VOLITIONRX LTD 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read together with our consolidated financial statements in Part II within this Report. This discussion includes an analysis of our financial condition and results of operations for the years ended December 31, 2025 and 2024 and year-over-year comparisons between those periods. Certain statements made in this section constitute “forward-looking statements,” which are subject to numerous risks and uncertainties including those described in this section. For additional information, refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements” within this Report. Company Overview Volition is a multi-national epigenetics company. It has patented technologies that use chromosomal structures, such as nucleosomes, and transcription factors as biomarkers in cancer and other diseases. The tests in the Company’s product portfolio detect certain characteristic changes that occur from the earliest stages of disease, enabling early detection and offering a better way to monitor disease progression and a patient’s response to treatment. The tests offered by Volition and its subsidiaries are designed to detect and monitor a range of life-altering diseases, including certain cancers and diseases associated with NETosis, such as sepsis. Early diagnosis and monitoring have the potential to not only prolong the life of patients but also improve their quality of life. We have several key pillars of focus: · Nu.Q ® Vet - cost-effective, easy-to-use blood tests for dogs and other companion animals. The Nu.Q ® Vet Cancer Test is commercially available as a cancer screening test in dogs. · Nu.Q ® NETs - detects diseases associated with NETosis such as sepsis. · Nu.Q ® Discover - a complete solution to profiling nucleosomes. · Nu.Q ® Cancer - from screening, diagnosis and staging, therapy decision, planning and treatment to monitoring response to treatment and disease progression with a particular focus on lung cancer. · Capture-Seq™ / Capture-PCR™ - isolating and capturing circulating tumor-derived DNA from plasma samples for early cancer detection. The Company has grown from a single two-meter lab bench at the University of Namur in Belgium to a purpose-built 17,000 square foot lab and 10,000 square foot production facility in Gembloux, Belgium, an Innovation Lab in California, and offices in California, London and Nevada. We now have a team of over 75 dedicated employees, spanning a wide range of disciplines; all united in our mission to improve outcomes for patients. Cultivating successful, ongoing relationships with stakeholders worldwide has been fundamental to Volition’s development. We have fostered ties with leading academic institutions, clinical centers of excellence, multi-national diagnostic and pharmaceutical companies and financial institutions across the globe. We have identified the specific processes and resources required to achieve the near and medium-term objectives of our business plan, including personnel, facilities, equipment, research and testing materials including antibodies and clinical samples, and the protection of intellectual property. To date, operations have proceeded satisfactorily in relation to our business plan. However, it is possible that some resources will not readily become available in a suitable form or on a timely basis or at an acceptable cost. It is also possible that the results of some processes may not be as expected, and that modifications of procedures and materials may be required. Such events could result in delays to the achievement of the near and medium-term objectives of our business plan, in particular the progression of clinical validation studies and regulatory approval processes for the purpose of bringing products to the IVD market. Our future as an operating business will depend on our ability to obtain sufficient capital contributions, financing and/or generate revenues as may be required to sustain our operations. Management plans to address the above as needed by: (a) obtaining additional financing through debt or equity transactions; (b) securing additional grant funding; (c) granting licenses to third parties in exchange for specified up-front and/or back-end payments; and (d) developing and commercializing our products on an accelerated timeline. Management continues to exercise tight cost controls to conserve cash. Our ability to continue as a going concern is dependent upon our accomplishment of the plans described in the preceding paragraph and eventually to attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. If we are unable to obtain adequate capital, we could be forced to cease operations. 31 Table of Contents Liquidity and Capital Resources We have financed our operations since inception primarily through private placements and public offerings of our common stock. As of December 31, 2025, we had cash and cash equivalents of approximately $1.1 million. Net cash used in operating activities was $19.7 million and $25.9 million for the years ended December 31, 2025 and December 31, 2024, respectively. The decrease in cash used in operating activities during 2025 when compared to 2024 was primarily due lower personnel costs of $2.4 million, lower research and development expenses of $2.7 million together with an increase in accounts payable of $1.1 million during the period. Net cash used in investing activities was $0.1 million and $0.6 million for the years ended December 31, 2025 and December 31, 2024, respectively. The decrease in cash used in investing activities during 2025 was primarily due to reduced purchases of laboratory equipment as compared to 2024. Net cash provided by financing activities after associated costs was $17.1 million and $8.7 million for the years ended December 31, 2025 and December 31, 2024, respectively. Net cash provided by financing activities in 2025 consisted of (i) $6.3 million in cash, before deducting commitment and legal fees of $0.3 million, received in exchange for the issuance of a senior secured convertible note and warrants in May 2025, (ii) $2.3 million in cash, before deducting offering expenses of $0.1 million, received from the issuance and sale of common stock and warrants in a registered direct offering that closed in March 2025, (iii) $0.3 million in net proceeds received from the issuance and sale of 448,706 shares of common stock under our “at-the-market” facility with Jefferies LLC (“Jefferies”) acting as exclusive placement agent, which facility terminated effective April 20, 2025, (iv) $1.7 million in net proceeds received from the issuance and sale of 4,364,087 shares of common stock under our 2025 ATM Sales Agreement during the year ended December 31, 2025, (v) $1.2 million in cash, before deducting offering expenses of $0.1 million, received from the issuance and sale of common stock and warrants in a registered direct offering that closed in August 2025, (vi) $0.3 million in cash, received from the issuance and sale of common stock and warrants in a private placement that closed in September 2025 and (vii) $6.0 million in net proceeds received from the issuance and sale of common stock and warrants in an underwritten public offering with Newbridge. This compares with $0.7 million in net cash received from the issuance of shares of common stock under our “at-the-market” facility during the period ended December 31, 2024, $6.3 million in cash received before deducting offering expenses of $0.2 million from the issuance and sale of the shares of common stock, pre-funded warrants and common warrants in a registered direct offering that closed in August 2024, and a further $1.9 million in cash received before deducting offering expenses of $0.1 million from the issuance and sale of common stock and common warrants in a registered direct offering to certain directors and executive officers of the Company as well as other investors that closed in December 2024. For additional information on our “at the market facility,” refer to Note 7, Common Stock – Equity Distribution Agreements, of the Notes to consolidated financial statements included within this Report. The following table summarizes our approximate contractual payments due by year as of December 31, 2025. Approximate Payments (Including Interest) Due by Year Total 2026 2027 - 2030 Greater than 5 years Description $ $ $ $ Financing lease liabilities 402,344 63,116 252,460 86,768 Operating lease liabilities and short-term lease 561,012 274,159 286,853 - Grants repayable 590,745 117,093 339,402 134,250 Long-term debt 7,998,134 1,602,982 6,339,584 55,568 Collaborative agreements obligations 1,248,176 1,248,176 - - Convertible Note 6,666,666 5,000,000 1,666,666 - Total 17,467,077 8,305,526 8,884,965 276,586 32 Table of Contents We intend to use our cash reserves to predominantly fund product development, and commercialization activities. We do not currently have sufficient revenues and expect to rely on additional future financing, through the sale of licensing or distribution rights, grant funding and the sale of equity or debt securities to provide sufficient funding to execute our strategic plan. There is no assurance that we will be successful in raising further funds. In the event additional financing is delayed, we will prioritize the completion of clinical validation studies for the purpose of the sale of licensing or distribution rights, and the maintenance of our patent rights. In the event of an ongoing lack of financing, it may be necessary to discontinue operations, which will adversely affect the value of our common stock. We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive activities. For these reasons, our auditors included in their report on our audited financial statements for the year ended December 31, 2025, an explanatory paragraph regarding factors that raise substantial doubt that we will be able to continue as a going concern. Results of Operations Comparison of the Years Ended December 31, 2025 and December 31, 2024 The following table sets forth our results of operations for the years ended on December 31, 2025, and December 31, 2024, respectively (expressed in United Stated Dollars, except outstanding share numbers and percentages). Increase Percentage Increase 2025 2024 (Decrease) (Decrease) $ $ $ % Service 450,805 228,138 222,667 98 % Product 1,276,579 1,005,373 271,206 27 % Total Revenues 1,727,384 1,233,511 493,873 40 % Research and development 10,081,299 14,406,486 (4,325,187 ) (30 %) General and administrative 9,463,581 8,487,562 976,019 11 % Sales and marketing 3,921,075 5,364,433 (1,443,358 ) (27 %) Total Operating Expenses 23,465,955 28,258,481 (4,792,526 ) (17 %) Grant income 516,515 103,368 413,147 >100 % Gain /(Loss) on disposal of fixed assets 1,829 (34,731 ) 36,560 <(100 %) Interest income 600 9,947 (9,347 ) (94 %) Interest expense (532,192 ) (340,362 ) (191,830 ) 56 % Amortization of debt discount (1,957,147 ) - (1,957,147 ) <(100 %) Gain on change in fair value of warrant liability 76,908 28,763 48,145 >100 % Gain on change in fair value of derivative liability 128,729 - 128,729 >100 % Total Other Income (Expenses) (1,764,758 ) (233,015 ) (1,531,743 ) <(100 %) Net Loss (23,503,329 ) (27,257,985 ) (3,754,656 ) (14 %) Revenues Our operations are transitioning from a research and development stage to a commercialization stage. Revenue for the year ended December 31, 2025 was $1.7 million compared with $1.2 million for the year ended December 31, 2024. The main source of revenues during the years ended December 31, 2025 and December 31, 2024, was product sales primarily of the Nu.Q® Vet Cancer Test and Nu.Q Discover kits. Services revenue related solely to Nu.Q ® Discover services. 33 Table of Contents Operating Expenses Total operating expenses decreased to $23.5 million from $28.3 million for the years ended December 31, 2025 and December 31, 2024, respectively, as a result of the factors described below. Research and Development Expenses Research and development expenses decreased to $10.1 million from $14.4 million for the years ended December 31, 2025 and December 31, 2024, respectively. The decrease in overall research and development expenditures during 2025 was primarily related to lower research expenses and a reduction in personnel expenses as a result of reduced clinical trial activity following completion of certain clinical studies. FTE personnel numbers within this division decreased by five to forty-seven during 2025 compared to the prior year period. 2025 2024 Change $ $ $ Personnel expenses 5,957,453 7,463,938 (1,506,485 ) Stock based compensation 134,286 233,014 (98,728 ) Direct research and development expenses 2,177,834 4,397,828 (2,219,994 ) Other research and development 777,263 1,221,903 (444,640 ) Depreciation and amortization 1,034,463 1,089,803 (55,340 ) Total research and development expenses 10,081,299 14,406,486 (4,325,187 ) General and Administrative Expenses General and administrative expenses increased to $9.5 million from $8.5 million for the years ended December 31, 2025 and December 31, 2024, respectively. The increase in overall general and administrative expenditures during 2025 was primarily due to stock-based compensation, legal and professional fees and higher personnel expenses and partially offset by lower general and administrative expenses. The FTE personnel number within this division decreased by two to seventeen during 2025 compared to the prior year period. 2025 2024 Change $ $ $ Personnel expenses 4,509,900 4,220,539 289,361 Stock-based compensation 1,292,807 746,459 546,348 Legal and professional fees 2,398,904 1,909,076 489,828 Other general and administrative 1,109,447 1,447,719 (338,272 ) Depreciation and amortization 152,523 163,769 (11,246 ) Total general and administrative expenses 9,463,581 8,487,562 976,019 Sales and Marketing Expenses Sales and marketing expenses decreased to $3.9 million from $5.4 million for the years ended December 31, 2025 and December 31, 2024, respectively. The decrease in overall sales and marketing expenditures was primarily due to reduced personnel expenses and direct marketing and professional fees during the year. The FTE personnel number within this division decreased by three to eleven during 2025 compared to the prior year period. 2025 2024 Change $ $ $ Personnel expenses 2,859,964 4,104,101 (1,244,137 ) Stock-based compensation 312,617 289,069 23,548 Other Sales & Marketing expenses 717,972 922,602 (204,630 ) Depreciation and amortization 30,522 48,661 (18,139 ) Total sales and marketing expenses 3,921,075 5,364,433 (1,443,358 ) 34 Table of Contents Other Income (Expenses) For the year ended December 31, 2025, other expenses increased to approximately $1.8 million compared to other expenses of approximately $0.2 million for the year ended December 31, 2024. This increase in other expenses was primarily due to amortization of debt discount of $2.0 million related to the Lind note and $0.5 million of interest expenses partially offset by increased grant income received of approximately $0.5 million during 2025 compared to $0.1 million in 2024, together with gains in the fair value of derivative and warrant liabilities, during 2025. Net Loss For the year ended December 31, 2025, the Company’s net loss was $23.5 million, a decrease of approximately $3.8 million, in comparison to a net loss of $27.3 million for the year ended December 31, 2024. The change was a result of the factors described above. Going Concern We have not attained profitable operations and are dependent upon obtaining external financing to continue to pursue our operational and strategic plans. For these reasons, management has determined that there is substantial doubt that the business will be able to continue as a going concern without further financing. Off-Balance Sheet Arrangements We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders. Future Equity or Debt Financings We may seek to obtain additional capital through the sale of debt or equity securities if we deem it desirable or necessary. These sales may include the sale of equity securities from time to time through our “at the market facility” with JonesTrading Institutional Services, LLC under a Capital On Demand™ Sales Agreement dated April 22, 2025 (see Note 7, Common Stock – “At the Market” Offerings of the Notes to consolidated financial statements). However, we may be unable to obtain such additional capital when needed, or on terms favorable to us or our stockholders, if at all. If we raise additional funds by issuing equity securities, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or such equity securities may provide for rights, preferences or privileges senior to those of the holders of our common stock. If additional funds are raised through the issuance of debt securities, the terms of such securities may place restrictions on our ability to operate our business. 35 Table of Contents Critical Accounting Policies and Estimates Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), applied on a consistent basis. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We also regularly evaluate estimates and assumptions related to deferred income tax asset valuation allowances, useful lives of property and equipment and intangible assets, deferred revenue valuation, revenue recognition, warrant liability, borrowing rate used in operating lease right-of-use asset and liability valuations, impairment analysis of intangible assets and valuations of stock-based compensation. We base our estimates and assumptions on current facts, historical experiences, information from third-party professionals and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations could be affected. We regularly evaluate the accounting policies that we use to prepare our consolidated financial statements. A complete summary of these policies is included in the Notes to our consolidated financial statements. We have determined that for the periods reported in this Report the following accounting policies are critical in understanding our financial condition and results of operations: 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. Impairment of Long-Lived Assets In accordance with ASC 360, “Prop erty 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. Foreign Currency Translation The Company has functional currencies in Euros, U.S. Dollars and British Pounds Sterling and its reporting currency is the U.S. 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. Recently Issued Accounting Pronouncements The Company has implemented all applicable new accounting pronouncements that are in effect. The Company does not believe that there are any other applicable new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company and are not required to disclose this information. 36 Table of Contents