UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DCD.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission ~~file number:~~File Number: 001-34810

~~Vermillion,~~Aspira Women’s Health Inc.

(Exact ~~Name~~name of ~~Registrant~~registrant as ~~Specified~~specified in ~~Its Charter)~~its charter)


Delaware		33-0595156
(State or ~~Other Jurisdiction~~other jurisdiction of ~~Incorporation~~incorporation or ~~Organization)~~organization)		(I.R.S. Employer Identification No.)
12117 Bee Caves Road, Building Three, Suite 100, Austin, Texas		78738
(Address of ~~Principal Executive Offices)~~principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (512) 519-0400

~~(Registrant’s Telephone Number, Including Area Code~~)

1Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	AWH	The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~


Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☐☑	Smaller reporting company ☑ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☑ No ☐

As of ~~October 31, 2017,~~April 30, 2021, the registrant had ~~59,998,748~~111,946,449 shares of common stock, par value $0.001 per share, outstanding.

~~VERMILLION,~~ASPIRA WOMEN’S HEALTH INC.

FORM 10-Q

For the Quarter Ended March 31, 2021

Table of Contents



		Page
PART I	Financial Information	4 3
Item 1	Financial Statements	4 3
	Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 (unaudited)	4 3
	Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 (unaudited)	4
	6Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2021 and 2020 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 (unaudited)	7 6
	Notes to Condensed Consolidated Financial Statements (unaudited)	8 7
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3	Quantitative and Qualitative Disclosures About Market Risk	26 27
Item 4	Controls and Procedures	26 27
PART II	Other Information	27 28
Item 1	Legal Proceedings	27 28
Item 1A	Risk Factors	27 28
Item 6	Exhibits	28 29
SIGNATURES		29 30

~~Vermillion, OVA1 and Overa~~The following are registered and unregistered trademarksand service marksof ~~Vermillion,~~ Aspira Women’s HealthInc.

:VERMILLION®,ASPIRA WOMEN’S HEALTH™, OVA1®, OVERA®,ASPIRA LABS®,ASPIRAIVD®,OVACALC®,ASPIRA GENETIXSM, OVA1PLUS®,OVASIGHTTM, ENDOCHECK™,OVAINHERIT™,ASPIRA SYNERGYSM,, and OVA360™.

PART I - FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

~~Vermillion,~~Aspira Women’s Health Inc.

Condensed Consolidated Balance Sheets

(Amounts in Thousands, Except Share and Par Value Amounts)

(Unaudited)


	September 30,		December 31,		March 31,		December 31,
	2017		2016		2021		2020
Assets
Current assets:
Cash and cash equivalents	$	7,752	$	5,242	$	59,369	$	16,631
Accounts receivable		221		275		952		865
Prepaid expenses and other current assets		175		498		981		1,077
Inventories		155		93		71		30
Total current assets		8,303		6,108		61,373		18,603
Property and equipment, net		1,364		1,911		533		583
Right-of-use assets						391		406
Other assets		11		-		-		13
Total assets	$	9,678	$	8,019	$	62,297	$	19,605

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	514	$	881	$	1,587	$	1,103
Accrued liabilities		1,430		1,464		3,471		3,618
Deferred Revenue		62		-
Current portion long-term debt						645		645
Short-term debt		191		182		408		611
Other current liabilities		32		34
Lease liability						37		23
Total current liabilities		2,229		2,561		6,148		6,000
Non-current liabilities:
Long-term debt		1,528		1,667		3,428		3,477
Other non-current liabilities		-		29
Lease liability						396		409
Total liabilities		3,757		4,257		9,972		9,886
Commitments and contingencies (Note 3)
Stockholders’ equity:
Common stock, par value $0.001 per share, 150,000,000 shares authorized at
September 30, 2017 and December 31, 2016; 59,998,748 and 52,328,492 shares
issued and outstanding at September 30, 2017 and December 31, 2016,
respectively		60		52
Common stock, par value $0.001 per share, 150,000,000 shares authorized at March 31, 2021 and December 31, 2020; 111,716,852 and 104,619,876 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively						112		105
Additional paid-in capital		398,959		389,266		498,199		449,680
Accumulated deficit		(393,098)		(385,556)		(445,986)		(440,066)
Total stockholders’ equity		5,921		3,762		52,325		9,719
Total liabilities and stockholders’ equity	$	9,678	$	8,019	$	62,297	$	19,605

See accompanying notes to the unaudited condensed consolidated financial statements.

Aspira Women’s Health Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(Amounts in Thousands, Except Share Amounts)

(Unaudited)


	Common Stock
	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity
Balance at December 31, 2020	104,619,876	$	105	$	449,680	$	(440,066)	$	9,719
Net loss	-		-		-		(5,920)		(5,920)
Common stock issued in conjunction with exercise of stock options	196,976		-		317		-		317
Common stock issued for restricted stock awards	-				-		-		-
Common stock issued in conjunction with public offering, net of issuance costs of $0.5 million	6,900,000		7		47,713		-		47,720
Stock compensation charge	-		-		489		-		489
Balance at March 31, 2021	111,716,852	$	112	$	498,199	$	(445,986)	$	52,325



	Common Stock
	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity
Balance at December 31, 2019	97,286,157	$	97	$	430,802	$	(422,161)	$	8,738
Net loss	-		-		-		(3,706)		(3,706)
Common stock issued in conjunction with exercise of stock options	2,500		-		1		-		1
Stock compensation charge	-		-		269		-		269
Balance at March 31, 2020	97,288,657	$	97	$	431,072	$	(425,867)	$	5,302

See accompanying notes to the unaudited condensed consolidated financial statements.

~~Vermillion,~~Aspira Women’s Health Inc.

Condensed Consolidated Statements of Cash Flows

(Amounts in Thousands)

(Unaudited)


	Nine Months Ended				Three Months Ended
	September 30,				March 31,
	2017		2016		2021			2020
Cash flows from operating activities:
Net loss	$	(7,542)	$	(12,122)	$	(5,920)		$	(3,706)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash lease expense						16			-
Depreciation and amortization		599		523		90			56
Stock-based compensation expense		997		861		489			269
Loss on sale and disposal of property and equipment		4		3		1			2
Changes in operating assets and liabilities:
Accounts receivable		54		(44)		(87)			(111)
Prepaid expenses and other assets		312		354		(94)			14
Inventories		(62)		(5)		(41)			(38)
Accounts payable, accrued liabilities and other liabilities		(401)		(769)		291			13
Deferred revenue		62		-
Net cash used in operating activities		(5,977)		(11,199)		(5,255)			(3,501)
Cash flows from investing activities:
Purchase of property and equipment		(56)		(1,240)		(41)			(23)
Net cash used in investing activities		(56)		(1,240)		(41)			(23)
Cash flows from financing activities:
Proceeds from private placement offering of common stock, net of issuance costs		5,127		-
Proceeds from exercise of common stock warrants, net of issuance costs		3,577		-
Proceeds from issuance of DECD loan, net of issuance costs		-		1,967
Principal repayment of DECD loan		(136)		(73)		(3)			(48)
Repayment of capital lease obligations		(25)		(22)
Proceeds from issuance of common stock from exercise of stock options		-		5		317			1
Net cash provided by financing activities		8,543		1,877
Proceeds from DECD loan						—			-
Proceeds from PPP loan						—			-
Proceeds from exercise of warrants						—			-
Proceeds from public offering						48,236	��		-
Payment of issuance costs for public offering						(516)			-
Net cash provided by (used in) financing activities						48,034			(47)
Net increase (decrease) in cash and cash equivalents		2,510		(10,562)		42,738			(3,571)
Cash and cash equivalents, beginning of period		5,242		18,642		16,631			11,703
Cash and cash equivalents, end of period	$	7,752	$	8,080	$	59,369		$	8,132
Supplemental disclosure of cash flow information:
Cash paid during the period for interest		36		24		29			9
Supplemental disclosure of non-cash investing and financing activities:
Deemed dividend on warrant repricing		942		-
Supplemental disclosure of noncash investing and financing activities:
Net (decrease) increase in right-of-use assets						(15)			1

See accompanying notes to the unaudited condensed consolidated financial statements.

1. ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

Aspira Women’s Health Inc., formerly known as Vermillion, Inc. (“~~Vermillion”; Vermillion~~Aspira” and its wholly-owned subsidiaries are collectively referred to as the “Company,” ~~“we” or “our”~~) is incorporated in the state of Delaware, and is engaged in the business of developing and commercializing diagnostic tests for gynecologic disease. The Company currently markets and sells ~~OVA1™~~the following products and ~~Overa™~~related services: (1) OVA1, a blood test designed to, in addition to a physician’s clinical assessment of a woman with a pelvic mass, identify women who are at high-risk of having a malignant ovarian tumor prior to planned surgery; (2) OVERA, a second-generation biomarker panel intended to maintain OVA1’s high sensitivity while improving specificity; (3) OVA1plus, a reflex offering, which uses OVA1 and OVERA as a confirmation for OVA1 intermediate range results and leverages the strengths of OVA1’s Multivariate Index Assay (“MIA”) sensitivity and OVERA’s (MIA2G) specificity and as a result reduces false elevations by over 40%;; (4) Aspira GenetiX, a genetic test for gynecological cancer risk, with a core focus on female cancers, including breast, ovarian, endometrial, uterine and cervical cancers; and (5) Aspira Synergy, the Company’s new decentralized platform and cloud service technology. Through March 31, 2021, the Company’s product and related services revenue was limited to revenue generated by sales of ~~malignancy tests for ovarian cancer (“OVA1”~~OVA1, OVA1plus and ~~“Overa,” respectively)~~Aspira GenetiX. The Company sells OVA1 and OVA1plus through ~~Vermillion’s~~Aspira’s wholly-owned Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) certified clinical laboratory, ~~ASPiRA LABS,~~Aspira Labs, Inc. (“ASPiRA LABS”).

The Company also offers in-vitro diagnostic (“IVD”) trial services to third-party customers through its wholly-owned subsidiary, ASPiRA IVD, Inc. (“ASPiRA IVD”), which commenced operations in June 2016. ~~ASPiRA IVD is a specialized, CLIA certified, laboratory provider dedicated to meeting the unique testing needs of IVD manufacturers seeking to commercialize high-complexity assays.~~

The Company has incurred significant net losses and negative cash flows from operations since inception, and as a result has an accumulated deficit of approximately ~~$393,098,000 at September 30, 2017.~~$445,986,000. The Company also expects to incur a net loss and negative cash flows from operations for 2021.

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. The novel coronavirus has since spread to over 100 countries, including every state in the ~~remainder of 2017~~United States. In March 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic, and the ~~foreseeable future. The Company’s management believes that successful achievement~~United States declared a national emergency with respect to the coronavirus outbreak. This outbreak has severely impacted global economic activity, and many countries and many states in the United States have reacted to the outbreak by instituting quarantines, mandating business and school closures and restricting travel. In addition, many conventions and industry conferences have been canceled.

As a result of the ~~Company’s business objectives will require additional financing. Given these conditions, there is substantial doubt about~~COVID-19 pandemic and actions taken to contain it, the Company’s ~~ability to continue~~test volume, and resulting revenue, decreased significantly in late March and the full month of April 2020 as fewer patients visited their physicians and elective surgeries were postponed as a ~~going concern. The condensed consolidated financial statements have been prepared on a going concern basis and do not include any adjustments that might~~ result ~~from these uncertainties.~~

of closures. The Company ~~expects~~saw some increases in its test volume towards the latter half of the second quarter and in the third quarter of 2020, and test volume trended back to ~~raise capital through a variety~~pre-COVID-19 levels during the late third quarter 2020. In order to reduce the impact of ~~sources, which may include~~limitations on visiting physician offices due to closures and quarantines, the ~~exercise of common stock warrants, equity offerings, debt financing, collaborations, licensing arrangements, grants~~Company implemented other mechanisms for reaching physicians such as virtual sales representative meetings and ~~government funding~~increased digital sales and ~~strategic alliances. However, additional funding may not be available when needed or on terms acceptable~~marketing. Enrollment for future studies has been slower than originally planned due to the ~~Company. If~~impact of current closures for some states. The full impact of the COVID-19 pandemic continues to evolve as of the date of this filing. As a result, the Company is unable to ~~obtain additional capital, it may not be able to continue sales and marketing, research and development,~~estimate the extent of the impact of the COVID-19 pandemic on its operations or ~~other operations on the scope or scale of current activity and that could have a material adverse effect on the Company’s business, results of operations and financial condition.~~liquidity.

~~As discussed in Note 4, on August 31, 2017, certain investors exercised outstanding warrants for common stock for net proceeds of approximately $3,577,000 after deducting offering expenses.~~

As discussed in Note 4, on February 17, 2017, the Company completed a private placement pursuant to which certain investors purchased Vermillion common stock and warrants to purchase shares of Vermillion common stock for net proceeds of approximately $5,127,000 after deducting offering expenses.

As discussed in Note 3, in March 2016, the Company entered into ana loan agreement (as amended on March 7, 2018 and April 3, 2020, the “DECD Loan Agreement”) with the State of Connecticut Department of

Economic and Community Development (the ~~“Loan Agreement”~~“DECD”), pursuant to which it may borrow up to $4,000,000 from the ~~State of Connecticut Department of Economic and Community Development (the “DECD”).~~DECD.

The loan may be prepaid at any time without premium or penalty. An initial disbursement of $2,000,000 was made to the Company inon April 15, 2016 under the DECD Loan Agreement. ~~The Loan Agreement provides that~~On December 3, 2020, the Company received a disbursement of the remaining $2,000,000 ~~will be disbursed if and when~~under the DECD Loan Agreement, as the Company ~~achieves certain future milestones.~~ had achieved the target employment milestone necessary to receive an additional $1,000,000 under the DECD Loan Agreement and the DECD determined to fund the remaining $1,000,000 under the DECD Loan Agreement after concluding that the required revenue target would likely have been achieved in the first quarter of 2020 in the absence of the impacts of COVID-19.

8On April 10, 2020, the Company received a stimulus check of approximately $89,000 from the U.S. Department of Health and Human Services pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

As discussed in Note 3, on May 1, 2020, the Company obtained a loan (the “PPP Loan”) from BBVA USA in the aggregate amount of $1,005,767, pursuant to the Paycheck Protection Program (the “PPP”), which was established under the CARES Act, as administered by the U.S. Small Business Administration (the “SBA”).

As discussed in Note 4, during June 2020, all of the warrants from the Company’s 2017 private placement were exercised. The Company received $5,058,608 in aggregate proceeds from the exercise of the warrants.

As discussed in Note 4, on July 20, 2020, the Company completed a private placement of Aspira common stock, par value $0.001 per share, for net proceeds of $10.6 million, after deducting expenses related to the private placement.

As discussed in Note 4, on February 8, 2021, the Company completed a public offering (the “2021 Offering”) resulting in net proceeds of approximately $47.7 million, after deducting underwriting discounts and offering expenses.

As discussed in Note 3, in March 2021, the Company applied for forgiveness of the PPP Loan, but there is no assurance that all or a portion of the PPP Loan will be forgiven.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management of the Company, all adjustments, consisting of normal recurring adjustments necessary for the fair statement of results for the periods presented, have been included. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year or any other interim period.

The unaudited condensed consolidated financial statements and related disclosures have been prepared with the presumption that users of the interim unaudited condensed consolidated financial statements have read or have access to the audited consolidated financial statements for the preceding fiscal year. The condensed consolidated balance sheet at December 31, ~~2016~~2020 included in this report has been derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by GAAP. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, ~~2016~~2020 included in ~~Vermillion’s~~Aspira’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 31, ~~2017~~2021 (the ~~“2016~~“2020 Annual Report”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated results.

– OVA1, OVERA and OVA1plus: The Company ~~has adopted ASC 954-605,Health Care Entities—Revenue Recognition,~~ as ~~revenue from laboratory services has become significant to the Company~~.~~The Company's~~recognizes product revenue in accordance with the provisions of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Product revenue is ~~generated by performing diagnostic services using its~~recognized upon completion of the OVA1, OVERA or OVA1plus test and ~~Overa tests, and the service is completed upon the~~ delivery of ~~test~~ results to the ~~prescribing physician. The Company recognizes revenue related to billings for Medicare and commercial payers~~physician based on ~~an accrual basis, net~~estimates of ~~contractual and other adjustments, when~~ amounts that will ultimately be ~~realized can~~realized. In determining the amount of revenue to be ~~estimated. Until~~recognized for a contract has been negotiated with a commercial payer or governmental program, the OVA1 and Overa tests may or may not be covered by these entities' existing reimbursement policies. In addition, patients do not enter into direct agreements withdelivered test result, the Company ~~that commit them to pay any portion of~~considers factors such as payment history and amount, payer coverage, whether there is a reimbursement contract between the cost of the tests in the event that their insurance declines to reimburse the Company. In the absence of an agreement with the patient or other clearly enforceable legal right to demand payment from the patient, the related revenue is only recognized upon cash receipt.

~~Estimates of amounts that~~payer and the Company, ~~will ultimately realize~~and any developments or changes that could impact reimbursement. These estimates require significant judgment by ~~management. Some patients have out-of-pocket costs for amounts not covered by their insurance carrier, and~~management as the ~~Company may bill the patient directly for these amounts in the form of co-payments and co-insurance in accordance with the patient’s health plan. Some payers may not cover the OVA1 and Overa tests~~collection cycle on some accounts can be as ordered by the prescribing physician under their reimbursement policies. The Company pursues reimbursement from such patients on a case-by-case basis. In the absence of contracted reimbursement coverage or the ability to estimate the amount that will ultimately be realized for the Company's services, revenue is recognized when cash is received.

~~See discussion of ASU No. 2014-09 (defined below) included in Recent Accounting Pronouncements below.~~

The Company’s service revenue is generated by performing IVD trial services for third-party customers. In accordance with SAB Topic 13, service revenue is recognized when the following revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured.

~~See discussion of ASU No. 2014-09 included in Recent Accounting Pronouncements below.~~

~~The~~ Company ~~has made no other significant~~ ~~changes in its critical accounting policies and estimates from those disclosed in the 2016 Annual Report.~~

In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), Compensation - Stock Compensation (“ASU 2016-09”). The new guidance simplifies several aspects of the accounting for share-based payments, including immediate recognition of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees' maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows for the excess tax benefit and employee taxes paid when an employer withholds shares for tax-withholding purposes. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016 and interim periods within that reporting period. The adoption of this standard is not expected to have a material effect on our financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which removes inconsistencies and weaknesses in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets, provides more useful information to users of financial statements through improved disclosure requirements and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. This guidance requires that an entity depict the consideration by applying a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. On April 1, 2015, the FASB voted for a one-year deferral of the effective date of the new revenue recognition standard, ASU No. 2014-09. On July 15, 2015, the FASB affirmed these changes, which requires public entities to apply the amendments in ASU 2014-09 for annual reporting beginning after December 15, 2017. Early adoption is permitted beginning after December 31, 2016, the original effective date in ASU 2014-09.

~~The Company is in the early stages of its analysis of the effect ASU 2014-09 will have on its Service Revenue, but expects to complete its analysis during the fourth quarter of 2017.~~

~~The Company is~~ also continuing its analysis of the effect ASU 2014-09 will have on its Product Revenue and also expects to complete this analysis in the fourth quarter of 2017. Revenue that is recognized upon the ultimate receipt of cash under the Company’s existing revenue recognition policy will have to be reassessed under the new standard. The Company’s implementation process is to reviewreviews its patient account population ~~to determine the~~and determines an appropriate distribution of patient accounts by payer (~~i.e.~~ (i.e., Medicare, patient pay, other third-party payer, ~~etc~~.etc.) into portfolios with similar collection ~~experience~~experience. The Company has elected this practical expedient that, when evaluated for collectability, ~~will result~~results in a materially

consistent revenue amount for such portfolios as if each patient account were evaluated on an individual contract basis. During the period ended March 31, 2021, there were no adjustments to estimates of variable consideration to derecognize revenue for services provided in a ~~contract-by-contract basis.~~prior period. There were no impairment losses on accounts receivable recorded during the periods ended March 31, 2021 and 2020.

Genetics Revenue – Aspira GenetiX: Under ASC 606, the Company’s genetics revenue is recognized upon completion of the Aspira GenetiX test and delivery of results to the physician based on estimates of amounts that will ultimately be realized. In determining the amount of revenue to be recognized for a delivered test result, the Company considers factors such as payment history and amount, payer coverage, whether there is a reimbursement contract between the payer and the Company, and any developments or changes that could impact reimbursement. These estimates require significant judgment by management as the Company has limited experience with such factors relating to Aspira GenetiX.

Service Revenue - The Company’s service revenue was generated by performing in vitro diagnostic (“IVD”) trial services for third-party customers. Measurement of progress on contracts with customers was generally based on the input measurement of cost incurred relative to the total expected costs to satisfy the performance obligation. The Company ~~has~~does not ~~yet determined if~~expect to have any significant service revenue going forward, as it ~~plans to utilize~~largely wound down performing the ~~full retrospective or modified retrospective method of adoption, but anticipates adopting the new standard~~ASPiRA IVD, Inc. (“ASPiRA IVD”) trial services in the ~~first~~fourth quarter of ~~2018.~~2019. During 2020, the Company’s service revenue was limited to the fulfillment of one legacy IVD contract.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This update changes the impairment model from the currently used incurred loss methodology to an expected loss methodology, which will result in the more timely recognition of losses. The ASU 2016-13 is scheduled to be effective in 2023 for smaller reporting companies. The Company is currently assessing the impact of this standard on its consolidated financial statements.

In March 2015, the Company ~~entered into a commercial~~reached an agreement with Quest Diagnostics, ~~Incorporated~~Inc. (“Quest Diagnostics”). Pursuant to this agreement, all OVA1 U.S. testing services for Quest Diagnostics customers were transferred to~~Vermillion’s~~ Aspira’s wholly-owned subsidiary, ASPiRA LABS,as of August 2015. Pursuant to this agreement, as amended as of March 11, ~~2017,~~2020, Quest Diagnostics has ~~agreed~~continued to provide blood draw and logistics support by transporting

specimens ~~from its clients~~ to ASPiRA LABS for testing ~~through at least March 11, 2018~~ in exchange for a market value fee. ~~Per~~The purpose of the ~~terms~~2020 amendment was to extend the term of ~~this agreement,~~the Testing and Services Agreement from March 11, 2019 to March 11, 2023 and for the Company ~~will not offer~~ to ~~existing or future~~pay an annual fee of $75,000 for the services of a part-time Quest Diagnostics ~~customers tests that Quest Diagnostics offers.~~project manager.

On May 1, 2020, the Company obtained the PPP Loan from BBVA USA in the aggregate amount of $1,005,767. The application for these funds required the Company to, in good faith, certify that the described economic uncertainty at the time made the loan request necessary to support the ongoing operations of the Company. This certification further required the Company to consider its current business activity and its ability to access other sources of liquidity sufficient to support ongoing operations in a manner that was not significantly detrimental to the business. Under the terms of the CARES Act and the PPP Loan, all or a portion of the principal amount of the PPP Loan is subject to forgiveness so long as, over the 24-week period following the Company’s receipt of the proceeds of the PPP Loan, the Company used those proceeds for payroll costs, rent, utility costs or the maintenance of employee and compensation levels. The PPP Loan, which was granted pursuant to a promissory note, matures on May 1, 2022. Any unforgiven portion of the PPP Loan bears interest at a rate of 1.000% per annum, payable monthly in equal installments commencing in August 2021. The Company applied for forgiveness of the PPP Loan in March 2021, but there is no assurance that all or a portion of the PPP Loan will be forgiven. The PPP Loan is subject to any new guidance and new requirements released by the Department of the Treasury.

On March 22, 2016, the Company entered into the DECD Loan Agreement, pursuant to which the Company may borrow up to $4,000,000 from the DECD. ~~Proceeds from the~~ $2,000,000 April 2016 initial disbursement under the Loan Agreement were utilized primarily to fund the build-out, information technology infrastructure and other costs related to the Company’s Trumbull, Connecticut facility and operations. The loan bears interest at a fixed rate of 2.0% per annum and requires equal monthly payments of principal and interest until maturity, which occurs on April 15, 2026. As security for the loan, the Company has granted the DECD a blanket security interest in the Company’s personal and intellectual property. The DECD’s security interest in the Company’s intellectual property may be subordinated to a qualified institutional lender.

The loan may be prepaid at any time without premium or penalty. An initial disbursement of $2,000,000 was made to the Company on April 15, 2016 under the DECD Loan Agreement. On December 3, 2020, the Company received a disbursement of the remaining $2,000,000 under the DECD Loan Agreement, as the Company had achieved the target employment milestone necessary to receive an additional $1,000,000 under the DECD Loan Agreement and the DECD determined to fund the remaining $1,000,000 under the DECD Loan Agreement after concluding that the required revenue target would likely have been achieved in the first quarter of 2020 in the absence of the impacts of COVID-19.

Under the terms of the DECD Loan Agreement, the Company may be eligible for forgiveness of up to ~~$2,000,000~~$1,500,000 of the principal amount of the loan if the Company achieves certain job creation and retention milestones by ~~March 1, 2018.~~December 31, 2022. Conversely, if the Company is either unable to ~~meet these job creation milestones, namely, hiring 40~~retain 25 full-time employees with a specified average annual salary ~~within the allotted timeframe and retaining those employees~~ for a consecutive two-year period or does not maintain the Company’s Connecticut operations ~~for a period of 10 years,~~through March 22, 2026, the DECD may require early repayment of a portion or all of the loan plus a penalty of 5%. of the total funded loan.

As of March 31, 2021, the annual amounts of future minimum principal payments due under certain of the Company’s contractual obligations are shown in the table below. Debt issuance costs for the DECD loan were $18,000. Debt related to the PPP Loan of $1,006,000 and that certain insurance promissory note of $408,000, as described below, are not included in the table below, as the PPP Loan’s forgiveness is pending a decision by the SBA as of the date of this filing, and the $408,000 insurance promissory note is cancellable.

During 2020 and 2019, the Company entered into insurance promissory notes for the payment of insurance premiums at an interest rate of 3.88% and 4.49% respectively, with an aggregate principal amount outstanding of approximately $408,000 and $611,000 as of March 31, 2021 and December 31, 2020, respectively. The amount outstanding could be substantially offset by the cancellation of the related insurance coverage which is classified in prepaid insurance. These notes are payable in ten monthly installments with maturity dates of October 1, 2021 and October 1, 2020, respectively.

As discussed above, an initial disbursement of $2,000,000 was made to the Company on April 15, 2016 under the Loan Agreement. The Loan Agreement provides that the remaining $2,000,000 will be disbursed if and when the Company achieves certain future milestones. The loan may be prepaid at any time without premium or penalty .

The Company leases facilities to support its business of discovering, developing and commercializing diagnostic tests in the fields of gynecologic disease. The Company’s principal facility, including the CLIA laboratory used by ASPiRA LABS, is located in Austin, Texas, and the CLIA laboratory used byfor ASPiRA IVD services is located in Trumbull, Connecticut. ~~The~~In October 2020, the Company renewed the Austin, Texas lease ~~includes an aggregate annual base rent of $85,000 and annual estimated common area charges, taxes and insurance of $46,000 and~~for one additional year. The Company’s renewed lease expires on January 31, ~~2019.~~ 2022, with no automatic renewal or renewal option.

In October 2015, the Company entered into a lease agreement for a facility in Trumbull, Connecticut. The lease required initial payments for the buildout of leasehold improvements to the office space, which were approximately $596,000. In September 2020, the Company exercised the renewal option for its Trumbull, Connecticut lease. The ~~term of~~Company’s renewed lease expires on June 30, 2026, with a five year renewal option. The Company is not reasonably certain that it will exercise the ~~lease is~~ five ~~years~~year renewal option beginning ~~after the initial date of occupancy in January~~ on July 1, 2026.

~~2016 and a rent abatement period of five months.~~ The ~~lease includes an aggregate annual base rent of $32,000 and annual estimated common area charges, taxes and insurance of $95,000.~~

~~Building rent~~expense associated with these operating leases for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016 totaled $66,000 and $71,000, respectively. Building rent for~~2020 is shown in the ~~nine months ended September 30, 2017 and 2016 totaled $189,000 and $175,000, respectively.~~table below (in thousands).

~~Capital Lease~~Based on the Company’s leases as of March 31, 2021, the table below sets forth the approximate future lease payments related to operating leases with initial terms of one year or more (in thousands).

In April 2015, the Company leased a laboratory instrument for a total initial payment of $125,000 and ongoing payments of approximately $3,500 per month for 36 months after delivery. The agreement also requires minimum annual purchases of reagents from the manufacturer of the equipment. The laboratory instrument was placed into service on July 1, 2015.

~~The accumulated amortization of assets under capital~~Weighted-average lease ~~obligations was $174,000~~term and ~~$97,000~~discount rate were as ~~of September 30, 2017 and 2016, respectively. The net book value of assets under capital lease obligations was $58,000 and $135,000 as ofSeptember 30, 2017 and 2016, respectively.~~ follows:

The Company is a party to an amended research collaboration agreement with The Johns Hopkins University School of Medicine under which the Company licenses certain of its intellectual property. directed at the discovery and validation of biomarkers in human subjects, including but not limited to clinical application of biomarkers in the understanding, diagnosis and management of human disease. Under the terms of the amended research collaboration agreement, ~~Vermillion~~Aspira is required to pay the greater of 4% royalties on net sales of diagnostic tests using the assigned patents or annual minimum royalties of $57,500. Royalty expense for the ~~three months~~periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016 totalled $30,000~~2020 totaled $57,000 and ~~$24,000,~~$46,000, respectively. ~~Royalty expense~~

From time to time, the Company is involved in legal proceedings and regulatory proceedings arising from operations. The Company establishes reserves for specific liabilities in connection with legal actions that management deems to be probable and estimable. The Company is not currently a party to any proceeding, the ~~nine months ended September 30, 2017 and 2016 totalled $94,000 and $66,000, respectively.~~adverse outcome of which would have a material adverse effect on the Company’s financial position or results of operations.

~~In December 2014,~~On February 17, 2017, the Company issued certain warrants to purchase up to an aggregate of ~~4,166,659~~ 2,810,338 shares of ~~Vermillion~~Aspira common stock at an exercise price of ~~$2.00~~$1.80 per share in ~~conjunction~~connection with a ~~December 2014~~February 2017 private placement of ~~Vermillion~~Aspira common stock. The warrants ~~expire by their original terms on December 23, 2017.~~were initially sold at a price of $0.125 per share of common stock underlying the warrants.

On ~~August 31, 2017, certain holders exercised warrants to purchase 3,796,818 shares~~June 1, 2020, following the 20th consecutive trading day for which the closing price per share of ~~Vermillion~~Aspira common stock, ~~in consideration for~~as reported on the ~~Company agreeing to reduce~~Nasdaq stock market, exceeded the exercise price, the Company sent notice to ~~$1.00 per share of Vermillion common stock.~~

The Company issued 3,796,818 shares of Vermillion common stock and received $3,796,818 in aggregate gross proceeds (approximately $3,577,000 net of transaction costs). The incremental non-cash fair value of approximately $942,000 from the ~~modification~~investors holding such warrants accelerating the expiration date of the warrants, ~~was calculated using~~in accordance with the ~~Black-Scholes model and recorded as a deemed dividend~~terms thereof. Pursuant to the ~~warrant holders within stockholders’ equity.~~terms of the warrants, any portion of the warrants not exercised prior to such accelerated expiration date would become void and of no value.

~~2017~~As of June 9, 2020, all of the warrants were exercised. The Company issued 2,810,338 shares of Aspira common stock and received $5,060,000 in aggregate proceeds from the exercise of the warrants. As of the date of the issuance of these financial statements, there are no outstanding warrants for the purchase of Aspira common stock.

On ~~February 17, 2017,~~July 20, 2020, the Company completed a private placement pursuant to which certain investors purchased ~~3,747,125~~3,150,000 shares of ~~Vermillion~~Aspira common stock at a price of ~~$1.40~~$3.50 per share. ~~Vermillion also issued warrants to purchase shares of Vermillion common stock at a price of $0.125 per warrant share in the private placement.~~ Net proceeds of the private placement were ~~approximately $5,127,000~~ $10.6 million, after deducting ~~offering expenses. The warrants are exercisable for~~ ~~2,810,338~~ ~~shares~~expenses related to the private placement of ~~Vermillion common stock at $1.80 per share.~~ ~~The warrants expire on the fifth anniversary of the date of issuance~~ or, if earlier, five business days after Vermillion delivers notice that the closing price per share of its common stock exceeded the exercise price for 20 consecutive trading days during the exercise period.

$384,000. The sale of common stock ~~and issuance of warrants~~ qualified for equity treatment under GAAP.

On February 4, 2021, the Company entered into an underwriting agreement (the “2021 Underwriting Agreement”) with William Blair & Company, L.L.C. and Truist Securities, Inc., as representatives of several underwriters (the “2021 Underwriters”), in connection with the underwritten public offering of 6,000,000 shares of Aspira common stock at a price to the public of $7.50 per share. The ~~respective values~~2021 Underwriters purchased these 6,000,000 shares at the public offering price per share, less the underwriting discount of $0.4875 per share.

Under the 2021 Underwriting Agreement, the Company granted the 2021 Underwriters an option to purchase up to an additional 900,000 shares of Aspira common stock at the public offering price, less the underwriting discount of $0.4875 per share. On February 5, 2021, the 2021 Underwriters notified the Company that they were exercising this option in connection with the closing of the ~~warrants and~~2021 Offering. The 2021 Offering, including the additional 900,000 shares of Aspira common stock, ~~were calculated using their relative fair values~~closed on February 8, 2021 and ~~classified under common stock and additional paid-in capital. The value ascribed~~resulted in net proceeds to the ~~warrants is $804,000~~Company of approximately $47.7 million, after deducting underwriting discounts and ~~to the common stock is approximately $4,296,000.~~offering expenses.

~~The~~At the Company’s ~~employees, directors, and consultants are eligible to receive awards under~~2019 annual meeting of stockholders, the Company’s stockholders approved the Vermillion, Inc. ~~Second Amended and Restated 2010~~2019 Stock Incentive Plan (the ~~“2010~~“2019 Plan”). The ~~2010~~purposes of the 2019 Plan ~~permits~~are (i) to align the ~~granting~~interests of ~~a variety~~the Company’s stockholders and recipients of awards ~~including~~under the 2019 Plan by increasing the proprietary interest of such recipients in the Company’s growth and success; (ii) to advance the interests of the Company by attracting and retaining non-employee directors, officers, other employees, consultants, independent contractors and agents; and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders. The 2019 Plan allows the Company to grant stock options, ~~share~~stock appreciation rights, restricted stock, restricted stock units and performance awards to participants.

Subject to the terms and conditions of the 2019 Plan, the initial number of shares ~~restricted share units, unrestricted shares, deferred share units, performance and cash-settled awards, and dividend equivalent rights. The 2010~~authorized for grants under the 2019 Plan ~~provides for issuance of up to 8,122,983~~is 10,492,283. To the extent an equity award granted under the 2019 Plan expires or otherwise terminates without having been exercised or paid in full, or is settled in cash, the shares of ~~Vermillion~~ common stock subject to ~~adjustment as provided in~~such award will become available for future grant under the ~~2010~~2019 Plan.

~~During the nine months ended September 30, 2017, the Company awarded to Vermillion’s non-employee directors 131,250~~ As of March 31, 2021, 10,438,081 shares of Aspira common stock were subject to outstanding stock options, and 75,988 shares of Aspira common stock were subject to unvested restricted stock awards and a total of 3,946,874 shares of Aspira common stock were reserved for issuance under the 2010 Plan having a fair value of approximately $281,000 as payment for services to be rendered in 2017. These shares of restricted stock vested 50% on June 1, 2017 and 25% on September 1, 2017, and the remaining 25% will vest on December 1, 2017. The Company also issued to certain consultants 27,878 shares of restricted stock under the 2010 Plan having a fair value of approximately $48,000.2019 Plan.

During the three months ended September 30, 2017, the Company issued to certain consultants 5,037 shares of restricted stock under the 2010 Plan having a fair value of approximately $9,000. The Company did not make any awards of restricted stock to non-employee directors during the three months ended September 30, 2017.

During the nine months ended September 30, 2017, the Company also granted certain consultants options to purchase 70,000 shares of Vermillion common stock with an exercise price of $2.14 per share. The Company also granted certain officers and employees options to purchase approximately 916,000 shares of Vermillion common stock with an exercise price of $2.14 per share. In addition,March 31, 2021, the Company granted ~~certain officers and employees options to purchase 14,500 shares of Vermillion common stock with an exercise price of $1.83 per share. These stock options generally vest 25% on each of~~ the ~~four anniversaries of~~following awards under the ~~grant date.~~ 2019 Plan:

During the nine months ended September 30, 2017, the Company also granted certain officers and employees options to purchase 250,000 shares of Vermillion common stock with an exercise price of approximately $2.14 per share with performance-based vesting based on certain metrics through December 31, 2017. These options vest 25% on each of the four anniversaries of the grant date if the performance-based metrics are met.

During the three months ended September 30, 2017, the Company granted certain officers and employees options to purchase 22,500 shares of Vermillion common stock with an exercise price of $1.32 per share. These stock options vest 25% on each of the four anniversaries of the vesting commencement date for each such stock option.

During the three months ended September 30, 2017, the Company granted certain consultants of the Company options to purchase 120,000 shares of Vermillion common stock with an exercise price of $1.32 per share. These stock options vest in 24 equal monthly installments beginning on the vesting commencement date for each such stock option.

The allocation of employee stock-based compensation expense by functional area for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 was as follows:


	Three Months Ended
	March 31,
(in thousands)	2021		2020
Cost of revenue	$	31	$	23
Research and development		25		—
Sales and marketing		139		37
General and administrative		190		201
Total	$	385	$	261

Three Months Ended September 30,

Nine Months Ended September 30,
(in thousands)

2017

2016

2017

2016
Cost of revenue

$
21

$
24

$
61

$
70
Research and development

—

10

5

63
Sales and marketing

38

10

108

66
General and administrative

216

198

630

623
Total

$
275

$
242

$
804

$
822

5. LOSS PER SHARE

The Company calculates basic loss per share using the weighted average number of shares of ~~Vermillion~~Aspira common stock outstanding during the period. Because the Company is in a net loss position, diluted loss per share is calculated using the weighted average number of shares of ~~Vermillion~~Aspira common stock outstanding and excludes the effects of ~~7,971,860~~10,514,070 and ~~7,485,632~~12,543,364 potential shares of ~~Vermillion~~Aspira common stock as of ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively, that are anti-dilutive. Potential shares of ~~Vermillion~~Aspira common stock include incremental shares of ~~Vermillion~~Aspira common stock issuable upon the exercise of outstanding warrants, stock options and unvested restricted stock units.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995.

These statements involve a number of risks and uncertainties. Words such as “may,” “expects,” “intends,” “anticipates,” “believes,” “estimates,” “plans,” “seeks,” “could,” “should,” “continue,” “will,” “potential,” “projects” and similar expressions are intended to identify such forward-looking statements. Readers are cautioned that these forward-looking statements speak only as of the date on which this Quarterly Report on Form 10-Q is filed with the Securities and Exchange Commission ~~(“SEC”~~(the “SEC”), and, except as required by law, ~~Vermillion,~~Aspira Women’s Health Inc. (“~~Vermillion”~~Aspira” and, together with its subsidiaries, the “Company,” “we,” “our,” or “us”) does not assume any obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after such date.

Examples of forward-looking statements ~~regarding our business~~ include, ~~the following:~~without limitation:

expectations relating to the Paycheck Protection Program loan (the “PPP” Loan);

projections or expectations regarding our future test volumes, revenue, cost of revenue, operating expenses, research and development expenses, gross profit margin, cash flow, results of operations and financial condition;

our plan to broaden our commercial focus from ovarian cancer to differential diagnosis of women with a range of gynecological ~~disorders;~~disorders, including additional pelvic disease conditions such as endometriosis, in addition to genetics risk assessment, including, breast and ovarian cancer hereditary risk assessment and carrier screening;

our planned business strategy and strategic business drivers and the anticipated ~~timing of the implementation~~effects thereof;

plans ~~with respect~~ to ~~our market expansion~~commercialize OVA1, OVERA, OVA1plus, Aspira GenetiX, OVASight, EndoCheck, OVAInherit and ~~growth, including plans to market Overa outside the United States;~~Aspira Synergy on a global level;

plans to develop new algorithms, ~~and~~ molecular diagnostic ~~tests;~~ tests, products and tools and otherwise expand our product offerings, including plans to develop a product using genetics, proteins and other modalities to assess the risk of developing cancer when carrying a pathogenic variant associated with hereditary breast and ovarian cancer that is difficult to detect through a diagnostic test;

~~plans~~Plans and timeline to ~~develop a product or tool combining an OVA1 with results of a symptom index;~~

~~plans to~~ establish ~~our own~~ payer coverage for ~~OVA1~~OVERA, Aspira GenetiX, OVASight, EndoCheck and ~~Overa;~~OVAInherit separately and expand coverage for OVA1;

intentions to address clinical questions related to early disease detection, treatment response, monitoring of disease progression, prognosis and other issues in the fields of oncology and women’s health;

~~plans to leverage infrastructure and enhance our pipeline of future technologies by fostering relationships with in vitro diagnostic (“IVD”) companies;~~

~~plans with respect to ASPiRA IVD, Inc. (“ASPiRA IVD”);~~

~~expected service revenue growth based on ASPiRA IVD;~~

~~expected license revenue in future periods;~~

~~our planned focus~~ on the execution of five core strategic business drivers in ovarian cancer diagnostics and specialized laboratory services to address unmet medical needs for women faced with gynecologic disease and other conditions and the continued development of our business;

anticipated efficacy of our products, product development activities and product ~~innovations;~~innovations, including our ability to improve sensitivity and specificity over traditional diagnostic biomarkers;

expected competition in the markets in which we compete;

plans with respect to ASPiRA LABS, ~~Inc. (“~~including plans to expand ASPiRA ~~LABS”);~~LABS’ testing capabilities;

plans to add a genetics laboratory to our Connecticut office;

expectations regarding future services provided by Quest Diagnostics ~~Incorporated (“Quest Diagnostics”);~~Incorporated;

plans to ~~expand our ovarian cancer franchise beyond OVA1, including with respect to Overa~~develop informatics products and ~~OvaX;~~

~~plans regarding the commercialization of Overa;~~

~~plans to~~ develop and perform laboratory developed tests (“LDTs”);

plans ~~with respect~~ to ~~the Company’s~~develop a race and / or ethnicity-specific pelvic mass ~~registry, including anticipated sources of funding;~~

~~anticipated effects on reimbursement for OVA1 from changes to Novitas Solutions’ administrative requirements;~~

~~expectations regarding~~ the Company’s monitoring and combining multiple protein biomarkers to create diagnostic tests to aid physicians considering treatment options for patients with complex diseases, and the Company’s future development of new In Vitro Diagnostic Multivariate Index Assays (IVDMIA);risk assessment;

expectations regarding existing and future collaborations and partnerships for our products, including ~~OVA1 and Overa distribution agreements;~~plans to enter into decentralized arrangements for our Aspira Synergy product;

plans regarding future publications;

our ~~continued~~ ability to continue to comply with applicable governmental regulations, expectations regarding pending regulatory submissions and plans to seek regulatory approvals for our tests ~~outside~~within the United ~~States;~~

~~our ability to obtain~~States and ~~maintain the regulatory approvals required to market Overa in other countries;~~internationally, as applicable;

our continued ability to expand and protect our intellectual property portfolio;

anticipated liquidity, capital requirements and ~~capital requirements;~~

~~anticipated~~ future ~~losses and our ability to continue as a going concern;~~

~~expectations regarding the second disbursement from our financing arrangement with the State of Connecticut Department of Economic and Community Development (the “DECD”);~~

~~expected expenditures, including the expected decrease in expenses related to research and development in 2017;~~

~~our ability to use our net operating loss carryforwards;~~

~~expected market adoption of our diagnostic tests, including OVA1 and Overa;~~

~~expectations regarding our ability to launch new products developed, licensed, co-marketed or acquired;~~losses;

expectations regarding raising capital and the amount of financing anticipated to be required to fund our planned operations;

expectations regarding the results of our clinical utility studies and our ability to recruit patients to participate in such studies;

our ability to use our net operating loss carryforwards and anticipated future tax liability under U.S. federal and state income tax legislation;

expected market adoption of our diagnostic tests, including OVA1, OVERA, OVA1plus and Aspira GenetiX;

expectations regarding our ability to launch new products we develop, license, co-market or acquire;

expectations regarding the size of the markets for our products;

expectations regarding reimbursement for our products, and our ability to obtain such reimbursement, from third-party payers such as private insurance companies and government insurance ~~plans.~~plans;

plans to use AbbVie Inc. serum samples in EndoCheck product validation studies;

expectations regarding the wind down of our ASPiRA IVD, Inc. subsidiary and future service revenue;

expectations in leveraging telehealth, including for the development of a process for patients to access Aspira GenetiX testing directly;

expected target launch date for OVASight;

Plans with respect to EndoCheck whether or not the FDA designates it a Breakthrough Device; and

expectations regarding the impacts resulting from or attributable to the COVID-19 pandemic and actions taken to contain it.

Forward-looking statements are subject to significant risks and uncertainties, including those discussed in Part I Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2016 (our “2016 Annual Report”) and Part II, Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the three months ended March 31, 2017 (our “2017 First Quarterly Report”),~~2020, that could cause actual results to differ materially from those projected in such forward-looking statements due to various factors, including impacts resulting from or relating to the COVID-19 pandemic and actions taken to contain it; expectations regarding the forgiveness of the PPP Loan, anticipated use of capital and its effects; our ability to increase the volume of ~~OVA1 or Overa~~our product sales; ~~our ability to market our test through sales channels other than Quest Diagnostics including ASPiRA LABS;~~ failures by third-party payers to reimburse ~~OVA1 or Overa~~for our products and services or changes ~~or variances in~~to reimbursement rates; our ability to ~~secure additional capital on acceptable terms~~continue developing existing technologies and to ~~execute~~develop, protect and promote our ~~business plan;~~proprietary technologies; plans to develop and perform LDTs; our ability to comply with Food and Drug Administration (“FDA”) regulations that relate to our products and to obtain any FDA clearance or approval required to develop and commercialize OVA1 and/or Overa both within and outside the United States; in the event that we succeed in commercializing OVA1 and/or Overa outside the United States, the political, economic and other conditions affecting other countries (including foreign exchange rates);medical devices; our ability to develop and commercialize additional diagnostic products and achieve market acceptance with respect to these products; our ability to compete successfully; our ability to obtain any regulatory approval required for our future diagnostic products; ~~our~~ or our

suppliers’ ability to comply with ~~United States Food and Drug Administration (“FDA”)~~FDA requirements for production, marketing and post-market monitoring of our products; ~~additional costs that may be required to make further improvements to our manufacturing operations;~~ our ability to maintain sufficient or acceptable supplies of immunoassay kits from our suppliers; in the event that we succeed in commercializing our ~~ability to continue to develop, protect~~products outside the United States, the political, economic and promote our proprietary technologies; future litigation against us, including infringement of intellectual property and product liability exposure; our ability to retain key employees; business interruptions; legislative actions resulting in higher compliance costs;other conditions affecting other countries; changes in healthcare policy; our ability to comply with environmental laws; ~~our ability to generate sufficient demand for ASPiRA LABS’ services to cover its operating costs;~~ our ability to comply with the additional laws and regulations that apply to us in connection with the operation of ASPiRA LABS; our ability to ~~comply with FDA regulations that relate to~~use our ~~products and to obtain any FDA clearance or approval required to develop and perform LDTs; ASPiRA IVD’s lack of~~net operating history; ASPiRA IVD’s ability to generate and maintain business; fluctuations over time with respect to ASPiRA IVD’s operating results; ASPiRA IVD’s ability to enter into profitable contracts; ASPiRA IVD’s ability to maintain effective information systems without significant interruption; ASPiRA IVD’s ability to perform its services in compliance with contractual requirements, regulatory standards and ethical considerations; andloss carryforwards; our ability to ~~continue as~~use intellectual property directed to diagnose biomarkers; our ability to successfully defend our proprietary technology against third parties; our ability to obtain licenses in the event a ~~going concern.~~ third party successfully asserts proprietary rights; the liquidity and trading volume of our common stock; the concentration of ownership of our common stock; our ability to retain key employees; our ability to secure additional capital on acceptable terms to execute our business plan; business interruptions; the effectiveness and availability of our information systems; our ability to integrate and achieve anticipated results from any acquisitions or strategic alliances; future litigation

against us, including infringement of intellectual property and product liability exposure; and additional costs that may be required to make further improvements to our manufacturing operations.

Overview

Our ~~vision~~core mission is to ~~drive~~transform the ~~advancement~~state of women’s health, ~~by providing innovative methods~~globally, starting with ovarian cancer. We aim to ~~detect, monitor~~eradicate late-stage detection of ovarian cancer and ~~manage~~to ensure that all our solutions will meet the ~~treatment~~needs of ~~both benign~~women of all ages, races, ethnicities and ~~malignant gynecologic disease, with our primary focus being diseases~~stages of the ~~female pelvic cavity.~~disease. Our core patient goal is to develop a lifelong relationship with each patient, ensuring each woman has access to the best-in-class diagnostics.

~~We have expanded our corporate strategy with the goal of transforming Vermillion from a technology license company to a diagnostic service and bio-analytic solutions provider.~~

Our plan is to broaden our commercial focus from ovarian cancer to differential diagnosis of women with a range of gynecological disorders. Our strategy is being deployed in three phases. The three phases are a rebuild phase, which was completed in the third quarter of 2015, a transformation phase, which is now virtually complete except for continuing expansion of payer coverage, and a market expansion and growth phase, which we began in 2017.

During the first phase, we expanded our leadership team by hiring several new senior leaders including a chief executive officer. In addition, we expanded our commercial strategy, reestablished medical and advisory support, rebuilt our patient advocacy strategy and established a billing system and a payer strategy outside of our relationship with Quest Diagnostics. During the second phase, ~~we completed the process of obtaining licensure of ASPiRA LABS~~ ~~in all of the states that require licenses, and are in the process of establishing our own payer coverage for OVA1,~~ ~~Multivariate Index Assay~~ ~~(MIA), and our second-generation OVA1 test, trademarked Overa,~~ ~~Multivariate Index Assay, 2~~nd ~~Generation~~ ~~(MIA2G). Overa has been launched on a targeted basis. In the third phase, we~~ We plan to ~~fully commercialize OVA1~~continue commercializing our new generation of technology and ~~Overa by utilizing the full national licensure of ASPiRA LABS, select laboratories for distribution, managed care coverage in select markets,~~ ~~our sales force and~~ ~~existing customer base. Unlike OVA1, Overa uses a global testing platform, which will allow Overa to~~ ~~be deployed~~ internationally. We initiated the targeted launch of Overa in October 2016 with two key accounts converting from OVA1 to Overa. In October 2015, we announced registration of the CE mark for and clearance to market Overa in the European Union. We also plan to develop an LDT product series, which we refer to internally as OvaX. We anticipate that OvaX will include not only biomarkers, but also clinical risk factors, other diagnostics and patient history data in order to boost predictive value.

We are dedicated to the discovery, development and commercialization of novel high-value diagnostic and bio-analytical solutions that help physicians diagnose, treat and improve outcomes for women. Our tests are intended to detect, characterize and stage disease, and to help guide decisions regarding patient treatment, which may include decisions to refer patients to specialists, to perform additional testing, or to assist in monitoring response to therapy. A distinctive feature of our approach is to combine multiple biomarkers, other modalities and diagnostics, clinical risk factors and patient data into a single, reportable index score that has higher diagnostic accuracy than its constituents. We concentrate on our development of novel diagnostic tests for gynecologic disease, with an initial focus on ovarian cancer.decentralized technology transfer service platform. We also intend to ~~address clinical questions related~~raise public awareness regarding the diagnostic superiority of OVA1 as compared to ~~early disease detection, treatment response, monitoring of disease progression, prognosis and others through collaborations~~cancer antigen 125 (“CA125”) for African American women with ~~leading academic and research institutions.~~adnexal masses.

~~Our initial product,~~We currently market and sell the following products and related services: (1) OVA1, ~~is an FDA cleared~~a blood test designed to, in addition to a physician’s clinical assessment of a woman with a pelvic mass, identify women who are at ~~high risk~~high-risk of having a malignant ovarian

tumor prior to planned ~~surgery.~~ surgery;~~We have launched on a targeted basis~~ (2) OVERA, a second-generation biomarker panel ~~known as Overa, which is~~ intended to maintain ~~our product’s~~OVA1’s high sensitivity while improving ~~specificity.~~specificity; (3) OVA1plus, a reflex offering which uses OVA1 and OVERA as a confirmation for OVA1 intermediate range results and leverages the strengths of OVA1’s Multivariate Index Assay (“MIA”) sensitivity and OVERA’s (MIA2G) specificity and as a result reduces false elevations by over 40%; (4) Aspira GenetiX, a genetic test for gynecologic cancer risk, with a core focus on female reproductive cancers, including breast, ovarian, endometrial, uterine and cervical cancers; and (5) Aspira Synergy, our new decentralized platform and cloud service technology, which we plan to house our algorithms for decentralized global access. We plan to make OVA1, OVERA, OVA1plus and Aspira GenetiX available through Aspira Synergy. Our OVA1 algorithm received FDA de novo classification in September 2009, and our OVERA algorithm received FDA 501(k) clearance ~~for Overa~~ in March 2016. ~~Overa uses~~OVA1 and OVERA each use the Roche cobas 4000, 6000 ~~platform~~and 8000 platforms for analysis of proteins. Through March 31, 2021, our product and related services revenue has been limited to revenue generated by sales of OVA1, OVA1plus and Aspira GenetiX. In 2021, we have begun to enter into decentralized arrangements with large healthcare networks and large practices for our Aspira Synergy product.

.We are developing three additional products and related services, including two diagnostic algorithms, OVASight (previously OVANex) and EndoCheck, and a high-risk diagnostic algorithm, OVAInherit, for patients with or without a pelvic mass who are genetically predisposed to ovarian cancer. These products may be launched as LDTs or FDA-cleared tests.

OVASight is validated to confirm risk of malignancy for women with an indeterminate mass that includes not only biomarkers, but also other clinical risk factors, and potentially other diagnostics and patient history data to increase predictive value. OVASight is our third-generation risk of malignancy for ovarian cancer test and focuses on women who present with an indeterminate mass with a very low risk of cancer. In this group, women with a low risk have the potential to be sequentially monitored to a finalized classification of low-risk or high-risk. This is intended for women who are not planned for surgery.

EndoCheck, a blood test to be used in conjunction with other non-surgical modalities, will address the patient population of women who are experiencing moderate to severe pelvic pain and provide non- surgical confirmation that their symptoms are indicative of endometriosis. The goal of this test is to support an early diagnosis and direct appropriate medical management that potentially reduces the progression of disease. Current detection methods for endometriosis require surgery, a surgical biopsy and/or visualization. EndoCheck is intended to address this large patient population using a non-invasive solution with both the sensitivity and specificity equal to or greater than surgical biopsy and/or visualization.

OVAInherit will be designed as a high-risk diagnostic tool, intended for those patients with or without a pelvic mass who are genetically predisposed to gynecologic cancer. It will use genetics, proteins and other modalities to assess the risk of gynecologic cancers early without visible

presence of cancer via traditional ultrasound methodologies. Our related trial, OVA360, has launched and will be focused on developing a diagnostic test for the early detection of ovarian cancer.

In addition, we have reaffirmed the acceleration of the target launch date of OVASight to the fourth quarter of 2021. This test initially will allow physicians to assess benign pelvic masses with much better performing technology than CA125, and our next revision will allow a mass to be monitored over time. This new test will leverage its high negative predictive value to rule out ovarian cancer risk, as well as high positive predictive value to rule in the risk of ovarian cancer. We expect that the first review of this OVASight test will occur at the American Society of Clinical Oncology 2021 meeting, which is scheduled to be held virtually on June ~~2014, Vermillion launched~~ 4, 2021.

We ultimately plan to commercialize each of OVA1, OVERA, OVA1plus, Aspira GenetiX, OVASight, EndoCheck and OVAInherit on a global level. We currently hold CE marks for OVA1 and OVERA. In addition, each of OVA1 and OVERA, and the reflex offering, OVA1plus, will be offered on our global testing platform, which allows both tests to be deployed worldwide.

Outside of the United States, we have studies in process to validate OVERA and OVA1 in specific populations. This includes active international distribution agreements for OVERA with Pro-Genetics LTD in Israel and MacroHealth, Inc. in the Philippines. The MacroHealth, Inc. agreement was our first agreement regarding our decentralized technology, Aspira Synergy, for OVERA specimen testing.

We own and operate Aspira Labs, Inc. (“ASPiRA ~~LABS, a Clinical Laboratory Improvements Amendments of 1988 (“CLIA”~~LABS”) ~~certified national laboratory~~, based in Austin, Texas, a Clinical Chemistry and Endocrinology Laboratory accredited by the College of American Pathologists, which specializes in applying biomarker-based technologies to address critical needs in the management of gynecologic cancers and disease. ASPiRA LABS provides expert diagnostic services using a state-of-the-art biomarker-based ~~diagnostic algorithm~~risk assessment to aid in clinical decision making and advance personalized treatment plans. The lab currently processes our OVA1 and ~~Overa~~OVERA tests, and we plan to expand the testing to other gynecologic conditions with high unmet need. We also plan to develop and perform LDTs at ASPiRA ~~LABS in the future.~~LABS. ASPiRA LABS holds a ~~CLIA~~Clinical Laboratory Improvements Amendments of 1988 (“CLIA”) Certificate of ~~Registration~~Accreditation and a state laboratory license in California, ~~Florida,~~ Maryland, New York, Pennsylvania and Rhode Island. This allows the lab test OVA1 and OVERA to be performed on a national basis. The Centers for Medicare & Medicaid Services (“CMS”) issued a ~~provider~~supplier number to ASPiRA LABS in ~~March~~ 2015.

Recent Developments

Leadership Developments

On May 11, 2021, the Company announced the appointment of Greg Richard as Aspira’s Head of Corporate Strategy, Reimbursement and Managed Care. Mr. Richard will be responsible for our overall corporate strategy and enhancing our blueprint for reimbursement for our current products as well as the new products and services in our robust pipeline. In addition, he will be responsible for leading our Revenue Cycle Management and supporting the Company’s strategic business development initiatives.

In February 2021, the Company announced the appointment of Nicole Sandford to Aspira’s board of directors. Ms. Sandford has extensive corporate governance and accounting experience from her 17 years at Deloitte, including most recently as the national managing partner for its Regulatory and Operational Risk practice. She currently serves as Executive Vice President and Global Board Services Leader at Ellig Group, LLC, where she advises boards and senior executives on matters related to governance.

In ~~2016, we created a new service within~~ the ~~ASPiRA channel strategy, “an ASPiRA IVD Services Program”. In April 2016,~~first quarter of 2021, we formed ~~ASPiRA IVD~~our own internal patient advisory board, led by our Chief Spokeswoman, Dr. Diane Powis. This board includes ovarian cancer patients and survivors whose mission is to ~~offer IVD trial services to third-party customers.~~ ASPiRA IVD is a specialized laboratory provider dedicated to meeting the unique testing needs of IVD manufacturers seeking to commercialize high-complexity assays. ASPiRA IVD was built around a core of laboratory expertiselead how we serve and ~~an FDA-compliant quality system, and strives to deliver accurate and reliable results to its third-party customers suitable for FDA submission. ASPiRA IVD~~ ~~received a CLIA laboratory license in June 2016 and commenced operations~~educate patients early in the ~~second quarter of 2016.~~process.

In this program, we also plan to leverage our existing infrastructure and enhance our pipeline of future technologies by fostering relationships with IVD companies who are developing new diagnostics including companion diagnostics platforms. We believe this plan will allow us to continue to be innovative in evaluating potential diagnostics. Our goal with the addition of this line of business is to invest in our short-term and long-term enterprise value while leveraging our specimen bank, database, FDA experience, laboratory informatics and operating efficiency.

~~Strategy:~~

Business, Product and Coverage Developments

On May 12, 2021, the Company announced the execution an Aspira Synergy agreement with one of the largest women’s health networks whereby the OVA1plus testing will be performed in its laboratory with data interpretation by Aspira. The health network employs 300+ physicians and is responsible for 500,000 patient visits per year.

On May 12, 2021, we announced the initiation of a large prospective study with The Feinstein Institutes for Medical Research, the science arm of Northwell Health, the largest private healthcare provider in New York State. Northwell Health treats over 2 million patients annually and employs over 16,000 credentialled physicians. The study will further support longitudinal studies for the use of OVASight as a serial monitoring test for high-risk women predisposed for hereditary ovarian cancer.

The FDA’s Breakthrough Devices Program provides patients and health care providers with timely access to medical devices and device-led combination products that provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions by speeding up their development, assessment and review. In the first quarter of 2021, we submitted to the FDA a Breakthrough Device designation request with respect to EndoCheck, and we have been in communications with the FDA regarding our request and [we plan?] to update the submission based on the guidance we have received thus far. There is no assurance that the FDA will grant our request for EndoCheck to be designated as a Breakthrough Device. If our device is granted a Breakthrough Device designation in the next six months, we plan to move forward with interacting with the FDA through a variety of options including sprint discussions, a request for a discussion on a data development plan, and a request for clinical protocol agreement, and any final submission will be a de novo submission. If the FDA denies our request for a Breakthrough Device designation in the next six months, we plan to proceed with a LDT.

In the first quarter of 2021, we announced that we entered into an agreement with Dana Farber Cancer Institute, Brigham and Women’s Hospital and Medical University Lodz to evaluate their jointly-developed novel microRNA technology in combination with current Aspira technologies, for the development of a highly sensitive and specific early detection test for women with a high-risk of ovarian cancer.

In the first quarter of 2021, we are continuing to increase our investment in research and development, and one of our key investments is our efforts on closing the racial and ethnic gap in women’s healthcare specific to the diagnostic accuracy of ovarian cancer detection. We have five active sites enrolled in our disparity clinical study; the most recent addition was Wayne State University in Detroit, Michigan as our first National Cancer Institute site.

In the first quarter of 2021, we submitted an abstract to the American Society for Clinical Oncology for their early June 2021 conference, and will be publishing both the analytical and clinical validation findings in the third quarter of 2021.

In the first quarter of 2021, we announced coverage by New York State Medicaid – one of the larger Medicaid populations in the U.S., covering 33% of the population in the state. This brought our total covered lives to approximately 179M or 54% of the U.S. population as of April 1, 2021.

In the first quarter of 2021, we presented at a Congressional Briefing “Advancing Health Outcomes for Women and Minorities.” We delivered a call to action for OVA1 as the standard of care for ovarian cancer risk assessment for Caucasian and non-Caucasian women and the need for funding large race and ethnicity-based trials.

COVID-19 Pandemic

many states in the United States have reacted to the outbreak by instituting quarantines, mandating business and school closures and restricting travel. Patient enrollment for our planned research studies has been lower due to the impact of closures and restricted travel, which has led to delays in the completion of such studies. Our commercial efforts to enter into decentralized arrangements with large healthcare networks and supergroups have continued to move forward. However, finalization of such deals have been slowed by the pandemic. In addition, many conventions and industry conferences have been cancelled.

As a result of the COVID-19 pandemic and actions taken to contain it, the majority of our non-laboratory employees have been working remotely since March 2020, and we expect that they will continue to do so until the number of daily COVID-19 cases in the areas surrounding our offices consistently level off or declines. In terms of business continuity, our lab operations require on site essential employees. As previously disclosed, we have put in place staffing and reagent contingency plans to ensure there is no down time at our lab. We believe the lab could continue to operate in the event any isolated infection were to impact a portion of the workforce. In addition, as of the date of the filing of this Form 10-Q, we have approximately five months of reagents, one of our key testing supplies, in stock, depending on volume of tests performed, and we are working with the manufacturer to ensure a consistent supply over the next six months.

We are ~~focused~~committed to following recommended physical and social distancing guidelines in order to reduce the risk of infection for our employees. We have also decreased our travel and convention-related expenses. We have taken several measures to reduce the impact of the COVID-19 related closures and quarantines. For example, because our salespeople have experienced limitations on their ability to physically visit physician offices, we have implemented other means of coverage such as virtual sales representative meetings and increased digital sales and marketing. In March 2020, our sales team began making in-person calls to customers as determined on a state-by-state basis, in accordance with local guidelines. We have developed protocols and training for our team where physical visits are allowed to help ensure employee, customer and patient safety.

In the first quarter 2021, our test volume remained relatively flat compared to the fourth quarter of 2020. Given the potential for future resurgences of COVID-19 cases and the variety of federal and state actions taken to contain them, we are unable to estimate the potential future impact of the COVID-19 pandemic on our business, results of operations or cash flows as of the date of this filing.

On March 27, 2020, the U.S federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act is an emergency economic stimulus package in response to the coronavirus outbreak which, among other things, provided loans, guarantees and subsidies to qualifying businesses and contained numerous income tax provisions. Some of these tax provisions are expected to be effective retroactively for years ending before the date of enactment. We do not expect these tax provisions to have a material impact on our financial statements.

On April 10, 2020, we received a stimulus check of approximately $89,000 from the U.S. Department of Health and Human Services pursuant to the CARES Act.

On May 1, 2020, we were granted the PPP Loan from BBVA USA in the aggregate amount of $1,005,767, pursuant to the PPP, which was established under the CARES Act as administered by the SBA. We believe we are using the proceeds of the PPP Loan in a manner that qualifies for complete forgiveness of the PPP Loan but caution that there can be no assurance that all or any portion of the PPP Loan will be forgiven. In March 2021, we applied for forgiveness of the PPP Loan. See “Liquidity and Capital Resources” for more information.

Strategy

We are focused on execution of ~~five~~the following core strategic business drivers in women’s pelvic mass assessment, starting with ovarian cancer diagnostics, and specialized laboratory services to build long-term value for our investors:

Maximizing the existing ~~OVA1~~OVA1plus opportunity in the United States by ~~taking the lead in~~actively pursuing payer coverage and commercialization of ~~OVA1. This strategy included the launch of a~~ ~~CLIA certified clinical laboratory, ASPiRA LABS, in June 2014;~~OVA1plus;

Expanding the distribution platform beyond the U.S. by launching ~~Overa,~~OVA1plus (OVERA, a next generation biomarker panel, and OVA1 on the same platform), while building the clinical utility and health economics foundation of both OVA1 and ~~Overa,~~OVERA, which we believe may allow for better domestic market penetration and international ~~expansion (FDA clearance for Overa was received in March 2016);~~expansion;

Leveraging our existing database and specimen bank while building the largest specimen and data repository of gynecologic pelvic mass patients worldwide;

Expanding our product offerings to additional women’s health diseases with a focus on pelvic disease conditions such as ~~endometriosis~~pelvic mass monitoring and ~~polycystic ovarian syndrome~~endometriosis by adding additional gynecologic bio-analytic solutions involving biomarkers, genetics, other modalities (~~e.g.~~(e.g., imaging), clinical risk factors and patient data to aid diagnosis and risk stratification of women presenting with a pelvic ~~mass disease;~~mass;

Coupling our OVA1 products with an individual’s hereditary genetic risk to refine ovarian cancer risk assessment for the high-risk populations; and

Expanding distribution avenues to super groups and health systems through our ~~customer offerings with the launch of our ASPiRA IVD laboratory services.~~de-centralized testing platform, Aspira Synergy.

We believe that these business drivers will contribute significantly to addressing unmet medical needs for women faced with gynecologic disease and other conditions and the continued development of our business.

~~OVA1 addresses a clear clinical need, namely~~

We have active international distribution agreements for OVERA with Pro-Genetics LTD in Israel and MacroHealth, Inc. in the ~~pre-surgical identification of women who are at risk of having a malignant ovarian tumor. Numerous studies have documented the benefit of referral of these women to gynecologic oncologists~~Philippines. The MacroHealth, Inc. agreement was our first agreement regarding decentralized technology transfer for ~~their initial surgery. Prior to the clearance of OVA1, no blood test had been cleared by~~

18OVERA specimen testing.

In the ~~FDA~~United States, revenue for ~~physicians to use in the pre-surgical management of ovarian adnexal masses. OVA1 is a qualitative serum test that utilizes five well-established biomarkers~~diagnostic tests comes from several sources, including third-party payers such as insurance companies, government healthcare programs, such as Medicare and proprietary software cleared as part of the OVA1 510(k) to determine the likelihood of malignancy in women over age 18, with a pelvic mass for whom surgery is planned. OVA1 should not be used without an independent clinical/radiological evaluationMedicaid, client bill accounts and is not intended to be a screening test or to determine whether a patient should proceed to surgery. Incorrect use of OVA1 carries the risk of unnecessary testing, surgery and delayed diagnosis. OVA1 was developed through large pre-clinical studies in collaboration with numerous academic medical centers encompassing over 2,500 clinical samples. OVA1 was fully validated in a prospective multi-center clinical trial encompassing 27 sites reflective of the diverse nature of the clinical centers at which ovarian adnexal masses are evaluated.

patients. Novitas Solutions, ~~the~~a Medicare contractor, covers and reimburses for ~~OVA1. This~~OVA1 tests performed in certain states, including Texas. Due to OVA1 tests being performed exclusively at ASPiRA LABS in Texas, the local coverage determination from Novitas Solutions essentially provides national coverage for patients enrolled in Medicare as well as Medicare Advantage health plans. ~~However,~~ ASPiRA LABS ~~initially experienced difficulty in obtaining payment from Novitas Solutions~~also bills third-party commercial and other government payers as well as client bill accounts and patients for most claims submitted due to Novitas Solutions’ administrative requirements. In October 2016, Novitas Solutions updated its administrative requirements for OVA1 reimbursement which has improved our ability to obtain reimbursement for OVA1 from Novitas Solutions.OVA1.

In October 2016, we launched our pelvic mass specimen and data repository and began the collection of Institutional Review Board patient consents for collection and cataloguing of serum samples for future research purposes.

In November 2016, ~~The American College of Obstetricians and Gynecologists ("ACOG”)~~the ACOG issued Practice Bulletin Number 174 which included OVA1 as a “Multivariate Index Assay”~~. This bulletin outlines ACOG's “new”~~, outlining ACOG’s clinical management guidelines for adnexal mass management.

~~These new clinical management guidelines replace the July 2007 version,~~ Practice Bulletin 83. Practice Bulletins summarize current information on techniques and clinical management issues for the practice of obstetrics and gynecology. Practice Bulletins are evidence-based documents, and recommendations are based on the evidence. This is also the only clinical management tool used for adnexal masses. Guidelines do not exist for adnexal masses, only Practice Bulletins. Guidelines do exist, however, for ovarian cancer management.

~~The Practice Bulletin~~Number 174 recommends that obstetricians and gynecologists evaluating women with adnexal masses who do not meet Level A criteria of a low risk transvaginal ultrasound should proceed with Level B clinical guidelines. Level B guidelines state that the physician may use risk assessment tools such as existing CA125 technology or OVA1 (“Multivariate Index Assay”) as listed in the bulletin. Based on this, OVA1 ~~has now~~ achieved parity with CA125 as a Level B clinical recommendation for the management of adnexal masses.

~~In December 2016, we received an FDA Clarification Letter regarding OVA1~~

Practice Bulletins summarize current information on techniques and ~~Overa.~~clinical management issues for the practice of obstetrics and gynecology. Practice Bulletins are evidence-based documents, and recommendations are based on the evidence. This ~~letter was in reference to~~is also the ~~September 7, 2016 FDA Safety Communication advising women and their physicians against the use of~~only clinical management tool used for adnexal masses. Although there are Practice Bulletins, guidelines do not exist for adnexal masses. ACOG guidelines do exist, however, for ovarian cancer ~~screening tests for asymptomatic women.~~management.

In order to avoid any confusion, as well as to document the FDA position on OVA1 and Overa, Jeffrey Shuren, M.D., J.D., Director for the Center for Devices and Radiological Health at the FDA, sent a letter to Vermillion, dated December 21, 2016. In the letter, Dr. Shuren stated:

~~We agree that this safety communication does not apply to Vermillion’s FDA-cleared tests, OVA1 (MIA) and Overa (MIA2G), which are not screening tests for ovarian cancer.~~

FDA cleared OVA1 (MIA) and Overa (MIA2G) as aids to further assess the likelihood that malignancy is present when the physician’s independent clinical and radiological evaluation does not indicate malignancy. The intended uses of the two assays are the same—to help physicians more reliably identify which patients would benefit from consultation with or referral to a gynecologic oncologist. OVA1 (MIA) and Overa (MIA2G) are indicated for women who present with an adnexal mass.

In March 2015, we entered into a new commercial agreement with Quest Diagnostics. Pursuant to this agreement, all OVA1 U.S. testing services for Quest Diagnostics customers were transferred to Vermillion’s wholly-owned subsidiary, ASPiRA LABS, as of August 10, 2015. Pursuant to this agreement, as amended as of March 11, 2017, Quest Diagnostics has agreed to provide blood draw and logistics support by transporting specimens from its clients to ASPiRA LABS for testing through at least March 11, 2018 in exchange for a market value fee. Per the

1921

~~terms of this agreement, we will not offer to existing or future Quest Diagnostics customers CA 125-II or other tests that Quest Diagnostics offers.~~

In ~~2016, we continued to make progress with increased payer positive medical polices and in network agreements for a total of over 80 million covered lives.~~

~~In the first half of 2017, ASPiRA IVD services landed two top pharmaceutical trial service agreements including one enrollment study.~~

~~In July 2017~~October 2018, ASPiRA LABS ~~expanded its patient advocacy program nationally to assist patients with proactive benefit checks, with over 90% resulting~~launched OVA1plus, a clinical pathway which combines the strengths of OVA1 and OVERA. This offering helps drive earlier ovarian cancer risk detection, which in ~~OVA1 utilization.~~turn lowers overall healthcare costs and reduces inefficiencies in the care pathway.

Recent Publications

In ~~September 2017,~~parallel to building our OVA platform offering and our commercial deployment, we have been working on several key publications and product extensions.

In March 2021, the results of an OVA1plus study were presented as a poster at the Society of Gynecologic Oncology’s 2021 Annual Meeting on Women’s Cancer (the “SGO Meeting”). The objective of the study was to determine whet~~preliminary Protecting Access~~her using OVERA to ~~Medicare Act~~perform reflex testing on test results with a high OVA1 score can improve specificity in detection of ~~2014 (PAMA) price for OVA1 and Overa~~malignancy in women with adnexal masses, a testing process we refer to as our OVA1plus test. These results indicate that the OVA1plus test did improve specificity in detection of ovarian cancers. Although the SGO Meeting was ~~published by~~cancelled due to the ~~Center for Medicare and Medicaid Service (CMS).~~ ~~The preliminary OVA1 rate is based~~COVID-19 pandemic, the abstract was made available on the ~~median of private payer payments submitted by Vermillion as part of the market-based payment reforms mandated through PAMA.~~ SGO Meeting’s website.~~The Overa price was benchmarked to the only proteomic test currently on the fee schedule, which uses biomarkers~~ ~~and an algorithm to produce a prognostic score~~. ~~The new rates, once finalized, are scheduled to become effective January 1, 2018.~~

~~In 2017, we continued to make progress with increased payer positive medical polices and in network agreements for a total of over 123 million covered lives, expected effective by February 2018.~~

Critical Accounting Policies and Estimates

~~There have been no material~~Our product revenue is generated by performing diagnostic services using our OVA1, OVERA, OVA1plus or ASPiRA GenetiX tests, and the service is completed upon the delivery of the test result to the prescribing physician. The entire transaction price is allocated to the single performance obligation contained in a contract with a patient.Under ASC Topic 606, Revenue from Contracts with Customers, all revenue is recognized upon completion of the OVA1, OVERA, OVA1plus or ASPiRA GenetiX test and delivery of test results to the physician based on estimates of amounts that will ultimately be realized. In determining the amount of revenue to be recognized for a delivered test result, we consider factors such as payment history and amount, payer coverage, whether there is a reimbursement contract between the payer and us, and any developments or changes tothat could impact reimbursement. These estimates require significant judgment by management. For OVA1, OVERA and OVA1plus tests, we also review our ~~critical accounting policies~~patient account population and ~~estimates from those disclosed~~determine an appropriate distribution of patient accounts by payer (i.e., Medicare, patient pay, other third-party payer, etc.) into portfolios with similar collection experience. When evaluated for collectability, this results in ~~Item 7 of our 2016 Annual Report.~~a materially consistent revenue amount for such portfolios as if each patient account were evaluated on an individual contract basis.

2022

Results of Operations - Three Months Ended ~~September 30, 2017~~March 31, 2021 Compared to Three Months Ended ~~September 30, 2016~~March 31, 2020

The selected summary financial and operating data of the Company for the three months ended ~~September~~March 31, 2021 ~~30, 2017~~ and ~~2016~~2020 were as follows:


								Three Months Ended
	Three Months Ended September 30,				Increase (Decrease)			March 31,				Increase (Decrease)
(dollars in thousands)	2017		2016		Amount		%	2021		2020		Amount		%
Revenue:
Product	$	657	$	581	$	76	13	$	1,416	$	1,185	$	231	19
Genetics									80		25		55	220
Service		42		42		-	-		-		10		(10)	-
Total revenue		699		623		76	12		1,496		1,220		276	23
Cost of revenue:
Product		495		461		34	7		648		665		(17)	(3)
Genetics									245		130		115	88
Service		284		356		(72)	(20)		-		5		(5)	-
Total cost of revenue		779		817		(38)	(5)		893		800		93	12
Gross profit		(80)		(194)		114	(59)		603		420		183	44
Operating expenses:
Research and development		192		370		(178)	(48)		872		395		477	121
Sales and marketing		1,050		1,606		(556)	(35)		3,108		2,115		993	47
General and administrative		1,177		1,295		(118)	(9)		2,509		1,710		799	47
Total operating expenses		2,419		3,271		(852)	(26)		6,489		4,220		2,269	54
Loss from operations		(2,499)		(3,465)		966	(28)		(5,886)		(3,800)		(2,086)	55
Interest income (expense), net		(10)		(11)		1	(9)
Interest income, net									(24)		8		(32)	400
Other income (expense), net		-		-		-	-		(10)		86		(96)	112
Net loss		(2,509)		(3,476)		967	(28)	$	(5,920)	$	(3,706)	$	(2,214)	60

Product Revenue. Product revenue was ~~$657,000~~$1,416,000 for the three months ended ~~September 30, 2017~~March 31, 2021 compared to ~~$581,000~~$1,185,000 for the same period in ~~2016.~~2020. Revenue for ASPiRA LABS is ~~being~~ recognized when the OVA1, OVERA, or OVA1plus test is ~~being performed or~~ ~~when amounts that will~~completed based on estimates of what we expect to ultimately ~~be realized can be estimated. All other ASPiRA LABS revenue is being recognized on a cash basis and thus recognition of revenue lags the performance of some OVA1 tests.~~realize. The ~~13%~~19% product revenue ~~growth~~increase is primarily due to ~~improvement~~an increase in ~~the~~OVA1 average ~~unit price received~~revenue per test compared to the ~~same quarter in the~~ prior year. The increase in average unit price was driven by an increase in client bill contracts, expansion of positive medical policy and contracting with payers, and improved billing and collection practices.year, as well as higher test volume.

The number of ~~OVA1~~OVA1plus tests performed ~~decreased 13%~~increased 3% to ~~approximately 1,954 OVA1~~3,775 OVA1plus tests during the three months ended ~~September 30, 2017~~March 31, 2021 compared to ~~approximately 2,257 OVA1~~3,654 OVA1plus tests for the same period in ~~2016.~~2020. We expect revenue to continue to improve in 2021 due to: increased access to offices, patients’ return to physician visits, increased investment in our current commercial channel and new investment in our new healthcare system and Aspira Synergy commercial channels, provided that the COVID-19 pandemic does not further escalate and result in new quarantines and state closures. The ~~volume decrease~~duration of the pandemic and efforts to contain it remains uncertain.

The revenue per OVA1plus test performed increased to approximately $375 compared to $324 for the same period in 2020, an increase of 16%. This increase was primarily driven by an increase in payments by contracted payers.

Genetics Revenue.Genetics revenue was $80,000 for the three months ended March 31, 2021, compared to $25,000 for the same period in 2020. Revenue for Aspira GenetiX is recognized when the Aspira GenetiX test is completed based on estimates of what we expect to ultimately realize. The 220% genetics revenue increase is primarily due to an increase in Aspira GenetiX test volume as we continued to market this product in 2021, as well as a higher revenue per test. The revenue per test performed increased to approximately $456 compared to $230, and increase of 98%, for the ~~previously announced loss of a client bill customer~~same period in ~~July 2017, which~~2020. This increase was ~~concentrated in uncovered territories (territories not covered~~primarily driven by an ~~ASPiRA sales representative) and, to a lesser extent, the impact of hurricanes~~increase in ~~two key areas (Texas and Florida). Partially affecting the volume decrease was modest year-over-year growth in covered territories (territories covered~~payments by ~~an ASPiRA sales representative).~~contracted payers. We expect ~~the test volume~~revenue to improve in 2021 due to continued commercialization investment for the ~~fourth quarter relative~~Aspira GenetiX product, provided that the COVID-19 pandemic does not further escalate and

result in new quarantines and state closures. The duration of the pandemic and efforts to ~~volume in the third quarter of 2017.~~ contain it remains uncertain.

Service Revenue. Service revenue was ~~$42,000~~$0 for the three months ended ~~September 30, 2017~~March 31, 2021 compared to ~~$42,000~~$10,000 for the same period in ~~2016. Service revenue will vary from quarter to quarter based on~~2020. Substantially all projects with ASPiRA IVD were finalized during 2019 and the ~~size of ongoing customer projects.~~subsidiary’s operations were largely completed. Revenue for ASPiRA IVD ~~is being~~was recognized once certain revenue recognition criteria ~~has~~had been ~~met (see Note 1~~met. We do not expect to ~~the financial statements included in Part I, Item I of this Form 10-Q). We expect service revenue to increase in the fourth quarter of 2017 relative to~~ have any significant service revenue in 2021 as the ~~third quarter of 2017 due~~IVD trial services were largely wound down in 2019. However, the Company may continue to ~~the performance of certain anticipated projects.~~

21have some future legacy IVD activity in 2021.

Cost of Revenue – Product. Cost of product revenue was $648,000 for the three months ended March 31, 2021 compared to $665,000 for the same period in 2020, representing a decrease of $17,000, or 3%, due primarily to decreased blood draw fees.

Cost of Revenue - ~~Product.~~Genetics.Cost of ~~product~~genetics revenue, which consisted primarily of personnel costs and consulting expense after the launch of Aspira GenetiX, was ~~$495,000~~$245,000 for the three months ended ~~September 30, 2017~~March 31, 2021 compared to ~~$461,000~~$130,000 for the same period in ~~2016, representing an~~2020. The increase ~~of 7% due primarily~~in cost represented personnel and consulting costs, as well as increase in volume as compared to ~~some equipment maintenance costs and increased consultant fees incurred~~the same period in ~~the third quarter.~~2020. We expect the cost of ~~product~~genetics revenue to ~~decrease modestly~~increase in the ~~fourth~~second quarter of ~~2017 compared to the third quarter of 2017 as one-time costs incurred in the third quarter of 2017 are not expected to be repeated.~~2021.

Cost of Revenue - Service.Cost of service revenue was ~~$284,000~~$0 for the three months ended ~~September 30, 2017~~March 31, 2021 compared to ~~$356,000~~$5,000 for the same period in ~~2016. The 20% decrease related primarily to consulting~~2020. These costs related to project closure support and legacy IVD contracts.

Gross Profit Margin.Gross profit margin for OVA1plus was 54.2% for the ~~opening of the lab in the third quarter of 2016, which were not repeated in 2017. We expect the cost of service revenue to increase in the fourth quarter of 2017~~three months ended March 31, 2021 compared to 43.9% for the ~~third quarter~~same period in 2020, an increase of ~~2017~~10.3%. Overall gross profit margin was 40.3% for the three months ended March 31, 2021 compared to 34.4% for the same period in 2020, an increase of 5.9%, due primarily to ~~expected variable costs relating to performance of certain projects.~~ lower blood draw fees and consulting expenses.

Research and Development ~~Expenses~~Expenses.. Research and development expenses represent costs incurred to develop our technology and carry out clinical studies, and include personnel-related expenses, regulatory costs, reagents and supplies used in research and development laboratory work, infrastructure expenses, contract services and other outside costs. Research and development expenses for the three months ended ~~September 30, 2017 decreased $178,000,~~March 31, 2021 increased by $477,000, or ~~48%~~121%, compared to the same period in ~~2016.~~2020. This ~~decrease~~increase was primarily due to ~~a reduction~~clinical utility and product development costs related to OVASight, our third-generation product, as well as investments in ~~personnel~~bioinformatics and ~~personnel related expenses.~~Aspira Synergy. We expect research and development expenses to ~~remain consistent with third quarter 2017 levels~~increase in ~~the fourth quarter~~2021, as a result of ~~2017.~~increased projects and clinical studies.

Sales and Marketing ~~Expenses~~Expenses.. Our sales and marketing expenses consist primarily of personnel-related expenses, education and promotional expenses, and infrastructure expenses. These expenses include the costs of educating physicians ~~laboratory personnel~~ and other healthcare professionals regarding OVA1, OVERA, OVA1plus and ~~Overa.~~Aspira GenetiX. Sales and marketing expenses also include the costs of sponsoring continuing medical education, medical meeting participation, and dissemination of scientific and health economic publications. Sales and marketing expenses for the three months ended ~~September 30, 2017 decreased $556,000,~~March 31, 2021 increased by $993,000, or ~~35%~~47%, compared to the same period in ~~2016.~~2020. This ~~decrease~~increase was primarily due to ~~a reduction in consulting~~increased personnel related and ~~marketing services and~~public relations costs, partially offset by lower ~~health economic study~~travel costs indue to the ~~third quarter of 2017 compared to 2016.~~COVID-19 pandemic. We expect sales and marketing expenses to increase ~~modestly over~~in 2021, due to investing in key strategic hires and product portfolio expansion, as well as the ~~remainder of 2017 as we focus efforts on~~continued re-openings relating to the ~~commercialization of OVA1~~COVID-19 pandemic, provided that the COVID-19 pandemic does not further escalate and ~~Overa.~~result in new quarantines and state closures.

General and Administrative ~~Expenses~~Expenses.. General and administrative expenses consist primarily of personnel-related expenses, professional fees and other costs, including legal, finance and accounting expenses and other infrastructure expenses. General and administrative expenses for the three months ended ~~September 30, 2017 decreased~~ March 31, 2021 increased by ~~$118,000,~~ $799,000, or 9%47%, compared to the same period in ~~2016. The decrease~~2020. This increase was primarily due to ~~a reduction~~an

increase in ~~consulting services.~~legal expenses of $284,000, headcount and personnel expenses of $374,000 and board of director fees of $185,000. We expect general and administrative expenses to ~~remain consistent with third quarter 2017 levels~~increase in ~~the fourth quarter of 2017.~~2021 due to higher personnel costs.

22Net Other Income (Expense).

~~Results of Operations – Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~The selected summary financial and operating data of the Company~~ Net other income (expense) for the ~~nine~~three months ended ~~September~~ ~~30, 2017 and 2016 were as follows:~~

Nine Months Ended September 30,

Increase (Decrease)
(dollars in thousands)

2017

2016

Amount

%
Revenue:

Product

$
2,195

$
1,640

$
555

34
Service

128

197

(69)

(35)
Total revenue

2,323

1,837

486

26
Cost of revenue:

Product

1,345

1,516

(171)

(11)
Service

855

416

439

106
Total cost of revenue

2,200

1,932

268

14
Gross profit

123

(95)

218

(229)
Operating expenses:

Research and development

685

1,868

(1,183)

(63)
Sales and marketing

3,114

5,514

(2,400)

(44)
General and administrative

3,825

4,645

(820)

(18)
Total operating expenses

7,624

12,027

(4,403)

(37)
Loss from operations

(7,501)

(12,122)

4,621

(38)
Interest income (expense), net

(32)

(16)

(16)

100
Other income (expense), net

(9)

16

(25)

(156)
Net loss

(7,542)

(12,122)

4,580

(38)

~~Product Revenue~~. Product revenue was $2,195,000 for the nine months ended September 30, 2017 compared to $1,640,000 for the same period in 2016. Revenue for ASPiRA LABS is being recognized when the OVA1 test is being performed or ~~when amounts that will ultimately be realized can be estimated~~. All other ASPiRA LABS revenue is being recognized on a cash basis and thus recognition of revenue lags the performance of some OVA1 tests. The $555,000, or 34%, product revenue growth is due to improvement in the average unit price received per testMarch 31, 2021 decreased by $96,000, compared to the same period in the prior year. The increase in average unit price was driven by an increase in client bill contracts, expansion of positive medical policy and contracting with payers, and improved billing and collection practices.

The number of OVA1 tests performed decreased 3% to approximately 6,665 OVA1 tests during the nine months ended September 30, 2017 compared to approximately 6,867 OVA1 tests for the same period in 2016. The volume decrease was primarily due to the previously announced loss of a client bill customer in July 2017, which was concentrated in uncovered territories (territories not covered by an ASPiRA sales representative) and, to a lesser extent, the impact of hurricanes in two key areas (Texas and Florida).

~~Service Revenue~~. Service revenue was $128,000 for the nine months ended September 30, 2017 compared to $197,000 for the same period in 2016, a decrease of $69,000, or 35%. Service revenue will vary from quarter to quarter based on the size of ongoing customer projects. Revenue for ASPiRA IVD is being recognized once certain revenue recognition criteria has been met (see Note 1 to the financial statements included in Part I, Item I of this Form 10-Q).

~~Cost of Revenue - Product.~~ Cost of product revenue was $1,345,000 for the nine months ended September 30, 2017 compared to $1,516,000 for the same period in 2016, representing a decrease of $171,000, or 11%, due to operating efficiencies compared to the prior year.

~~Cost of Revenue - Service.~~ Cost of service revenue was $855,000 for the nine months ended September 30, 2017 compared to $416,000 for the same period in 2016. ASPiRA IVD did not commence operations until June 2016 and thus included only four months of expense compared to three full quarters of2020. Other expense in ~~2017.~~

~~Research and Development Expenses~~. Research and development expenses represent costs incurred to develop our technology and carry out clinical studies, and include personnel-related expenses, regulatory costs, reagents and supplies used in research and development laboratory work, infrastructure expenses, contract services and other outside costs. Research and development expenses through March 2016 also included costs related to activities performed under contracts with our collaborators and strategic partners. Research and development expenses for the ~~nine months ended September 30, 2017 decreased $1,183,000, or 63%, compared to the same period in 2016. This decrease was primarily due to the expiration~~first quarter of ~~our collaboration agreement with The Johns Hopkins University School of Medicine in March 2016 as well as lower personnel and personnel related expenses due to the clearance of Overa in March 2016.~~

~~Sales and Marketing Expenses. Our sales and marketing expenses consist~~2021 consisted primarily of ~~personnel-related expenses, education and promotional expenses, and infrastructure expenses. These expenses include~~franchise taxes, whereas other income in the ~~costs~~first quarter of educating physicians, laboratory personnel and other healthcare professionals regarding OVA1 and Overa. Sales and marketing expenses also include the costs of sponsoring continuing medical education, medical meeting participation, and dissemination of scientific and health economic publications. Sales and marketing expenses for the nine months ended September 30, 2017 decreased $2,400,000, or 44%, compared to the same period in 2016. This decrease was primarily due to a reduction in personnel and personnel expenses and decreases in consulting and marketing services compared to the prior year period.

~~General and Administrative Expenses. General and administrative expenses consist~~2020 consisted primarily of ~~personnel-related expenses, professional fees~~the stimulus check received from the U.S. Department of Health and other costs, including legal, finance and accounting expenses and other infrastructure expenses. General and administrative expenses for the nine months ended September 30, 2017 decreased by $820,000, or 18%, compared to the same period in 2016. The decrease was primarily due to the reductionHuman Services of ~~consulting services and ASPiRA IVD start-up expenses in 2016 not being repeated in 2017.~~ approximately $89,000.

We plan to continue to expend resources selling and marketing OVA1, OVERA, OVA1plus and ~~Overa, operating our IVD trial services business~~Aspira GenetiX and developing additional diagnostic tests and service capabilities.

We have incurred significant net losses and negative cash flows from operations since inception. At September 30, 2017, we had an accumulated deficit of $393,098,000 and stockholders’ equity of $5,921,000. As of September 30, 2017, we had $7,752,000 of cash and cash equivalents and $2,229,000 of current liabilities. Working capital was $6,074,000 and $3,547,000 at September 30, 2017 and December 31, 2016, respectively.

~~In December 2014,~~On February 8, 2021, the Company ~~issued warrants~~completed a public offering (the “2021 Offering”), resulting in net proceeds to ~~purchase up to an aggregate~~the Company of 4,166,659 shares of Vermillion common stock at an exercise price of $2.00 per share in conjunction with a December 2014 private placement of Vermillion common stock. The warrants expire by their original terms on December 23, 2017.approximately $47.7 million, after deducting underwriting discounts and offering expenses.

On August 31, 2017, certain holders exercised warrants to purchase 3,796,818 shares of Vermillion common stock in consideration for the Company agreeing to reduce the exercise price to $1.00 per share of Vermillion common stock.

~~The Company issued 3,796,818 shares of Vermillion common stock and received $3,796,818 in aggregate gross proceeds (approximately $3,577,000 net of transaction costs).~~July

~~On February 17, 2017,~~ 20, 2020, the Company completed a private placement pursuant to which certain investors purchased ~~Vermillion~~3,150,000 shares of Aspira common stock at a per share price of $3.50. Net proceeds of the private placement were approximately $10.6 million, after deducting underwriting discounts and ~~warrants to purchase~~offering expenses.

In early June 2020, we issued 2,810,338 shares of ~~Vermillion~~Aspira common stock upon the exercise of all of our outstanding warrants and received approximately $5.1 million in aggregate proceeds therefrom.

On May 1, 2020, the Company obtained the PPP Loan from BBVA USA in the aggregate amount of $1,005,767. The application for ~~net~~these funds required the Company to, in good faith, certify that the described economic uncertainty at the time made the loan request necessary to support the ongoing operations of the Company. This certification further required the Company to consider its current business activity and its ability to access other sources of liquidity sufficient to support ongoing operations in a manner that was not significantly detrimental to the business. Under the terms of the CARES Act and the PPP Loan, all or a portion of the principal amount of the PPP Loan is subject to forgiveness so long as, over the 24-week period following the Company’s receipt of the proceeds of ~~approximately $5,127,000 after deducting offering expenses.~~the PPP Loan, the Company used those proceeds for payroll costs, rent, utility costs or the maintenance of employee and compensation levels. The PPP Loan, which was granted pursuant to a promissory note, matures on May 1, 2022. Any unforgiven portion of the PPP Loan bears interest at a rate of 1.000% per annum, payable monthly in equal installments commencing in August 2021. The Company applied for forgiveness of the PPP Loan in March 2021, but there is no assurance that all or a portion of the PPP Loan will be forgiven. The PPP Loan is subject to any new guidance and new requirements released by the Department of the Treasury.

On March 22, 2016, we entered into ana loan agreement (as amended on March 7, 2018 and April 3, 2020, the “DECD Loan Agreement”) with the State of Connecticut Department of Economic and Community Development (the ~~“Loan Agreement”~~“DECD”), pursuant to which we may borrow up to $4,000,000 from the DECD. ~~We received an~~The loan bears interest at a fixed rate of 2.0% per annum and requires equal monthly payments of principal and interest until maturity, which occurs on April 15, 2026. As security for the loan, we have granted the DECD a blanket security interest in our personal and intellectual property. The DECD’s security interest in our intellectual property may be subordinated to a qualified institutional lender.

The loan may be prepaid at any time without premium or penalty. An initial disbursement of $2,000,000 inwas made to us on April 15, 2016 under ~~this~~the DECD Loan Agreement. On December 3, 2020, the Company received a disbursement of the remaining $2,000,000 under the DECD Loan Agreement, as we achieved the target employment milestone necessary to receive an additional $1,000,000 under the DECD Loan Agreement and the DECD determined to fund the remaining $1,000,000 under the DECD Loan Agreement after concluding that the required revenue target would likely have been achieved in the first quarter of 2020 in the absence of the impacts of COVID-19.

~~agreement. The remaining $2,000,000 will be disbursed if and when we achieve certain future milestones.~~ Under the terms of the DECD Loan Agreement, ~~the Company~~we may be eligible for forgiveness of up to ~~$2,000,000~~$1,500,000 of the principal amount of the loan if ~~the Company achieves~~we achieve certain job creation and retention milestones by ~~March 1, 2018 (the “Measurement Date”).~~December 31, 2022. Conversely, if ~~the Company is~~we are either unable to ~~meet these job creation milestones, namely, hiring 40~~retain 25 full-time employees with a specified average annual salary ~~within the allotted timeframe and retaining those employees~~ for a consecutive two-year period or does not maintain ~~the Company’s~~our Connecticut operations ~~for a period of 10 years,~~through March 22, 2026, the DECD may require early repayment of a portion or all of the loan plus a penalty of 5%. of the total funded loan. For additional information, see Note 3 of our consolidated financial statements.

The Company has incurred significant net losses and negative cash flows from operations since inception. At March 31, 2021 we had an accumulated deficit of $445,986,000 and stockholders’ equity of $52,325,000. As of March 31, 2021, we had $59,369,000 of cash and cash equivalents and $6,148,000 of current liabilities. Working capital was $55,225,000 and $12,603,000 at March 31, 2021 and December 31, 2020, respectively. There can be no assurance that we will achieve or sustain profitability or positive cash flow from operations. In addition, while we expect to grow revenue through ASPiRA LABS, there is ~~continuing~~no assurance of our ability to ~~monitor progress towards achieving~~generate substantial revenues and cash flows from ASPiRA LABS’ operations. We expect cash from our products and services to be our only material, recurring source of cash in 2021.

Net cash used in operating activities was $5,255,000 for the ~~employment milestone noted above. See also Note 3~~ three months ended March 31, 2021, resulting primarily from the net loss reported of $5,920,000, which includes non-cash items such as stock compensation expense of $489,000 and depreciation and amortization of $90,000, offset by changes in accounts payable, accrued and other liabilities of $291,000, partially offset by changes in prepaid expense of $94,000 and accounts receivable of $87,000.

Net cash used in investing activities was $41,000 and $23,000 for the three months ended March 31, 2021 and 2020, respectively, which consisted of property and equipment purchases.

Net cash provided by financing activities was $48.0 million for the three months ended March 31, 2021, which resulted primarily from the February 2021 public offering, resulting in net proceeds to the ~~financial statements included~~Company of approximately $47.7 million, after deducting underwriting discounts and offering expenses. Net cash used in ~~Part I, Item I of this Form 10-Q~~financing activities was $47,000 for ~~further information regarding~~ the ~~Loan Agreement.~~same period in 2020.

We expect to incur a net loss and negative cash flows from operations in 2021. The impact of the ~~remainder~~COVID-19 pandemic and actions taken to contain it on our liquidity for 2021 cannot be estimated as of ~~2017~~the date of this filing.

However, we believe that our cash and ~~the foreseeable future. Our management believes that successful achievement of~~cash equivalents will be sufficient to fund our business objectives will require additional financing. Given these conditions, there is substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements have been prepared on a going concern basis and do not include any adjustments that might result from these uncertainties.

The Company expects to raise capital through a variety of sources, which may include the exercise of common stock warrants, equity offerings, debt financing, collaborations, licensing arrangements, grants and government funding and strategic alliances. However, additional funding may not be available when needed or on terms acceptable to the Company. If the Company is unable to obtain additional capital, it may not be able to continue sales and marketing, research and development, or other operations ~~on the scope or scale of current activity and that could have a material adverse effect on the Company’s business, results of operations and financial condition.~~

~~Net cash used in operating activities was $5,977,000~~ for the nine months ended September 30, 2017, resulting primarily from the net loss reported of $7,542,000 and changes in accounts payable, accrued and other liabilities of $401,000, partially offset by stock compensation expense of $997,000, depreciation and amortization of $599,000 and changes in prepaid expenses of $312,000.next twelve months.

Net cash used in operating activities was $11,199,000 for the nine months ended September 30, 2016 resulting primarily from the net loss reported of $12,122,000 and changes in accounts payable, accrued and other liabilities of $769,000, partially offset by stock compensation expense of $861,000, depreciation and amortization of $523,000 and changes in prepaid expenses of $354,000.

Net cash used in investing activities was $56,000 and $1,240,000 for the nine months ended September 30, 2017 and 2016, respectively. The higher costs in 2016 resulted from purchases of property and equipment for the ASPiRA IVD laboratory.

Net cash provided by financing activities was $8,543,000 for the nine months ended September 30, 2017, which consisted primarily of proceeds from the sale of Vermillion common stock in our February 2017 private placement, net of issuance costs, as well proceeds from the exercise of common stock warrants, net of issuance costs.

~~Net cash provided by financing activities of $1,877,000 for the nine months ended September 30, 2016 consisted primarily of proceeds from the DECD loan.~~

Our future liquidity and capital requirements will depend upon many factors, including, among others:

~~the successful targeted launch of Overa;~~

~~resources devoted to~~ our ~~IVD trials laboratory and services;~~

~~the revenue generated by our IVD trial services business;~~products;

We have significant net operating loss (“NOL”) carryforwards as of ~~September 30, 2017~~March 31, 2021 for which a full valuation allowance has been provided due to our history of operating losses. Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”), as well as similar state provisions may restrict our ability to use our NOL credit carryforwards due to ownership change limitations occurring in the past or that could occur in the

future. These ownership changes may also limit the amount of NOL credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively.

Legislation commonly referred to as the Tax Cuts and Jobs Act (H.R. 1) was enacted on December 22, 2017. As a result of the Tax Cuts and Jobs Act of 2017, federal NOLs arising before January 1, 2018, and federal NOLs arising after January 1, 2018, are subject to different rules. The Company's pre- 2018 federal NOLs will expire in varying amounts from 2021 through 2037, if not utilized; and can offset 100% of future taxable income for regular tax purposes. Any federal NOLs arising after January 1, 2018, can generally be carried forward indefinitely and can offset up to 80% of future taxable income. State NOLs will expire in varying amounts from 2021 through 2037 if not utilized. The Company's ability to use its NOLs during this period will be dependent on the Company's ability to generate taxable income, and the NOLs could expire before the Company generates sufficient taxable income.

The Company believes that Section 382 ownership changes occurred as a result of the Company's follow-on public offerings in 2011, 2013, and 2015. Any limitation may result in the expiration of a portion of the net operating loss and tax credit carryforwards before utilization and any net operating loss and tax credit carryforwards that expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the Company's valuation allowance. Due to the existence of a valuation allowance, it is not expected that such limitations, if any, will have an impact on the Company's results of operations or financial position.

As of ~~September 30, 2017,~~March 31, 2021, we had no off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our condensed consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

Per Item 305(e) of Regulation S-K, the information called for by this Item 3 is not required.

Our senior management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management, including our Chief Executive Officer and Chief ~~Accounting~~Financial Officer, performed an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~September 30, 2017.~~March 31, 2021. Based on this evaluation, our Chief Executive Officer and Chief ~~Accounting~~Financial Officer have concluded that as of ~~September 30, 2017,~~March 31, 2021, our disclosure controls and procedures were effective.

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

In the ordinary course of business, we may periodically become subject to legal proceedings and claims arising in connection with ongoing business activities. The results of litigation and claims cannot be predicted with certainty, and unfavorable resolutions are possible and could materially and adversely affect our results of operations, cash flows and financial position. In addition, regardless of the outcome, litigation could have an adverse impact on us because of defense costs, diversion of management resources and other factors. While the outcome of these proceedings and claims cannot be predicted with certainty, there are no matters, as of ~~September 30, 2017,~~March 31, 2021, that, in the opinion of management, will have a material adverse effect on our financial position, results of operations or cash flows.

There have been no material changes to our risk factors from those disclosed under “Risk Factors” in Part I, Item 1A of our ~~2016~~2020 Annual Report, ~~and Part II, Item 1A of our 2017 First Quarterly Report.~~filed with the SEC on March 31, 2021. The risks and uncertainties described in our ~~2016~~2020 Annual ~~Report and 2017 First Quarterly~~ Report are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also materially adversely affect our business, financial condition or results of operations.

~~(a)~~ The following exhibits are filed or incorporated by reference with this report as indicated below:

Exhibit

Incorporated by Reference

Filed
Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Herewith

3.1

Fourth Amended and Restated Certificate of Incorporation of Vermillion, Inc. dated January 22, 2010

8-K

000-31617

3.1

January 25, 2010

3.2

Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation, effective June 19, 2014

10-Q

001-34810

3.2

August 14, 2014

3.3

Fifth Amended and Restated Bylaws of Vermillion, Inc., effective June 19, 2014

10-Q

001-34810

3.3

August 14, 2014

4.1

Form of Letter Agreement, by and between Vermillion, Inc. and certain warrant holders

8-K

001-34810

4.1

August 28, 2017

31.1

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

√
31.2

Certification of the Chief Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

√
32.1

Certification of the Chief Executive Officer and Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)
101

Interactive Data Files

√

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Payments Due by Period
(in thousands)		Total		2021		2022		2023		2024		2025		Thereafter
DECD Loan		3,084		151		204		406		452		461		1,410
Total	$	3,084	$	151	$	204	$	406	$	452	$	461	$	1,410


Weighted-average remaining lease term (in years)		5.2
Weighted-average discount rate		9.36%


Grant Date	Number of Shares	Type of Award	Exercise Price / Share	Fair Value / Share
1/28/2021	262,000	Options	$ 7.79	$ 4.95
3/19/2021	1,971,912	Options	$ 7.40	$ 4.71
3/19/2021	350,000	Performance Options	$ 7.40	$ 4.71
3/19/2021	75,988	Restricted Stock Units	$ -	$ -
	2,659,900


	~~Vermillion,~~Aspira Women’s Health Inc.
Date: ~~November 8, 2017~~May 14, 2021	/s/ Valerie B. Palmieri
	Valerie B. Palmieri President and Chief Executive Officer (Duly Authorized Officer and Principal Executive Officer)
Date: ~~November 8, 2017~~May 14, 2021	/s/ ~~Eric J. Schoen~~Robert Beechey
	~~Eric J. Schoen~~Robert Beechey ~~Senior Vice President, Finance and~~ Chief ~~Accounting~~Financial Officer (Duly Authorized Officer, Principal Financial Officer and Principal Accounting Officer)


									Three Months Ended
	Three Months Ended September 30,				Nine Months Ended September 30,				March 31,
	2017		2016		2017		2016		2021		2020
Revenue:
Product	$	657	$	581	$	2,195	$	1,640	$	1,416	$	1,185
Genetics										80	$	25
Service		42		42		128		197		-		10
Total revenue		699		623		2,323		1,837		1,496		1,220
Cost of revenue:(1)
Cost of revenue(1):
Product		495		461		1,345		1,516		648		665
Genetics										245		130
Service		284		356		855		416		-		5
Total cost of revenue		779		817		2,200		1,932		893		800
Gross profit (loss)		(80)		(194)		123		(95)
Gross profit										603		420
Operating expenses:
Research and development(2)		192		370		685		1,868		872		395
Sales and marketing(3)		1,050		1,606		3,114		5,514		3,108		2,115
General and administrative(4)		1,177		1,295		3,825		4,645		2,509		1,710
Total operating expenses		2,419		3,271		7,624		12,027		6,489		4,220
Loss from operations		(2,499)		(3,465)		(7,501)		(12,122)		(5,886)		(3,800)
Interest income (expense), net		(10)		(11)		(32)		(16)		(24)		8
Other income (expense), net		-		-		(9)		16		(10)		86
Net loss	$	(2,509)	$	(3,476)	$	(7,542)	$	(12,122)	$	(5,920)	$	(3,706)
Deemed dividend on warrant repricing		(942)		-		(942)		-
Net loss attributable to common stockholders	$	(3,451)	$	(3,476)	$	(8,484)	$	(12,122)
Net loss per share attributable to common stockholders - basic and diluted	$	(0.06)	$	(0.07)	$	(0.15)	$	(0.23)
Net loss per share - basic and diluted									$	(0.05)	$	(0.04)
Weighted average common shares used to compute basic and diluted net loss per common share		57,455,786		52,237,287		55,909,788		52,167,543		108,661,712		97,287,461
Non-cash stock-based compensation expense included in cost of revenue and operating expenses:
(1) Cost of revenue	$	29	$	27	$	108	$	73	$	34	$	25
(2) Research and development		2		10		7		63		26		-
(3) Sales and marketing		38		14		115		70		139		42
(4) General and administrative		257		210		767		655		290		202



		Three Months Ended March, 31
Lease Cost	Classification	2021		2020
Operating rent expense
	Cost of revenue	$	19	$	15
	Research and development		13		11
	Sales and marketing		11		6
	General and administrative		21		14
Variable rent expense
	Cost of revenue	$	1	$	3
	Research and development		0		1
	Sales and marketing		12		11
	General and administrative		13		14


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK