VOLITIONRX LTD Fair Value Disclosure
On a recurring basis, we measure certain financial assets and liabilities based upon the fair value hierarchy as described in the Company's significant accounting policies in Note 3. The following table presents information about the Company's liabilities measured at fair value as of December 31, 2015.
| Level 1 | Level 2 | Level 3 | Fair Value at December 31, 2015 |
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| Liabilities | ||||||||||||||||
| Derivative Liability | $ | - | $ | - | $ | - | $ | - | ||||||||
| Level 1 | Level 2 | Level 3 | Fair Value at December 31, 2014 |
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| Liabilities | ||||||||||||||||
| Derivative liability | $ | - | $ | 1,577,640 | $ | - | $ | 1,577,640 | ||||||||
The fair value changes in the fair value of recurring fair value measurements using model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data (Level 2), relate solely to the derivative liability as follows:
| Balance as of December 31, 2014 | $ | 1,577,640 | ||
| Exercise of warrants attached to derivative liability | $ | (74,347 | ) | |
| Adjustment due to expiry of derivative liability | $ | (1,163,549 | ) | |
| Fair value adjustments | $ | (339,744 | ) | |
| Balance as of December 31, 2015 | $ | - |
During the year ended December 31, 2015, the Company issued warrants for services at fair market value of $nil, options under the 2011 Equity Incentive Plan at fair market value of $950,455 and re-measured options, where their exercise period was extended, to fair market value of $705,818, an increase of $20,796. The Company did not issue shares of common stock for services and as at December 31, 2015, the Company had no derivative liabilities.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.