Securities registered pursuant to Section 12(g) of the Act:  None

__________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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, or a smaller reporting 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.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒

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

The aggregate market value of voting common stock held by non-affiliates of the registrant is $$290,267,53947,231,865 and is based upon the last sales price as quoted on The NASDAQNasdaq Capital Market as of June 28,  2019.

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

30, 2020. As of March 24,  2020,April 23, 2021, the registrant had 97,288,657111,946,449 shares of common stock, par value $0.001 per share, outstanding.outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Explanatory Note



Certain information fromThis Amendment No. 1 on Form 10-K/A (this “Amendment”) amends the registrant’s definitive Proxy StatementAnnual Report on Form 10-K of Aspira Women’s Health Inc., a Delaware corporation (“Aspira” and, together with its subsidiaries, the “Company”, “we”, “our” or “us”), for its Annual Meeting of Stockholdersthe fiscal year ended December 31, 2020, which was originally filed with the Securities Exchange Commission (“SEC”) on March 31, 2021 (the “Original Filing”).

This Amendment is incorporated by reference intobeing filed to amend Part III of this report. The registrantthe Original Filing to include the information required by and not included in Part III of the Original Filing because the Company no longer intends to file the Proxy Statement with the Securities and Exchange Commissiona definitive proxy statement for an annual meeting of stockholders within 120 days of the end of its fiscal year ended December 31, 2019.2020. This Amendment amends and restates in their entirety Items 10, 11, 12, 13 and 14 of Part III of the Original Filing.



In addition, pursuant to the rules of the SEC, the Company has also included as exhibits currently dated certifications required under Section 302 of the Sarbanes-Oxley Act of 2002. As such, this Amendment also updates, amends and supplements Part IV, Item 15(b) of the Original Filing to include the filing of new Exhibits 31.1 and 31.2, certifications of our Chief Executive Officer and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. We are amending and refiling Item 15(b) of Part IV solely to reflect the inclusion of those certifications. Because no financial statements are contained within this Amendment and this Amendment does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 3, 4 and 5 of the certifications have been omitted. Because no financial statements are contained within this Amendment, we are not including certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. The cover page of the Original Filing is also amended to delete the reference to the incorporation by reference of the Company's definitive proxy statement.

Except as described above, no other changes have been made to the Original Filing. The Original Filing continues to speak as of the date of the Original Filing, and the Company has not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Filing other than as expressly indicated in this Amendment. Accordingly, this Amendment should be read in conjunction with the Original Filing and the Company’s other filings made with the SEC on or subsequent to March 31, 2021.

VERMILLION,ASPIRA WOMEN’S HEALTH INC.



FORM 10-K10-K/A



For the Fiscal Year Ended December 31, 20192020



Table of Contents







The following are registered and pendingunregistered trademarksand service marksof Vermillion, Aspira Women’s HealthInc.: Vermillion®VERMILLION®,ASPIRA WOMEN’S HEALTH™, OVA1®, Overa® OVERA®,ASPIRA LABS®,ASPIRAIVD®,OVACALC®,ASPIRA GENETIXandSM,  OVA1PLUS®,OVASIGHT ASPiRA GenetiXTM,  ENDOCHECK™,OVAINHERIT™,ASPIRA SYNERGYSM,, and OVA360™.



PART IIII



FORWARD-LOOKING STATEMENTSITEM 10.         DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Board of Directors

Our Board of Directors (the “Board”) currently consists of six members and two vacant board seats, with directors serving for a one-year term expiring at the 2021 annual meeting of our stockholders (the “Annual Meeting”) and until their successors are elected and qualified. 

Information regarding the current Board is set forth below.

Director Biographies and Qualifications

Sandra Brooks, M.D., M.B.A., age 60, Dr. Brooks was appointed to the Board of Directors in November 2020. Dr. Brooks is Senior Vice President & Chief Medical Officer at Thomas Jefferson University Hospitals, Center City Division, and a Professor in the Department of Obstetrics and Gynecology, Sidney Kimmel Medical College. Dr. Brooks trained in Obstetrics and Gynecology at the Hospital of the University of Pennsylvania and in Gynecologic Oncology at the Brigham and Women’s Hospital, Harvard Medical School, Dr. Brooks also served as Professor and Director of the Division of Gynecology Oncology at the University of Maryland for 10 years where in addition to clinical practice, and teaching trainees, her research focused on health services and cancer disparities. Dr. Brooks received her MBA in Medical Services Management at Johns Hopkins University before transitioning to physician executive roles in multi-site ambulatory and health system settings.

Our Board has determined that based upon Dr. Brooks’ extensive experience in the medical and health sciences, she has the qualifications and skills to serve as a member of our Board and member of our Compensation Committee.   Dr. Brooks was initially identified as a potential director candidate by our Chief Executive Officer.

Veronica G.H. Jordan, Ph.D., age 70, Dr. Jordan became a director of Aspira in December 2014 and serves as the Chair of our Compensation Committee and a member of our Audit Committee. Since 2007 she has served as an advisor to companies developing novel healthcare products and services. Previously, from 2001 to 2006, she was President and Chief Executive Officer of Medelle Corporation, a medical device company in women’s health. Prior to that, Dr. Jordan served for fourteen years in various executive positions at PAREXEL International Corporation. Earlier, she held business leadership roles at Biogen and managed an R&D department for Baxter International. Dr. Jordan served as a director of Albany Molecular Research Inc. (formerly Nasdaq:AMRI) from 2006 to 2016. She currently serves on the board of Bicycle Therapeutics (Nasdaq: BCYC) and is also the Chairperson for Royal Neighbors of America, a private life insurance company. In addition, Dr. Jordan currently serves on the boards of a number of not-for-profit organizations working to advance healthcare initiatives. She earned a B.Sc. in Biochemistry from Cambridge University and a Ph.D. in Biochemistry/Cell Biology from Oxford University. Dr. Jordan holds an Executive Masters Professional Director Certification from the American College of Corporate Directors.

Our Board has determined that based upon Dr. Jordan’s extensive experience in the life sciences industry, including relevant experience as a current and prior director and as an executive officer, she has the qualifications and skills to serve as a member of our Board, member of our Audit Committee and Chairperson of our Compensation Committee.

James T. LaFrance, age 62, was appointed to our Board in December 2013 and was also appointed Chairperson of our Board. Mr. LaFrance was initially designated as a director nominee pursuant to the Stockholders Agreement described under Item 13 below. He also served as our President and Chief Executive Officer from April 2014 to December 2014. Mr. LaFrance has over thirty years of diagnostic industry experience. From May 2012 to September 2013, Mr. LaFrance was head of digital pathology and acting Chief Executive Officer of Omnyx, LLC for GE Healthcare, a medical technology provider. From 2009 to 2011, Mr. LaFrance was the President and Chief Executive Officer of LaFrance Consulting, an independent consulting firm. Prior to that, Mr. LaFrance held a series

of commercial, strategic marketing and business development leadership roles at Ventana Medical Systems, Inc. (now Roche Tissue Diagnostics), a provider of tissue-based diagnostic solutions, including general manager of their North American and International commercial organizations from 2001 to 2009. Prior to Ventana, Mr. LaFrance served in leadership roles in strategic marketing and business development at Bayer Diagnostics. He currently serves as a member of the boards of HTG Molecular, Inc. and Personal Genome Diagnostics, Inc. He earned a Bachelor of Arts degree in Economics from the University of Connecticut and an M.B.A. from the University of Notre Dame.  

Our Board has determined that based upon Mr. LaFrance’s demonstrated executive-level management and commercial operations skills, as well as his prior role as our President and Chief Executive Officer and his prior board position, he has the qualifications and skills to serve as a member and the Chairperson of our Board.

Valerie B. Palmieri, age 59, was appointed as our President and Chief Executive Officer in January 2015 and was elected to our Board in June 2015. She first joined Aspira as Chief Operating Officer in October 2014. Ms. Palmieri brings to Aspira more than 30 years of experience in the diagnostic laboratory industry, serving in numerous sales, operations, and executive leadership positions for both laboratory service and consulting organizations.

From April 2009 to October 2014, Ms. Palmieri was the President and Chief Executive Officer of Momentum Consulting, LLC, a national consulting firm serving the life science and diagnostic laboratory industries. During her time at Momentum, Ms. Palmieri also served as CEO/President of two healthcare start-ups that resulted in a successful exit for one and won her recognition as one of the “Top 10 Entrepreneurs of Springboard Enterprises” for the other. Prior to that she spent six years as the National Vice President of Anatomic Pathology Operations with LabCorp, one of the largest public diagnostic laboratories in the world. LabCorp was the successor company to Dianon Systems, also a publicly traded company, where she served as Senior Vice President of Operations. She was a key leader in the sale of Dianon to LabCorp in 2003. Ms. Palmieri holds a Bachelor of Science degree in Medical Technology from Western Connecticut State University.

Our Board has determined that based upon Ms. Palmieri’s extensive experience in the life science and diagnostic laboratory industries, including relevant experience as our President and Chief Executive Officer and as an executive officer, she has the qualifications and skills to serve as a member of our Board.

Nicole Sandford, age 51, was appointed to the Board of Directors in February 2021. Ms. Sandford is a qualified audit committee financial expert with extensive experience advising boards and senior executives on accounting, auditing, governance, risk, compliance, crisis response and regulatory remediation. She served global accounting and consulting firm Deloitte from 1993 to 2020, most recently as the national managing partner for its Regulatory and Operational Risk practice. She has served as the audit partner for complex public companies in a variety of industries including technology, healthcare and manufacturing. As one of Deloitte’s most knowledgeable experts in corporate governance, Ms. Sandford was the architect and first leader of its Center for Board Effectiveness. After retiring from Deloitte in 2020, Ms. Sandford became EVP and board practice leader at Ellig Group, a New York-based search and advisory firm. She is Chair of Girl Scouts of Connecticut, director of the Stamford Public Education Foundation, Emeritus Member of the Advisory Board of the Weinberg Center for Corporate Governance at the University of Delaware and member of the Greenwich Hospital Breast Center Accreditation Leadership Committee.

Our Board has determined that based upon Ms. Sandford’s extensive financial expertise and experience in leadership, she has the qualifications and skills to serve as a member of our Board, member of our Audit Committee and member of our Nominating and Governance Committee.    Ms. Sandford was initially identified as a potential director candidate by our Chief Executive Officer.

David R. Schreiber, age 61, became a director of Aspira in December 2014. He serves as the Chairperson of our Audit Committee since June 2016 and previously served as a member of our Audit Committee from December 2014 to January 2016. He is also a member of our Nominating and Governance Committee. Mr. Schreiber has held a variety of executive positions in the diagnostic laboratory industry for the past 28 years. For over 15 years, Mr. Schreiber has consulted for private equity firms to assist with their due diligence efforts and served in various interim operating roles for targeted or existing portfolio companies. From 1986 to 1996, Mr. Schreiber was at Quest Diagnostics, initially in a variety of financial roles, his last position being Vice President and General Manager of Quest's Midwest Region, based in Chicago, Illinois. Following Quest, from 1996 to 2003, Mr. Schreiber was Senior Vice President and Chief Financial Officer of Dianon Systems, a publicly traded specialized pathology company, until Dianon was acquired by LabCorp. Mr. Schreiber was also a member of Dianon's board of directors. Following Dianon, Mr. Schreiber joined the board of directors of Specialty Labs, a publicly traded lab company focused on serving the esoteric needs of hospitals. Mr. Schreiber helped lead the turnaround of Specialty Labs which led to its successful sale to Ameripath/Welsh Carson. At the same time, Mr. Schreiber joined and

previously served on the board of Nanogen, a publicly traded nanotechnology company and also began his consulting career. Mr. Schreiber received a B.S. in Finance and an M.B.A. from Northern Illinois University.

Our Board has determined that based upon Mr. Schreiber’s extensive experience in the life sciences industry, including relevant experience as a current and prior director and an executive officer and chief financial officer, he has the qualifications and skills to serve as a member of our Board, Chairperson of our Audit Committee and member of our Nominating and Governance Committee.

Executive Officers

Set forth below is certain biographical information about our current executive officers:

Valerie B. Palmieri - Biographical information about Ms. Palmieri can be found under “Director Biographies and Qualifications.”

Robert Beechey joined Aspira in December 2017 as our Chief Financial Officer. Prior to joining the Company, Mr. Beechey spent three years with Q2 Solutions, a Quintiles Quest joint venture that provides clinical trial laboratory services. From 2016 to 2017, he served as Vice President and General Manager and, from 2015 to 2016, he served as Chief Financial Officer. From 2011 to 2015, Mr. Beechey served as Vice President of Quintiles Transnational Corporation, a research, clinical trial and pharmaceutical consulting services company that was acquired by Quintiles IMS Inc. (now known as IQVIA) in 2016. He also spent four years with Thermo Fisher Scientific, and over ten years with Eastman Kodak Company. Mr. Beechey received his Bachelors of Science in Economics from the Wharton School of the University of Pennsylvania, and his M.B.A. from Insead.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC and with any national securities exchange on which such securities are traded or quoted. As a practical matter, we assist our executive officers and directors by completing and filing Section 16 reports on their behalf. Based solely on a review of the copies of such reports filed with the SEC, and the written representations of our executive officers and directors, we believe that our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, complied with all applicable filing requirements for the year ended December 31, 2020.  Nicole Sandford failed to timely file a  Form 3 in February 2021.

Code of Ethics

We have adopted the Aspira Women’s Health Inc. Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to all of our officers, directors and employees. The Code of Ethics is available in the Investor Overview section of our website at http://www.aspirawh.com. We will disclose on our website any waiver of, or amendment to, the Code of Ethics as required by applicable SEC and Nasdaq requirements.

Audit Committee

The Audit Committee of the Board was established by the Board to oversee our corporate accounting and financial reporting processes, systems of internal control over financial reporting and the quality and integrity of our financial statements and reports. In addition, the Audit Committee oversees the qualification, independence and performance of our independent registered public accounting firm. The Audit Committee also recommends to the Board the appointment of our independent registered public accounting firm.

The Audit Committee is currently composed of three directors: Mr. Schreiber (Chairperson), Dr. Jordan and Ms. Sandford. The Audit Committee is governed by a written charter adopted by the Board. The Board has determined that each of Mr. Schreiber and Ms. Sandford qualify as an “audit committee financial expert,” as defined in applicable SEC rules. In making the determination

that each of Mr. Schreiber and Ms. Sandford qualifies as an “audit committee financial expert,” the Board made a qualitative assessment of each of Mr. Schreiber and Ms. Sandford’s level of knowledge and experience based on a number of factors, including Mr. Schreiber’s experience as the chief financial officer of other companies, and Ms. Sandford’s experience as a certified public accountant advising boards and senior executives.

ITEM 11.         EXECUTIVE COMPENSATION

Director Compensation

Our director compensation program is designed both to attract qualified non-employee directors and to fairly compensate them for their substantial responsibilities and time commitment. Periodically, the Compensation Committee reviews and determines the adequacy of the compensation program for non-employee directors and, based upon the results of its review, the Compensation Committee will make recommendations regarding the compensation program for non-employee directors to the Board. The 2020 annual level of non-employee director compensation did not change as compared to 2019. Directors are eligible to elect a mix of Restricted Stock Units (“RSUs”), stock option awards and cash awards. During 2020, the outside directors were compensated as follows:

2020 Director Compensation Table

The table below presents the compensation earned by our non-employee directors for the year ended December 31, 2020.   

Compensation Discussion and Analysis



This Annual Report section describes the compensation program for our Named Executive Officers. In particular, this section focuses

on Form 10-K contains forward-looking statements,our 2020 compensation program and related decisions. As a smaller reporting company, we are not required to include a

“Compensation Discussion and Analysis” and are permitted to exclude certain executive compensation tables from our

disclosure. We have elected to include a Compensation Discussion and Analysis as definedwell as additional tables under Item 402 on

a voluntary basis. As permitted under Item 402 of Regulation S-K, we are not including pay ratio disclosure in the Private Securities Litigation Reform Actlight of 1995. These statements involveour

status as a number of risks and uncertainties. Words suchsmaller reporting company.

Named Executive Officers During 2020

The following individuals who served 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 asexecutive officers of the date onCompany during 2020 were our “Named Executive Officers” for 2020:

Compensation Philosophy and Objectives

Our executive compensation program for our Named Executive Officers is administered by the Compensation Committee of the Board. The Compensation Committee annually reviews our executive compensation program to evaluate whether it appropriately rewards performance that is tied to sound decision-making and creating stockholder value, and is designed to achieve our goals of promoting financial and operational success by attracting, motivating and facilitating the retention of key employees with outstanding talent and ability. 

The goal of our compensation program for our Named Executive Officers is the same as for the overall Company, which this report is filedto foster compensation policies and practices that attract, engage and motivate high caliber talent by offering compensation in a competitive range. We are committed to a total compensation philosophy and structure that provides flexibility in responding to market factors; rewards and recognizes superior performance; attracts highly skilled, experienced and capable employees; and is fair and fiscally responsible.

The Compensation Committee has designed and implemented compensation programs for Named Executive Officers to reward them for improving our financial and operating performance and leadership excellence, to align their interests with those of our stockholders and to encourage them to remain with us for long and productive careers. Because bonus and equity compensation play a key role in aligning our executives’ interests with our stockholders’ interests, annual incentives and equity incentives constitute an essential portion of Named Executive Officer compensation. We believe that our compensation elements simultaneously fulfill one or more performance, alignment and/or retention objectives.

Base salary and annual incentives are designed to reward annual achievements and be commensurate with the Securitiesexecutive’s scope of responsibilities, demonstrated leadership abilities, and Exchange Commission (the “SEC”),management experience and except as required by law, Vermillion, Inc. (“Vermillion”effectiveness. Our other elements of compensation focus on motivating and together with its subsidiarieschallenging the “Company”, “we”, “our” or “us”) does not assume any obligationexecutive 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 includeachieve superior, longer-term, sustained results.

In establishing compensation for the following:Named Executive Officers, the following are the Compensation Committee’s objectives:



The Compensation Committee reviews all components of the Named Executive Officers’ compensation, including annual base salary, bonuses and equity compensation. The Compensation Committee also reviews projected payout obligations under several potential severance and change in control scenarios. In addition, from time to time, the Compensation Committee may hire compensation and benefits consultants to assist in developing and reviewing overall executive compensation strategies, which the Compensation Committee did utilize in 2020. The Compensation Committee determined that the Compensation Committee’s independent compensation consultant, Arnosti Consulting, Inc., had no conflicts of interest related to services rendered for the Compensation Committee. The Compensation Committee also receives input from the Chief Executive Officer regarding the compensation of all key employees other than her own compensation.

On June 23, 2020, we held a stockholder advisory vote on the compensation of our Named Executive Officers for 2020, commonly referred to as a say-on-pay vote. Our stockholders overwhelmingly voted to approve the 2020 compensation of our Named Executive Officers, as disclosed in the 2020 proxy statement, with approximately 99% of the shares present in person or by proxy voting “FOR” the proposal. Considering the results of this advisory vote, the Compensation Committee decided to retain our overall executive compensation philosophy and did not make any changes to our executive compensation program in response to the 2020 say-on-pay vote. The Compensation Committee believes that the elements of the Company’s executive compensation program are structured in a way that is supportive of the Company’s strategic objectives and is aligned with interests of the Company’s stockholders. 

Peer Group

In evaluating 2020 executive compensation decisions, the Compensation Committee also considers peer group comparator data derived from the following companies: Accelerate Diagnostics, Inc., Castle Biosciences Inc., Chembio Diagnostics, Inc., Co-Diagnostics, Inc., Cytosorbents Corp, Derm Tech, Inc., Enzo Biochem Inc., Exagen Inc., Fulgent Genetics, Inc., GenMark Diagnostics, Inc., Meridian Bioscience Inc., NanoString Technologies Inc., Orasure Technologies Inc., Oxford Immunotec Global PLC, Personalis, Inc., Quanterix Corp, Quotient Ltd, T2 Biosystems, Inc., Veracyte, Inc. and VolitionRx.

Compensation Components

Our executive compensation program is designed to attract executives with the requisite skills deemed necessary to support our strategic objectives, to reward executives for the achievement of near-term and long-term objectives, and to retain executives by aligning compensation with the longer-term creation of stockholder value, by developing a sustainable business with consistent performance.

Our compensation program is comprised of the following components for the Named Executive Officers:

Forward-looking statements

The Compensation Committee believes that these elements of compensation, when combined, are subjecteffective, and will continue to significant risksbe effective, in achieving the overall objectives of our compensation program.

Base Salaries. Executive salaries are determined based on the data from our comparator group, an evaluation of each officer’s individual performance throughout the year, level of responsibility, overall salary structure, budget guidelines and uncertainties, including those discussed in Part I Item 1A, “Risk Factors,”assessment of our financial condition. We believe that could cause actual results to differ materially from those projected in such forward-looking statements due to various factors, includingthis approach ensures that our ability to continue as a going concern; ability to increase the volume of OVA1, Overa, OVA1PLUS or ASPiRA GenetiX 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 requirementscost structure will allow us to remain publicly traded;competitive in the event that we succeedmarket. Salaries paid to the Named Executive Officers in commercializing OVA1, Overa, OVA1PLUSfiscal 2020 were within a targeted range of the peer group aggregate. The Compensation Committee normally reviews and ASPiRA GenetiX outsideadjusts as appropriate the United States,base salaries for the political, economic and other conditions affecting other countries;Named Executive Officers in the first half of each calendar year. For fiscal year 2020, there were no adjustments to the base salaries of the Named Executive Officers.  

Annual Bonuses. Consistent with our abilityobjectives 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 monitoringtie a significant portion of our products; additional costs that may be required to make further improvementsthe Named Executive Officers’ total compensation to our manufacturing operations; our ability to maintain sufficient or acceptable suppliesperformance, all Named Executive Officers have a target bonus 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 infringementa fixed percentage 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 withtheir base salary. At the additional laws and regulations that apply to us in connection with the operationbeginning 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.

ITEM 1.          BUSINESS

Company Overview

Corporate Vision:  To transformeach fiscal year, the stateCompensation Committee establishes performance measures and goals, which typically include milestones and targets. The milestones and targets are formulated into specific metrics on which to measure performance and attainment of women’s health, globally, starting with ovarian cancer. We aimgoals during the year. The Compensation Committee typically assigns weightings to ensure that women of all ages, stagesthe various performance goals to provide a balanced approach to the various factors applied to determining bonus amounts. For fiscal year 2020, these goals, milestones 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 toolstargets, which will drive better health and wellbeing for each patient we serve.

Our plan is to broaden our commercial focus from ovarian cancer to differential diagnosis of women with a range of gynecological disorders. We plan to continue commercializing our new generation of technology and decentralized technology transfer service platform. We also intend to raise public awareness regarding the diagnostic superiority of OVA1 as compared to cancer antigen 125 (“CA125”) for African American women with adnexal masses.

In the fourth quarter of 2018, we launched our new generation of technology, OVA1PLUS. OVA1PLUS iswere designed to improve accuracy and reduce false positive diagnoses by over 30% by leveraging the strengths of OVA1’s sensitivity and Overa’s specificity. OVA1PLUS will also be available through a decentralized platform structure enabling hospital networks and super groups to run the test in their labs.

We expanded our commercial strategy in late 2018 and the first quarter of 2019 through the establishment of medical and advisory support and a Key Opinion Leader Network alignedchallenging yet achievable with our territories in the US. We ultimately plan to globally commercialize OVA1 and Overa by utilizing the full national licensure of ASPiRA LABS, select laboratories for distribution, managed care coverage in select markets, our sales force and existing customer base. During 2018 we put OVA1, as we have with Overa, on a global testing platform, which allows both tests to be deployed internationally as well as run locally in the United States at major customer sites. We initiated the targeted launch of Overa in October 2016 with two key accounts converting from OVA1 to Overa. In October 2015, we announced registration of the CE mark for and clearance to market Overa in the European Union.

We also plan to develop an LDT product series 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 algorithm LDT, which we refer to internally as OVAnex, and formerly referred to as Diagnostic Algorithm #1 and Watch and Wait, focuses on monitoring women with pelvic masses.  We expect OVAnex to be available for commercial use in 2021. The second diagnostic algorithm LDT, Endocheck, formerly known as Diagnostic Algorithm #2, will focus on endometriosis. We also plan to expand our portfolio of products to include OVAinherit, which is the basis for a high-risk screening test for those patients who are genetically predisposed to ovarian cancer. This algorithm will include genetics, proteins and other modalities to assess the risk. All of our products arestrong management performance, focused on gynecologic diseases that cannot be assessed through a traditional biopsy.

Mission Statement:  We are dedicated to the discovery, development and commercialization of novel high-value diagnostic and bio-analytical solutions that help physicians diagnose, treat and improve outcomes for women. Our tests are intended to detect and to help guide decisions regarding patient treatment, which may include decisions to refer patients to specialists, to perform additional testing, or to assist in monitoring patients. A distinctive feature of our approach is the combination of multi-modal diagnostics and data. Our goal is to combine multiple biomarkers, other modalities and diagnostics, clinical risk factors and patient data into a single, reportable index score that has higher diagnostic accuracy than its constituents. We concentrate our development of novel diagnostic tests for gynecologic disease, with an initial focus on ovarian cancer. We also intend to address clinical questions related to early disease detection, treatment response, monitoring of disease progression, prognosis and others through collaborations with leading academic and research institutions.

Science of Biomarkers: Our focus on translational biomarkers and informatics enables us to address the market for novel diagnostic tests that simultaneously measure multiple biomarkers. A biomarker is a biomolecule or variant biomolecule that is present at measurably greater or lesser concentrations in a disease state versus a normal condition. Conventional protein tests measure a single protein biomarker whereas most diseases are complex. We believe that efforts to diagnose cancer and other complex diseases have failed in large part because the disease is heterogeneous at the causative level (i.e., most diseases can be traced to multiple potential etiologies) and at the human response level (i.e., each individual afflicted with a given disease can respond to that ailment in a specific manner).

Consequently, measuring a single biomarker when multiple biomarkers may be altered in a complex disease is unlikely to provide meaningful information about the disease state. We believe that our approach of monitoring and combining multiple biomarkers using a variety of analytical techniques has allowed and will continue to allow us to create diagnostic tests with sufficient sensitivity and specificity about the disease state to aid the physician considering treatment options for patients with complex diseases. Such assays are commonly referred to as IVDMIA (also known as In Vitro Diagnostic Multivariate Index Assays), and often utilize advanced algorithms based on logistic regression, pattern recognition and the like. Often, IVDMIA algorithms are non-intuitive, and therefore require rigorous clinical validation and error modeling. Vermillion and its collaborators are considered experts in these areas

and, in the case of OVA1, presented both the clinical validation and error modeling needed in order to gain pre-market notification clearance under the Federal Food, Drug and Cosmetic Act, known as 510(k) clearance, of OVA1 as an IVD software device.

Our Business and Products:  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 over 30% 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 Carrier screening, genetic screening for carriers of disease. 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 and OVA1, Overa and OVA1PLUS are each available through our decentralized platform and cloud service testing. Through December 31, 2019, Vermillion’s product and related services revenue has primarily been limited to revenue generated by sales of OVA1, with ASPiRA GenetiX revenue beginning in the fourth quarter of 2019. 

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

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.

In the fourth quarter of 2018, we entered into a comprehensive study agreement with Clalit Health Services to validate OVA1 (MIA), OVERA® (MIA2G) and OVA1PLUS on the Israeli population. Vermillion’s technology will be studied on this high risk hereditary ovarian cancer population to determine if earlier stage disease can be diagnosed and if the time to surgical treatment can be expedited for improved surgical outcomes for patients with an adnexal mass.

In the fourth quarter of 2019, we completed all outstanding service revenue contract commitments relating to our ASPiRA IVD subsidiary. The Company is no longer pursuing IVD contracts and has fulfilled all contractual obligations under previous contracts. All direct employees and contract labor have been terminated.

About OVA1 and Overa: OVA1addresses a clear clinical need, namely the pre-surgical identification of women who are at high risk of having a malignant ovarian tumor. Numerous studies have documented the benefit of referral of these women to gynecologic oncologists for their initial surgery. Prior to the clearance of OVA1, no blood test had been cleared by the FDA for physicians to use in the pre-surgical management of ovarian adnexal masses. OVA1 and Overa are qualitative serum tests that utilize five well-established biomarkers and proprietary software cleared as part of the OVA1 510(k) to determine the likelihood of malignancy in women over age 18, with a pelvic mass for whom surgery is planned. OVA1 or Overa should not be used without an independent clinical/radiological evaluation and is not intended to be a screening test or to determine whether a patient should proceed to surgery. Incorrect use of OVA1 or Overa carries the risk of unnecessary testing, surgery and/or delayed diagnosis. OVA1 was developed through large pre-clinical studies in collaboration with numerous academic medical centers encompassing over 2,500 clinical samples. OVA1 was fully validated in a prospective multi-center clinical trial encompassing 27 sites reflective of the diverse nature of the clinical centers at which ovarian adnexal masses are evaluated.

In November 2016, the American College of Obstetricians and Gynecology (“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. Practice Bulletins are 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.  

About OVA1PLUS: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 allows 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.

About Decentralized Technology Transfer:In the fourth quarter of 2018, we launched our new platform and cloud service for OVA1 and Overa testing. The platform and web service allow third-party facilities to perform OVA1 and Overa and calculate OVA1 and Overa scores locally, enabling increased reach and access in the markets we serve.

About ASPiRA GenetiX:  In June 2019, we launched ASPiRA GenetiX, which is genetic testing for specific women’s health diseases, with a core focus on ovarian cancer. ASPiRA GenetiX’s initial offering is designed to detect hereditary breast and ovarian cancer syndrome (“HBOC”) and Carrier screening, genetic screening for carriers of disease. 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. The testing is performed by Fulgent Genetics, Inc.

About OVAnex: We are developing 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 algorithm LDT, which we refer to internally as OVAnex, and formerly referred to as Diagnostic Algorithm #1 and Watch and Wait, focuses on monitoring women with pelvic masses.  The new test will have a strong sensitivity and specificity as well as a strong 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. We expect OVAnex to be commercially available in 2021.  

About Endocheck: The second LDT product we are developing is known as Endocheck, formerly referred to as Diagnostic Algorithm #2, will focus on endometriosis. The Endocheck test is being developed to act as an aide in detection of endometriosis. We expect to develop and validate the test in 2021 and commercially launch in the fourth quarter of 2022.

About OVAinherit: We also plan to expand our portfolio of products to include OVAinherit, which is the basis for a high-risk screening test for those patients which are genetically predisposed. This algorithm will include genetics, proteins and other modalities to assess the risk of ovarian cancer.

Strategy:  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.following:



Studies and Publications

Below is a list of peer reviewed publications or articles published by outside parties to date regarding our technology, including five new publications in 2019.

The Diagnostic Field

The economics of healthcare demand effective and efficient allocation of resources which can be accomplished through disease prevention, early detection of disease leading to early intervention, and diagnostic tools that can triage patients to more appropriate therapy and intervention. In December 2018, Allied Market Research, a market research and business consulting partnership, published a study which forecasts the global IVD market to reach $93.6 billion by 2025, growing at a compound annual growth rate of 4.8% from 2018 to 2025. We have chosen to concentrate our business focus in the areas of oncology and women’s health where we have established strong key opinion leaders, and provider and patient relationships. Demographic trends suggest that, as the population ages, the burden from gynecologic diseases, including cancers, will increase and the demand for quality diagnostic, prognostic and predictive tests will escalate. In addition, the areas of oncology and women’s health generally lack quality diagnostic tests and, therefore, we believe patient outcomes can be significantly improved by the development of novel diagnostic tests.

Ovarian Cancer

Background    

Commonly known as the “silent killer,” ovarian cancer leads to nearly 14,000 deaths each year in the United States. As of early 2020, The American Cancer Society (“ACS”) estimated that nearly 22,000 new ovarian cancer cases will be diagnosed, with the majority of patients diagnosed in the late stages of the disease in which the cancer has spread beyond the ovary. Unfortunately, ovarian cancer patients in the late stages of the disease have a poor prognosis, which leads to high mortality rates. According to the National Cancer Institute, when ovarian cancer is diagnosed at its earliest stage, patients have up to a 92.4% 5-year survival rate following surgery and/or chemotherapy if detected in stage 1. However, many ovarian cancer patients are diagnosed after the tumor

has spread outside the ovary. For ovarian cancer patients diagnosed in the late-stages of the disease, the 5-year survival rate falls to as low as 24.3%. 

While the diagnosis of ovarian cancer in its earliest stages greatly increases the likelihood of long-term survival from the disease, another factor that predicts clinical outcomes from ovarian cancer is the specialized training of the surgeon who operates on the ovarian cancer patient. Numerous studies have demonstrated that treatment of malignant ovarian tumors by specialists such as gynecologic oncologists or at specialist medical centers improves outcomes for women with these tumors. Published guidelines from the Society of Gynecologic Oncology (“SGO”) and the ACOG recommend referral of women with malignant ovarian tumors to specialists. Unfortunately, we believe only about one-third of women with these types of tumors are operated on by specialists, in part because of inadequate diagnostics that can identify such malignancies with high sensitivity. Accordingly, there is a clinical need for a diagnostic test that can provide adequate predictive value to stratify patients with a pelvic mass into those with a high risk of invasive ovarian cancer versus those with a low risk of ovarian cancer, which is essential for improving overall survival in patients with ovarian cancer.

Although adnexal masses are relatively common, malignant tumors are less so. Screening studies have indicated that the prevalence of simple ovarian cysts in women 55 years of age and older can be as high as 14%.[1] Adnexal masses are thought to be even more common in premenopausal women, but there are more non-persistent, physiologic ovarian masses in this demographic group. For instance, in the University of Kentucky ovarian cancer screening project, the rate of postmenopausal women with persistently abnormal ultrasound findings requiring surgery was 1.4%.[2] According to 2010 U.S. census data, there are 36.8 million women between the ages of 50 and 70 in the U.S., suggesting that there are more than 500,000 suspicious adnexal masses in this segment alone. Those that do require evaluation for the likelihood for malignancy could potentially benefit from the use of OVA1 or Overa.

The ACOG Ovarian Cancer Guidelines and the SGO guidelines help physicians evaluate adnexal masses for malignancy. These guidelines take into account menopausal status, CA125 levels, and physical and imaging findings. However, these guidelines have notable shortcomings because of their reliance on diagnostics with certain weaknesses. Most notably, the CA125 blood test, which is cleared by the FDA only for monitoring for recurrence of ovarian cancer, is negative in up to 50% of early stage ovarian cancer cases. Moreover, CA125 can be elevated in numerous conditions and diseases other than ovarian cancer, including benign ovarian masses and endometriosis. These shortcomings limit the CA125 blood test’s utility in distinguishing benign from malignant ovarian tumors or for use in detection of early stage ovarian cancer. Transvaginal ultrasound is another diagnostic modality used with patients with ovarian masses. Attempts at defining specific morphological criteria that can aid in a benign versus malignant diagnosis have led to the morphology index and the risk of malignancy index, with reports of 40-70% predictive value. However, ultrasound interpretation can be variable and dependent on the experience of the operator. Accordingly, the ACOG and SGO guidelines perform only modestly in identifying early stage ovarian cancer and malignancy in pre-menopausal women. Efforts to improve detection of cancer by lowering the cutoff for CA125 (the “Modified ACOG/SGO Guidelines”) provide only a modest benefit, since CA125 is absent in about 20% of epithelial ovarian cancer cases and is poorly detected in early stage ovarian cancer overall.

In November 2016, ACOG practice bulletin 174 (November 2016) states the following “The multivariate index assay has demonstrated higher sensitivity and negative predictive value for ovarian malignancy when compared with clinical impression and CA 125 alone.”[3]

The ovarian cancer information page on American Cancer Society’s website (cancer.org/cancer/ovarian-cancer/about/new-research.html) indicates that:

For women who have an ovarian tumor, a test called OVA1 can measure the levels of 5 proteins in the blood. The levels of these proteins, when looked at together, are used to determine whether a woman’s  tumor should be considered low risk or high risk. If the tumor is labeled ‘low risk’ based on this test, the woman is not likely to have cancer. If the tumor is considered ‘high risk,’ the woman is more likely to have a cancer, and should see a specialist (a gynecologic oncologist). This test is NOT a screening test and it is NOT a test to decide if you should have surgery or not− it is meant for women who have an ovarian tumor where surgery has been decided but have not yet been referred to a gynecologic oncologist. [4]

In 2019, two studies were released indicating superior clinical performance of OVA1 over CA125 and OVA1 over CA125, HE4 and Risk of Malignancy Algorithm (“ROMA”) in African American women. [5],[6]

[1] Greenlee RT, Kessel B, Williams CR, Riley TL, Ragard LR, Hartge P, Buys SS, Partridge EE, Reding DJ. Prevalence, incidence, and natural history of simple ovarian cysts among women >55 years old in a large cancer screening trial. Am J Obstet Gynecol. 2010 Apr; 202(4):373.e1-9.

[2] van Nagell JR Jr, DePriest PD, Ueland FR, DeSimone CP, Cooper AL, McDonald JM, Pavlik EJ, Kryscio RJ. Ovarian cancer screening with annual transvaginal sonography: findings of 25,000 women screened. Cancer. 2007 May 1;109(9):1887-96.

[3] The American College of Obstetrics and Gynecologists Practice Bulletin No. 174: Evaluation and Management of Adnexal Masses. Obstet &  Gynecol. 2016 Nov; 128(5):e210-e226.

[4] The American Cancer Society medical and editorial content team. “What’s New in Ovarian Cancer Research?” About Ovarian Cancer Ovarian, American Cancer Society, 11 Apr. 2018.

[5] Dunton  C,  Bullock RG, Fritsche H. Ethnic Disparity in Clinical Performance Between Multivariate Index Assay and CA125 in Detection of Ovarian Malignancy. Future Oncology.  2019 Aug. 

[6] Dunton C, Bullock RG, Fritsche H. Multivariate Index Assay is Superior to CA125 and HE4 Testing in Detection of Ovarian Malignancy in African-American Women. Biomark Cancer. 2019 Jun.

Commercialization and Distribution

Starting in 2014, we offered OVA1 via ASPiRA LABS. In March 2015, we entered into a commercial agreement with Quest Diagnostics. Pursuant to this agreement, all OVA1 U.S. testing services for Quest Diagnostics customers were transferred to Vermillion’s wholly-owned subsidiary, ASPiRA LABS. Pursuant to this agreement as amended as of March 11,  2020, Quest Diagnostics has continued to provide blood draw and logistics support by transporting specimens to ASPiRA LABS for testing in exchange for a market value fee. Per the terms of the agreement, we may not offer to existing or future Quest Diagnostics customers any tests that Quest Diagnostics offers.

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 technology transfer for Overa specimen testing.

We ultimately plan to commercialize OVA1, Overa, OVA1PLUS and ASPiRA GenetiX on a global level. We currently hold CE marks for OVA1 and Overa. In addition, each of OVA1 and Overa are already offered on our global testing platform, which allows both tests to be deployed worldwide.

Customers

In the United States, our clinical customer base can be segmented into three major groups: physicians, physician office laboratories and hospital laboratories. Both within and outside the United States, laboratories may become our customers, either directly with us through payer contracts or client bill arrangements or via decentralized technology transfer relationships established between us and authorized distributors.

Research and Development

Our research and development efforts center on the discovery and validation of biomarkers and combinations of biomarkers that can be developed into diagnostic assays. We have done this predominantly through collaborations we have established with academic institutions such as JHU and M.D. Anderson as well as through contract research organizations such as PrecisionMed, Inc. In addition, we actively seek collaborations and initiate dialog with clinical academics, in order to generate publications, intellectual property or test development in broader areas of gynecologic oncology and other gynecologic diseases. 

In 2019, two studies identified a disparity in diagnosis for African American women and demonstrated that OVA1 has superior sensitivity for detection in this population over CA125 or ROMA.

Some of the new biomarkers currently under consideration for validation are (a) 15 serum proteins highly associated with ovarian cancer that were identified by mass spectrometry; (b) circulating methylated DNA fragments from cancer genes; and (c) micro-RNA profiles in serum.

Commercial Operations

We have a commercial infrastructure, including sales and marketing and reimbursement expertise. We also operate a national CLIA certified clinical laboratory, ASPiRA LABS. Our sales representatives work to identify opportunities for educating general gynecologists and gynecologic oncologists on the benefits of OVA1. In February 2015, Vermillion received ISO 13485:2003 certification for our quality management system from the British Standards Institution (BSI), one of the world's leading certification bodies. We currently hold CE marks for OVA1 and Overa.  We are targeting markets outside of the United States now that we have Overa cleared on the Roche cobas platform, which is available globally. We  currently have two decentralized technology transfer contracts with distributors outside the United States.

Approximately 12,898 OVA1 tests were performed in 2019 compared to 7,679 in 2018, with the increase being attributed to expanded commercial efforts. In 2019, we continued to increase sales through experienced Market Development Managers and Regional Account Managers. As awareness of our product continues to build, these managers are focused on efforts that will have a

positive impact on regional payers and create positive coverage decisions.  They are working with local key opinion leaders and meeting with medical directors to discuss the clinical need, our technology assessment package and increasing experience and cases studies showing the positive outcomes utilizing OVA1, Overa and OVA1PLUS. 

There are still obstacles to overcome and significant milestones ahead. First, the average gynecologist will only see about 2 to 4 patients per month who may need our test, and additional effort will be required to establish a consistent ordering pattern.  Second, despite gains in positive medical policy coverage and contract agreements, insurance coverage and patient bills remain a concern to the physician and can disrupt the ordering pattern of a generalist who is supportive of our products. We have instituted a “Patient Transparency Program” to assist with this process by proactively assessing insurance and educating patients on testing costs prior to testing being performed.

Revenue and Reimbursement

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. Because OVA1 tests are exclusively performed at ASPiRA LABS in Texas, this 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. Through December 31, 2019, Vermillion’s product and related services revenue has primarily been limited to revenue generated by sales of OVA1, with ASPiRA GenetiX beginning to generate revenue in the fourth quarter of 2019.

In the fourth quarter of 2019, we completed all outstanding service revenue contract commitments relating to our ASPiRA IVD subsidiary. 

In December 2013, the CMS made its final determination and authorized Medicare contractors to set prices for Multianalyte Assays with Algorithmic Analyses (“MAAA”) test CPT codes when they determine it is payable. In late 2016, OVA1 was included on the list of clinical diagnostic laboratory test procedure codes as one for which the CMS would require reporting of private payer rates as part of the implementation of Protecting Access to Medicare Act of 2014 (“PAMA”). In November 2017, we announced that the CMS released the Final 2018 Clinical Lab Fee Schedule (“CLFS”), effective January 1, 2018. Under the new fee schedule, the price for OVA1(MIA) (code 81503) is $897. This is a four-fold increase over the previous CMS rate, and this new rate was based on the median of private payer payments submitted to CMS by companies, including ASPiRA Labs, as part of the market-based payment reform mandated through PAMA. The rate is scheduled to be in effect for a three-year term from January 2018 through December 2020.This rate is extended through 2021.

CMS also published a final price for Overa of $950, which was benchmarked to the only proteomic test currently on the CLFS that uses biomarkers and an algorithm to produce a prognostic score. The rate is scheduled to be in effect for a three-year term from January 2018 through December 2020.This rate is extended through 2021.

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

In June 2019, we announced that both BlueCross BlueShield of Texas and BlueCross BlueShield of Arizona began offering preferred coverage for OVA1®(MIA).

We are reimbursed for ASPiRA GenetiX based on either contracted rates or out of network rates for covered testing under patient insurance plans.

Competition

The diagnostics industry in which we operate is competitive and evolving. There is intense competition among healthcare, biotechnology and diagnostics companies attempting to discover candidates for potential new diagnostic products. These companies may:

We compete with companies in the United States and abroad that are engaged in the development and commercialization of novel biomarkers that may form the basis of novel diagnostic tests. These companies may develop products that are competitive with and/or perform the same or similar functions as the products offered by us or our collaborators, such as biomarker specific reagents or diagnostic test kits. Also, clinical laboratories may offer testing services that are competitive with the products sold by us or our collaborators. For example, a clinical laboratory can either use reagents purchased from manufacturers other than us or use its own

internally developed reagents to make diagnostic tests. If clinical laboratories make tests in this manner for a particular disease, they could offer testing services for that disease as an alternative to products sold by us used to test for the same disease. The testing services offered by clinical laboratories may be easier to develop and market than test kits developed by us or our collaborators because the testing services are not subject to the same clinical validation requirements that are applicable to FDA-cleared or approved diagnostic test kits.

Fujirebio Diagnostics sells Risk of Ovarian Malignancy Algorithm (“ROMA”). ROMA combines two tumor markers and menopausal status into a numerical score using a publicly available algorithm. This test has the same intended use and precautions as OVA1. ROMA is currently marketed as having utility limited to epithelial ovarian cancers, which accounts for 80% of ovarian malignancies. Based upon the results of studies done in 2013 and 2019, we believe that OVA1 has superior performance when compared to the Fujirebio Diagnostics test.

In addition, competitors such as Becton Dickinson and Abbott Laboratories have publicly disclosed that they have been or are currently working on ovarian cancer diagnostic assays. Academic institutions periodically report new findings in ovarian cancer diagnostics that may have commercial value.

We also compete in the development and commercialization of genetic testing for hereditary cancer and carrier screening for autosomal-recessive or X-linked conditions with companies in the United States and internationally. The testing services offered by competitive clinical laboratories, if performed in-house, may be easier to develop and market than our testing, which is performed by a third party.

Several companies such as Invitae Corporation, Myriad Genetics, Inc., Laboratory Corporation of America, Inc., Natera, Ambry Genetics, and Progenity, Inc. offer similar genetic testing for carrier screening and hereditary genetic testing. We believe that the technology offered by our testing is competitive with these companies and that our existing relationships with gynecologist offices enhance our ability to reach customers.

Intellectual Property Protection

Our intellectual property includes the federally registered trademarks for Vermillion, OVA1 Overa and OVA1PLUS as well asa pending trademark for ASPiRA GenetiX and a portfolio of owned, co-owned or licensed patents and patent applications. As of the date of the filing of this Annual Report on Form 10-K, our clinical diagnostics patent portfolio included 18 issued United States patents, 7 pending United States patent applications, and numerous pending patent applications and issued patents outside the United States. These patents and patent applications fall into 23 patent families and are directed to diagnostic technologies.

Manufacturing

We are the manufacturer of OVA1 and Overa. Components of OVA1 and Overa include purchased reagents for each of the component assays as well as the OvaCalc® software. Because we do not directly manufacture the component assays, we are required to maintain supply agreements with manufacturers of each of the assays. As part of our quality systems, reagent lots for these assays are tested to ensure they meet specifications required for inclusion in OVA1 and Overa. Only reagent lots determined by us as having met these specifications are permitted for use in OVA1 and Overa. OVA1PLUS is a service offering that combines OVA1 and Overa. Our principal supplier is Roche Diagnostics Corporation.

Environmental Matters

Medical Waste

We are subject to licensing and regulation under federal, state and local laws relating to the handling and disposal of medical specimens and hazardous waste as well as to the safety and health of laboratory employees. ASPiRA LABS is operated in material compliance with applicable federal and state laws and regulations relating to disposal of all laboratory specimens. We utilize outside vendors for disposal of specimens. We cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of these materials. We could be subject to fines, penalties and damages claims in the event of an improper or unauthorized release of, or exposure of individuals to, hazardous materials. In addition, claimants may sue us for injury or contamination that results from our use, or the use by third parties, of these materials, and our liability may exceed our total assets. Compliance with environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development or production efforts.

Occupational Safety

In addition to its comprehensive regulation of safety in the workplace, the Federal Occupational Safety and Health Administration has established extensive requirements relating to workplace safety for healthcare employers whose workers may be exposed to blood-borne pathogens such as HIV and the hepatitis virus. These regulations, among other things, require work practice controls, protective clothing and equipment, training, medical follow-up, vaccinations and other measures designed to minimize exposure to chemicals and transmission of the blood-borne and airborne pathogens. Although we believe that we have complied in all

material respects with such federal, state and local laws, failure to comply could subject us to denial of the right to conduct business, fines, criminal penalties and other enforcement actions.

Specimen Transportation

Regulations of the Department of Transportation, the International Air Transportation Agency, the Public Health Service and the Postal Service apply to the surface and air transportation of clinical laboratory specimens. Although we believe that we have complied in all material respects with such federal, state and local laws, failure to comply could subject us to denial of the right to conduct business, fines, criminal penalties and other enforcement actions.

Government Regulation 

General.    Our activities related to diagnostic products are, or have the potential to be, subject to regulatory oversight by the FDA under provisions of the Federal Food, Drug and Cosmetic Act and regulations thereunder, including regulations governing the development, marketing, labeling, promotion, manufacturing and export of our products. The Federal Food, Drug and Cosmetic Act requires that medical devices introduced to the United States market, unless exempted by regulation, be the subject of either a pre-market notification clearance, known as a 510(k) clearance or 510(k) de novo clearance, or a pre-market approval (“PMA”). OVA1 was cleared by the FDA in September 2009 under the 510(k) de novo guidelines. OVA1 was the first FDA-cleared blood test for the pre-operative assessment of ovarian masses. We received 510(k) clearance for Overa, our second-generation biomarker panel in March 2016. 

Even in the case of devices like analyte specific reagents (“ASRs”), which may be exempt from 510(k) clearance or PMA approval requirements, the FDA may impose restrictions on marketing. Our potential future ASR products may be sold only to clinical laboratories certified under CLIA to perform high complexity testing. In addition to requiring approval or clearance for new products, the FDA may require approval or clearance prior to marketing products that are modifications of existing products or the intended uses of these products. Additionally, the FDA will generally conduct a pre-approval inspection for PMA devices. Our suppliers’ manufacturing facilities are subject to periodic and unannounced inspections by the FDA and state agencies for compliance with Quality System Regulations (“QSRs”). Although we believe that we and our suppliers will be able to operate in compliance with the FDA’s QSRs for ASRs, we cannot ensure that we or our suppliers will be in or be able to maintain compliance in the future. We passed an FDA inspection in 2016. However, we cannot ensure that we will pass any future inspection, if and when it occurs. If the FDA believes that we or our suppliers are not in compliance with applicable laws or regulations, the FDA can issue a Form 483 List of Observations or warning letter, detain or seize our products, issue a recall notice, enjoin future violations and assess civil and criminal penalties against us. In addition, approvals or clearances could be withdrawn under certain circumstances.

ASPiRA LABS and any customers using our products for clinical use in the United States may be regulated under CLIA, which is intended to ensure the quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualifications, administration, participation in proficiency testing, patient test management, quality control, quality assurance and inspections. The regulations promulgated under CLIA establish three levels of diagnostic tests - namely, waived, moderately complex and highly complex - and the standards applicable to a clinical laboratory depend on the level of the tests it performs.

FDA Regulation of Cleared Tests.  Once granted, a 510(k) clearance or PMA approval may place substantial restrictions on how our device is marketed or to whom it may be sold. All devices cleared by the FDA are subject to continuing regulation by the FDA and certain state agencies. As a medical device manufacturer, we are also required to register and list our products with the FDA. We are required to set forth and adhere to a quality policy and other regulations. In addition, we are required to comply with the FDA’s QSRs, which require that our devices be manufactured and records be maintained in a prescribed manner with respect to manufacturing, testing and control activities. Additionally, we may be subject to inspection by federal and state regulatory agencies. Non-compliance with these standards can result in, among other things, fines, injunctions, civil penalties, recalls, and total or partial suspension of production. Further, we are required to comply with FDA requirements for labeling and promotion. For example, the FDA prohibits cleared or approved devices from being promoted for uncleared or unapproved uses. Labeling and promotional activities are subject to scrutiny by the FDA, which prohibits the marketing of medical devices for unapproved uses. Additionally, the FDA requires us to perform certain post-marketing studies to verify or validate the clinical performance of FDA-cleared tests, as is permitted by their statutory authority. Failure to comply with our post-marketing study requirements may lead to enforcement actions by the FDA, including seizure of our product, injunction, prosecution and/or civil money penalties.

In addition, the medical device reporting regulation requires that we provide information to the FDA whenever evidence reasonably suggests that one of our devices may have caused or contributed to a death or serious injury, or where a malfunction has occurred that would be likely to cause or contribute to a death or serious injury if the malfunction were to recur.

Foreign Government Regulation of Our Products.  We intend to obtain regulatory approval in other countries to market our tests. Medical device laws and regulations are in effect in many of the countries in which we may do business outside the United States. These range from comprehensive device approval requirements for some or all of our potential future medical device products, to requests for product data or certifications. The number and scope of these requirements are increasing. In addition, products which have not yet been cleared or approved for domestic commercial distribution may be subject to the FDA Export Reform and

Enhancement Act of 1996. Each country also maintains its own regulatory review process, tariff regulations, duties and tax requirements, product standards, and labeling requirements. In February 2015, Vermillion also received ISO 13485:2003 certification for our quality management system from the British Standards Institution (BSI), one of the world's leading certification bodies. In March 2015, OVA1 was CE marked, a requirement for marketing the test in the European Union. In October 2015, we announced registration of the CE mark for and clearance to market Overa in the European Union.

Employees

As of December 31, 2019, we had 52 full-time employees and 53 total employees. We also engage independent contractors from time to time.

Code of Ethics for Executive Officers

We have adopted a Code of Ethics for Executive Officers. We publicize the Code of Ethics for Executive Officers by posting the policy on our website, www.vermillion.com. We will disclose on our website any waivers of, or amendments to, our Code of Ethics.

Corporate Information

We were originally incorporated in 1993, and we had our initial public offering in 2000. Our executive offices are located at 12117 Bee Caves Road, Building Three, Suite 100, Austin, Texas 78738, and our telephone number is (512) 519-0400. We maintain a website at www.vermillion.com and www.aspiralab.com where general information about us is available. 

Information About Us

We file annual reports, quarterly reports, current reports, proxy statements, and other information with the SEC.

The SEC maintains an Internet website, www.sec.gov, that contains reports, proxy statements, and other information regarding issuers that file electronically with the SEC.

In addition, we make available free of charge under the Investor Overview section of our website, www.vermillion.com, the Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) as soon as reasonably practicable after we have electronically filed such material with or furnished such material to the SEC. You may also obtain these documents free of charge by submitting a written request for a paper copy to the following address:

Investor Relations

Vermillion, Inc.
12117 Bee Caves Road, Building Three, Suite 100
Austin, TX 78738

The information contained on our websites is not incorporated by reference in this Annual Report on Form 10-K and should not be considered a part of this Annual Report on Form 10-K.

ITEM 1A.          RISK FACTORS 

Investing in our securities involves a high degree of risk. You should carefully consider the following risk factors and uncertainties together with all of the other information contained in this Annual Report on Form 10-K, including our audited consolidated financial statements and the accompanying notes in Part II Item 8, “Financial Statements and Supplementary Data.” If any of the following risks materializes, our business, financial condition,  results of operations and growth prospects could be materially adversely affected, and the value of an investment in our common stock may decline significantly. The risks and uncertainties described below 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, results of operations and growth prospects

Risks Related to Our Business

There is substantial doubt about our ability to continue as a going concern, and this may adversely affect our stock price and our ability to raise capital.

We have incurred significant losses and negative cash flows from operations since inception and have an accumulated deficit of nearly $422 million as of the end of the period covered by this report. The Company also expects to incur a net loss and negative cash flows from operations in 2020. Given these conditions, there is substantial doubt about the Company’s ability to continue as a going concern andour independent registered public accounting firm’s report on our financial statements for the year ended December 31, 2019 includes an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern given our recurring net losses and negative cash flows from operations.

The Company’s management believes that successful achievement of the business objectives will require additional financing. The Company expects to raise capital through a variety of sources, which may include the exercise of common stock warrants, equity offerings, debt financing, collaborations, licensing arrangements, grants and government funding and strategic alliances. However, additional funding may not be available when needed or on terms acceptable to the Company. If the Company is unable to obtain additional capital, it may not be able to continue sales and marketing, research and development, distribution 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.

If we are unable to increase the volume of OVA1 sales, our business, results of operations and financial condition will be adversely affected.

We have experienced significant operating losses each year since our inception and we expect to incur a net loss for fiscal year 2020. Our losses have resulted principally from costs incurred in cost of revenue, sales and marketing, general and administrative costs and research and development. The number of OVA1 tests performed in 2017, 2018 and 2019 was 8,575, 7,679 and 12,898, respectively. If we are unable to increase the volume of OVA1 sales, our business, results of operations and financial condition will be adversely affected.

Failures by third-party payers to reimburse OVA1, Overa, OVA1PLUS, or ASPiRA GenetiX or changes or variances in reimbursement rates could materially and adversely affect our business, financial condition and results of operations.

We are responsible for obtaining payment from third-party payers. Accordingly, our future revenues will be dependent upon third-party reimbursement payments to ASPiRA LABS. Insurance coverage and reimbursement rates for diagnostic tests are uncertain, subject to change and particularly volatile during the early stages of commercialization. There remain questions as to what extent third-party payers, like Medicare, Medicaid and private insurance companies will provide coverage for OVA1, Overa, OVA1PLUS and ASPiRA GenetiX and for which indications. While CMS has issued PAMA reimbursement rates for OVA1 and Overa effective January 1, 2018, there is no guarantee that CMS will continue to cover the OVA1 test or that the payment rate will be comparable to the PAMA rate. Such uncertainty could create payment uncertainty from other payers as well. The reimbursement rates for OVA1, Overa, OVA1PLUS and ASPiRA GenetiX are largely out of our control. We have experienced volatility in the coverage and reimbursement of OVA1 and Overa due to contract negotiation with third-party payers and implementation requirements and the reimbursement amounts we have received from third-party payers varies from payer to payer, and, in some cases, the variation is material. 

Third-party payers, including private insurance companies as well as government payers such as Medicare and Medicaid, have increased their efforts to control the cost, utilization and delivery of healthcare services. These measures have resulted in reduced payment rates and decreased utilization of diagnostic tests such as OVA1 and Overa. From time to time, Congress has considered and implemented changes to the Medicare fee schedules in conjunction with budgetary legislation, and pricing for tests covered by Medicare is subject to change at any time. Reductions in third-party payer reimbursement rates may occur in the future. Reductions in the price at which OVA1 and Overa is reimbursed could have a material adverse effect on our business, results of operations and financial condition. If we are unable to establish and maintain broad coverage and reimbursement for OVA1, Overa, OVA1PLUS or ASPiRA GenetiX or if third-party payers change their coverage or reimbursement policies with respect to OVA1, Overa, OVA1PLUS or ASPiRA GenetiX, our business, financial condition and results of operations could be materially adversely affected.

We will need to raise additional capital in the future, and if we are unable to secure adequate funds on terms acceptable to us, we may be unable to execute our business plan.

We will seek to raise additional capital through the issuance of equity or debt securities in the public or private markets, or through a collaborative arrangement or sale of assets. Additional financing opportunities may not be available to us, or if available, may not be on favorable terms. The availability of financing opportunities will depend, in part, on market conditions, and the outlook for our business. Any future issuance of equity securities or securities convertible into equity could result in substantial dilution to our stockholders, and the securities issued in such a financing may have rights, preferences or privileges senior to those of our common stock. If we are unable to obtain additional capital, we may not be able to continue our sales and marketing, research and development, distribution or other operations on the scope or scale of our current activity.

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. There is no assurance that we will be able to regain compliance by the July 27, 2020 extended deadline, and there is no assurance that we will otherwise 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 TheNasdaqCapital Market, the announcement or implementation of such a reverse stock split could negatively affect the price of Vermillion common stock.

If we fail to continue to develop our existing technologies, we may not be able to successfully foster adoption of our products and services.  

Our technologies are new and complex, and are subject to change as new discoveries are made. New discoveries and advancements in the diagnostic field are essential if we are to foster the adoption of our product offerings. Development of our existing technologies remains a substantial risk to us due to various factors, including the scientific challenges involved, our ability to find and collaborate successfully with others working in the diagnostic field, and competing technologies, which may prove more successful than our technologies.

We may not succeed in developing additional diagnostic products, and, even if we do succeed in developing additional diagnostic products, the diagnostic products may never achieve significant commercial market acceptance.

Our success depends on our ability to continue to develop and commercialize diagnostic products. There is considerable risk in developing diagnostic products based on our biomarker discovery efforts, as candidate biomarkers may fail to validate results in larger clinical studies or may not achieve acceptable levels of clinical accuracy. For example, markers being evaluated for one or more next-generation diagnostic tests may not be validated in downstream pre-clinical or clinical studies, once we undertake and perform such studies. In addition, development of products combining biomarkers with imaging, patient risk factors or other risk indicators carry higher than average risks due to technical, clinical and regulatory uncertainties. While we have published proof of concept on combining OVA1 and imaging, for example, our ability to develop, verify and validate an algorithm that generalizes to routine testing populations cannot be guaranteed. Also, outcomes of prospective and retrospective trials, for OVAnex which are essential for clinical validation, are uncertain. In addition, our efforts to develop other diagnostic tests, such as Endocheck,  are in the discovery phase, and future pre-clinical or clinical studies may not support our early data. If successful, the regulatory pathway and clearance/approval process may require extensive discussion with applicable authorities and possibly medical panels or other oversight mechanisms. These pose considerable risk in projecting launch dates, requirements for clinical evidence and eventual pricing and return on investment. Although we are engaging important stakeholders representing gynecologic oncology, benign gynecology, patient advocacy, women’s health research, reimbursement and others, success, timelines and value will be uncertain and require active management at all stages of innovation and development.

Clinical testing is expensive, takes many years to complete and can have an uncertain outcome. Clinical failure can occur at any stage of the testing. Clinical trials for our next generation ovarian cancer tests, and other future diagnostic tests, may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and/or non-clinical testing on these tests. In addition, the results of our clinical trials may identify unexpected risks relative to safety or efficacy, which

could complicate, delay or halt clinical trials, or result in the denial of regulatory approval by the FDA and other regulatory authorities.  

If we do succeed in developing additional diagnostic tests with acceptable performance characteristics, we may not succeed in achieving commercial market acceptance for those tests. Our ability to successfully commercialize diagnostic products, including OVA1, Overa, OVA1PLUS and/or ASPiRA GenetiX will depend on many factors, including:

These factors present obstacles

At the beginning of each fiscal year, the Compensation Committee establishes bonus payout targets for each Named Executive Officer. The Compensation Committee generally establishes the individual payout targets for each Named Executive Officer based on the executive’s position, level of responsibility and a review of the peer group. For 2020, the payout targets for each Named Executive Officer remained the same as the prior year and were as follows:

After the close of each fiscal year, or other such timeframe as determined by the Compensation Committee, the Compensation Committee assesses the performance of each Named Executive Officer against the pre-established metrics and specific progress of the Company with respect to commercial acceptancesuch metrics. Each Named Executive Officer receives a bonus based on his or her individual payout target and our performance measured relative to the performance goals and Company progress with respect to the pre-established metrics.

Despite the challenges resulting from the COVID-19 pandemic, the Compensation Committee determined that significant corporate progress had been made with respect to the pre-established metrics and, as a result, the bonus payout for each of the Named Executive Officers was paid at 100%. The following table sets forth the 2020 annual bonus payouts for each of our existingNamed Executive Officers:

Equity Incentive Compensation.The equity component of our executive compensation program is designed to fulfill our performance alignment and potential diagnostic products, for which we will have to spend substantialretention objectives.

In general, Named Executive Officers receive incentive stock option grants at the time and financial resources to overcome, and there is no guarantee that we will be successful in doing so. Our inability to do so successfully would prevent us from generating revenue from OVA1, Overa, OVA1PLUS and ASPiRA GenetiX and developing future diagnostic products.

The diagnostics market is competitive, and we may not be able to compete successfully, which would adversely impact our ability to generate revenue.

Our principal competition currently comes from the many clinical options available to medical personnel involved in clinical decision making. For example, rather than ordering an OVA1, Overa or OVA1PLUS test for a woman with an adnexal mass, obstetricians, gynecologists, and gynecologic oncologists may choose a different clinical option or none at all. If we are not able to convince clinicians that OVA1, Overa and OVA1PLUS provide significant improvement over current clinical practices, our ability to commercialize OVA1, Overa and OVA1PLUS will be adversely affected. Additionally, in September 2011,of hire. Annually thereafter, they receive additional Fujirebio Diagnostics received FDA clearance for its ROMA test. ROMA combines two tumor markersequity-based compensation as recommended by the Compensation Committee. Equity-based compensation is based on individual performance and menopausal status into a numerical score using a publicly available algorithm. This test hascontributions toward the same intended useachievement of our business objectives, as well as overall Company performance. The number of underlying shares that may be purchased pursuant to the stock options granted to each Named Executive Officer varies based on the executive’s position and precautions as OVA1, and our revenues could be materially and adversely affected if the ROMA test is successful.responsibilities. In addition, competitors, such as Becton Dickinson, ArrayIt Corporation, Abbott Laboratories and others have publicly disclosed that they have been oramounts are currently working on ovarian cancer diagnostic assays. Academic institutions periodically report new findings in ovarian cancer diagnostics that may have commercial value. Our failure to compete with any competitive diagnostic assay if and when commercialized could adversely affect our business, financial condition and resultsdetermined by comparing the level of operations.  

We have priced OVA1, Overa and OVA1PLUS at a point that recognizes the value-added by its increased sensitivity for detecting ovarian malignancy. If others develop a testequity-based compensation that is viewedawarded to be similar to OVA1, Overa or OVA1PLUS in efficacy but is pricedexecutives at a lower point, we and/or our strategic partners may have to lower the price of OVA1, Overa or OVA1PLUS in order to effectively compete, which would impact our margins and potential for profitability.peer group companies.

The Our diagnostic tests are subject to ongoing regulation by the FDA and any delay by or failure of the FDA to approve our diagnostic tests submittedCompensation Committee granted equity-based compensation to the FDA may adversely affect our business, results of operations and financial condition.Named Executive Officers during the year ended December 31,

Our activities related to diagnostic products are, or have the potential to be, subject to regulatory oversight by the FDA under provisions of the Federal Food, Drug and Cosmetic Act and regulations thereunder, including regulations governing the development, marketing, labeling, promotion, manufacturing and export of our products. Failure to comply with applicable requirements can lead to sanctions, including withdrawal of products from the market, recalls, refusal to authorize government contracts, product seizures, civil money penalties, injunctions and criminal prosecution.

The Federal Food, Drug and Cosmetic Act requires that medical devices introduced to the United States market, unless exempted by regulation, be the subject of either a pre-market notification clearance, known as a 510(k) clearance or 510(k) de novo clearance, or a PMA. Some of our potential future clinical products may require a 510(k) or 510(k) de novo clearance, while others may require a PMA. With respect to devices reviewed through the 510(k) process, we may not market a device until an order is issued by the FDA finding our product to be substantially equivalent to a legally marketed device known as a predicate device. A 510(k) submission may involve the presentation of a substantial volume of data, including clinical data. The FDA may agree that the product is substantially equivalent to a predicate device and allow the product to be marketed2020 in the United States. On the other hand, the FDA may determine that the device is not substantially equivalent and require a PMA or aform of de novostock options 510(k), or require further information, such as additional test data, including data from clinical studies, before it is able to make a determination regarding substantial equivalence. By requesting additional information, the FDA can delay market introduction of our products. Delays in receipt of orfollows:

failure

The Company’s 2019 Stock Incentive Plan generally authorizes us to receivemake awards reserving the following recourse against a participant who does not comply with certain employment-related covenants, either during employment or for certain periods after ceasing to be employed: we may terminate any necessary 510(k) clearanceoutstanding, unexercised, unexpired, unpaid, or PMA approval,deferred awards; rescind any exercise, payment or delivery pursuant to the impositionaward; or recapture any shares (whether restricted or unrestricted) or proceeds from the participant’s sale of stringent restrictions onshares issued pursuant to the labeling and sales of our products, couldaward. These remedies are also generally available to us for awards that would have had a lower grant level, vesting, or payment if a participant’s fraud or misconduct had not caused or partially caused the need for a material adverse effect on our business, resultsfinancial restatement by us or any affiliate. In addition, all awards or proceeds from the sale of operations and financial condition. Ifawards made or earned pursuant to the FDA indicates that a PMA is required for any of our potential future clinical products, the application2019 Stock Incentive Plan will require extensive clinical studies, manufacturing information and likely review by a panel of experts outside the FDA. Clinical studies to support either a 510(k) submission or a PMA application would need to be conducted in accordance with FDA requirements. Failure to comply with FDA requirements could result in the FDA’s refusal to accept the data or the imposition of regulatory sanctions. We cannot assure that any necessary 510(k) clearance or PMA approval will be granted on a timely basis, or at all. To the extent we seek FDA 510(k) clearance or FDA pre-market approval for other diagnostic tests, any delay by or failure of the FDA to clear or approve those diagnostic tests may adversely affect our consolidated revenues, results of operations and financial condition.

If we or our suppliers fail to comply with FDA requirements for production, marketing and post-market monitoring of our products, we may not be able to market our products and services and may be subject to stringent penalties, product restrictionsthe right of us to full recovery (with reasonable interest thereon) in the event that the Board determines reasonably and in good faith that any participant’s fraud or recall.

Failure to comply with FDA requirementsmisconduct has caused or partially caused the need for post-market monitoringa material restatement of our productsfinancial statements for any fiscal year to which the award relates.

Employee Benefits Programs. Our employee benefits program primarily consists of two components: (1) severance and change in control arrangements and (2) other broad-based benefits.

Severance and Change in Control Arrangements.  Under the terms of the Named Executive Officer’s employment agreements, each is eligible to receive severance benefits upon a termination by the Company without cause or by the executive officer due to good reason. The Compensation Committee believes that these arrangements are important in order to attract and retain executive officer talent as many of the peer group companies provide similar benefits.

In addition, the Compensation Committee believes that executive officers have a greater risk of job loss or modification as a result of a change in control transaction than other employees. Accordingly, the employment agreements include change in control provisions under which they will receive certain payments and benefits upon qualifying terminations that follow a change in control. The principal purpose of the change in control provisions is to provide executive officers with appropriate incentives to remain with us before, during and after any change in control transaction by providing the executive officers with security in the event their employment is terminated or materially changed following a change in control. By providing this type of security, the employment agreements help ensure that the executive officers support any potential change in control transaction that may affect be considered in the commercializationbest interests of our products, therefore adversely affectingstockholders, even while the transaction may create uncertainty in the executive officer’s personal employment situation. The Compensation Committee believes that salary and benefits for one year for our business. The FDA cleared OveraPresident and Chief Executive Officer and nine months for our Chief Financial Officer are reasonable and appropriate to achieve the desired objectives of the agreements.

Other Benefits.  Our Named Executive Officers participate in March 2016our standard employee benefits programs, including medical, dental, vision, life, short-term and OVA1 in September 2009. long-term disability insurance, 401(k) Plan and flexible spending accounts. 

Method for Determining Compensation Amounts

In connectiondeciding on the type and amount of compensation for each executive, the Compensation Committee seeks to align the interests of the Named Executive Officers with those of our stockholders. In making compensation decisions, the Compensation Committee reviews the performance of the Company and carefully evaluates an executive’s performance during the year against established goals, leadership qualities, operational performance, business responsibilities, career with the clearanceCompany, current compensation arrangements and long-term potential to enhance shareholder value. The types and relative importance of OVA1 we agreedspecific financial and other business objectives vary among our Named Executive Officers depending on their positions and the particular operations or functions for which they are responsible. The Compensation Committee does not adhere to conduct certain post-market surveillance studiesrigid formulas when determining the amount and mix of compensation elements. The Compensation Committee seeks to further analyze performance of OVA1. Whilestructure compensation elements in a manner that optimizes the OVA1 post-market study has been completed and closed with the FDA, Overa’s post-market surveillance requirement is completed but still in the final steps for closure with the FDA. Failure to comply with our post-marketing study requirements may lead to enforcement actions by the FDA, including seizure of our product, injunction, prosecution and/or civil money penalties, which may harm our business, results of operations and financial condition. 

Additionally, the commercialization of our products could be delayed, halted or prevented by applicable FDA regulations. If the FDA were to view any of our actions as non-compliant, it could initiate enforcement actions, such as a warning letter and possible imposition of penalties. For instance, we are subject to a number of FDA requirements, including compliance with the FDA’s Quality System Regulations “QSR” requirements, which establish extensive requirements for quality assurance and control as well as manufacturing procedures. Failure to comply with these regulations could result in enforcement actions for us or our potential suppliers. Adverse FDA actions in any of these areas could significantly increase our expenses and reduce our revenue. We will need to undertake steps to maintain our operations in line with the FDA’s QSR requirements. Some components of OVA1 and Overa are manufactured by other companies and we are required to ensure that,executive’s contributions to the extent that we incorporate those components intoCompany, and reflects an evaluation of the compensation paid by our finished OVA1and Overa (or OVA1PLUS, which is a reflex testing servicecompetitors.

The Compensation Committee reviews both current pay and the opportunity for future compensation to achieve an appropriate mix between equity incentive awards and cash payments in which both OVA1 and Overa are used), we use those components in compliance with QSR. Any failure to do so would have an adverse effect on our ability to commercialize OVA1, Overa or OVA1PLUS. Our suppliers’ manufacturing facilities, since they manufacture finished kits that we use in OVA1, Overa and OVA1PLUS, are subject to periodic regulatory inspections by the FDA and other federal and state regulatory agencies. Our facility also is subject to FDA inspection. We or our suppliers may not satisfy such regulatory requirements, and any such failure to do so may adversely affect our business, financial condition and results of operations. 

If our suppliers fail to produce acceptable or sufficient stock, make changes to the design or labeling of their biomarker kits or discontinue production of existing biomarker kits or instrument platforms, we may be unableorder to meet market demand for OVA1 and Overa.

The commercialization of our OVA1, Overa and OVA1PLUS tests depend on the supply of seven different immunoassay kits from third-party manufacturers that run on automated instruments. Failure by any of these manufacturers to produce kits that pass our quality control measures might lead to back-order and/or loss of revenue due to missed sales and customer dissatisfaction. In addition, if the design or labeling of any kit were to change, continued OVA1, Overa or OVA1PLUS supply could be threatened since new validation and submission to the FDA for 510(k) clearance could be required as a condition of sale. Discontinuation of any of these kits could require identification, validation and 510(k) submission on a revised OVA1, Overa or OVA1PLUS design. Likewise, discontinuation or failure to support or service the instruments may pose risk to ongoing operations.

For example, one of the five immunoassay component kits thatobjectives. However, prior stock compensation gains are used in OVA1 has ceased to be supported on the instrument as the manufacturer transitioned to a newer platform. While we have not experienced and do not anticipate disruption of ongoing operations, failure of a manufacturer to provide extended service or support might harm our business. Overa consolidates the five OVA1 immunoassays onto a single mainstream automated platform and substitutes a new immunoassay component kit for the discontinuing kit as a mitigating action. Although we received a 510(k) clearance from the FDA for Overa in March 2016, there can be no assurances that there will not be future disruptions in our supply chain. Any resulting disruption to our supply of OVA1 or Overa would adversely affect our business, financial condition and results of operations.

If we fail to maintain our rights to utilize intellectual property directed to diagnostic biomarkers, we may not be able to offer diagnostic tests using those biomarkers.

One aspect of our business plan is to develop diagnostic tests based on certain biomarkers, which we have the right to utilize through licenses with our academic collaborators, such as Johns Hopkins University School of Medicine and the University of Texas M.D. Anderson Cancer Center. In some cases, our collaborators own the entire right to the biomarkers. In other cases, we co-own the biomarkers with our collaborators. If, for some reason, we lose our license to biomarkers owned entirely by our collaborators, we may

not be ableconsidered in setting future compensation levels. The mix of compensation elements is designed to use those biomarkers in diagnostic tests. If we lose our exclusive license to biomarkers co-owned by usreward recent results and our collaborators, our collaborators may license their share of the intellectual property to a third party that may compete with us in offering diagnostic tests, which would materially adversely affect our business, results of operations and financial condition.

If a third party infringes on our proprietary rights, we may lose any competitive advantage we may have as a result of diversion of our time, enforcement costs and the loss of the exclusivity of our proprietary rights.

Our success depends in part on our ability to maintain and enforce our proprietary rights. We rely onmotivate long-term performance through a combination of patents, trademarks, copyrightscash and trade secrets to protect our technologyequity incentive awards.

The Compensation Committee has primary responsibility for assisting the Board in developing and brand. We have submitted a numberevaluating potential candidates for executive positions, including the Chief Executive Officer, or CEO. As part of patent applications covering biomarkers that may have diagnostic or therapeutic utility. Our patent applications may or may not resultthis responsibility, the Committee oversees the design, development and implementation of the compensation program for the Named Executive Officers. The Compensation Committee evaluates the performance of the CEO and determines CEO compensation in additional patents being issued.

If third parties engage in activities that infringe on our proprietary rights, we may incur significant costs in asserting our rights,light of the goals and objectives of the compensation program. The CEO and the attentionCompensation Committee assess the performance of the CFO, the other Named Executive Officer, and the Compensation Committee determines his compensation after considering initial recommendations from the CEO.

Compensation Policies and Practices Regarding Risk Management

In fulfilling its role in assisting the Board in its risk oversight responsibilities, the Compensation Committee believes that our compensation policies and practices do not motivate imprudent risk-taking. Specifically, the Compensation Committee reviewed the following features of our management may be diverted from our business. We may not be successful in asserting our proprietary rights, which could result in our patents being held invalid or a court holdingcompensation programs that the competitor is not infringing, either of which may harm our competitive position. We cannot be sure that competitors will not design around our patented technology.guard against excessive risk-taking:

We also rely upon the skills, knowledge and experience of our technical personnel. To help protect our rights, we require all employees and consultants to enter into confidentiality agreements that prohibit the disclosure of confidential information. These agreements may not provide adequate protection for our trade secrets, knowledge or other proprietary information in the event of any unauthorized use or disclosure. If any trade secret, knowledge or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, it could have a material adverse effect on our business, consolidated results of operations and financial condition.

If others successfully assert their proprietary rights against us, we may be precluded from making and selling our products or we may be required to obtain licenses to use their technology.

Our success depends on avoiding infringing on the proprietary technologies of others. If a third party were to assert claims that we are violating its patents, we might incur substantial costs defending ourselves in lawsuits against charges of patent infringement or other unlawful use of another’s proprietary technology. Any such lawsuit may involve considerable management and financial resources and may not be decided in our favor. If we are found liable, we may be subject to monetary damages or an injunction prohibiting us from using the technology. We may also be required to obtain licenses under patents owned by third parties and such licenses may not be available to us on commercially reasonable terms, if at all.

If we are able to establish operations in countries outside of the United States, wemay be subject to political, economic and other conditions affecting these countries that could result in increased operating expenses and regulation.

In 2018 and 2019, virtually all of our product revenue was generated in the United States. If we are able to successfully commercialize our products outside the United States, there are risks inherent in conducting business internationally, including the following:

Future litigation against us could be costly and time consuming to defend.

We are from time to time subject to legal proceedings and claims that arise in the ordinary course of business, such as claims brought by our clients in connection with commercial disputes, employment claims made by current or former employees, and claims brought by third parties alleging infringement of their intellectual property rights. In addition, we may bring claims against third parties for infringement of our intellectual property rights. Litigation may result in substantial costs and may divert our attention and resources, which may adversely affect our business, results of operations and financial condition.

An unfavorable judgment against us in any legal proceeding or claim could require us to pay monetary damages. In addition, an unfavorable judgment in which the counterparty is awarded equitable relief, such as an injunction, could harm our business, results of operations and financial condition.

Our diagnostic efforts may cause us to have significant product liability exposure.

The testing, manufacturing and marketing of medical diagnostic tests entail an inherent risk of product liability claims. Potential product liability claims may exceed the amount of our insurance coverage or may be excluded from coverage under the terms of the policy. We will need to increase our amount of insurance coverage in the future if we are successful at introducing new diagnostic products, and this will increase our costs. If we are held liable for a claim or for damages exceeding the limit of our insurance coverage, we may be required to make substantial payments. This may have an adverse effect on our business, financial condition and results of operations.

Because our business is highly dependent on key executives and employees, our inability to recruit and retain these people could hinder our business plans.

We are highly dependent on our executive officers and certain key employees. Our executive officers and key employees are employed at will by us. Any inability to engage new executive officers or key employees could impact operations or delay or curtail our research, development and commercialization objectives. To continue our research and product development efforts, we need people skilled in areas such as clinical operations, regulatory affairs and clinical diagnostics. Competition for qualified employees is intense.

If we lose the services of any executive officers or key employees, our ability to achieve our business objectives could be harmed, which in turn could adversely affect our business, financial condition and results of operations.

Business interruptions could limit our ability to operate our business.

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. A significant business interruption could result in losses or damages incurred by us and require us to cease or curtail our operations.

Changes in healthcare policy could increase our costs and adversely impact sales of and reimbursement for our tests, which would have an adverse effect on our business, financial condition and results of operations.  

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively, the “PPACA”) halted certain reductions in payment mandated by the PPACA as well as certain CMS policies and has instead established a market-based reimbursement system for clinical laboratories beginning in 2018 after requiring reporting of certain private payer reimbursement data by laboratories. CMS also issued various regulations and guidance generally effective in 2014 that limited reimbursement for clinical laboratory tests as a general matter, but permitted the continued ability for CMS to pay for Multianalyte Assays with Algorithmic Analyses in certain circumstances. In addition to these changes, a number of states are also contemplating significant reform of their healthcare policies. We cannot predict whether future healthcare initiatives will be implemented at the federal or state level, or the effect any future legislation or regulation will have on us. Other changes to healthcare laws may adversely affect our business, financial condition and results of operations.

The current presidential administration and U.S. Congress has made efforts to delay, modify or repeal certain provisions of the Affordable Care Act. In December 2017, the House and Senate passed a new tax bill effective January 1, 2019 that ended the individual mandate, a tax-based shared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage. The passage of this bill resulted in increased premiums and resulted in fewer covered individuals. Over time, this and other changes could have an impact on coverage and reimbursement for healthcare items and services covered by plans that were authorized by the Affordable Care Act. In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted that reduced payments to Medicare providers. The ultimate implementation of any healthcare reform legislation and any new laws and regulations, and its impact on us, is impossible to predict. Any significant reforms made to the healthcare system in the United States, or in other jurisdictions, may have an adverse effect on our business, financial condition and results of operations.

We are subject to environmental laws and potential exposure to environmental liabilities.

We are subject to various international, federal, state and local environmental laws and regulations that govern our operations, including the handling and disposal of non-hazardous and hazardous wastes, the recycling and treatment of electrical and electronic equipment, and emissions and discharges into the environment. Failure to comply with such laws and regulations could result in costs for corrective action, penalties or the imposition of other liabilities. We are also subject to laws and regulations that impose liability and clean-up responsibility for releases of hazardous substances into the environment. Under certain of these laws and regulations, a current or previous owner or operator of property may be liable for the costs to remediate hazardous substances or petroleum products on or from its property, without regard to whether the owner or operator knew of, or caused, the contamination, as well as incur liability to third parties affected by such contamination. The presence of, or failure to remediate properly, such substances could adversely affect the value and the ability to transfer or encumber such property.

The operation of ASPiRA LABS requires us to comply with numerous laws and regulations, which is expensive and time-consuming and could adversely affect our business, financial condition and results of operations, and any failure to comply could result in exposure to substantial penalties and other harm to our business.

In June 2014, we launched a clinical laboratory, ASPiRA LABS. Clinical laboratories that perform tests on human subjects in the United States for the purpose of providing information for the diagnosis, prevention or treatment of disease must be certified under CLIA and licensed under applicable state laboratory laws. CLIA regulates the quality of clinical laboratory testing by requiring laboratories to comply with various technical, operational, personnel and quality requirements intended to ensure that the services provided are accurate, reliable and timely. State laws may require that additional quality standards be met and that detailed review of scientific validations and technical procedures for tests occur.

ASPiRA LABS holds a CLIA Certificate of Accreditation and a state laboratory license in California, Florida, Maryland, New York, Pennsylvania and Rhode Island. This allows the lab to perform OVA1, Overa and OVA1PLUS testing on a national basis. We are subject to periodic surveys and inspections to maintain our CLIA certification, and such certification is also required to obtain payment from Medicare, Medicaid and certain other third-party payers. Failure to comply with CLIA or state law requirements may result in the imposition of corrective action or the suspension or revocation of our CLIA certification or state licenses. If our CLIA certification or state licenses are suspended or revoked or our right to bill the Medicare and Medicaid programs or other third-party payers is suspended, we would no longer be able to sell our tests, which would adversely affect our business, financial condition and results of operations.

In addition, no assurance can be given that ASPiRA LABS’  suppliers or commercial partners will remain in compliance with applicable CLIA and other federal or state regulatory requirements for laboratory operations and testing. ASPiRA LABS’ facilities and procedures and those of ASPiRA LABS’ suppliers and commercial partners are subject to ongoing regulation, including periodic inspection by regulatory and other government authorities. Possible regulatory actions for non-compliance could include warning letters, fines, damages, injunctions, civil penalties, recalls, seizures of ASPiRA LABS’ products, and criminal prosecution.

Our clinical laboratory business is also subject to regulation at both the federal and state level in the United States, as well as regulation in other jurisdictions outside of the United States, including:

• Medicare and Medicaid coverage, coding and payment regulations applicable to clinical laboratories;

• the Federal Anti-Kickback Statute and state anti-kickback prohibitions;

• the federal physician self-referral prohibition, commonly known as the Stark Law, and state self-referral prohibitions;

• the Medicare civil monetary penalty and exclusion requirements;

• the Federal False Claims Act civil and criminal penalties and state equivalents; and

• the Federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) as amended by the

  Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”);

Many of these laws and regulations prohibit a laboratory from making payments or furnishing other benefits to influence the referral of tests (by physicians or others) that are billed to Medicare, Medicaid or certain other federal or state healthcare programs. The penalties for violation of these laws and regulations may include monetary fines, criminal and civil penalties and/or suspension or exclusion from participation in Medicare, Medicaid and other federal healthcare programs. Several states have similar laws that may apply even in the absence of government payers. HIPAA and HITECH and similar state laws seek to protect the privacy and security of individually identifiable health information, and penalties for violations of these laws may include required reporting of breaches, monetary fines and criminal or civil penalties.

While we seek to conduct our business in compliance with all applicable laws and develop compliance policies to address risk as appropriate, many of the laws and regulations applicable to us are vague or indefinite and have not been interpreted by governmental authorities or the courts. These laws or regulations also could in the future be interpreted or applied by governmental authorities or the courts in a manner that could require us to change our operations. 

Any action brought against us for violation of these or other laws or regulations (including actions brought by private qui tam “whistleblower” plaintiffs), even if successfully defended, could divert management’s attention from our business, damage our reputation, limit our ability to provide services, decrease demand for our services and cause us to incur significant expenses for legal fees and damages. If we fail to comply with applicable laws and regulations, we could suffer civil and criminal penalties, fines, recoupment of funds received by us, exclusion from participation in federal or state healthcare programs, and the loss of various licenses, certificates and authorizations necessary to operate our business. We also could potentially incur additional liabilities from

third-party claims. If any of the foregoing were to occur, it could have a material adverse effect on our business, financial condition and results of operations.

In the future, we plan to develop and perform LDTs at ASPiRA LABS, and future regulation of LDTs may adversely affect commercialization of our diagnostic tests, which would negatively affect our results of operations and financial condition.

We intend to develop and perform LDTs at ASPiRA LABS in the future. The FDA has historically exercised enforcement discretion and not required approvals or clearances for LDTs. Instead, CMS oversees clinical laboratory operations through the Clinical Laboratory Improvement Amendments (“CLIA”) program.

Legislative proposals addressing the FDA’s oversight of LDTs have been previously introduced, and we expect that new legislative proposals will be introduced from time to time. The likelihood that Congress will pass such legislation and the extent to which such legislation may affect the FDA’s plans to regulate LDTs as medical devices is difficult to predict. In January 13, 2017, the FDA released a Discussion Paper on LDTs and, in October 2017, the FDA released a draft guidance document outlining the FDA’s proposal to actively regulate LDTs. The 2017 Discussion Paper makes recommendations on what the agency would like to see better-controlled. However, it does not have the force of law, and it is not a guidance document.

In December 2018, Congress released a draft of the Verifying Accurate, Leading-edge IVCT Development (“VALID”) Act, which incorporates FDA ideas for diagnostics regulation. This bill proposes a regulatory framework for IVDs and LDTs and would require premarket approval for in vitro clinical tests. If VALID is passed, we may fail to gain approval for some or all of our LDTs.

Even without any new guidance documents, the FDA may assert that a test that we believe to be an LDT is not an LDT and could require us to seek clearance or approval to offer such tests for clinical use. If the FDA pre-market review or approval is required for any of the future LDTs we may develop, we may be forced to stop selling our tests or be required to modify claims or make such other changes while we work to obtain FDA clearance or approval. Our business, results of operations and financial condition would be negatively affected until such review is completed and clearance to market or approval is obtained.

If pre-market review is required by the FDA or if we decide to voluntarily pursue FDA pre-market review of our future LDTs, there can be no assurance that any tests we develop in the future will be cleared or approved on a timely basis, if at all. Obtaining FDA clearance or approval for diagnostics can be expensive, time consuming and uncertain, and for higher-risk devices generally takes several years and requires detailed and comprehensive scientific and clinical data. In addition, medical devices are subject to ongoing FDA obligations and continued regulatory oversight and review. Ongoing compliance with FDA regulations for those tests would increase the cost of conducting our business and subject us to heightened regulation by the FDA and penalties for failure to comply with these requirements.

The operation of ASPiRA LABS depends on the effectiveness and availability of our information systems, including the information systems we use to provide services to our customers and to store employee data, and failures of these systems, including in connection with cyber-attacks, may materially limit our operations or have an adverse effect on our reputation.

The information systems we use for our ASPiRA LABS business are comprised of systems we have purchased or developed, our legacy information systems and, increasingly, web-enabled and other integrated information systems. In using these information systems, we may rely on third-party vendors to provide hosting services, where our infrastructure is dependent upon the reliability of their underlying platforms, facilities and communications systems. We also plan to utilize integrated information systems that we provide customers access to or install for our customers in conjunction with our delivery of services. The addition of our decentralized technology transfer business may also be affected by these information systems.

As the breadth and complexity of ASPiRA LABS’ information system grows, we will increasingly be exposed to the risks inherent in maintaining the stability of our legacy systems due to prior customization, attrition of employees or vendors involved in their development, and obsolescence of the underlying technology as well as risks from the increasing number and scope of external data breaches on companies generally. Because certain customers and clinical trials may be dependent upon these legacy systems, we will also face an increased level of embedded risk in maintaining the legacy systems and limited options to mitigate such risk. We are also exposed to risks associated with the availability of all of our information systems, including:

The materialization of any of these risks may impede the processing of data, the delivery of databases and services, and the day-to-day management of our ASPiRA LABS business and could result in the corruption, loss or unauthorized disclosure of proprietary, confidential or other data. While we have disaster recovery plans in place in line with applicable regulations and industry standards, they might not adequately protect us in the event of a system failure. Despite any precautions we take, damage from fire, floods, hurricanes, the outbreak or escalation of war, acts of terrorism, power loss, telecommunications failures, computer viruses,

break-ins and similar events at our various computer facilities or those of our third-party vendors could result in interruptions in the flow of data to us and from us to our customers. Corruption or loss of data may result in the need to repeat a trial at no cost to the customer, but at significant cost to us, the termination of a contract or damage to our reputation. As our business continues its efforts to expand globally, these types of risks may be further increased by instability in the geopolitical climate of certain regions, underdeveloped and less stable utilities and communications infrastructure, and other local and regional factors. Additionally, significant delays in system enhancements or inadequate performance of new or upgraded systems could damage our reputation and harm our business. Although we carry property and business interruption insurance which we believe is customary for our industry, our coverage might not be adequate to compensate us for all losses that may occur.

Unauthorized disclosure of sensitive or confidential data, whether through systems failure or employee or distributor negligence, cyber-attacks, fraud or misappropriation, could damage our reputation and cause us to lose customers and, to the extent any such unauthorized disclosure compromises the privacy and security of individually identifiable health information, could also cause us to face sanctions and fines under the Federal Health Insurance Portability and Accountability Act of 1996 as amended by the Health Information Technology for Economic and Clinical Health Act of 2009. Similarly, we have been and expect that we will continue to be subject to attempts to gain unauthorized access to or through our information systems or those we internally or externally develop for our customers, including a cyber-attack by computer programmers and hackers who may develop and deploy viruses, worms or other malicious software programs, process breakdowns, denial-of-service attacks, malicious social engineering or other malicious activities, or any combination of the foregoing. These concerns about security are increased when information is transmitted over the Internet. Threats include cyber-attacks such as computer viruses, worms or other destructive or disruptive software, and any of these could result in a degradation or disruption of our services or damage to our properties, equipment and data. They could also compromise data security. If such attacks are not detected immediately, their effect could be compounded. These same risks also apply to ASPiRA LABS. Successful attacks could result in negative publicity, significant remediation and recovery costs, legal liability and damage to our reputation and could have an adverse effect on our business, financial condition and results of operations.

We selectively explore acquisition opportunities and strategic alliances relating to other businesses, products or technologies. We may not be successful in integrating other businesses, products or technologies with our business. Any such transaction also may not produce the results we anticipate, which could adversely affect our business, financial condition and results of operations.

We selectively explore and may pursue acquisition and other opportunities to strengthen our business and grow our company. We may enter into business combination transactions, make acquisitions or enter into strategic partnerships, joint ventures or alliances, any of which may be material. The market for acquisition targets and strategic alliances is highly competitive, which could make it difficult to find appropriate merger or acquisition opportunities. If we are required to raise capital by incurring debt or issuing additional equity for any reason in connection with a strategic acquisition or investment, financing may not be available or the terms of such financing may not be favorable to us and our stockholders, whose interests may be diluted by the issuance of additional stock.

The process of integration may produce unforeseen regulatory issues and operating difficulties and expenditures and may divert the attention of management from the ongoing operation of our business and harm our reputation. We may not successfully achieve the integration objectives, and we may not realize the anticipated cost savings, revenue growth and synergies in full or at all, or it may take longer to realize them than expected, any of which could negatively impact our business, financial condition and results of operations.

Risks Related to Owning Our Stock

The liquidity and trading volume of our common stock may be low, and our ownership is concentrated.

The liquidity and trading volume of our common stock has at times been low in the past and may again be low in the future. If the liquidity and trading volume of our common stock is low, this could adversely impact the trading price of our shares, our ability to issue stock and our stockholders’ ability to obtain liquidity in their shares. Our stock issuances since May 2013 have primarily involved a significant issuance of stock to a limited number of investors, significantly increasing the concentration of our share ownership in a few holders.

According to information provided on Schedules 13D and 13G, as amended, filed as recently as February 14, 2020, five persons, in aggregate, beneficially owned approximately 62 million shares of our common stock, including the right to acquire approximately 3 million shares under warrant or option agreements. The shares of common stock currently held by these individuals, excluding the right to acquire those shares under warrant or option agreements, represent 61% of our outstanding shares of common stock. Under a May 2013 stockholders agreement, two of these persons have certain rights to designate a director to be nominated by us to serve on the Board of Directors. As a result, these stockholders will be able to affect the outcome of, or exert significant influence over, all matters requiring stockholder approval, including the election and removal of directors and any change in control. In particular, this concentration of ownership of our common stock could have the effect of delaying or preventing a change in control of us or otherwise discouraging or preventing a potential acquirer from attempting to obtain control of us. This, in turn, could have a negative effect on the market price of our common stock. It could also prevent our stockholders from realizing a premium over the market prices for their shares of common stock. Moreover, the interests of this concentration of ownership may not always coincide with our interests or the interests of other stockholders. The concentration of ownership also contributes to the low trading volume and volatility of our common stock.

Our stock price has been, and may continue to be, highly volatile.

The trading price of our common stock has been highly volatile and could continue to be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including:



Executive Officer Compensation

President and Chief Executive Officer. In connection with Ms. Palmieri’s appointment to the position of President and Chief Executive Officer, the Company and Ms. Palmieri entered into an amended and restated employment agreement, effective as of January 1, 2015. Pursuant to Ms. Palmieri’s employment agreement, the Company will pay Ms. Palmieri an annual base salary of $375,000. Effective April 1, 2019, Ms. Palmieri’s annual base salary was increased to $400,000 and was not further adjusted in 2020.  In addition, Ms. Palmieri will be eligible for a bonus of up to fifty percent (50%) of her base salary for achievement of Company and individual performance-related goals to be established by the Compensation Committee (the “Performance Goals”). If Ms. Palmieri is terminated without cause or resigns for good reason (as these terms are defined in the employment agreement) and provided that she complies with certain requirements (including signing a standard separation agreement), under the employment agreement: (i) she will be entitled to continued payment of her base salary as then in effect for a period of 12 months following the date of termination; (ii) she will be entitled to continued health and dental benefits through COBRA premiums paid by the Company until the earlier of 12 months after termination or the time that she obtains employment with reasonably comparable or greater health and dental benefits and (iii) she will have a 12-month period after her termination of service (as employee, director or consultant) to exercise any and all of her options that had vested upon termination of employment to purchase Company common stock market in general and(subject to earlier expiration at the market for diagnostic technology companies, in particular, have experienced significant price and volume fluctuationsend of the option’s original term or Ms. Palmieri’s breach of her employment agreement or other agreement with the Company). In addition, if Ms. Palmieri is terminated without cause before the expiration of the performance period, she will be paid, on a pro rata basis, a bonus commensurate with the portion of the Performance Goals that have often been unrelatedachieved by the time of such termination. Finally, Ms. Palmieri’s employment agreement provides that if Ms. Palmieri’s employment is terminated without cause or disproportionate tofor good reason within the operating performance of those companies. These broad market and industry factors may adversely affect the market price of our common stock, regardless of our operating performance. In the past,12-month period following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs, potential liabilities and the diversion of our attention and our resources.

Anti-takeover provisions in our charter, bylaws, other agreements and under Delaware law could make a third-party acquisition of the Company difficult.

Certain provisions of our certificate of incorporation and bylaws may have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of us, even if a change of control might be(as such term is defined in the employment agreement), then, in addition to the severance obligations due to Ms. Palmieri as described above, 100% of any then-unvested options to purchase Company common stock previously granted by the Company will vest upon the date of such termination (subject to earlier expiration at the end of the option’s original term).

Chief Financial Officer.  On December 18, 2017, we entered into an employment agreement with Robert Beechey. The employment agreement between the Company and Mr. Beechey provides that the Company would initially pay Mr. Beechey an annual base salary of $280,000. Under the employment agreement, Mr. Beechey is eligible for a bonus of up to 40% of his base salary for achievement of performance-related goals and milestones. The employment agreement provides that, in the event that Mr. Beechey is terminated without cause or resigns for good reason (as these terms are defined in the employment agreement), he is entitled to receive: (i) continued payment of his base salary as then in effect for a period of nine months following the date of termination; (ii) continued health and dental benefits paid by the Company until the earlier of nine months after termination or the time that Mr. Beechey obtains employment with reasonably comparable or better health and dental benefits and (iii) a 12-month period after termination to exercise any and all of his vested options to purchase the Company’s common stock (subject to earlier

deemed beneficial to our stockholders. Such provisions could limitexpiration at the price that certain investors might be willing to pay inend of the futureoption’s original term). Additionally, if Mr. Beechey’s employment is terminated without cause or if he resigns for our securities. Our certificate of incorporation eliminatesgood reason within the right of stockholders to call special meetings of stockholders or to act by written consent without a meeting, and our bylaws require advance notice for stockholder proposals and director nominations, which may preclude stockholders from bringing matters before an annual meeting of stockholders or from making nominations for directors at an annual meeting of stockholders. Our certificate of incorporation also authorizes undesignated preferred stock, which makes it possible for our board of directors, without stockholder approval, to issue preferred stock with voting or other rights or preferences that could adversely affect the voting power of holders of common stock. In addition, the likelihood that the holders of preferred stock will receive dividend payments and payments upon liquidation could have the effect of delaying, deferring or preventing a change in control.

In connection with our private placement offering of common stock and warrants in May 2013, we entered into a stockholders agreement which, among other things, includes agreements limiting our ability to effect12-month period following a change in control without(as the consent of at least one ofterm is defined in the two primary investorsemployment agreement), then, in that offering. These and other provisions may haveaddition to the effect of deferring hostile takeovers or delaying changes in control or management of us. The amendmentseverance obligations due to Mr. Beechey as described above, 100% of any of the provisions of either our certificate of incorporation or bylaws described in the preceding paragraph would require not only approvalthen-unvested options previously granted by our board of directors and the affirmative vote of at least 66 2/3% of our then outstanding voting securities, but also the consent of at least one of the two primary investors in the May 2013 offering. We are also subject to certain provisions of Delaware law that could delay, deter or prevent a change in control of the Company. These provisions could make a third-party acquisition of the Company difficultwill vest upon the date of such termination.

2020 Summary Compensation Table

The compensation earned by the Named Executive Officers for the year ended December 31, 2020 and limitDecember 31, 2019 was as follows:

2020 Grants of Plan-Based Awards

The grants of plan-based awards to the price that investors might be willing to payNamed Executive Officers during 2020 were as follows:

2020Outstanding Equity Awards at Fiscal Year-End

The outstanding equity awards held by the future for shares of our common stock.  

Because we do not intend to pay dividends, our stockholders will benefit from an investment in our common stock only if it appreciates in value.

We have never declared or paid any cash dividends on our common stock. We currently intend to retain our future earnings, if any, to finance the expansion of our business and do not expect to pay any cash dividends in the foreseeable future. As a result, the success of an investment in our common stock will depend entirely upon any future appreciation. There is no guarantee that our common stock will appreciate in value or even maintain the price at which our stockholders purchased their shares.

We may need to sell additional shares of our common stock or other securities in the future to meet our capital requirements, which could cause significant dilution.

Until such time, if ever,Named Executive Officers as we can generate substantial product revenues, we expect to finance our cash needs through a combination of the exercise of common stock warrants, public or private equity offerings, debt financings, collaborations, licensing arrangements, grants and government funding and strategic alliances. To the extent that we raise additional capital through the sale of equity or convertible debt, such financing may be dilutive to stockholders. Debt financing, if available, may involve restrictive covenants and potential dilution to stockholders. Furthermore, a perception that future sales of our common stock in the public market are likely to occur could affect prevailing trading prices of our common stock.

As of December 31, 2019, we had 97,286,157 shares of our common stock outstanding and 10,955,683 shares of our common stock reserved for future issuance to employees, directors and consultants pursuant to our employee stock plans, which excludes 6,612,878 shares of our common stock that2020 were subject to outstanding options.We also have warrants outstanding to purchase 2,810,338 shares of Vermillion common stock that were sold in conjunction with a  private placement, which took place in February 2017.

The exercise of all or a portion of our outstanding options and warrants will dilute the ownership interests of our stockholders.as follows:



ITEM 1B.      UNRESOLVED STAFF COMMENTS

None.



ITEM 2.         PROPERTIES

Potential Payments Upon Termination

The following chart indicatestable set forth amounts payable to the facilities that we lease, the location and sizeNamed Executive Officers if such officer had been terminated as of each facility and its designated use. We believe that these facilities are suitable and adequate for our current needs.December 31, 2020:





ITEM 3.          12.         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

LEGAL PROCEEDINGSSecurity Ownership Of Certain Beneficial Owners And Management

From time to time, we are involved in legal proceedings and regulatory proceedings arising out

The following table sets forth certain information regarding beneficial ownership of our operations. We establish reserves for specific liabilities in connection with legal actions that we deemcommon stock as of April 23, 2021 (unless otherwise indicated), by (1) each person known by us to be probable and estimable. Asthe beneficial owner of more than five percent of the dateoutstanding shares of our common stock, (2) each of our directors, (3) each of our Named Executive Officers, and (4) all of our directors and executive officers as a group. All shares are subject to the named person’s sole voting and investment power except where otherwise indicated. 

Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act. Shares of common stock, which are issued and outstanding, are deemed to be beneficially owned by any person who has or shares voting or investment power with respect to such shares. Shares of common stock which are issuable upon exercise of options or warrants or the vesting of RSUs are deemed to be issued and outstanding and beneficially owned by any person who has or shares voting or investment power over such securities only if such securities are exercisable within 60 days of April 23, 2021, and, in any event, solely for purposes of calculating that person’s percentage ownership of the filingcommon stock (and not for purposes of this Form 10-K, we  are not a party tocalculating the percentage ownership of any proceeding, the adverse outcome of which would have a material adverse effect on our financial position or results of operations.other person).



ITEM 4.           MINE SAFETY DISCLOSURES    

              Not applicable.Except where otherwise indicated, the number of shares of common stock deemed outstanding and used in the denominator for determining percentage ownership for each person equals (i) 111,946,449 shares of common stock outstanding as of April 23,

PART II

ITEM 5.     ��     MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our2021, plus (ii) such number of shares of common stock is traded on The NASDAQ Capital Market under the symbol “VRML.”

Onas are issuable pursuant to RSUs, options or warrants held by that person (and excluding RSUs, options and warrants held by other persons) which may vest or be exercised within 60 days of April 2,  2020, there were 97 registered holders of record of our common stock. The closing price of our common stock on April 3, 2020 was $0.78.23, 2021.







Dividends

We have never paid or declared any dividend on our common stock and we do not anticipate paying cash dividends on our common stock in the foreseeable future. If we pay a cash dividend on our common stock, we also may be required to pay the same dividend on an as-converted basis on any outstanding warrants or other securities. Moreover, any preferred stock or other senior debt or equity securities to be issued and any future credit facilities might contain restrictions on our ability to declare and pay dividends on our common stock. We intend to retain all available funds and any future earnings to fund the development and expansion of our business.*    Less than 1%



Equity Compensation Plan Information

We currently maintain two equity-based compensation plans that were approved

See Part II Item 5 on page 26 of the Original Filing, which is incorporated into this Item by our stockholders. The plans are the Amended and Restated 2010 Stock Incentive Plan, as amended (the “2010 Plan”) and the Vermillion, Inc. 2019 Stock Incentive Plan (the “2019 Plan”).

2010 Plan.    The authority of Vermillion’s Board of Directors to grant new stock options and awards under the 2010 Plan terminated in 2019. The Board of Directors continued to administer the 2010 Plan with respect to the stock options that remained outstanding under the 2010 Plan. At December 31, 2019, options to purchase 6,405,878 shares of common stock remained outstanding under the 2010 Plan.

2019 Plan.  The 2019 Plan is administered by the Compensation Committee of Vermillion’s Board of Directors. Our employees, directors, and consultants are eligible to receive awards under the 2019 Plan. The 2019 Plan permits the granting of a variety of awards, including stock options, share appreciation rights, restricted shares, restricted share units, unrestricted shares, deferred share units, performance and cash-settled awards, and dividend equivalent rights. We are authorized to issue up to 10,492,283 shares of Vermillion’s common stock under the 2019 Plan. At December 31, 2019, options to purchase 207,000 shares of common stock remained outstanding under the 2019 Plan.reference.



The number of shares of Vermillion’s common stock to be issued upon exercise of outstanding stock options, the weighted-average exercise price of outstanding stock options and the number of shares available for future stock option grants and stock awards under the 2019 Plan as of December 31, 2019, were as follows:

Performance Graph

Pursuant to ITEM 13.         CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEthe accompanying instructions, the information called for by Item 201(e) of Regulation S-K is not required.



ITEM 6.         SELECTED FINANCIAL DATA

Per Item 301(c) of Regulation S-K, the information called for by Item 6 of Form 10-K is not required.Relationships Resulting from 2013 Private Placement



ITEM 7.           MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS