UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DCD.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 20172023

OR

☐o 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

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

(Registrant’s Telephone Number, Including Area Code)Securities registered pursuant to Section 12(b) of the Act:

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 ☑þNo ☐¨

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 ☑þNo ☐¨

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):

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 ☑þ

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,November 9, 2023, the registrant had 59,998,74810,336,834 shares of common stock, par value $0.001 per share, outstanding.

VERMILLION,ASPIRA WOMEN’S HEALTH INC.

FORM 10-Q

For the Quarter Ended September 30, 2023

Table of Contents

Vermillion, OVA1 and OveraThe following are registered and unregistered trademarks and service marks of Vermillion, Aspira Women’s HealthInc.: VERMILLION ^SM, Aspira Women’s Health®, OVA1®, OVERA®, ASPiRA LABS ^SM, OvaCalc®, OVASUITE^SM, ASPiRA GenetiX^SM , OVA1PLUS®,OVAWATCH^SM, EndoCheck^SM, OVAInherit^SM, Aspira Synergy^SM,, OVA360^SM, ASPIRA IVD® , and YOUR HEALTH, OUR PASSION®.

PART I - FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

Vermillion,Aspira Women’s Health Inc.

Condensed Consolidated Balance Sheets (unaudited)

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

(Unaudited)

Aspira Women’s Health Inc.

Vermillion, Inc.

Condensed Consolidated Statements of Operations (unaudited)

(Amounts in Thousands, Except Share and Per Share Amounts)

(Unaudited)

Vermillion,Aspira Women’s Health Inc.

Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity (unaudited)

(Amounts in Thousands, Except Share Amounts)

‎

Aspira Women’s Health Inc.

Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity (unaudited) (continued)

(Amounts in Thousands, Except Share Amounts)

See accompanying notes to the unaudited condensed consolidated financial statements.
‎

Aspira Women’s Health Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

(Amounts in Thousands)

(Unaudited)

See accompanying notes to the unaudited condensed consolidated financial statements.

‎

Vermillion,Aspira Women’s Health Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

Organization

Vermillion,Aspira Women’s Health Inc. (“Vermillion”; VermillionAspira” 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 discovering, developing and commercializing risk assessment and diagnostic tests for gynecologic disease.diseases. The Company sells OVA1™currently markets and Overa™distributes the following products and related services: (1) Ova1Plus, a non-invasive blood test that combines two FDA-cleared tests for women with pelvic masses who are planned for surgery: Ova1, leveraging its high sensitivity, and Overa, with its high specificity; and (2) OvaWatch, a non-invasive blood test used to assess the risk of malignancy tests for ovarian cancer (“OVA1”for women with adnexal masses, evaluated by initial clinical assessment as likely benign or indeterminant with a negative predictive value of 99%.

Collectively, these tests are referred to and “Overa,” respectively) through Vermillion’s wholly-owned Clinical Laboratory Improvement Amendmentsmarketed as OvaSuite.Revenue from these sources is included in total revenue in the results of 1988 (“CLIA”operations for the three and nine months ended September 30, 2023 and 2022, respectively.

Reverse Stock Split

On May 9, 2023, the Company’s board of directors approved a one-for-fifteen reverse stock split (the “Reverse Stock Split”) certified clinical laboratory, ASPiRA LABS, Inc. (“ASPiRA LABS”).  of the Company’s common stock without any change to its par value, which became effective on May 12, 2023. All references to share and per share amounts for all periods presented in these unaudited condensed consolidated financial statements have been retrospectively restated to reflect the Reverse Stock Split. Par values were not adjusted.

The

Liquidity

As of September 30, 2023, the Company also offers in-vitro diagnostic (“IVD”) trial services to third-party customers through its wholly-owned subsidiary, ASPiRA IVD, Inc. (“ASPiRA IVD”)had approximately $5,100,000 of cash and cash equivalents (excluding restricted cash of $256,000), which commencedan accumulated deficit of approximately $515,214,000, and working capital of approximately $2,410,000. For the three and nine months ended September 30, 2023, the Company incurred a net loss of $4, 706,000 and $13,601,000, respectively, and used cash in 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.

Going Concern

$3,321,000 and $12,444,000, respectively. 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.inception. The Company also expects to continue to incur a net loss and negative cash flows from operations for the remainder of 2017 and2023. In the foreseeable future. The Company’s management believesevent that successful achievement of the Company’s business objectivesexisting cash on hand is not sufficient to fund operations, meet its capital requirements or satisfy the anticipated obligations as they become due, the Company expects to take further action to protect its liquidity position, which include, but are not limited to:

Raising capital through equity or debt offerings either in the public markets or via private placement offering, including through financing facilities described elsewhere in the financial statements; however, no assurance can be given that capital will require additional financing.be available on acceptable terms or at all;

Reducing executive bonuses or replacing cash compensation with equity grants;

Reducing professional services and consulting fees and eliminating non-critical projects;

Reducing, eliminating or deferring discretionary marketing programs; and

Reducing travel and entertainment expenses.

The Company also has outstanding warrants to purchase shares of its common stock that may be exercised although there can be no assurance that the warrants will be exercised.

There can be no assurance that the Company will achieve or sustain profitability or positive cash flow from operations. Given thesethe above conditions, there is substantial doubt about the Company’s ability to continue as a going concern.concern within one year after the consolidated interim financial statements are issued. The unaudited condensed consolidated financial statements have been prepared on a going concern basis and do not include any adjustments that might result from these uncertainties.

TheOn June 1, 2022, the Company expects to raise capital throughreceived a varietydeficiency letter from the Listing Qualifications Department of sources, which may include the exercise ofNasdaq Stock Market notifying the Company that, for the preceding 30 consecutive business days, the closing bid price for the Company’s common stock warrants,  equity offerings, debt financing, collaborations, licensing arrangements, grants and government funding and strategic alliances. However,was below the minimum $1.00 per share requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”). On November 29, 2022, the Company was granted an additional funding may not be available when needed180-calendar day compliance period, or on terms acceptableuntil May 29, 2023, to regain compliance with the minimum bid price requirement. On May 26, 2023, the Company received notice from Nasdaq that it had regained compliance.

On July 11, 2023, the Company received a second deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market notifying the Company that, for the 30 consecutive business days prior to the Company. Ifdate of the deficiency letter, the Company’s Market Value of Listed Securities was below the minimum of $35 million requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(2) (the “MVLS Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), Nasdaq provided the Company is unablewith 180 calendar days, or until January 8, 2024, to obtain additional capital, it may not be able to continue sales and marketing, research and development, or other operations onregain compliance with 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.

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,MVLS Requirement. On September 12, 2023, 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,received notice from Nasdaq that it had regained compliance. There is no assurance that the Company entered into an agreement (the “Loan Agreement”) pursuant to which it may borrow up to $4,000,000 fromwill maintain compliance with the StateMVLS Requirement or any of Connecticut Department of Economic and Community Development (the “DECD”). An initial disbursement of $2,000,000 was made to the Company in April 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. other Nasdaq continued listing requirements.

Basis of Presentation

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 footnotesnotes 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, 20162022 included in this report has been derived from the audited consolidated financial statements at that date, but does not include all the information and footnotesnotes 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, 20162022 included in Vermillion’sthe Company’s Annual Report on Amendment No. 1 to Annual Report on Form 10-K which was/A, filed with the Securities and Exchange CommissionSEC on March 31,  2017 (the “2016 Annual Report”).October 26, 2023.

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.

Significant Accounting and Reporting Policies

Revenue Recognition

Product Revenue

– OvaSuite: 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'srecognizes product revenue in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Product revenue is generated by performing diagnostic services using its OVA1recognized upon completion of the OvaSuite 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 payersphysician based on an accrual basis, netestimates of contractual and other adjustments, when amounts that will ultimately be realized canrealized. In determining the amount of revenue to be estimated. Untilrecognized 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 ofconsiders 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 thatpayer and the Company, will ultimately realizeand 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,management as the collection cycle on some accounts can be as long as one year. The effect of any change made to an estimated input component and, therefore revenue recognized, would be recorded as a change in estimate at the Company may billtime of 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 as ordered by the prescribing physician under their reimbursement policies. change.

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.  

Service Revenue

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. 

Recent Accounting Pronouncements

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 theand 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 experienceexperience. The Company has elected this practical expedient that, when evaluated for collectability, will resultresults 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 September 30, 2023, there were no adjustments to estimates of variable consideration to derecognize revenue for services provided in a contract-by-contract basis.prior period; however, additional revenue of approximately $5,000 and $115,000 was recognized for amounts collected in excess of revenue estimated for prior periods during the three and nine months ended September 30, 2023, respectively. There were no impairment losses on accounts receivable recorded during the three and nine months ended September 30, 2023 and 2022, respectively.

Genetics Revenue – Aspira GenetiX: Under ASC 606, the Company’s genetics revenue was 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 considered factors such as payment history and amount, payer coverage, whether there was 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.

In September 2022, the Company received a notice of cancellation from its only Aspira Synergy genetics carrier screening customer, Axia Women’s Health. As a result of this cancellation, along with the general deterioration of commercial opportunities in the genetics carrier screening market, the Company has ceased providing Aspira GenetiX, including genetics carrier screening, on the Aspira Synergy platform, effective September 30, 2022. The Company had previously recognized genetics revenue under ASC 606 upon completion of the Aspira GenetiX test and delivery of results to the physician based on estimates of amounts that would ultimately have been realized. The Company did not incur any termination penalties nor did the Company accrue any expenses as a result of the cancellation. This is not expected to have a material impact on the Company’s revenues in any future periods.

Accounts Receivable: Virtually all accounts receivable are derived from sales made to customers located in North America. The Company performs ongoing credit evaluations of its customers’ financial condition and generally does not require collateral. The Company maintains an allowance for credit losses based upon the expected collectability of accounts receivable.In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status and makes judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company also considers customer-specific information, current market conditions, and reasonable and supportable forecasts of future economic conditions.

Correction of Errors

On October 13, 2023, the Audit Committee of the Board of Directors (the “Audit Committee”) of the Company and the Company’s management determined that its previously issued financial statements in its Annual Report on Form 10-K for the year ended December 31, 2022, as well as the previously filed Quarterly Report on

Form 10-Q for the quarterly period ended September 30, 2022 (collectively, the “Prior Period Financial Statements”), should be restated and should no longer be relied upon due to an error in the Company’s accounting for certain warrants issued in August 2022 as part of its underwritten offering with William Blair & Company, LLC.

The Company identified material errors in its accounting for warrants (the “Warrants”) issued pursuant to the underwriting agreement with William Blair & Company LLC in August 2022 (the “2022 Underwriting Agreement”). Specifically, when calculating the issuance date fair value of the Warrants, the Company used assumptions in the Black Scholes Valuation calculation that were associated with the incorrect Warrant issuance date. The Company used the 2022 Underwriting Agreement date of August 22, 2022, instead of the Warrant issuance date per the Common Stock Purchase Warrant Agreement dated August 25, 2022. The incorrect warrant issuance date resulted in an inaccurate market closing price, risk free interest rate, and stock price volatility assumptions used in the Black Scholes Valuation calculation. The initial calculation based upon the August 22, 2022 assumptions calculated an issuance date fair value of the warrant liability of approximately $7,752,000, whereas the updated calculation with the August 25, 2022 assumptions calculated an issuance date fair value of the warrant liability of approximately $3,984,000, which results in a difference of approximately $3,768,000.

The change in the initial fair value of the warrant liability resulted in an adjustment of previously reported change in fair value of warrant liabilities in the amount of $3,768,000 on the consolidated statement of operations for the three and nine months ended September 30, 2022, with a corresponding adjustment in consolidated statement of cash flows for the nine months ended September 30, 2022.

Additionally, upon the initial recording of this transaction, total offering costs of $1,296,000 were allocated between expense included in the consolidated statements of operations and stockholders’ equity included in the consolidated balance sheets based on the percentage of the Warrant fair value of $7,752,000 and total gross proceeds of $9,000,000. $1,117,000 of offering costs were initially allocated to the Warrants and expensed immediately to general and administrative (“G&A”) expense instead of as a non-operating expense in the consolidated statements of operations and comprehensive loss, and the remaining offering costs had a net impact to stockholders’ equity of $179,000. The updated allocation using the August 25, 2022 issuance date fair value of $3,984,000 resulted in a reallocation of offering costs of $543,000 from G&A expense to equity, and an adjustment of $574,000 from G&A expense to non-operating expense; $574,000 of the offering costs are now expensed immediately as other income (expense) on the consolidated statements of operations for the year ended December 31, 2022, and offering costs of $543,000 are recorded in stockholders’ equity on the consolidated balance sheet as of December 31, 2022. As a result of the change there was an adjustment in the presentation of the offering costs related to the warrant liability of $1,117,000 from cash flows used in operating activities to cash flows provided by financing activities on the Company’s consolidated statement of cash flows.

As a result of the material error discussed above, the Company restated its financial statements for the year ended December 31, 2022 and the unaudited interim financial statements for the three and nine months ended September 30, 2022 to reflect the correction of the error.

In addition to the errors identified above, the restated consolidated financial statements for the year ended December 31, 2022 also included adjustments to correct certain other immaterial errors.

These errors, discussed below, both individually and in the aggregate, had no material impact on earnings per share for the year ended December 31, 2022.

The effects of the restatement on the unaudited interim financial statements as of and for the three and nine months ended September 30, 2022 are set forth as follows.

‎

Aspira Women’s Health Inc.

Condensed Consolidated Balance Sheets

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

(Unaudited)