 2022, the Company entered into an underwriting agreement with Newbridge Securities Corporation (“Newbridge”) in connection with an underwritten public offering of 3,450,000 shares of the Company’s common stock, which includes Newbridge’s exercise in full of its overallotment option (of 450,000 shares), pursuant to the Company’s “shelf” registration statement on Form S-3 (declared effective by the SEC on November 8, 2021, File No. 333-259783) (as amended and supplemented from time to time, the “2021 Form S-3”). Newbridge purchased the shares from the Company at a weighted average price of $ 1.87 per share. The offering closed on August 2, 2022. The Company received net proceeds of approximately $ 6.4 million from the offering before deducting offering expenses of $ 0.2 million paid by the Company. F-53 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 7 - Common Stock (continued) Equity Capital Raises (continued) 2021 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 of the Company’s common stock, pursuant to the Company’s “shelf” registration statement on Form S-3 (declared effective by the SEC on September 28, 2018, File No. 333-227248) (the “2018 Form S-3”). Cantor purchased the shares from the Company at a price of $ 4.9533 per share, and elected not to exercise an option to purchase up to an additional 571,428 shares of common stock at the same price per share. The offering closed on February 12, 2021. The Company received net proceeds of approximately $ 18.9 million from the offering before deducting offering expenses. Equity Distribution Agreements 2022 On May 20, 2022, the Company entered into an equity distribution agreement (the “2022 EDA”) with Jefferies LLC (“Jefferies”) to sell shares of the Company’s common stock, with an aggregate offering price of up to $ 25.0 million, from time to time through an “at the market” offering pursuant to the Company’s 2021 Form S-3 through Jefferies acting as the Company’s agent and/or principal. The Company is not obligated to sell any shares under the 2022 EDA. As of December 31, 2022, the Company raised aggregate net proceeds (net of broker commissions and fees) of approximately $ 0.8 million under the 2022 EDA through the sale of 350,829 shares of common stock, before deducting offering expenses. See Note 11 for additional details regarding the Company’s equity distribution agreements subsequent to December 31, 2022. From January 1, 2022 through May 7, 2022, the Company raised aggregate net proceeds (net of broker commissions and fees) of approximately $ 9,500 under the 2021 EDA (as defined below) through the sale of 3,000 shares of its common stock. The Company terminated the 2021 EDA effective May 7, 2022. 2021 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 the Company’s common stock, with an aggregate offering price of up to $ 25.0 million, from time to time through an “at the market” offering pursuant to the Company’s 2021 Form S-3 through Cantor and Oppenheimer acting as the Company’s agents and/or principals. From the 2021 EDA’s effectiveness on November 8, 2021 through December 31, 2021, the Company raised aggregate net proceeds (net of broker commissions and fees) of approximately $ 0.7 million through the sale of 190,600 shares of its common stock. On November 10, 2020, the Company entered into an equity distribution agreement (the “2020 EDA”) with Cantor and Oppenheimer to sell shares of the Company’s common stock, with an aggregate offering price of up to $ 25.0 million, from time to time through an “at the market” offering pursuant to the 2018 Form S-3 through Cantor and Oppenheimer acting as the Company’s agents and/or principals. During the year ended December 31, 2021 (and from inception of the 2020 EDA), the Company raised aggregate net proceeds (net of broker commissions and fees) of $ 2.7 million under the 2020 EDA through the sale of 754,348 shares of its common stock. The Company terminated the 2020 EDA effective November 8, 2021. On September 7, 2018, the Company entered into an equity distribution agreement (as amended, the “2018 EDA”) with Oppenheimer to sell shares of the Company’s common stock, with an aggregate offering price of up to $ 10.0 million, from time to time through an “at the market” offering pursuant to the 2018 Form S-3 through Oppenheimer acting as the Company’s agent and/or principal. The Company utilized the 2018 EDA in full during the three months ended March 31, 2021, and raised aggregate net proceeds (net of broker commissions and fees) of approximately $ 9.7 million under the 2018 EDA since inception 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 commissions and fees) of $ 1.2 million under the 2018 EDA through the sale of 308,609 shares of its common stock. F-54 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 7 - Common Stock (continued) 2022 and 2021 Issuances Upon Warrant Exercises For the years ended December 31, 2022 and December 31, 2021 no warrants were exercised. No te 8 - Stock-Based Compensation a ) Warrants The following table summarizes the changes in warrants outstanding of the Company during the year ended December 31, 2022 and December 31, 2021: Weighted Average Number of Exercise Price Warrants $ 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 Granted 54,000 3.05 Exercised - - Expired - - Outstanding at December 31, 2022 539,000 3.80 Exercisable at December 31, 2022 485,000 3.88 2022 Effective April 4, 2022, the Company granted a warrant to purchase 54,000 shares of common stock to a Company employee for services to the Company and/or its subsidiaries. This warrant shall vest in two equal installments at 12 months and 24 months from the grant date, subject to continued service and expire on April 4, 2028 and April 4, 2029, respectively, with an exercise price of $ 3.05 per share . The Company has calculated the estimated fair market value of this warrant at $ 80,901 , using the Black-Scholes model and the following assumptions: term 3.5 years, stock price $ 2.95 , exercise price $ 3.05 , 71.07 % volatility, 2.53 % risk-free rate, and no forfeiture rate. 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 vested 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 $ 4.80 , exercise price $ 4.90 , 75.03 % volatility, 0.59 % risk free rate, and no forfeiture rate. F-55 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ 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, 2022. The warrants outstanding have a weighted average price of $3.80 per share and an aggregate weighted average remaining contractual life of 3.24 years. The warrants exercisable have a weighted average price of $3.88 per share. Weighted Average Proceeds to Exercise Remaining Company if Number Number Price Contractual Exercised Outstanding Exercisable ($) Life (Years) $ 125,000 125,000 2.47 0.15 308,750 54,000 - 3.05 5.76 164,700 50,000 50,000 3.45 3.17 172,500 125,000 125,000 3.95 4.01 493,750 185,000 185,000 4.90 4.09 906,500 539,000 485,000 2,046,200 Stock-based compensation expense related to warrants of $ 84,102 and $ 701,781 was recorded for the years ended December 31, 2022, and December 31, 2021, respectively. Total remaining unrecognized compensation cost related to non-vested warrants is approximately $ 35,812 and is expected to be recognized over a period of 1.26 years. As of December 31, 2022, the total intrinsic value of warrants was $ 0 . 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-56 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 8 - Stock-based Compensation (continued) b ) Options (continued) On April 4, 2022, 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 7,750,000 shares, which amendment was approved by the stockholders at an annual meeting held on June 13, 2022. 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, 2022 and December 31, 2021: Weighted Average Number of Exercise Price Options $ 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 Granted - - Exercised - - Expired/Cancelled ( 42,413 ) 3.43 Outstanding at December 31, 2022 4,985,105 3.87 Exercisable at December 31, 2022 4,495,011 3.93 2022 During the year ended December 31, 2022, no options were granted. On August 18, 2022, 2,515 Options previously granted to an employee on August 3, 2021 were cancelled and returned as authorized shares under the 2015 Plan upon the resignation of such employee. On November 18, 2022, 5,000 Options previously granted to an employee on April 13, 2020 were cancelled and returned as authorized shares under the 2015 Plan upon three months following the termination of such employee. On November 18, 2022, 32,383 Options previously granted to an employee on August 3, 2021 were cancelled and returned as authorized shares under the 2015 Plan upon the resignation of such employee. On November 18, 2022, 2,515 Options previously granted to an employee on August 3, 2021 were cancelled and returned as authorized shares under the 2015 Plan upon three months following the termination of such employee. F-57 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 8 - Stock-based Compensation (continued) b ) Options (continued) 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 vested 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. 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 Note Date Plan # Date Date $ (i) Jul 14, 2021 2011 292,000 Jul 23, 2015 Jul 23, 2025 442,273 Jul 14, 2021 2011 6,367 Mar 20, 2013 Mar 20, 2023 4,151 Jul 14, 2021 2011 8,151 Sep 2, 2013 Sep 2, 2023 6,009 Sep 21, 2021 2015 335,000 Apr 13, 2020 Apr 13, 2030 163,945 (ii) Sep 21, 2021 2015 89,163 Jan 23, 2018 Jan 23, 2028 24,194 (ii) Sep 21, 2021 2015 308,066 Feb 13, 2017 Feb 13, 2027 127,719 Nov 3, 2021 2015 760,000 Apr 15, 2016 Apr 15, 2026 984,511 Nov 3, 2021 2015 15,000 Jun 23, 2016 Jun 23, 2026 19,582 Nov 3, 2021 2015 50,000 Jan 1, 2017 Jan 1, 2027 32,456 Nov 3, 2021 2015 387,934 Mar 30, 2017 Mar 30, 2027 224,901 Nov 3, 2021 2015 615,837 Jan 23, 2018 Jan 23, 2028 213,646 Dec 8, 2021 2015 425,000 Apr 13, 2020 Apr 13, 2030 180,267 Dec 8, 2021 2015 10,000 Dec 1, 2020 Dec 1, 2030 5,209 Dec 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-58 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ 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 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. F-59 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 8 - Stock-Based Compensation (continued) b ) Options (continued) Below is a table summarizing the options issued and outstanding as of December 31, 2022, 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 5.22 years. Weighted Average Proceeds to Exercise Remaining Company if Number Number Price Contractual Life Exercised Outstanding Exercisable ($) (Years) $ 635,000 635,000 3.25 2.12 2,063,750 2,717 2,717 3.35 0.67 9,102 1,022,587 532,493 3.40 8.32 3,476,796 795,000 795,000 3.60 6.94 2,862,000 1,682,837 1,682,837 4.00 3.76 6,731,348 11,801 11,801 4.35 0.44 51,334 89,163 89,163 4.38 5.07 390,534 50,000 50,000 4.80 4.01 240,000 696,000 696,000 5.00 4.24 3,480,000 4,985,105 4,495,011 19,304,864 Stock-based compensation expense related to stock options of $ 1,127,502 and $ 1,069,605 was recorded for the year ended December 31, 2022 and December 31, 2021 respectively. Total remaining unrecognized compensation cost related to non-vested stock options is approximately $ 287,363 and is expected to be recognized over a period of 0.76 years. As of December 31, 2022, the total intrinsic value of stock options was $nil. As of December 31, 2022, an aggregate of 417,318 shares of common stock remained available for future issuance under the 2015 Plan. F-60 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 8 - Stock-Based Compensation (continued) c ) Restricted Stock Units (RSUs) Below is a table summarizing the RSUs issued and outstanding as of December 31, 2022, all of which were issued pursuant to the 2015 Plan. Weighted Average Number of Exercise Price RSUs $ Outstanding at December 31, 2020 67,500 3.47 Granted 789,500 3.33 Vested ( 31,250 ) 3.55 Cancelled ( 15,000 ) 3.3 Outstanding at December 31, 2021 810,750 3.33 Granted 1,892,102 1.64 Vested ( 377,007 ) 3.33 Cancelled ( 62,937 ) 2.88 Outstanding at December 31, 2022 2,262,908 2.05 2022 Below is a table summarizing the RSUs granted during the year ended December 31, 2022, all of which were issued pursuant to the 2015 Plan. These RSUs vest equally over periods stated on the dates noted, subject to continued service, and will result in the compensation expense stated. The exception to this is specified in note (iv) which is described in detail below. Equity First Second Third RSU Incentive RSUs Grant Vesting Vesting Vesting Vesting Expense Note Plan # Date Period Date Date Date $ 2015 8,000 Feb 8, 2022 24 Months Feb 8, 2023 Feb 8, 2024 N/A 22,640 2015 30,000 Mar 1, 2022 24 Months Mar 1, 2023 Mar 1, 2024 N/A 84,300 2015 32,000 Apr 4, 2022 24 Months Apr 4, 2023 Apr 4, 2024 N/A 94,400 2015 104,000 Apr 4, 2022 36 Months Apr 4, 2023 Apr 4, 2024 Apr 4, 2025 306,800 2015 33,000 Jun 1, 2022 24 Months Jun 1, 2023 Jun 1, 2024 N/A 80,850 2015 63,102 Aug 15, 2022 24 Months Aug 15, 2023 Aug 15, 2024 N/A 126,835 2015 25,000 Sep 21, 2022 24 Months Sep 21, 2023 Sep 21, 2024 N/A 42,250 (iii) 2015 1,144,000 Oct 4, 2022 36 Months Oct 4, 2023 Oct 4, 2024 Oct 4, 2025 1,670,240 (iv) 2015 450,000 Oct 4, 2022 Up to 42 Months Variable Variable Variable 321,078 (v) 2015 3,000 Nov 29, 2022 36 Months Nov 29, 2023 Nov 29, 2024 Nov 29, 2025 6,450 1,892,102 2,755,843 F-61 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 8 - Stock-Based Compensation (continued) c ) Restricted Stock Units (RSUs) (continued) (iii) These RSUs vest upon the achievement of corporate goals focused around product development and commercialization with further time-based vesting, subject to continued service of the award recipient to the Company through the applicable vesting dates. On October 13, 2022, the Compensation Committee of the Board of Directors approved the satisfactory achievement of certain corporate goals previously established by the Compensation Committee, which resulted in the vesting of the rights with respect to an aggregate of 198,275 RSUs. The RSUs are further subject to a three-year time based vesting schedule, vesting in three equal installments on the dates set forth in the table above, and conditioned upon the recipient’s continued service through the applicable vesting date. On January 12, 2023, the Compensation Committee of the Board of Directors approved the satisfactory achievement of certain additional corporate goals, which resulted in the vesting of the rights with respect to an aggregate of an additional 424,875 RSUs, subject to the foregoing time-based vesting and conditioned upon the recipient’s continued service through the applicable vesting date. (iv) These RSUs vest upon the share price closing above $ 5.00 per share for a minimum of ten consecutive trading days within a period of three years from the date of grant, with further time-based vesting in a single installment six months after the timely achievement of the target, if at all, and subject to continued service. The estimated fair value of the RSUs that include a market vesting condition will be measured on the grant date using a Monte Carlo Simulation of a Geometric Brownian Motion stock path model and incorporating the probability of vesting occurring. The estimated fair value of these awards will be recognized over the derived service period (as determined by the valuation model), with such recognition occurring regardless of whether the market condition is met. (v) The Company granted an aggregate of 3,000 RSUs on November 29, 2022 as an employment inducement award. These RSUs are subject to time-based vesting and subject to the continued service of each recipient. Below is a table summarizing the RSUs vested during the year ended December 31, 2022, all of which were issued pursuant to the 2015 Plan. Equity Incentive RSUs Vest Shares Shares Withheld for Plan # Date Issued Taxes 2015 15,000 Mar 25, 2022 15,000 - 2015 26,250 Apr 13, 2022 21,712 4,538 2015 50,000 May 1, 2022 35,000 15,000 2015 230,102 Aug 3, 2022 191,992 38,110 2015 12,000 Sep 7, 2022 7,038 4,962 2015 19,905 Oct 4, 2022 13,022 6,883 2015 21,750 Nov 1, 2022 12,344 9,406 2015 2,000 Dec 15, 2022 1,181 819 377,007 297,289 79,718 F-62 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 8 - Stock-Based Compensation (continued) c ) Restricted Stock Units (RSUs) (continued) Below is a table summarizing the RSUs cancelled during the year ended December 31, 2022, all of which were originally issued pursuant to the 2015 Plan. Equity Incentive RSUs Cancellation RSUs Plan # Date Cancelled 2015 33,000 May 31, 2022 33,000 2015 1,365 Aug 18, 2022 1,365 2015 17,572 Nov 18, 2022 17,572 2015 11,000 Nov 21, 2022 11,000 62,937 62,937 F-63 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 8 - Stock-Based Compensation (continued) c ) Restricted Stock Units (RSUs) (continued) 2021 Below is a table summarizing the RSUs granted during the year ended December 31, 2021, all of which were issued pursuant to the 2015 Plan. Equity Incentive RSUs Grant Vesting First Vesting Second Vesting Third Vesting RSU Expense Note Plan # Date Period Date Date Date $ 2015 5,000 Jan 1, 2021 - Jan 1, 2021 N/A N/A 19,450 2015 30,000 Mar 25, 2021 24 Months Mar 25, 2022 Mar 25, 2023 N/A 107,700 2015 150,000 May 1, 2021 36 Months May 1, 2022 May 1, 2023 May 1, 2024 496,500 (i) 2015 460,191 Aug 3, 2021 24 Months Aug 3, 2022 Aug 3, 2023 N/A 1,523,232 2015 38,000 Sep 7, 2021 24 Months Sep 7, 2022 Sep 7, 2023 N/A 126,160 (ii) 2015 39,809 Oct 4, 2021 24 Months Oct 4, 2022 Oct 4, 2023 N/A 121,019 2015 43,500 Nov 1, 2021 24 Months Nov 1, 2022 Nov 1, 2023 N/A 152,685 2015 23,000 Dec 15, 2021 24 Months Dec 15, 2022 Dec 15, 2023 N/A 77,740 789,500 2,624,486 (i) 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 . (ii) 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 as well as continued service by the participant through the applicable vesting date. 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 and will result in total compensation expense of $121,019 . F-64 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 8 - Stock-Based Compensation (continued) c ) Restricted Stock Units (RSUs) (continued) Below is a table summarizing the RSUs vested during the year ended December 31, 2021, all of which were issued pursuant to the 2015 Plan. Equity Incentive RSUs Vest Plan # Date Shares Issued Shares Withheld for Taxes 2015 5,000 Jan 1, 2021 3,000 2,000 2015 26,250 Apr 13, 2021 21,712 4,538 31,250 24,712 6,538 Below is a table summarizing the RSUs cancelled during the year ended December 31, 2021, all of which were originally issued pursuant to the 2015 Plan. RSUs Equity Incentive Plan # Vest Date RSUs Cancelled 2015 15,000 Dec 31, 2020 15,000 15,000 15,000 F-65 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 8 - Stock-Based Compensation (continued) c ) Restricted Stock Units (RSUs) (continued) Below is a table summarizing the RSUs issued and outstanding as of December 31, 2022 of which the last to vest have a remaining contractual life of 3.26 years. Weighted Average Weighted Average Grant date Remaining Number Fair Value Contractual Life Outstanding $ (Years) 450,000 0.69 3.26 1,133,000 1.46 1.76 25,000 1.69 1.22 63,102 2.01 1.08 3,000 2.15 1.91 33,000 2.45 0.92 30,000 2.81 0.67 8,000 2.83 0.61 136,000 2.95 0.97 19,904 3.04 0.38 311,152 3.31 0.59 12,000 3.32 0.68 2,000 3.38 0.48 21,750 3.51 0.42 15,000 3.59 0.23 2,262,908 Stock-based compensation expense related to RSUs of $ 1,903,054 and $ 898,910 was recorded in the years ended December 31, 2022, and December 31, 2021, respectively. Total remaining unrecognized compensation cost related to non-vested RSUs is $ 2,214,593 . F-66 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 9 - Income Taxes The Company has estimated net operating losses for the years ended December 31, 2022 and 2021 of $ 28.6 million and $ 24.4 million, respectively, available to offset taxable income in future years. The significant components of deferred income taxes and assets as of December 31, 2022 and December 31, 2021 are as follows: December 31, 2022 December 31, 2021 Net Deferred Tax Liability $ $ Excess of tax over book depreciation and amortization ( 46,001 ) ( 8,330 ) ROU Asset ( 117,134 ) ( 28,657 ) Lease Liability 122,279 47,301 Accrued expenses 5,655 1,199 Unrealized Gain/Loss - 103,106 Capitalized research expenses 1,237,122 - Stock-based compensation 321,956 186,252 Net Operating Losses carry-forward 28,556,992 24,390,040 Research and development tax credits 769,317 606,729 Gross deferred tax assets 30,850,186 25,297,640 Valuation allowance ( 30,850,186 ) ( 25,297,640 ) Net deferred tax asset - - Change in Valuation Allowance ( 5,552,546 ) December 31, 2022 December 31, 2021 Summary Rate Reconciliation % % Federal statutory rate 21.0 21.0 State income taxes, net of federal benefit - - Permanent Differences ( 0.6 ) ( 4.8 ) Stock based compensation ( 0.3 ) ( 0.6 ) Federal Research & Development Credits 0.7 0.5 Foreign taxes ( 0.1 ) 1.5 Federal Deferred Rate Decrease 0.5 ( 14.4 ) Change in Valuation Allowance ( 21.2 ) ( 3.2 ) Total - - Disclosure Amounts December 31, 2022 Net Operating Losses - United States 35,072,965 Net Operating Losses - Foreign 90,614,447 Credit Carryforward - United States - Credit Carryforward - Foreign 769,317 Increase in Valuation Allowance 5,552,546 F-67 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 10 - Commitments and Contingencies a) Finance Lease Obligations 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, 2022, the balance payable was $ 482,146 . 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, 2022, the balance payable was $ 0 . 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, 2022. 2023 $ 57,726 2024 $ 57,725 2025 $ 57,725 2026 $ 57,726 2027 $ 57,726 Greater than 5 years $ 252,534 Total $ 541,162 Less: Amount representing interest $ ( 59,016 ) Present value of minimum lease payments $ 482,146 b) Operating Lease Right-of-Use Liabilities As of December 31, 2022, operating lease right-of-use assets and liabilities arising from operating leases were $ 619,392 and $ 645,254 , respectively. During the year ended December 31, 2022, cash paid for amounts included for the measurement of lease liabilities was $ 245,354 and the Company recorded operating lease expense of $ 267,434 . Our weighted average discount rate is 2.38 % and the weighted average remaining lease term is 25 months. The following is a schedule showing the future minimum lease payments under operating leases by years and the present value of the minimum payments as of December 31, 2022. 2023 $ 264,799 2024 $ 164,225 2025 $ 120,209 2026 $ 94,600 2027 $ 25,800 Total Operating Lease Obligations $ 669,633 Less: Amount representing interest $ ( 24,379 ) Present Value of minimum lease payments $ 645,254 F-68 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 10 – Commitments and Contingencies (continued) b) Operating Lease Right-of-Use Liabilities (continued) 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, 2022, $ 76,955 was recognized in short-term lease costs associated with the office space leases in Singapore and Nevada. The annual payments remaining for such short-term office leases as of December 31, 2022, were as follows: 2023 $ 27,069 2024 - 2027 $ - Total Operating Lease Liabilities $ 27,069 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, 2022, the grant balance repayable was $ 26,831 . 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, 2022, the grant balance repayable was $ 107,280 . 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, 2022, the grant balance repayable was $ 97,799 . 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, 2022, the grant balance repayable was $ 230,392 . F-69 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 10 – Commitments and Contingencies (continued) c) Grants Repayable (continued) As of December 31, 2022, the balance repayable was $ 462,302 and the annual payments remaining were as follows: 2023 $ 49,283 2024 $ 26,541 2025 $ 34,581 2026 $ 42,026 2027 $ 45,978 Greater than 5 years $ 263,893 Total Grants Repayable $ 462,302 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, 2022, the principal balance payable was $ 82,659 . 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, 2022, the principal balance payable was $ 188,806 . 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, 2022, €1 million has been drawn down under this agreement and the principal balance payable was $ 482,954 . 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, 2022, the principal balance payable was $ 0 . In 2019, the Company entered into a 4 -year loan agreement with Namur Innovation and Growth for € 500,000 with fixed interest rate of 4.80 %, maturing September 2024 . As of December 31, 2022, the principal balance payable was $ 279,548 . In 2020, the Company entered into a 10 -year loan agreement with Namur Invest for a maximum of € 830,000 with fixed interest rate of 4.00 %, maturing March 2031 . As of December 31, 2022, the amount that has been drawn down under this agreement was € 707,599 , representing a principal balance payable of $ 759,419 . 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, 2022, the amount that has been drawn down under this agreement was € 450,000 , representing a principal balance payable of $ 442,708 . On February 5, 2022 the Company entered into a 9 -month loan agreement with First Insurance Funding for a maximum of $ 620,549 with fixed interest rate of 3.57 %, maturing November 2022 . As of December 31, 2022, the principal balance payable was $ 0 . On August 16, 2022, the Company entered into a 4 -year loan agreement with Namur Invest for a maximum of € 1,000,000 with fixed interest rate of 6.00 %, maturing July 2026 . As of December 31, 2022, the amount that has been drawn down under this agreement was € 1,000,000 , representing a principal balance payable of $ 1,073,231 . F-70 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 10 – Commitments and Contingencies (continued) d) Long-Term Debt (continued) On November 18, 2022, the Company entered into a 4 -year loan agreement with Namur Invest for a maximum of € 500,000 with fixed interest rate of 5.45 %, maturing December 2027 . As of December 31, 2022, the amount that has been drawn down under this agreement was € 500,000 , representing a principal balance payable of $ 536,615 . As of December 31, 2022, the total balance for long-term debt payable was $ 3,845,940 and the payments remaining were as follows: 2023 $ 1,268,528 2024 $ 1,138,227 2025 $ 704,312 2026 $ 480,358 2027 $ 281,602 Greater than 5 years $ 446,799 Total $ 4,319,826 Less: Amount representing interest $ ( 473,886 ) Total Long-Term Debt $ 3,845,940 e) Collaborative Agreement Obligations 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, 2022, $ 510,000 is still to be paid by the Company under this agreement. In 2019, the Company entered into a funded sponsored research agreement with the Texas A&M University (“TAMU”) in consideration for the license granted to the Company for a 5 -year period for a cost to the Company of up to $ 400,000 payable over such period. As of December 31, 2022, $ 0 is still to be paid by the Company under this agreement. In 2020, the Company entered into a research agreement for the bioinformatic analysis of cell-free DNA fragments from whole-genome sequencing with the Hebrew University of Jerusalem for six months for a cost to the Company of € 54,879 . Subsequently the parties entered into an amendment to the agreement with an additional cost to the Company of € 100,236 . In the year ended December 31, 2022, the parties entered into agreements for an additional cost to the Company of € 39,000 . As of December 31, 2022, $ 23,018 is still to be paid by the Company under the amended agreement. On August 2, 2022, the Company entered into a sponsored research agreement with The University of Texas MD Anderson Cancer Center to evaluate the role of neutrophil extracellular traps (“NETs”) in cancer patients with sepsis for a cost to the Company of $ 346,787 . As of December 31, 2022, $ 346,787 is still to be paid by the Company under this agreement. As of December 31, 2022, the total amount to be paid for future research and collaboration commitments was approximately $ 879,805 and the annual payments remaining were as follows: 2023 $ 798,032 2024 - 2027 $ 81,773 Total Collaborative Agreement Obligations $ 879,805 F-71 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ 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, 2022, TAMU has a 12.5 % equity interest in Volition Vet. Volition Germany On January 10, 2020, the Company, through its wholly-owned subsidiary Belgian Volition, acquired an epigenetic reagent company, Octamer GmbH (“Octamer”), based in Munich, Germany, and hired its founder for his expertise and knowledge to be passed to Company personnel. On March 9, 2020, Octamer was renamed to Volition Germany GmbH (or “Volition Germany”). In connection with the transaction agreement, the Company entered into a royalty agreement with the founder providing for the payment of royalties in the amount of 6 % of net sales of Volition Germany’s nucleosomes as reagents to pharmaceutical companies for use in the development, manufacture and screening of molecules for use as therapeutic drugs for a period of five years post-closing. As of December 31, 2022, $ 210 is payable under the 6 % royalty agreement on sales to date towards the Company’s aggregate minimum royalty obligation of $ 118,055 . Volition America On November 3, 2020, the Company entered into a professional services master agreement (the “Master Agreement”) with Diagnostic Oncology CRO, LLC (“DXOCRO”) to conduct a pivotal clinical trial and provide regulatory submission and reimbursement related services. On August 8, 2022, the Company and DXOCRO amended and restated the Master Agreement to expand the scope of DXOCRO’s consultant services provided thereunder (the “A&R Master Agreement”). The A&R Master Agreement requires DXOCRO to support development and clinical validation studies for the Company’s Nu.Q® product portfolio in the United States, including by conducting large-scale finding studies across multiple sites in the U.S. using Nu.Q® NETs and Nu.Q® Cancer tests to determine clinical utility in sepsis and non-Hodgkin’s lymphoma. The Company anticipates DXOCRO’s services under the agreement will be completed by the end of the third quarter 2023 at a total cost to the Company of up to $4.2 million . The Company’s payment obligations accrue upon delivery of projects under the agreement. The Company may terminate the agreement or any project thereunder upon at least 30 days’ prior written notice. Unless earlier terminated, the A&R Master Agreement terminates on the later of December 31, 2025 or the date upon which all services have been completed. As of December 31, 2022, $ 264,692 is payable under the A&R Master Agreement, and up $ 3,435,165 may be payable by Company in future periods for services rendered. g) Legal Proceedings There are no legal proceedings which the Company believes will have a material adverse effect on its financial position. F-72 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 10 – Commitments and Contingencies (continued) h) Commitments in Respect of Corporate Goals and Performance-Based Awards In August 2021 and October 2021, the Compensation Committee of the Board of Directors approved the granting of equity-based awards under the 2015 Plan as well as cash bonuses, vesting upon achievement of certain corporate goals focused around product development and commercialization, to various personnel including directors, executives, members of management, consultants and employees of the Company and/or its subsidiaries. On June 23, 2022, the Compensation Committee of the Board of Directors approved the achievement of all of the remaining outstanding corporate goals related to the awards in August 2021 and October 2021 resulting in the payment of the cash bonus awards and the vesting of the remaining rights to the equity-based awards, which equity-based awards remain subject to time-based vesting in equal installments on each of August 3, 2022 and August 3, 2023 (with the exception of October 4, 2022 and October 4, 2023 for one award) and the continuous service of the award recipient through the applicable vesting date. As of December 31, 2022, the Company has paid compensation expense of $ 737,137 in relation to the July 1, 2022 specified corporate goals based on the actual outcomes related to the prescribed performance targets. In October 2022, the Compensation Committee of the Board of Directors approved the granting of cash bonuses, payable upon achievement of various corporate goals focused around product development, manufacturing, financing and commercialization, to various personnel including directors, executives, members of management, consultants and employees of the Company and/or its subsidiaries. Conditional upon the achievement by January 1, 2023 and July 1, 2023 of all specified corporate goals as set forth in the minutes of the Compensation Committee, as well as continued service by the award recipients, the Company at the sole discretion of the Chief Executive Officer and the Chief Financial Officer would pay a cash bonus to such award recipients. As of December 31, 2022, the Company has accrued compensation expense of $ 905,856 in relation to the January 1, 2023 and July 1, 2023 specified corporate goals based on the actual outcomes related to the prescribed performance targets. As discussed in detail in Note 8, - Stock-Based Compensation, an aggregate of 1,144,000 RSUs were issued under the 2015 Stock Incentive Plan in connection with the October 2022 grants and an aggregate of 1,000,000 stock options and 500,000 RSUs were issued under the 2015 Stock Incentive Plan in connection with the August 2021 and October 2021 grants. As of December 31, 2022, the Company has recognized compensation expense of $ 969,593 in relation to the options vested in 2022 and $630,863 in relation to the options that will vest in 2023. The Company has unrecognized compensation expense of $ 270,550 to such stock options, based on the outcomes related to the prescribed performance targets on the outstanding awards. Total Amortised Amortised Un-Amortised Award 2022 2021 2023 $ $ $ $ 969,593 580,411 389,182 - 630,863 450,090 180,773 270,550 F-73 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 10 – Commitments and Contingencies (continued) h) Commitments in Respect of Corporate Goals and Performance-Based Awards (continued) As of December 31, 2022, the Company has recognized compensation expense of $ 822,149 in relation to the RSUs fully vested in 2022 and $ 530,930 in relation to RSUs that will vest in 2023. The Company has unrecognized compensation expense of $ 228,491 to such RSUs, based on the outcomes related to the prescribed performance targets on the outstanding awards. Total Amortised Amortised Un-Amortised Award 2022 2021 2023 $ $ $ $ 822,149 493,207 328,942 - 530,930 379,191 151,739 228,491 As of December 31, 2022, the Company has recognized total compensation expense of $ 245,861 of which $ 134,087 in relation to RSUs that will vest in 2023, $ 65,088 in relation to RSUs that will vest in 2024, and $ 46,686 in relation to RSUs that will vest in 2025. The Company has unrecognized compensation expense of $ 1,408,319 in relation to such RSUs, based on the outcomes related to the prescribed performance targets on the outstanding awards. Vesting Amortised Year 2022 Un-Amortised $ $ 2023 134,087 417,327 2024 65,088 470,244 2025 46,686 520,748 245,861 1,408,319 F-74 Table of Contents VOLITIONRX LIMITED Notes to Consolidated Financial Statements For Years Ended December 31, 2022 and 2021 ($ expressed in United States Dollars) Note 11 - Subsequent Events Common Stock Issuances and Repurchases From January 1 to January 19, 2023, the Company raised aggregate net proceeds (net of broker commissions and fees) of approximately $ 656,000 under the 2022 EDA through the sale of 279,703 shares of its common stock. No additional shares have been sold under the 2022 EDA through March 8, 2023. On January 5, 2023, the Company purchased from a former officer 13,264 shares of its common stock at $ 2.39 per share, for a total cost to the Company of $ 31,772 .66. These shares were subsequently retired. RSU Vesting On January 12, 2023, the Compensation Committee of the Board of Directors approved the satisfactory achievement of certain corporate goals established by the Compensation Committee on October 4, 2022, which resulted in the vesting of rights with respect to an aggregate of 424,875 RSUs. The RSUs are further subject to a 3-year time based vesting schedule, vesting in three equal installments on each of October 4, 2023, October 4, 2024 and October 4, 2025 , respectively, and conditioned upon the recipient’s continued service through the applicable vesting date. On February 8, 2023, 4,000 RSUs previously granted to an employee vested and resulted in the issuance of 2,369 shares of common stock and the remaining 1,631 shares of common stock were withheld as taxes and returned to the 2015 Plan. On March 1, 2023, 15,000 RSUs previously granted to employees vested and resulted in the issuance of 9,609 shares of common stock. An aggregate of 5,391 shares of common stock were withheld as taxes and returned to the 2015 Plan. Capital Raise On February 17, 2023, the Company entered into an underwriting agreement with Newbridge in connection with an underwritten public offering of 4,945,000 shares of the Company’s common stock, which includes Newbridge’s exercise in full of its overallotment option, pursuant to the Company’s 2021 Form S-3. Newbridge purchased the shares from the Company at a price of $ 1.6275 per share. The offering closed on February 22, 2023. The Company received net proceeds of approximately $ 8.0 million from the offering before deducting offering expenses payable by the Company. Commercial Product Launches On January 12, 2023, the Company announced the availability of its Nu.Q® Vet Cancer Test through the IDEXX Laboratories, Inc. reference laboratory network in the U.S. On February 16, 2023, the Company announced that its Nu.Q® Vet Cancer Test was available for pre-order to veterinarians at the point of care through Heska. END NOTES TO FINANCIALS F-75 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.