UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.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, 2019~~March 31, 2020

☐ 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: 001-34810

Vermillion, Inc.

(Exact name of registrant as specified in its charter)


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

~~(512) 519-0400~~

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

Securities 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	VRML	The Nasdaq Stock ~~Exchange~~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 every Interactive Data File required to be submitted 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 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.


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 ☑

As of ~~October 31, 2019,~~April 30, 2020, the registrant had ~~97,238,427~~97,377,890 shares of common stock, par value $0.001 per share, outstanding.

VERMILLION, INC.

FORM 10-Q

For the Quarter Ended ~~September 30, 2019~~March 31, 2020

Table of Contents


		Page
PART I	Financial Information	43
Item 1	Financial Statements	43
	Condensed Consolidated Balance Sheets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 (unaudited)	43
	Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (unaudited)	54
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (unaudited)	65
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (unaudited)	86
	Notes to Condensed Consolidated Financial Statements (unaudited)	97
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	1713
Item 3	Quantitative and Qualitative Disclosures About Market Risk	2825
Item 4	Controls and Procedures	2826
PART II	Other Information	2927
Item 1	Legal Proceedings	2927
Item 1A	Risk Factors	2927
Item 6	Exhibits	3029
SIGNATURES		31

The following are registered and pending trademarks of Vermillion, Inc.: Vermillion®, OVA1®, Overa® and ASPiRA GenetiXSM.

PART I - FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

Vermillion, Inc.

Condensed Consolidated Balance Sheets

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

(Unaudited)


	September 30,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Assets
Current assets:
Cash and cash equivalents	$	14,636	$	9,360	$	8,132	$	11,703
Accounts receivable, net		996		786
Accounts receivable						946		924
Prepaid expenses and other current assets		389		550		845		758
Inventories		29		92		63		25
Total current assets		16,050		10,788		9,986		13,410
Property and equipment, net		399		608		318		353
Other assets		84		12		49		65
Total assets	$	16,533	$	11,408	$	10,353	$	13,828

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	879	$	950	$	1,595	$	1,158
Accrued liabilities		2,403		1,825		2,164		2,588
Short-term debt		192		189		194		193
Other current liabilities		63		-		32		39
Total current liabilities		3,537		2,964		3,985		3,978
Non-current liabilities:
Long-term debt		1,148		1,292		1,050		1,099
Other non-current liabilities		21		-		16		13
Total liabilities		4,706		4,256		5,051		5,090
Commitments and contingencies (Note 3)
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding at September 30, 2019 and December 31, 2018		-		-
Common stock, par value $0.001 per share, 150,000,000 shares authorized at September 30, 2019 and December 31, 2018; 97,238,427 and 75,501,394 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		97		75
Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding at March 31, 2020 and December 31, 2019						-		-
Common stock, par value $0.001 per share, 150,000,000 shares authorized at March 31, 2020 and December 31, 2019; 97,288,657 and 97,286,157 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively						97		97
Additional paid-in capital		430,504		414,001		431,072		430,802
Accumulated deficit		(418,774)		(406,924)		(425,867)		(422,161)
Total stockholders’ equity		11,827		7,152		5,302		8,738
Total liabilities and stockholders’ equity	$	16,533	$	11,408	$	10,353	$	13,828

See accompanying notes to the unaudited condensed consolidated financial statements.


									Three Months Ended
	Three Months Ended September 30,				Nine Months Ended September 30,				March 31,
	2019		2018		2019		2018		2020		2019
Revenue:
Product	$	1,241	$	739	$	3,120	$	1,979	$	1,210	$	779
Service		44		35		110		152		10		24
Total revenue		1,285		774		3,230		2,131		1,220		803
Cost of revenue:(1)
Cost of revenue(1):
Product		736		477		1,950		1,538		795		516
Service		213		301		601		851		5		178
Total cost of revenue		949		778		2,551		2,389		800		694
Gross profit (loss)		336		(4)		679		(258)
Gross profit										420		109
Operating expenses:
Research and development(2)		340		129		774		425		395		209
Sales and marketing(3)		2,425		1,343		7,569		4,046		2,115		2,364
General and administrative(4)		1,421		1,167		4,210		3,780		1,710		1,255
Total operating expenses		4,186		2,639		12,553		8,251		4,220		3,828
Loss from operations		(3,850)		(2,643)		(11,874)		(8,509)		(3,800)		(3,719)
Interest income (expense), net		34		(6)		39		(25)
Interest income, net										8		7
Other income (expense), net		(4)		(3)		(15)		(17)		86		(4)
Net loss	$	(3,820)	$	(2,652)	$	(11,850)	$	(8,551)	$	(3,706)	$	(3,716)
Net loss per share - basic and diluted	$	(0.04)	$	(0.04)	$	(0.14)	$	(0.13)	$	(0.04)	$	(0.05)
Weighted average common shares used to compute basic and diluted net loss per common share		97,144,586		75,306,074		83,017,019		68,288,216		97,287,461		75,507,532
Non-cash stock-based compensation expense included in cost of revenue and operating expenses:
(1) Cost of revenue	$	20	$	35	$	57	$	93	$	25	$	16
(2) Research and development		-		2		4		4		-		2
(3) Sales and marketing		32		14		93		85		42		22
(4) General and administrative		243		245		738		657		202		144

See accompanying notes to the unaudited condensed consolidated financial statements.

Preferred Stock

Common Stock

Shares

Amount

Shares

Amount

Additional Paid-In Capital

Accumulated Deficit

Total Stockholders’ Equity
Balance at December 31, 2018
-

$
-

75,501,394

$
75

$
414,001

$
(406,924)

$
7,152
Net loss
-

-

-

-

-

(3,716)

(3,716)
Common stock issued in conjunction with exercise of stock options
-

-

19,687

-

17

-

17
Common stock issued for restricted stock awards
-

-

11,667

-

3

-

3
Stock compensation charge
-

-

-

-

181

-

181
Balance at March 31, 2019
-

$
-

75,532,748

$
75

$
414,202

$
(410,640)

$
3,637
Net loss
-

-

-

-

-

(4,314)

(4,314)
Common stock issued for restricted stock awards
-

-

95,452

-

123

-

123
Common stock issued in conjunction with public offering, net of $1,371 in issuance costs
-

-

18,750,000

19

13,611

-

13,630
Stock compensation charge
-

-

-

-

290

-

290
Balance at June 30, 2019
-

$
-

94,378,200

$
94

$
428,226

$
(414,954)

$
13,366
Net loss
-

-

-

-

-

(3,820)

(3,820)
Common stock issued for restricted stock awards
-

-

47,727

-

62

-

62
Common stock issued in conjunction with the exercise of the underwriter’s option to purchase additional shares in connection with a public offering, net of $158 in issuance costs
-

-

2,812,500

3

2,089

-

2,092
Issuance costs related to public offering
-

-

-

-

(107)

-

(107)
Stock compensation charge
-

-

-

-

234

-

234
Balance at September 30, 2019
-

$
-

97,238,427

$
97

$
430,504

$
(418,774)

$
11,827


	Preferred Stock			Common Stock
	Shares	Amount		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


	Preferred Stock			Common Stock									Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity		Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity
Balance at December 31, 2017	-	$	-	60,036,017	$	60	$	399,400	$	(396,053)	$	3,407
Net loss	-		-	-		-		-		(2,850)		(2,850)
ASC 606 adjustment to retained earnings	-		-	-		-		-		500		500
Common stock issued for restricted stock awards	-		-	3,321		-		6		-		6
Stock compensation charge	-		-	-		-		176		-		176
Balance at March 31, 2018	-	$	-	60,039,338	$	60	$	399,582	$	(398,403)	$	1,239
Balance at December 31, 2018													-	$	-	75,501,394	$	75	$	414,001	$	(406,924)	$	7,152
Net loss	-		-	-		-		-		(3,049)		(3,049)	-		-	-		-		-		(3,716)		(3,716)
Common stock issued in conjunction with exercise of stock options	-		-	32,500		-		30		-		30	-		-	19,687		-		17		-		17
Common stock issued for restricted stock awards	-		-	202,413		-		225		-		225	-		-	11,667		-		3		-		3
Common stock issued in conjunction with public offering, net of $1,006 in issuance costs	-		-	10,000,000		10		8,981		-		8,991
Preferred stock issued in conjunction with public offering, net of $504 in issuance costs	50,000		-	-		-		4,496		-		4,496
Preferred stock converted to common stock	(50,000)		-	5,000,000		5		(5)		-		-
Stock compensation charge	-		-	-		-		136		-		136	-		-	-		-		181		-		181
Balance at June 30, 2018	-	$	-	75,274,251	$	75	$	413,445	$	(401,452)	$	12,068
Net loss	-		-	-		-		-		(2,652)		(2,652)
Common stock issued for restricted stock awards	-		-	108,433		-		106		-		106
Issuance costs related to public offering	-		-	-		-		(2)		-		(2)
Stock compensation charge	-		-	-		-		190		-		190
Balance at September 30, 2018	-	$	-	75,382,684	$	75	$	413,739	$	(404,104)	$	9,710
Balance at March 31, 2019													-	$	-	75,532,748	$	75	$	414,202	$	(410,640)	$	3,637

See accompanying notes to the unaudited condensed consolidated financial statements.


	Nine Months Ended				Three Months Ended
	September 30,				March 31,
	2019		2018		2020		2019
Cash flows from operating activities:
Net loss	$	(11,850)	$	(8,551)	$	(3,706)	$	(3,716)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		276		527		56		124
Stock-based compensation expense		893		839		269		184
Loss on sale and disposal of property and equipment		54		11		2		1
Changes in operating assets and liabilities:
Accounts receivable		(210)		49		(111)		87
Prepaid expenses and other assets		173		228		14		(43)
Inventories		63		(13)		(38)		(6)
Accounts payable, accrued liabilities and other liabilities		507		(159)		13		261
Net cash used in operating activities		(10,094)		(7,069)		(3,501)		(3,108)
Cash flows from investing activities:
Purchase of property and equipment		(121)		(58)		(23)		(49)
Proceeds from sale of property and equipment						-		1
Net cash used in investing activities		(121)		(58)		(23)		(48)
Cash flows from financing activities:
Proceeds from public offering of preferred stock, net of issuance costs		-		4,496
Proceeds from public offering of common stock, net of issuance costs		13,523		8,990
Proceeds from issuance of common stock in conjunction with the exercise of the underwriter’s option to purchase additional shares in connection with a public offering, net of issuance costs		2,092		-
Principal repayment of DECD loan		(141)		(138)		(48)		(47)
Repayment of capital lease obligations		-		(29)
Proceeds from issuance of common stock from exercise of stock options		17		29		1		17
Net cash provided by financing activities		15,491		13,348
Net increase in cash and cash equivalents		5,276		6,221
Net cash used in financing activities						(47)		(30)
Net decrease in cash and cash equivalents						(3,571)		(3,186)
Cash and cash equivalents, beginning of period		9,360		5,539		11,703		9,360
Cash and cash equivalents, end of period	$	14,636	$	11,760	$	8,132	$	6,174
Supplemental disclosure of cash flow information:
Cash paid during the period for interest		31		33		9		11
Non-cash investing and financing activities:
Supplemental disclosure of noncash investing and financing activities:
Net increase in other assets/other liabilities for right of use assets		84		-		1		147
50,000 shares of convertible preferred stock converted to 5,000,000 shares of common stock, net of issuance costs		-		4,496

See accompanying notes to the unaudited condensed consolidated financial statements.

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

Vermillion, Inc. (“Vermillion”; Vermillion and its wholly-owned subsidiaries are collectively referred to as the “Company,” “we,” “our,” or “us”) is incorporated in the state of Delaware, and is engaged in the business of developing and commercializing diagnostic tests for gynecologic disease. The Company sells OVA1,Overa and ~~Overa~~OVA1PLUS risk of malignancy tests for ovarian cancer (“~~OVA1”~~OVA1,” “Overa,” and ~~“Overa,~~“OVA1PLUS,” respectively) through Vermillion’s wholly-owned Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) certified clinical laboratory, ASPiRA LABS, Inc. (“ASPiRA LABS”). The Company also ~~recently launched~~sells a product for genetic testing for specific women’s health diseases, called ASPiRA GenetiX, with a core focus on ovarian cancer.

The Company has historically also offered 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 iswas 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 ~~decided to discontinue~~discontinued pursuing contracts for ASPiRA IVD and ~~is completing~~its contractual commitments ~~which are expected to be~~were concluded in the fourth quarter of 2019.

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 ~~$418,774,000~~$425,867,000 and limited liquidity at ~~September 30, 2019.~~March 31, 2020. The Company also expects to incur a net loss and negative cash flows from operations for ~~2019. There can be no assurance that~~2020. Given these conditions, there is substantial doubt about the ~~Company will achieve or sustain profitability or positive cash flow~~Company’s ability to continue as a going concern for a period of one year from ~~operations.~~the date these consolidated financial statements are issued. The consolidated financial statements have been prepared on a going concern basis and do not contain any adjustments as a result of these uncertainties.

~~However, management believes that~~As a result of the COVID-19 pandemic and actions taken to contain it, our test volume, and resulting revenue, has decreased significantly in late March and April 2020 as fewer patients are visiting their physicians and elective surgeries have been postponed as a result of closures. Although we have seen some increases in late April and early May 2020, it is uncertain what the duration of the decreased test volumes might be. In order to reduce the impact of limitations on visiting physician offices due to the current ~~working capital position will~~closures and quarantines, we have implemented other means of coverage such as virtual sales representative meetings and increased digital sales and marketing. Enrollment for future studies may also be ~~sufficient~~delayed due to ~~meet~~ the ~~Company’s working capital needs for at least~~impact of current closures. The full impact of the ~~next 12 months.~~COVID-19 pandemic continues to evolve as of the date of this filing. As a result, we are unable to estimate the extent of the impact of the COVID-19 pandemic on our liquidity.

As discussed in Note 4, on June 28, 2019, the Company completed a public offering (the “Offering”), pursuant to which certain investors purchased Vermillion common stock for net proceeds of approximately ~~$13,800,000~~$13,521,000 after deducting underwriting discounts, commissions and other expenses related to the ~~offering but before deducting other expenses payable by us.~~ offering. On July 2, 2019, William Blair & Company, L.L.C., the sole underwriter of the Offering, exercised its option to

purchase additional shares of Vermillion common stock for net proceeds of ~~$2,092,500,~~ $2,092,000, after deducting underwriting discounts, commissions and other expenses related to the ~~offering but before deducting other expenses payable by us~~.

As discussed in Note 4, on April 17, 2018, the Company completed two public offerings (the “2018 Offerings”), pursuant to which certain investors purchased Vermillion common stock and Vermillion Series B convertible preferred stock for net proceeds of approximately $13,500,000 after deducting offering expenses.offering.

As discussed in Note 3, in March 2016, the Company entered into an agreement ~~(the~~(as amended, the “Loan Agreement”), pursuant to which it may borrow up to $4,000,000 from the State of Connecticut Department of Economic and Community Development (the “DECD”). An initial disbursement of $2,000,000 was made to the Company on April 15, 2016 under the Loan Agreement. The remaining $2,000,000 will be advanced if and when the Company achieves certain future milestones. The loan may be prepaid at any time without premium or penalty.

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 Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), as administered by the U.S. Small Business Administration (the “SBA”).

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, ~~2018~~2019 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, ~~2018~~2019 included in Vermillion’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on ~~March 28, 2019~~April 7, 2020 (the ~~“2018~~“2019 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.

In August 2018, the Financial Accounting Standards Board (the “FASB”) issued ASU 2018-15, Intangibles-Goodwill and Other-Internal Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2018-15 effective on January 1, 2020, using the prospective transition approach, which allows the Company to change the accounting method without restating prior periods or booking cumulative adjustments. The adoption of ASU 2018-15 did not have a material impact on the Company’s consolidated financial statements.

Product Revenue – OVA1, Overa and OVA1PLUS: The Company ~~accounts for~~recognizes product revenue in accordance with the provisions of ASC Topic 606, Revenue from Contracts with Customers (“(“ASC 606”)~~, which it adopted on January 1, 2018 using the modified retrospective method.~~ In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods and services.

The Company's product revenue is generated by performing diagnostic services using its OVA1 and Overa 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. All revenue is recognized upon completion of the OVA1, Overa or ~~Overa~~OVA1PLUS 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 current developments or changes that could impact reimbursement. These estimates require significant judgment by management as the collection cycle on some accounts can be as long as one year.

The Company also ~~reviewed~~reviews its patient account population and ~~determined~~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. The Company has elected this practical expedient that, when evaluated for collectability, results in a materially consistent revenue amount for such portfolios as if each patient account were evaluated on an individual contract basis. During the quarter ended March 31, 2020, there were approximately $14,000 of downward adjustments to estimates to recognize revenue for services provided in a prior period. There were no impairment losses on accounts receivable recorded during the ~~nine months~~quarters ended ~~September 30,~~March 31, 2020 and 2019.

Product 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 current 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.

: The Company’s service revenue was generated by performing 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. We do not expect to have any significant service revenue going forward as we ~~wind~~wound down the ASPiRA IVD ~~subsidiary.~~subsidiary in the fourth quarter of 2019.

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 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 Company adopted this standard on January 1, 2018, and the adoption did not have a material impact on the consolidated financial statements. In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Base Payment Accounting. This new guidance expands the scope of Topic 718 to include share-based payment transactions from acquiring goods and services from nonemployees, which was previously codified under Topic 505, where this change will modify the measurement requirements of nonemployee awards. This amendment is effective for annual periods after December 15, 2018. The Company adopted this standard on January 1, 2019, and its impact was not material.

~~In February~~ 2016, the FASB issued ASU No. ~~2016-2, Leases~~2016-13, Financial Instruments - Credit Losses (Topic ~~842~~326): Measurement of Credit Losses on Financial Instruments. 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 ~~2016-2”). This guidance~~ is ~~intended to make leasing activities more transparent and comparable, and requires substantially all leases~~scheduled to be ~~recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted~~effective in 2023 for as operating leases. ASU 2016-2 is effective for interim and annual periods beginning after December 15, 2018. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited, and early adoption was permitted. smaller reporting companies. The Company ~~adopted~~is currently assessing the impact of this ASU 2016-02 effective January 1, 2019 and elected the package of practical expedients and the new transition approach permitted by ASU 2018-11. ASU 2018-11 allows the Company not to reassess existing identification of leases, classification of leases or any initial direct costs. ~~The Company has also elected to use the hindsight practical expedient.~~ The Company has two office leases which are required to be recorded as Right of Use (“ROU”) assets and corresponding lease liabilities on the balance sheet. The Company had no short term leases with terms of less than twelve months as of the adoption date. The Company recognized ROU assets and a lease liability of approximately $178,000 related to its leases on its consolidated ~~balance sheet as of January 1, 2019. The Company did not have a cumulative adjustment impacting retained earnings.~~financial statements.

In May 2014, the FASB issued ASC 606, which superseded existing revenue recognition guidance. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company adopted ASC 606 effective January 1, 2018 using the modified retrospective method. Please see the above “Revenue Recognition” section for a discussion of the Company’s revenue recognition under ASC 606.

In March 2015, the Company entered into a commercial agreement with Quest Diagnostics, Incorporated (“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 2015. Pursuant to this agreement, as amended as of April 10, 2015, March 11, 2017, March 1, 2018 and March 11, 2020, Quest Diagnostics ~~is continuing~~has continued to provide blood draw and logistics support by transporting specimens from its clients to ASPiRA LABS for testing ~~through at least March 11, 2019~~ in exchange for a market value fee. ~~As of the date of this Quarterly Report on Form 10-Q, Quest continues to perform under the Agreement and we are in the process of negotiating its renewal.~~

Coronavirus Aid, Relief, and Economic Security (CARES) Act and Paycheck Protection Program Loan

On March 27, 2020, the U.S federal government enacted the CARES Act. The CARES Act is an emergency economic stimulus package in response to the coronavirus outbreak. The Company continues to evaluate the impact of the CARES Act on its business, future financial condition and results of operations but, with the

exception of the PPP Loan described below, did not note a material impact of the CARES Act for the three months ended March 31, 2020.

On May 1, 2020, we obtained 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. 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 take into account 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, all or a portion of the principal amount of the PPP Loan is subject to forgiveness so long as, over the eight-week period following our receipt of the proceeds of the PPP Loan, the Company uses 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 on December 1, 2020.

On March 22, 2016, the Company entered into the Loan Agreement with the DECD, pursuant to which the Company may borrow up to $4,000,000 from the DECD. Proceeds from the loan 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.

An initial disbursement of $2,000,000 was made to the Company on April 15, 2016 under the Loan Agreement. The remaining $2,000,000 will be advanced if and when the Company achieves certain other future milestones. The loan may be prepaid at any time without premium or penalty. On each of March 7, 2018 and April 3, 2020, the Company amended the Loan Agreement to adjust the future milestones which would allow the Company to continue to be eligible to borrow the remaining $2,000,000. The April 2020 amendment changes the criteria for receiving the next $1,000,000 available under the Loan Agreement by reducing from 40 to 25 the number of full-time employees that the Company is required to hire, by changing the date on or before which the Company must meet this requirement from March 1, 2021 to December 31, 2020, and by increasing the required capital investment of the Company from $18,000,000 to $18,800,000. Although the criteria for receiving the final $1,000,000 available under the loan were not changed as part of the April 2020 amendment, such disbursement is also conditioned on the Company meeting the requirements described above.

Under the terms of the Loan Agreement, as amended, 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, 2021 (the “Measurement Date”).~~December 31, 2022. Conversely, if the Company is either unable to meet these job creation and retention milestones, namely, hiring ~~and retaining for a consecutive two-year period~~4025 full-time employees with a specified average annual salary ~~by the Measurement Date,~~ on or before December 31, 2020 or retaining such employees for a consecutive two-year periodor does not maintain the Company’s Connecticut operations for a period of 10 years, the DECD may require early repayment of a portion or all of the loan depending on job attainment as compared to the required amount plus a penalty of 5% of the total funded loan.

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 that was used by ASPiRA IVD is located in Trumbull, Connecticut. The Austin, Texas lease expires on January 31, ~~2020~~2021 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. The ~~term of~~Company has the right to renew the lease ~~is five years beginning after the initial date of occupancy in January 2016 and a rent abatement period of five months, with~~for up to two ~~subsequent~~ five-year ~~renewal options~~terms at a rate equal to 90% of the then current fair market rate. The Company’s Trumbull, Connecticut lease expires on June 8, 2021.

~~As of the date of the implementation of the new lease standard, ASU 2016-2, the~~

The Company ~~was~~is not reasonably certain to exercise the renewal option for its Trumbull, Connecticut lease due to the uncertain nature of its pricing.

The expense associated with these operating leases for the three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is shown in the table below (in thousands).

~~The expense associated with these operating leases for the nine months ended September 30, 2019 and 2018 is shown in the table below (in thousands).~~

Based on our leases as of ~~September 30, 2019,~~March 31, 2020, the table below sets forth the approximate future lease payments related to operating leases with initial terms of one year or more (in thousands).

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 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 ended ~~September 30,~~March 31, 2020 and 2019 totalled $46,000 and ~~2018 totalled $50,000 and $30,000,~~$31,000, respectively. ~~Royalty expense for the nine months ended September 30, 2019 and 2018 totalled $125,000 and $78,000, respectively.~~

On June 26, 2019, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with William Blair & Company, L.L.C., as the sole underwriter (the “Underwriter”), in connection with an underwritten public offering of ~~Vermillion~~18,750,000 shares of the Company’s common ~~stock.~~stock, par value $0.001 per share.

Pursuant to the Underwriting Agreement, the Company agreed to issue and sell an aggregate of 18,750,000 shares of Vermillion common stock offered by the Underwriter in a public offering at a price of $0.80 per share (the “Offering”). The Offering closed on June 28, 2019 and resulted in net proceeds to the Company, of approximately $13,521,000 after deducting ~~underwriting discounts, commissions and other~~ expenses ~~related to the offering but before deducting other expenses payable by us~~, of approximately ~~$13,800,000.~~ $1,500,000.

Under the Underwriting Agreement, the Company granted the Underwriter an option to purchase up to an additional 2,812,500 shares of Vermillion common stock at the public offering price, less underwriting discounts and commissions. On July 2, 2019, the Underwriter exercised its option to purchase 2,812,500 shares of Vermillion common stock at a price of $0.80 per share and resulted in proceeds to the Company of $2,092,000, after deducting underwriting discounts, commissions and other expenses related to the offering ~~but before deducting other expenses payable by us, of $2,092,500.~~.

~~On April 13, 2018, the Company entered into two underwriting agreements~~ (each, a “2018 Underwriting Agreement”) with Piper Jaffray & Co., as the sole underwriter (the “2018 Underwriter”), in connection with separate but concurrent public offerings of the Company’s securities.

Pursuant to the first 2018 Underwriting Agreement, the Company agreed to issue and sell an aggregate of 10,000,000 shares of Vermillion common stock offered by the 2018 Underwriter in a public offering at a price to the public of $1.00 per share (the “2018 Common Stock Offering”). Under this 2018 Underwriting Agreement, the Company granted the 2018 Underwriter an option to purchase up to an additional 1,500,000 shares of Vermillion common stock at the public offering price, less underwriting discounts and commissions, to cover over-allotments, if any. The 2018 Underwriter did not exercise this option. The 2018 Common Stock Offering closed on April 17, 2018 and resulted in proceeds, net of 7% underwriting costs and other offering costs, to the Company of $8,990,000.

Pursuant to the second 2018 Underwriting Agreement, the Company agreed to issue and sell an aggregate of 50,000 shares of Vermillion Series B Convertible Preferred Stock, par value $0.001 per share, offered by the 2018 Underwriter in a public offering at a price to the public of $100.00 per share (the “Series B Offering”). The Series B Offering closed on April 17, 2018 and resulted in proceeds, net of 7% underwriting costs and other offering costs, to the Company of $4,496,000.

Upon obtaining Company stockholder approval at the annual meeting of Company stockholders on June 21, 2018, each of the 50,000 shares of Vermillion Series B Convertible Preferred Stock was automatically converted into shares of Vermillion common stock, at a conversion rate of 100 shares of Vermillion common stock per one

~~share of Vermillion Series B Convertible Preferred Stock, including shares issuable pursuant to customary anti-dilution provisions.~~

The Company’s employees, directors, and consultants were eligible to receive awards under the Vermillion, Inc. Second Amended and Restated 2010 Stock Incentive Plan, ~~(the “2010 Plan”),~~ which was replaced by the 2019 Plan (as defined below) with respect to future equity grants. As of ~~September 30, 2019,~~March 31, 2020, a total of ~~6,985,007~~5,860,377 shares of Vermillion common stock were reserved with respect to outstanding stock options and unvested restricted stock awards.

At the Company’s annual meeting of stockholders on June 18, 2019, the Company’s stockholders approved the Vermillion, Inc. 2019 Stock Incentive Plan (the “2019 Plan”). The purposes of the 2019 Plan are (i) to align the interests of the Company’s stockholders and recipients of awards 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, 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 authorized for grants under the 2019 Plan is 10,492,283. To the extent an equity award granted under the 2019 Plan ~~or the 2010 Plan~~ expires or otherwise terminates without having been exercised or paid in full, or is settled in cash, the shares of common stock subject to such award will become available for future grant under the 2019 Plan. As of ~~September 30, 2019,~~March 31, 2020, a total of 10,492,283 shares of common stock had been reserved for issuance under the 2019 Plan, of which ~~195,000~~3,515,708 shares of common stock are subject to outstanding stock options.

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company awarded the Company’s non-employee directors an aggregate of ~~190,909~~356,940 shares of restricted stock under the ~~2010~~2019 Plan, having a grant date of March ~~26, 2019~~19, 2020 and a grant date fair value of approximately ~~$252,000.~~$243,000. The vesting of these shares of restricted stock is as follows: 25% on April 1, ~~2019;~~2020; 25% on June 1, ~~2019;~~2020; 25% on September 1, ~~2019;~~2020; and 25% on December 1, ~~2019.~~2020. During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company also granted the Company’s non-employee directors options to purchase an aggregate of ~~402,584~~498,768 shares of Vermillion common stock with an exercise price of ~~$1.29~~$0.68 per share.

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company awarded certain consultants 11,667 shares of restricted stock under the 2010 Plan having a grant date fair value of approximately $10,000. During the nine months ended September 30, 2019, the Company also granted certain consultants options to purchase 50,000 shares of Vermillion common stock under the 2019 Plan. with an exercise price of ~~$0.47~~$0.82 per share.

These stock options have performance-based vesting conditions based on certain metrics through March 31, ~~2020~~2021. The Company also granted certain consultants options to purchase an aggregate of ~~100,000~~41,000 shares of Vermillion common stock with an exercise price of ~~$1.29~~$0.68 per share. During the nine months ended September 30, 2019, the Company also granted certain consultants options to purchase an aggregate of 35,001 shares of Vermillion common stock with an exercise price of $1.28 per share. These ~~stock options were granted under the 2010 Plan and were fully vested at the time of the grant~~.

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company granted certain officers and employees options to purchase an aggregate of ~~575,000~~850,000 shares of Vermillion common stock with an exercise price of ~~$0.47~~$0.82 per share. These stock options were granted under the ~~2010~~2019 Plan and have performance-based vesting conditions based on certain metrics through March 31, ~~2020~~2021.

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company granted certain officers and employees options to purchase an aggregate of ~~55,000 shares of Vermillion common stock with an exercise price of $0.71 per share, 125,000~~24,000 shares of Vermillion common stock with an exercise price of $0.77 per share and ~~1,073,000~~1,500,000 shares of Vermillion common stock with an exercise price of $1.29 per share. The Company granted certain officers and employees options to purchase an aggregate of 14,000 shares of Vermillion common stock with an exercise price of $1.28 per share and 20,000 shares of Vermillion common stock with an exercise price of $1.13 per share. These stock options ~~were granted under the 2010 Plan and~~ ~~vest 25% on each of the four anniversaries of the vesting commencement date for each such stock option.~~

During the nine months ended September 30, 2019, the Company granted certain officers and employees options to purchase an aggregate of 100,000 shares of Vermillion common stock with an exercise price of $1.01 per share. The Company also granted certain officers and employees options to purchase an aggregate of 95,000 shares of Vermillion common stock with an exercise price of $0.52 per share. These stock options ~~were granted under the 2019 Plan and~~ ~~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, 2019, the Company granted certain officers and employees options to purchase an aggregate of 95,000 shares of Vermillion common stock with an exercise price of $0.52$0.68 per share. These stock options were granted under the 2019 Plan and vest 25% on each of the four anniversaries of 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,~~March 31, 2020 and 2019 ~~and 2018~~ was as follows:

The Company calculates basic loss per share using the weighted average number of shares of Vermillion 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 common stock outstanding and excludes the effects of ~~9,795,345~~12,543,364 and ~~7,414,053~~10,144,433 potential shares of Vermillion common stock as of ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively, that are anti-dilutive. Potential shares of Vermillion common stock include incremental shares of Vermillion common stock issuable upon the exercise of outstanding warrants, stock options and unvested restricted stock units.

On December 18, 2017, the Company entered into a consulting agreement for a term of up to five months with the Company’s former Senior Vice President, Finance and Chief Accounting Officer. Pursuant to the terms of the consulting agreement through May 15, 2018, the consultant provided accounting and finance services related to the transition of financial leadership~~. The Company agreed to pay~~ ~~$150 per hour~~ ~~for such consulting services. The consultant also~~ ~~remained eligible for payout under the~~ Company’s 2017 Corporate Incentive Plan after he satisfactorily met certain performance obligations as outlined in the consulting agreement. During the nine months ended September 30, 2019 and 2018, the consultant was paid an aggregate of none and $53,925 for services provided pursuant to the consulting agreement.

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

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 (the “SEC”), and, except as required by law, Vermillion, Inc. (“Vermillion” 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:

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, ~~2018~~2019 (our ~~“2018~~“2019 Annual Report”), as supplemented by the section entitled “Risk Factors” in Part II, Item 1A of ~~our~~this Quarterly Report on Form 10-Q ~~for the quarter ended June 30, 2019,~~, that could cause actual results to differ materially from those projected in such forward-looking statements due to various factors, including our ability to continue as a going concern; our ability to increase the volume of our product sales; failures by third-party payers to reimburse OVA1 or Overa or changes or variances in reimbursement rates; our ability to secure additional capital on acceptable terms to execute our business plan; our ability to comply with Nasdaq’s continued listing requirements to remain publicly

traded; in the event that we succeed in commercializing OVA1, Overa, OVA1PLUS and ASPiRA GenetiX outside the United States, the political, economic and other conditions affecting other countries; our ability to continue developing existing technologies; 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 Food and Drug Administration (“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; our ability to continue to develop, protect and promote our proprietary technologies; our ability to use intellectual property directed to diagnose biomarkers; our ability to successfully defend our proprietary technology against third parties; future litigation against us, including infringement of intellectual property and product liability exposure; our ability to retain key employees; business interruptions; changes in healthcare policy; our ability to comply with environmental laws; 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 our products and to obtain any FDA clearance or approval required to develop and perform LDTs; our ability to integrate and achieve anticipated results from any acquisitions or strategic alliances; our ability to use our net operating loss carryforwards; the liquidity and trading volume of our common stock; ~~and~~ the concentration of ownership of our common ~~stock.~~stock; and impacts resulting from or relating to the COVID-19 pandemic and actions taken to contain it.

Our core mission is to transform the state of women’s health, globally, starting with ovarian cancer. We aim to ensure that women of all ages, stages and ethnicities have the best solutions available to assess their personalized risk of cancer at the earliest stage when it matters most. Our end goal is to serve a large global pelvic mass population and overall women’s health sector with a platform coupled with proprietary science and data tools which will drive better health and wellbeing for each patient we serve.

We currently market and sell the following products and 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 our product’s high sensitivity while improving specificity; (3) OVA1PLUS, a service offering combining our OVA1 and Overa products, designed to improve accuracy and reduce false elevations in the intermediate risk area by nearly 40% by leveraging the strengths of OVA1’s (MIA) sensitivity and Overa’s (MIA2G) specificity; and (4) ASPiRA GenetiX, a genetic test for specific women’s health diseases, initially focused on detecting hereditary breast and ovarian cancer syndrome (“HBOC”) and carriers of the gene. OVA1 received FDA clearance in September 2009, and Overa received FDA clearance in March 2016. OVA1 and Overa each use the Roche cobas 4000, 6000 and 8000 platforms. Through ~~September 30, 2019,~~March 31, 2020, our product and related services revenue has been limited to revenue generated by sales of ~~OVA1.~~OVA1, with ASPiRA GenetiX revenue beginning in the fourth quarter of 2019.

We are developing three additional products and related services, including two diagnostic algorithms as part of an LDT product series, OVANex and Endocheck and a high-risk screening algorithm, OVAinherit, for patients who are genetically predisposed to ovarian cancer.

We ultimately plan to commercialize each of our products on a global level.We currently hold CE marks for OVA1 and Overa. In addition, each of OVA1 and Overa are already offered on a global testing platform, which allows both tests to be deployed worldwide.

We also own and operate ASPiRA LABS, a Clinical Laboratory Improvements Amendments of 1988 (“CLIA”) certified national laboratory based in Austin, Texas, 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 to aid in clinical decision making and advance personalized treatment plans. The lab currently processes our OVA1 and 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. ASPiRA LABS holds a CLIA Certificate of Registration and a state laboratory license in California, Florida, Maryland, New York, Pennsylvania and Rhode Island. This allows the lab to process OVA1 on a national basis. The Centers for Medicare and Medicaid Services (“CMS”) issued a provider number to ASPiRA LABS in March 2015.

We ultimately plan to commercialize OVA1, Overa OVA1PLUS and ASPiRA GenetiX on a global level. We currently hold CE marks for OVA1 and Overa. During 2018 we put OVA1 and Overa on a global testing platform, which allows both tests to be deployed worldwide.

We also plan to develop an LDT product series of diagnostic algorithms that will include not only biomarkers, but also clinical risk factors, other diagnostics and patient history data in order to boost predictive value. The first diagnostic algorithms LDT, which we refer to internally as Watch and Wait, and formerly referred to as Diagnostic Algorithms #1, focuses on monitoring women with pelvic masses and has an expected launch date of

2021. The second diagnostic algorithms LDT, internally known as Diagnostic Algorithms #2, will focus on endometriosis. We also plan to expand our portfolio of products to include OVA360 screening, which will use genetics, proteins and other modalities to assess the risk of other gynecologic diseases that cannot be assessed through a traditional biopsy.

We expanded our commercial strategy in late 2018 and in the first quarter of 2019 through an investment in our commercial team and the establishment of medical and advisory support and a key opinion leader network aligned with our territories in the U.S.

In the fourth quarter of 2018, we launched OVA1PLUS. OVA1PLUS helps drive earlier detection, which in turn lowers overall healthcare costs and reduces inefficiencies in the care pathway. OVA1PLUS is available through a decentralized platform structure, which will allow other facilities, including hospital networks and large doctor practices, also known as super groups, to perform OVA1PLUS locally and upload raw data to us and receive the OVA1PLUS score, enabling increased reach and access in the geographic areas we serve. We plan to eventually pursue larger-scale partnerships to leverage this decentralized platform.

~~In January 2019, we announced that Cigna added OVA1®(MIA) to its national preferred coverage list.~~

In the first quarter of 2019, we began the development stage of our third-generation technology and first diagnostic ~~algorithms~~algorithm LDT, internally known as OVANex, and formerly referred to as Diagnostic Algorithm #1 and Watch and Wait. The new test will have strong sensitivity and specificity as well as a negative predictive value of greater than 99%, which will allow physicians to serially monitor women with a mass to delay or avoid unnecessary surgery. Tackling serial monitoring, which involves testing each patient two to four times a year, presents a new and potentially large market opportunity for us. The test will be initially launched as a serial monitoring LDT only, but the 2020 prospective monitoring study will be designed to enable us to submit for FDA clearance if we choose to do so. WeThe COVID-19 pandemic could have a potential impact on the recruitment of patients for the 2020 prospective monitoring study, as well as for additional population-based studies we anticipate conducting ~~further population-based studies and, if~~in the future. If all goes well with the 2020 prospective monitoring study, we expect a 2021 product launch.

In ~~June~~ the fourth quarter of 2019, we ~~announced that both BlueCross BlueShield of Texas~~completed all outstanding service revenue contracts relating to our ASPiRA IVD subsidiary. We are no longer pursuing in-vitro diagnosticcontracts and ~~BlueCross BlueShield of Arizona began offering preferred coverage for OVA1®(MIA).~~have fulfilled all contractual obligations under previous contracts. All ASPiRA IVD direct employees and contract labor have been terminated.

In June 2019, we launched ASPiRA GenetiX, which is genetic testing for specific women’s health diseases, with a core focus on ovarian cancer. Our initial launch is an offering to detect hereditary breast and ovarian cancer syndrome (“HBOC”) and carriers of the gene. Women who test positive for HBOC variants have a significantly elevated risk of developing ovarian cancer. ASPiRA GenetiX complements OVA1PLUS and is sold at the same call point as OVA1PLUS. In time, ASPiRA GenetiX testing results could be reported in a combined report with OVA1PLUS.

In August 2019, we received a deficiency letter from the Listing Qualifications Department of ~~The~~the Nasdaq Stock Market (“Nasdaq”) stating that, for the preceding 30 consecutive business days, the closing bid price for Vermillion common stock was below the minimum of $1.00 per share, ~~requirement~~as is required for continued ~~inclusion~~listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). ~~As provided in~~In accordance with the Nasdaq rules, we ~~have~~were provided an initial period of 180 calendar days, or until January 29, 2020, to regain compliance with the minimum bid price requirement. We may achieve compliance during this period if the closing bid price of Vermillion common stock is at least $1.00 per share for a minimum of 10 consecutive business days. If we fail to regain compliance on or prior toOn January ~~29,~~30, 2020, we ~~may be eligible for~~were granted an additional 180-calendar day compliance ~~period.~~ period to regain compliance with the minimum bid price requirement. On April 27, 2020, we were notified by Nasdaq that we had regained compliance. There is no assurance that we will maintain compliance with this or any of the other Nasdaq continued listing requirements.

~~In September~~On March 11, 2020, we entered into an Amendment No. 4 to Testing and Services Agreement (the “Amendment”) with Quest Diagnostics. The Amendment amends that certain Testing and Services Agreement, dated as of March 11, 2015 (as previously amended as of April 10, 2015, March 11, 2017 and March 1, 2018 (the “TSA”). The purpose of the Amendment was to extend the term of the TSA from March 11, 2019 to March 11, 2023 and for the Company to pay an annual fee of $75,000 for the services of a part-time Quest project manager.

On April 3, 2020, we ~~substantially completed~~entered into the ~~outstanding service revenue contracts relating~~Second Amendment to ~~our ASPiRA IVD subsidiary. We expect~~Assistance Agreement (the “Amendment”) with the State of Connecticut Department of Economic and Community Development (the “DECD”). The Amendment amends the loan agreement, dated as of March 22, 2016 (as amended on March 7, 2018 and April 3, 2020, the “Loan Agreement”), pursuant to which we may borrow up to $4,000,000 from the DECD. An initial disbursement of $2,000,000 was made to Vermillion on April 15, 2016 under the Loan Agreement. The primary purpose of the Amendment was to amend the conditions of the loan, including the criteria for receiving additional disbursements and the criteria for loan forgiveness. For additional information, see Note 3, “Commitments and Contingencies”, of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

On April 14, 2020, we announced that ~~any future service revenue from ASPiRA IVD will be minimal, and~~ we ~~expect to complete all outstanding contractual commitments relating to ASPiRA IVD in the fourth quarter of 2019.~~are now credentialed with Florida’s State Medicaid program for an estimated additional 3.6 million credentialed Medicaid lives.

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 United States. On March 11, 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic, and on March 13, 2020, the 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. Patient enrollment for our planned research studies has been lower due to the impact of closures and restricted travel, which could lead to delays in the completion of such studies. Our commercial efforts to enter into decentralized arrangements with large healthcare networks and supergroups continue to move forward. However, finalization of such deals may be slowed by the pandemic. In addition, many conventions and industry conferences have been canceled.

As a result of the COVID-19 pandemic and actions taken to contain it, the majority of our employees are working remotely. Our lab operations require on-site essential employees. We have stratified the lab operations team into two separate groups so that if an infection were to occur, it would be localized and not impact the entire workforce. 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 at least three 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 6 months.

We are 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 are taking several measures to reduce the impact of the current closures and quarantines. For example, because our salespeople are experiencing 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. Our sales team will recommence in-person calls to customers as determined on a state by state basis, in accordance with local guidelines. Some states, such as Texas, Tennessee and Georgia, have already allowed such in-person calls. We have developed protocols and training for our team where physical visits are allowed to help ensure employee, customer and patient safety.

Our test volume has decreased significantly as fewer patients are visiting their physicians and elective surgeries have been postponed as a result of closures, and it is uncertain what the duration of the decreased activity might be. As a result, we are unable to estimate the potential impact of the COVID-19 pandemic on our 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, provides loans, guarantees and subsidies to qualifying businesses and contains numerous income tax provisions. Some of these tax provisions are expected to be effective retroactively for years ending before the date of enactment. The Company continues to evaluate the implications of the CARES Act, and, aside from the below, its future impact on our business, financial condition and results of operations has not yet been determined.

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 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”). Under the terms of the CARES Act and the PPP, all or a portion of the principal amount of the PPP Loan is subject to forgiveness so long as, over the eight-week period following our receipt of the proceeds of the PPP Loan, the Company uses those proceeds for payroll costs, rent, utility costs or the maintenance of employee and compensation levels. We expect to use the proceeds of the PPP Loan in a manner that will qualify 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. 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 on December 1, 2020.

In the second quarter of 2020, we plan to begin running COVID-19 antibody and antigen tests. We are planning two channels for this offering.

We are focused on the execution of five core strategic business drivers in ovarian cancer diagnostics and specialized laboratory services to build long-term value for our investors:

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.

We have 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 decentralized ~~international agreement with~~technology transfer for Overa specimen ~~testing to be performed in the Philippines.~~testing.

In the United States, revenue for diagnostic tests comes from several sources, including third-party payers such as insurance companies, government healthcare programs, such as Medicare and Medicaid, client bill accounts and patients. Novitas Solutions, a Medicare contractor, covers and reimburses for 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. ASPiRA LABS also bills third-party commercial and other government payers as well as client bill accounts and patients for OVA1.

In November 2016, the ACOG issued Practice Bulletin Number 174 which included OVA1 as a “Multivariate Index Assay”, outlining ACOG’s clinical management guidelines for adnexal mass management. 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 achieved parity with CA125 as a Level B clinical recommendation for the management of adnexal masses.

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. Although there are Practice Bulletins, guidelines do not exist for adnexal masses. ACOG guidelines do exist, however, for ovarian cancer management.

In October 2018, ASPiRA LABS launched OVA1PLUS, a ~~new~~ clinical pathway which combines the strengths of ~~OVA1®~~OVA1 and ~~Overa®. The new~~Overa. This offering ~~improves accuracy~~helps drive earlier detection, which in turn lowers overall healthcare costs and reduces ~~false elevated risk results by nearly 40%.~~

In the fourth quarter of 2018, we launched our new platform and cloud service for decentralizing OVA1 testing. The platform and web service allows other facilities to perform OVA1 and calculate OVA1 scores locally, enabling increased reach and accessinefficiencies in the ~~markets we serve.~~care pathway.

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

In ~~April~~June and August 2019, we ~~presented our first CA125~~published two papers on the ethnic disparity ~~abstract at the American Association of Cancer Research annual meeting. The abstract showed superior detection of ovarian malignancy by~~in clinical performance between OVA1 ~~as compared to CA125~~ and ~~HE4.~~

~~In May 2019, we submitted a manuscript to a domestic journal supporting the launch of our first diagnostic algorithms LDT, internally known as Watch and Wait,~~

~~In June 2019, our first CA125 disparity data manuscript,~~its competitors. “Multivariate Index Assay is Superior to CA125 and HE4 Testing in Detection of Ovarian Malignancy in African American ~~Women,”~~Women” was published by Biomarkers in Cancer, an international peer-reviewed journal. ~~The study~~“Ethnic disparity in clinical performance between multivariate index assay and CA125 in detection of ovarian malignancy” was published in Future Oncology. Collectively, these studies indicated that in a comparison of Overa against Risk of Malignancy Algorithm (“ROMA”) (~~HE4~~(HE4 + CA125) and CA125, Overa, had the highest ~~performance~~sensitivity in ~~early stage ovarian cancer risk (90.5% sensitivity)~~ ~~assessment outperforming ROMA (HE4 + CA125) (76.2% sensitivity) and CA125 (63.1% sensitivity).~~detecting malignancy in African American women. The research was initiated after the publication of four independent articles showing that African American and non-Caucasian women demonstrated to have lower CA125 levels than Caucasian women. CA125 and HE4 have been used to evaluate women with pelvic masses to determine clinical management. Our review of data from previous prospective studies from ASPiRA Labs revealed that the OVA1 multivariate index assay had superior sensitivity to CA125 and HE4 in detecting ovarian malignancy with marked increases in theIn African American ~~population.~~women, CA125 detected 33.3%, ROMA detected 54.5%, and ~~HE4~~OVA1 detected ~~only 54.5%~~79.1% of ~~malignancy while OVA1 was able to detect 79.1% in African American women.~~ovarian cancers. OVA1 was superior in Caucasian women as well, atas it detected 93.2% ~~versus~~of ovarian cancers compared with the 82.9% ~~for CA125 and HE4. This is~~detected by ROMA. These were the first peer reviewed ~~paper~~papers on this topic. Our goal is to offer an ethnicity specific pelvic mass risk assessment starting with African American women.

In July 2019, a study was published in the journal Advanced Therapeutics, titled “Clinical Performance Comparison of Two In-Vitro Diagnostic Multivariate Index Assays (IVDMIAs) for Presurgical Assessment for Ovarian Cancer Risk”. A total of 993 patients were studied. The results of the study show that Vermillion’s second-generation multivariate index assay, Overa (MIA2G), has superior sensitivity to the current standards of care, ROMA and CA125, in detecting ovarian cancer, and the lowest false-negative rate in correctly characterizing ovarian malignancy risk.

In August 2019, a study was published in Journal of Surgical Oncology, titled “Combining A Second-Generation Multivariate Index Assay with Ovarian Imaging Improves the Preoperative Assessment of An Adnexal Mass”. ~~A total of 878 patients were studied.~~ The key conclusion of the study is that Overa® (MIA2G) and pelvic imaging are complementary tests and interpreting them together can provide important information about the malignant risk of an ovarian tumor. For physicians making decisions about a referral to a specialist, the combination of MIA2G with ultrasound has ~~the highest~~a significantly higher sensitivity when compared with ~~the current standards of care, CA125 and HE4 in predicting ovarian malignancy.~~

In ~~August 2019,~~March 2020, the results of an OVA1PLUS study were scheduled to be presented as a ~~new~~poster at the Society of Gynecologic Oncology’s 2020 Annual Meeting on Women’s Cancer (the “SGO Meeting”). The objective of the study ~~“Ethnic disparity~~was to determine whether using Overa to perform reflex testing on test results with a high OVA1 score can improve specificity in ~~clinical performance between multivariate index assay and CA125~~detection of 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 ~~malignancy”~~cancers. Although the SGO Meeting was ~~published in Future Oncology. This paper demonstrated superior detection in all women, and particularly in African American women, by OVA1. The results of~~canceled due to the study support that CA125 in African American women with adnexal masses has lower sensitivity than multivariate index assay. Implementation of multivariate index assay in evaluation of adnexal masses should increase sensitivity of detection of malignancy compared with CA125, particularly in African American women.

COVID-19 pandemic, the abstract was made available on the SGO Meeting’s website.

Our product revenue is generated by performing diagnostic services using our OVA1, ~~and~~ Overa, OVA1PLUS or ASPiRA GenetiX tests, and the service is completed upon the delivery of the test result to the prescribing physician. ~~Under~~The entire transaction price is allocated to the ~~previous revenue recognition accounting methodology, certain product revenue was recognized upon the ultimate receipt of cash.~~ single performance obligation contained in a contract with a patient.Under ASC Topic 606, Revenue from Contracts with Customers~~(“ASC 606”)~~, all revenue is recognized upon completion of the ~~OVA1 or Overa~~ test based on estimates of amounts that will ultimately be realized. In determining the amount to accrue for a delivered test result, we consider factors such as ~~historical~~ payment history and amount, payer coverage, whether there is a reimbursement contract between the payer and us, and any current developments or changes that could impact reimbursement. These estimates require significant judgment by management. We also ~~reviewed~~review our patient account population and ~~determined~~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 a materially consistent revenue amount for such portfolios as if each patient account were evaluated on an individual contract basis.

Results of Operations - Three Months Ended ~~September 30, 2019~~March 31, 2020 Compared to Three Months Ended ~~September 30, 2018~~March 31, 2019

The selected summary financial and operating data of the Company for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019 were as follows:


								Three Months Ended
	Three Months Ended September 30,				Increase (Decrease)			March 31,				Increase (Decrease)
(dollars in thousands)	2019		2018		Amount		%	2020		2019		Amount		%
Revenue:
Product	$	1,241	$	739	$	502	68	$	1,210	$	779	$	431	55
Service		44		35		9	26		10		24		(14)	(58)
Total revenue		1,285		774		511	66		1,220		803		417	52
Cost of revenue:
Product		736		477		259	54		795		516		279	54
Service		213		301		(88)	(29)		5		178		(173)	(97)
Total cost of revenue		949		778		171	22		800		694		106	15
Gross profit (loss)		336		(4)		340	8,500
Gross profit									420		109		311	285
Operating expenses:
Research and development		340		129		211	164		395		209		186	89
Sales and marketing		2,425		1,343		1,082	81		2,115		2,364		(249)	(11)
General and administrative		1,421		1,167		254	22		1,710		1,255		455	36
Total operating expenses		4,186		2,639		1,547	59		4,220		3,828		392	10
Loss from operations		(3,850)		(2,643)		(1,207)	46		(3,800)		(3,719)		(81)	2
Interest income (expense), net		34		(6)		40	(667)
Interest income, net									8		7		1	14
Other income (expense), net		(4)		(3)		(1)	33		86		(4)		90	(2,250)
Net loss	$	(3,820)		(2,652)	$	(1,168)	44	$	(3,706)	$	(3,716)	$	10	(0)

Product Revenue. Product revenue was ~~$1,241,000~~$1,210,000 for the three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$739,000~~$779,000 for the same period in ~~2018.~~2019. Revenue for ASPiRA LABS is recognized when the OVA1, Overa, OVA1PLUS or ASPiRA Genetix test is ~~being performed~~completed based on estimates of what we expect to ultimately realize. The ~~68%~~55% product revenue increase is due to an increase in the number of our tests performed. We expect revenue to ~~increase over~~decline in the ~~remainder~~second quarter due to the lower test volume as a result of the ~~year as~~COVID-19 pandemic and related closures. The duration of the ~~sales team continues~~pandemic and efforts to ~~execute its strategy.~~contain it is uncertain.

The number of OVA1 tests performed increased ~~82%~~58% to approximately ~~3,602~~3,654 OVA1 tests during the three months ended ~~September 30, 2019~~March 31, 2020 compared to approximately ~~1,981~~2,313 OVA1 tests for the same period in ~~2018.~~ 2019. Notably, prior to the March 2020 impact of the COVID-19 pandemic, there was an 80% increase in the combined January and February 2020 test volume, when compared to the same period in 2019. Although wWee expect the test volume to ~~improve over~~decline in the ~~remainder~~second quarter due to the COVID-19 pandemic and related closures, we have begun to see an increase in daily test volume during late April and early May 2020, when compared with the daily test volume in late March 2020.

The number of ASPiRA GenetiX tests performed increased to approximately 107 during the ~~year as we continue~~three months ended March 31, 2020 compared to ~~realize returns from our sales~~none in the same period of 2019. We expect ASPiRA GenetiX test volumes to decline in the second quarter due to the COVID-19 pandemic and ~~marketing investments.~~related closures.

For the ~~third~~first quarter of ~~2019,~~2020, revenue per OVA1 test performed decreased to approximately ~~$345~~$324 compared to ~~$352~~$337 for the ~~second~~first quarter of 2019. This decrease was driven by an increase in our mix of patient pay revenue in certain sales territories. ~~We have seen~~Through new contracts and insourcing our billing function, we expect to increase the percentage of revenue we receive from third-party payers as compared with revenue we receive from patient ~~pay stabilize between August 2019 and October 2019.~~payers, as well as improve collections from patient payers. We expect that the broader economic impacts of the COVID-19 pandemic will have an effect on our collections from patient payers, which may affect our revenue per OVA1 test in the second quarter.

Service Revenue. Service revenue was ~~$44,000~~$10,000 for the three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$35,000~~$24,000 for the same period in ~~2018.~~2019. All projects with ASPiRA IVD were ~~substantially~~ completed during 2019 and ~~revenue was~~the subsidiary’s operations were wound down. Some final project closure costs were recognized ~~during the three months ended September 30, 2019.~~in 2020, as well as charges to customers for billable project closure support. Revenue for ASPiRA IVD iswas recognized once certain revenue recognition criteria ~~have~~had been met. We do not expect to have any significant service revenue in ~~the fourth quarter of 2019 as we wind down the ASPiRA IVD subsidiary.~~2020.

Cost of Revenue - Product. Cost of product revenue was ~~$736,000~~$795,000 for the three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$477,000~~$516,000 for the same period in ~~2018,~~2019, representing an increase of 54% due primarily to the addition of ASPiRA GenetiX, as well as increases in ~~postage~~variable costs due to ~~new kits.~~increased volume. We expect the cost of product revenue to ~~increase slightly~~decrease along with the decrease in volume of tests performed in the ~~fourth~~second quarter of ~~2019 compared~~2020. We expect to experience lower gross margin percentages as the ~~third quarter~~volume of ~~2019.~~tests performed decreases due to certain fixed costs that will continue.

Cost of Revenue - Service. Cost of service revenue was ~~$213,000~~$5,000 for the three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$301,000~~$178,000 for the same period in ~~2018.~~2019. The ~~29%~~97% decrease ~~related primarily~~was due to ~~lower headcount and depreciation, and was partially offset by~~ the ~~early retirement of fixed assets and lab supply inventory balances. Although we expect the cost of service revenue to decrease in the fourth quarter as we~~ wind down ~~the~~of our ASPiRA IVD subsidiary ~~we do expect some costs to continue into the fourth quarter due to the fixed nature of certain related costs.~~in 2019.

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 for the three months ended ~~September 30, 2019~~March 31, 2020 increased by ~~$211,000,~~$186,000, or ~~164%~~89%, compared to the same period in ~~2018.~~2019. This increase was primarily due to clinical utility and product development costs related to ~~our third-generation serial monitoring algorithm~~OVANex in ~~2019.~~2020 as well as investments in bioinformatics. We expect research and development expenses to ~~remain consistent with the third quarter~~decline in the ~~fourth~~second quarter of ~~2019.~~2020, as patient recruitment for studies will be delayed as a result of the COVID-19 pandemic.

Sales and Marketing 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 and other healthcare professionals regarding OVA1, Overa, OVA1PLUS and 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, 2019 increased $1,082,000,~~March 31, 2020 decreased $249,000, or ~~81%~~11%, compared to the same period in ~~2018.~~2019. This ~~increase~~decrease was primarily due to ~~increased~~decreased headcount and personnel-related expenses in the ~~third~~first quarter of ~~2019~~2020 compared to ~~2018.~~2019, as well as reductions in consulting and travel due to the COVID-19 pandemic. We expect sales and marketing expenses to decrease modestly ~~over~~in the ~~remainder~~second quarter of ~~2019~~2020, due to the ~~termination of some consulting contracts, as well as~~continued travel restrictions resulting from the ~~completing the expansion of our sales team.~~COVID-19 pandemic.

General and Administrative 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, 2019~~March 31, 2020 increased by ~~$254,000,~~$455,000, or ~~22%~~36%, compared to the same period in ~~2018.~~2019. This increase is primarily due to an increase in headcount and personnel-related expenses as well as legal expenses when compared with those in the ~~third~~first quarter of ~~2018.~~2019. We expect general and administrative expenses to remain consistent with the ~~third~~first quarter in the ~~fourth~~second quarter of ~~2019.~~2020.

~~Results of Operations – Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018~~

~~The selected summary financial and operating data of the Company for the nine months ended September~~ ~~30, 2019~~ ~~and 2018 were as follows:~~

Nine Months Ended September 30,

Increase (Decrease)
(dollars in thousands)

2019

2018

Amount

%
Revenue:

Product

$
3,120

$
1,979

$
1,141

58
Service

110

152

(42)

(28)
Total revenue

3,230

2,131

1,099

52
Cost of revenue:

Product

1,950

1,538

412

27
Service

601

851

(250)

(29)
Total cost of revenue

2,551

2,389

162

7
Gross profit (loss)

679

(258)

937

363
Operating expenses:

Research and development

774

425

349

82
Sales and marketing

7,569

4,046

3,523

87
General and administrative

4,210

3,780

430

11
Total operating expenses

12,553

8,251

4,302

52
Loss from operations

(11,874)

(8,509)

(3,365)

40
Interest income (expense), net

39

(25)

64

256
Other income (expense), net

(15)

(17)

2

12
Net loss

$
(11,850)

(8,551)

$
(3,299)

39

~~Product Revenue~~. Product revenue was $3,120,000 for the nine months ended September 30, 2019 compared to $1,979,000 for the same period in 2018. The 58% product revenue increase is due to an increase in our tests performed, as well as improvement in our price per test.

The number of OVA1 tests performed increased 59% to approximately 9,044 OVA1 tests during the nine months ended September 30, 2019 compared to approximately 5,683 OVA1 tests for the same period in 2018.

~~Service Revenue~~. Service revenue was $110,000 for the nine months ended September 30, 2019 compared to $152,000 for the same period in 2018. There are no significant ongoing service revenue projects anticipated in the fourth quarter of 2019 as we wind down the ASPiRA IVD subsidiary.

~~Cost of Revenue - Product.~~ Cost of product revenue was $1,950,000 for the nine months ended September 30, 2019 compared to $1,538,000 for the same period in 2018, representing an increase of 27% due to the addition of our genetics offering, as well as increases in postage costs due to new kits, partially offset by decreases in depreciation and equipment costs incurred in 2019.

~~Cost of Revenue - Service.~~ Cost of service revenue was $601,000 for the nine months ended September 30, 2019 compared to $851,000 for the same period in 2018. The 29% decrease related primarily to lower headcount, lab supplies and depreciation as we wind down the ASPiRA IVD subsidiary, and was partially offset by the early retirement of fixed assets.

~~Research and Development Expenses~~. Research and development expenses for the nine months ended September 30, 2019 increased by $349,000, or 82%, compared to the same period in 2018. This increase was primarily due to clinical utility and product development costs related to our third-generation serial monitoring algorithm in 2019.

~~Sales and Marketing Expenses. Sales and marketing expenses for the nine months ended September 30, 2019~~ ~~increased $3,523,000, or 87%, compared to the same period in 2018. This increase was primarily due to increased headcount and personnel-related expenses in 2019 compared to 2018.~~

~~General and Administrative Expenses~~. General and administrative expenses for the nine months ended September 30, 2019 increased by $430,000, or 11%, compared to the same period in 2018. This increase is primarily due to an increase in headcount, as well as increases to legal costs in 2019 when compared with those in 2018.

We plan to continue to expend resources selling and marketing OVA1, Overa, OVA1PLUS and 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, 2019,~~March 31, 2020 we had an accumulated deficit of ~~$418,774,000~~$425,867,000 and stockholders’ equity of ~~$11,827,000.~~$5,302,000. As of ~~September 30, 2019,~~March 31, 2020, we had ~~$14,636,000~~$8,132,000 of cash and cash equivalents and ~~$3,537,000~~$3,985,000 of current liabilities. The Company expects to incur a net loss in ~~2019~~2020 as well. Working capital was ~~$12,513,000~~$6,001,000 and ~~$7,824,000~~$9,432,000 at ~~September~~March 31, 2020 ~~30, 2019~~ and December 31, ~~2018,~~2019, respectively.

On June 28, 2019, the Company completed ~~the Offering~~a public offering (the “Offering”) pursuant to which certain investors purchased Vermillion common stock for net proceeds of approximately ~~$13,800,000~~$13,521,000 after deducting underwriting discounts, commissions and other expenses related to the ~~offering but before deducting other expenses payable by us.~~offering. On July 2, 2019, William Blair & Company, L.L.C., the sole underwriter of the Offering, exercised its option to purchase additional shares of Vermillion common stock for net proceeds of ~~$2,092,500,~~$2,092,000, after deducting underwriting discounts, commissions and other expenses related to the offering ~~but before deducting other expenses payable by us~~.

On April 17, 2018, the Company completed the 2018 Offerings pursuant to which certain investors purchased shares of Vermillion common stock and shares of Vermillion Series B Convertible Preferred Stock for net proceeds of approximately $13,500,000 after deducting offering expenses.

On March 22, 2016, we entered into the Loan Agreement pursuant to which we may borrow up to $4,000,000 from the DECD. Proceeds from the loan were utilized primarily to fund the build-out, information technology infrastructure and other costs related to our 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, 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. Under the terms of the agreement, as amended, we may be eligible for forgiveness of up to $2,000,000 of the principal amount of the loan if we achieve certain job creation and retention milestones by March 1, 2021 (the “Measurement Date”). Conversely, if we are either unable to meet these job creation and retention milestones, namely, hiring and retaining for a consecutive two-year period 40 full-time employees with a specified average annual salary by the Measurement Date or do not maintain our Connecticut operations for a period of 10 years, the DECD may require early repayment of a portion or all of the loan depending on job attainment as compared to the required amount plus a penalty of 5% of the total funded loan.

An initial disbursement of $2,000,000 was made to the Company on April 15, 2016 under the Loan Agreement. The remaining $2,000,000 will be advanced if and when the Company achieves certain other future milestones. The loan may be prepaid at any time without premium or penalty.On each of March 7, 2018 and April 3, 2020, we amended the Loan Agreement to adjust the future milestones which would allow us to be eligible to borrow the remaining $2,000,000. Under the terms of the agreement, as amended, we may be eligible for forgiveness of up to $1,500,000 of the principal amount of the loan if we achieve certain job creation and retention milestones on or before December 31, 2022. Conversely, if we are either unable to meet these job creation and retention milestones, namely, hiring 25 full-time employees with a specified average annual salary on or before December 31, 2020 or retaining such employees for a consecutive two-year period on or before December 31, 2022, or do not maintain our Connecticut operations for a period of 10 years after the Loan Agreement Date, the DECD may require early repayment of a portion or all of the loan depending on job attainment as compared to the required amount plus a penalty of 5% of the total funded loan. For additional information, see Note 3, “Commitments and Contingencies”, of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

We expect to incur a net loss and negative cash flows from operations in ~~2019.~~ 2020. The impact of the COVID-19 pandemic and actions taken to contain it on our liquidity for 2020 cannot be estimated as of the date of this filing. However, we expect to generate less cash from operations due to lower sales volume and collections.

Our management believes that successful achievement of our business objectives ~~may~~will require additional capital.

The Company expects to raise capital ~~if necessary,~~ 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 $3,501,000 for the three months ended March 31, 2020, resulting primarily from the net loss reported of $3,706,000, partially offset by changes in stock compensation expense of $269,000, changes in depreciation and amortization of $56,000, changes in prepaid expense of $14,000 and changes in accounts payable, accrued and other liabilities of $13,000.

Net cash used in operating activities was ~~$10,094,000~~$3,108,000 for the ~~nine~~three months ended ~~September 30,~~March 31, 2019, resulting primarily from the net loss reported of ~~$11,850,000,~~$3,716,000 and changes in prepaid expenses of $43,000, partially offset by changes in ~~stock compensation expense of $893,000, changes~~ accounts payable, accrued and other liabilities of ~~$507,000,~~$261,000, stock compensation expense of $184,000, and depreciation and amortization of ~~$276,000, and changes in prepaid expense of $173,000.~~

Net cash used in operating activities was $7,069,000 for the nine months ended September 30, 2018, resulting primarily from the net loss reported of $8,551,000 partially offset by depreciation and amortization of $527,000, stock compensation expense of $839,000, and changes in prepaid expense of $228,000.$124,000.

Net cash used in investing activities was ~~$121,000~~$23,000 and ~~$58,000~~$48,000 for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively, which consisted primarily of property and equipment purchases.

Net cash ~~provided by~~used in financing activities was ~~$15,491,000~~$47,000 and $30,000 for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, respectively, which resulted primarily from the ~~proceeds from~~principal repayments of the ~~sale of Vermillion common stock of $13,523,000 in our June 2019 public offering.~~

~~Net cash provided by financing activities was $13,348,000 for the nine months ended September 30, 2018, which resulted primarily from the~~ ~~proceeds from the sale of Vermillion preferred stock of $4,496,000 and of Vermillion common stock of $8,990,000 in our April 2018 public offering.~~DECD loan.

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

We have significant net operating loss (“NOL”) carryforwards as of ~~September 30, 2019~~March 31, 2020 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, 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 in December 2017. As a result of the Tax Cuts and Jobs Act, NOLs arising before January 1, 2018 and NOLs arising after January 1, 2018 are subject to different rules. The Company’s pre-2018 NOLs will expire in varying amounts from 2023 through 2037, if not utilized, and can offset 100% of future taxable income for regular tax purposes. Any NOLs arising after January 1, 2018 can generally be carried forward indefinitely and can offset up to 80% of future taxable income. The Company’s ability to use its NOLs during this period will be dependent on its ability to generate taxable income, and the NOLs could expire before the Company generates sufficient taxable income. The Company’s ability to use NOL carryforwards may be restricted due to ownership change limitations occurring in the past or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”), as well as similar state specific provisions. These ownership changes may also limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and tax, respectively.

The Company’s management 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 NOL carryforwards before utilization and any NOL 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, 2019,~~March 31, 2020, 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 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, 2019.~~March 31, 2020. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of ~~September 30, 2019,~~March 31, 2020, 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, 2019,~~March 31, 2020, that, in the opinion of management, will have a material adverse effect on our financial position, results of operations or cash flows.

~~There~~Except as set forth below, there have been no material changes to our risk factors from those disclosed under “Risk Factors” in Part I, Item 1A of our ~~2018~~2019 Annual Report, ~~as supplemented by the risk factor disclosed under “Risk Factors” in Part II, Item 1A of our quarterly report on Form 10-Q for the quarter ended June 30, 2019,~~ filed with the SEC on ~~August 8, 2019.~~April 7, 2020. The risks and uncertainties described below and in our ~~2018~~2019 Annual Report ~~as supplemented,~~ 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.

Failure to meet Nasdaq’s continued listing requirements could result in the delisting of Vermillion common stock, negatively impact the price of Vermillion common stock and negatively impact our ability to raise additional capital.

On August 2, 2019, we received a deficiency letter from the Listing Qualifications Department of The Nasdaq Stock Market stating that, for the preceding 30 consecutive business days, the closing bid price for Vermillion common stock 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). On January 30, 2020, Vermillion was granted an additional 180-calendar day compliance period, or until July 27, 2020, to regain compliance with the minimum bid price requirement. On April 27, 2020, we received a notice that we had regained compliance. There is no assurance that we will maintain compliance with this or any of the other Nasdaq continued listing requirements.

If, in the future, we fail to comply with Nasdaq’s continued listing requirements, Vermillion common stock will be subject to delisting. If that were to occur, Vermillion common stock would be subject to rules that impose additional sales practice requirements on broker-dealers who sell Vermillion securities. The additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from effecting transactions in Vermillion common stock. This would adversely affect the ability of investors to trade Vermillion securities and would adversely affect the value and liquidity of Vermillion common stock. These factors could contribute to lower prices and larger spreads in the bid and ask prices for Vermillion common stock. If we seek to implement a reverse stock split in order to remain listed on The Nasdaq Capital Market, the announcement or implementation of such a reverse stock split could negatively affect the price of Vermillion common stock.

Our operations, as well as those of the collaborators on which we depend, are vulnerable to damage or interruption from fire; natural disasters, including earthquakes, computer viruses, human error, power shortages, telecommunication failures, international acts of terror, epidemics or pandemics such as COVID-19, and other similar events. Although we have certain business continuity plans in place, we have not established a formal comprehensive disaster recovery plan, and our back-up operations and business interruption insurance may not be adequate to compensate us for losses we may suffer. For example, we do not expect to be able to recover under our business interruption insurance for any adverse impact that COVID-19 has had on our business through March 31, 2020.A significant business interruption could result in losses or damages incurred by us and require us to cease or curtail our operations.

The novel coronavirus outbreak and the COVID-19 pandemic have adversely impacted, and are expected to further adversely impact, our business, results of operations and financial condition, and such future adverse impact may be material. In addition, other health epidemics, outbreaks or pandemics may adversely affect our business, results of operations and financial condition.

We face risks related to health epidemics and other outbreaks, including the global outbreak of the novel coronavirus and the disease caused by it, COVID-19. Beginning in March 2020, the COVID-19 pandemic and actions taken to contain it have led to travel restrictions, stay-at-home mandates and limitations on access to hospitals and other medical facilities.As a result, our test volumes have decreased, as fewer new patients are being tested and existing patients are extending planned testing schedules. In addition, travel restrictions and stay-at-home mandates have limited recruitment of individuals to participate in our research studies, which may cause delays in our product development timelines. Our salespeople have been limited in their ability to make in-person sales calls. Although we have adjusted our commercialization efforts to incorporate virtual sales meetings and increased digital sales and marketing, those efforts may be less effective than in-person meetings to promote use of our products. Our commercial efforts to enter into decentralized arrangements with large healthcare networks and supergroups continue to move forward. However, finalization of such deals may be slowed by the pandemic. Moreover, as the COVID-19 pandemic has caused unemployment, pay reductions and other economic strain, we have experienced and may continue to experience increased difficulty in collecting payment from patient payers. Although we have made efforts to increase the percentage of revenue we receive from third-party payers rather than patient payers, there is no assurance that such efforts will be successful.

To the extent our testing volumes decrease and/or we are unable to collect from patient payers, our revenues, cash flows from operations and liquidity will be adversely impacted. There is no assurance that sales or collections will return to normal levels during the remainder of 2020 or at any time thereafter. As of the date of the filing of this quarterly report on Form 10-Q, management is evaluating all options to conserve cash, and we have obtained stimulus funding and a loan pursuant to the Coronavirus Aid, Relief, and Economic Security Act to permit the Company to continue operations. Although we expect to begin running COVID-19 antibody and antigen testing in the second quarter of 2020 as part of our comprehensive pre-surgical risk test offering, there is no assurance that such plans will materialize, be successful or continue for future periods.

ITEM 6. EXHIBITS The following exhibits are filed or incorporated by reference with this report as indicated below:



Weighted-average remaining lease term (in years)		12.2
Weighted-average discount rate		~~2.50%~~7.75%


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	Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock	8-K		001-34810	4.1	April 17, 2018
3.4	Fifth Amended and Restated Bylaws of Vermillion, Inc., effective June 19, 2014	10-Q		001-34810	3.3	August 14, 2014
10.1	Amendment No. 4 to Testing and Services Agreement, executed as of March 11, 2020 by and among Vermillion, Inc., ASPiRA LABS, Inc. and Quest Diagnostics Incorporated	8-K		001-34810	10.1	March 17, 2020
10.2	Second Amendment to the Assistance Agreement by and between the State of Connecticut, acting by and through the Department of Economic and Community Development and Vermillion, Inc. dated April 3, 2020	10-K		001-34810	10.22	April 7, 2020
10.3	Promissory Note, dated May 1, 2020, between Vermillion, Inc. and BBVA USA	8-K		001-34810	10.1	May 7, 2020
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 Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	√
32.1		Certification of the Chief Executive Officer and Chief Financial 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	√

(1)	Furnished herewith


	Vermillion, Inc.
Date: ~~November 12, 2019~~May 14, 2020	/s/ Valerie B. Palmieri
	Valerie B. Palmieri President and Chief Executive Officer (Duly Authorized Officer and Principal Executive Officer)
Date: ~~November 12, 2019~~May 14, 2020	/s/ Robert Beechey
	Robert Beechey Chief Financial Officer (Duly Authorized Officer, Principal Financial Officer and Principal Accounting Officer)




		Three Months Ended September 30
Lease Cost	Classification	2019		2018
Operating rent expense
	Cost of revenue	$	9	$	25
	Research and development		2		7
	Sales and marketing		9		12
	General and administrative		11		22

Variable rent expense
	Cost of revenue	$	13	$	0
	Research and development		3		0
	Sales and marketing		12		1
	General and administrative		16		1



		Nine Months Ended September 30					Three Months Ended March 31
Lease Cost	Classification	2019		2018		Classification	2020		2019
Operating rent expense
	Cost of revenue	$	27	$	75	Cost of revenue	$	15	$	9
	Research and development		9		21	Research and development		11		4
	Sales and marketing		26		36	Sales and marketing		6		8
	General and administrative		33		67	General and administrative		14		11

Variable rent expense
	Cost of revenue	$	37	$	0	Cost of revenue	$	3	$	12
	Research and development		9		0	Research and development		1		3
	Sales and marketing		32		0	Sales and marketing		11		10
	General and administrative		44		4	General and administrative		14		14


2019	$	31
2020		40	$	24
2021		14		15
2022				2
2023				3
2024				4
2025				1
Total Operating Lease Payments		85		49
Less: Interest		-1		(10)
Present Value of Lease Liabilities	$	84		39


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK