UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20222023
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 001-34810
Aspira Women’s Health Inc. |
(Exact name of registrant as specified in its charter) |
Delaware | 33-0595156 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
12117 Bee Caves Road, Building | 78738 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (512) 519-0400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.001 per share | AWH | The |
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 þ 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 þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ | Accelerated filer ¨ |
Non-accelerated filer þ | Smaller reporting company þ Emerging growth company ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
As of August 5, 2022,10, 2023, the registrant had 112,296,38810,198,341 shares of common stock, par value $0.001 per share, outstanding.
ASPIRA WOMEN’S HEALTH INC.
FORM 10-Q
For the Quarter Ended June 30, 20222023
Table of Contents
The following are registered and unregistered trademarks and service marks of Aspira Women’s Health Inc.: VERMILLIONSM, Aspira Women’s HealthSM®, OVA1®, OVERA®, ASPiRA LABS® SM, OvaCalc®, OVASUITESM, ASPiRA GenetiXSM , OVA1PLUS®, OVAWATCHSM, EndoCheck™SM, OVAInherit™SM, Aspira SynergySM,, and OVA360SM, ASPIRA IVDSM® , and YOUR HEALTH, OUR PASSIONSM®.
PART I - FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
Aspira Women’s Health Inc.
Condensed Consolidated Balance Sheets (unaudited)
(Amounts in Thousands, Except Share and Par Value Amounts)
June 30, | December 31, | June 30, | December 31, | |||||||
2022 | 2021 | 2023 | 2022 | |||||||
Assets | (Unaudited) | |||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 20,480 | $ | 37,180 | $ | 4,246 | $ | 13,306 | ||
Accounts receivable | 1,112 | 1,027 | ||||||||
Accounts receivable, net of reserves of $57 and $9, at June 30, 2023 and December 31, 2022, respectively | 1,638 | 1,245 | ||||||||
Prepaid expenses and other current assets | 1,173 | 1,624 | 706 | 1,442 | ||||||
Inventories | 191 | 174 | 272 | 316 | ||||||
Total current assets | 22,956 | 40,005 | 6,862 | 16,309 | ||||||
Property and equipment, net | 438 | 464 | 261 | 368 | ||||||
Right-of-use assets | 315 | 346 | 342 | 282 | ||||||
Restricted cash | 250 | 250 | 255 | 251 | ||||||
Other assets | 57 | 14 | - | 163 | ||||||
Total assets | $ | 24,016 | $ | 41,079 | $ | 7,720 | $ | 17,373 | ||
Liabilities and Stockholders’ Equity | ||||||||||
Liabilities and Stockholders’ Equity (Deficit) | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 1,374 | $ | 1,501 | $ | 1,072 | $ | 881 | ||
Accrued liabilities | 5,059 | 5,299 | 3,549 | 3,650 | ||||||
Current portion of long-term debt | 283 | 201 | 259 | 403 | ||||||
Short-term debt | 260 | 779 | 306 | 764 | ||||||
Lease liability | 68 | 60 | 188 | 77 | ||||||
Total current liabilities | 7,044 | 7,840 | 5,374 | 5,775 | ||||||
Non-current liabilities: | ||||||||||
Long-term debt | 2,536 | 2,718 | 1,334 | 2,315 | ||||||
Lease liability | 314 | 349 | 228 | 272 | ||||||
Warrant liabilities | 1,312 | 2,280 | ||||||||
Total liabilities | 9,894 | 10,907 | 8,248 | 10,642 | ||||||
Commitments and contingencies (Note 2) |
|
| ||||||||
Stockholders’ equity: | ||||||||||
Common stock, par value $0.001 per share, 150,000,000 shares authorized at June 30, 2022 and December 31, 2021; 112,296,388 and 112,138,741 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively | 112 | 112 | ||||||||
Commitments and contingencies (Note 4) |
|
| ||||||||
Stockholders’ equity (deficit): | ||||||||||
Common stock, par value $0.001 per share, 200,000,000 and 150,000,000 shares authorized at June 30, 2023 and December 31, 2022, respectively; 8,473,363 and 8,306,326 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | 9 | 8 | ||||||||
Additional paid-in capital | 503,249 | 501,788 | 506,745 | 505,621 | ||||||
Accumulated deficit | (489,239) | (471,728) | (507,282) | (498,898) | ||||||
Total stockholders’ equity | 14,122 | 30,172 | ||||||||
Total liabilities and stockholders’ equity | $ | 24,016 | $ | 41,079 | ||||||
Total stockholders’ equity (deficit) | (528) | 6,731 | ||||||||
Total liabilities and stockholders’ equity (deficit) | $ | 7,720 | $ | 17,373 | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Aspira Women’s Health Inc.
Condensed Consolidated Statements of Operations (unaudited)
(Amounts in Thousands, Except Share and Per Share Amounts)
(Unaudited)
Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||
Revenue: | ||||||||||||||||||||||
Product | $ | 2,018 | $ | 1,720 | $ | 3,853 | $ | 3,136 | $ | 2,491 | $ | 2,018 | $ | 4,806 | $ | 3,853 | ||||||
Genetics | 48 | 79 | 106 | 159 | - | 48 | 1 | 106 | ||||||||||||||
Total revenue | 2,066 | 1,799 | 3,959 | 3,295 | 2,491 | 2,066 | 4,807 | 3,959 | ||||||||||||||
Cost of revenue(1): | ||||||||||||||||||||||
Product | 1,036 | 839 | 1,893 | 1,494 | 941 | 1,036 | 2,066 | 1,893 | ||||||||||||||
Genetics | 64 | 264 | 139 | 502 | - | 64 | - | 139 | ||||||||||||||
Total cost of revenue | 1,100 | 1,103 | 2,032 | 1,996 | 941 | 1,100 | 2,066 | 2,032 | ||||||||||||||
Gross profit | 966 | 696 | 1,927 | 1,299 | 1,550 | 966 | 2,741 | 1,927 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||
Research and development(2) | 1,410 | 1,471 | 2,758 | 2,343 | 693 | 1,410 | 1,924 | 2,758 | ||||||||||||||
Sales and marketing(3) | 3,580 | 4,018 | 8,077 | 7,126 | 1,772 | 3,580 | 4,334 | 8,077 | ||||||||||||||
General and administrative(4) | 4,196 | 3,279 | 8,559 | 5,788 | 3,406 | 4,196 | 6,573 | 8,559 | ||||||||||||||
Total operating expenses | 9,186 | 8,768 | 19,394 | 15,257 | 5,871 | 9,186 | 12,831 | 19,394 | ||||||||||||||
Loss from operations | (8,220) | (8,072) | (17,467) | (13,958) | (4,321) | (8,220) | (10,090) | (17,467) | ||||||||||||||
Interest (expense) income, net | (10) | 3 | (28) | (21) | ||||||||||||||||||
Other (expense) income, net | (13) | 995 | (16) | 985 | ||||||||||||||||||
Change in fair value of warrant liabilities | 992 | - | 968 | - | ||||||||||||||||||
Interest income (expense), net | 8 | (10) | 34 | (28) | ||||||||||||||||||
Other income (expense), net | 1,004 | (13) | 704 | (16) | ||||||||||||||||||
Net loss | $ | (8,243) | $ | (7,074) | $ | (17,511) | $ | (12,994) | $ | (2,317) | $ | (8,243) | $ | (8,384) | $ | (17,511) | ||||||
Net loss per share - basic and diluted | $ | (0.07) | $ | (0.06) | $ | (0.16) | $ | (0.12) | $ | (0.28) | $ | (1.10) | $ | (1.00) | $ | (2.34) | ||||||
Weighted average common shares used to compute basic and diluted net loss per common share | 112,242,893 | 111,958,928 | 112,191,520 | 110,311,666 | 8,400,157 | 7,482,860 | 8,357,013 | 7,479,435 | ||||||||||||||
Non-cash stock-based compensation expense included in cost of revenue and operating expenses: | ||||||||||||||||||||||
(1) Cost of revenue | $ | 35 | $ | 54 | $ | 87 | $ | 88 | $ | 2 | $ | 35 | $ | 15 | $ | 87 | ||||||
(2) Research and development | 53 | 95 | 49 | 121 | 56 | 53 | 133 | 49 | ||||||||||||||
(3) Sales and marketing | 58 | 336 | 205 | 475 | 139 | 58 | 122 | 205 | ||||||||||||||
(4) General and administrative | 464 | 797 | 1,107 | 1,087 | 291 | 464 | 351 | 1,107 | ||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Aspira Women’s Health Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited)
(Amounts in Thousands, Except Share Amounts)
(Unaudited)
Common Stock | |||||||||||||
Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity | |||||||||
Balance at December 31, 2021 | 112,138,741 | $ | 112 | $ | 501,788 | $ | (471,728) | $ | 30,172 | ||||
Net loss | - | - | - | (9,268) | (9,268) | ||||||||
Common stock issued in conjunction with exercise of stock options | 3,000 | - | 2 | - | 2 | ||||||||
Stock-based compensation expense | - | - | 838 | - | 838 | ||||||||
Balance at March 31, 2022 | 112,141,741 | $ | 112 | $ | 502,628 | $ | (480,996) | $ | 21,744 | ||||
Net loss | - | - | - | (8,243) | (8,243) | ||||||||
Common stock issued in conjunction with exercise of stock options | 20,000 | - | 11 | - | 11 | ||||||||
Common stock issued for restricted stock awards | 134,647 | - | 140 | - | 140 | ||||||||
Stock-based compensation expense | - | - | 470 | - | 470 | ||||||||
Balance at June 30, 2022 | 112,296,388 | $ | 112 | $ | 503,249 | $ | (489,239) | $ | 14,122 | ||||
Common Stock | |||||||||||||
Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | |||||||||
Balance at December 31, 2022 | 8,306,326 | $ | 8 | $ | 505,621 | $ | (498,898) | $ | 6,731 | ||||
Net loss | - | - | - | (6,067) | (6,067) | ||||||||
Common stock issued under an at the market offering agreement, net of issuance costs | 23,217 | - | 30 | - | 30 | ||||||||
Stock-based compensation expense | - | - | 133 | - | 133 | ||||||||
Balance at March 31, 2023 | 8,329,543 | $ | 8 | $ | 505,784 | $ | (504,965) | $ | 827 | ||||
Net loss | - | - | - | (2,317) | (2,317) | ||||||||
Common stock issued under an at the market offering agreement, net of issuance costs | 12,335 | - | 47 | - | 47 | ||||||||
Common stock issued under an equity line of credit agreement, net of issuance costs | 53,335 | - | 169 | - | 169 | ||||||||
Common stock issued for vested restricted stock awards | 30,441 | 1 | 263 | - | 264 | ||||||||
Common stock issued for entering into equity line of credit with Lincoln Park | 47,733 | 258 | 258 | ||||||||||
Stock-based compensation expense | - | - | 224 | - | 224 | ||||||||
Fractional shares adjustment related to reverse stock split | (24) | - | - | - | - | ||||||||
Balance at June 30, 2023 | 8,473,363 | $ | 9 | $ | 506,745 | $ | (507,282) | $ | (528) | ||||
Common Stock | ||||||||||||||||||||||||||
Common Stock | Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||
Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||
Balance at December 31, 2020 | 104,619,876 | $ | 105 | $ | 449,680 | $ | (440,066) | $ | 9,719 | |||||||||||||||||
Balance at December 31, 2021 | 7,475,916 | $ | 7 | $ | 501,893 | $ | (471,728) | $ | 30,172 | |||||||||||||||||
Net loss | - | - | - | (5,920) | (5,920) | - | - | - | (9,268) | (9,268) | ||||||||||||||||
Common stock issued in conjunction with exercise of stock options | 196,976 | - | 317 | - | 317 | 200 | - | 2 | - | 2 | ||||||||||||||||
Common stock issued in conjunction with public offering, net of issuance costs | 6,900,000 | 7 | 47,713 | - | 47,720 | |||||||||||||||||||||
Stock-based compensation expense | - | - | 489 | - | 489 | - | - | 838 | - | 838 | ||||||||||||||||
Balance at March 31, 2021 | 111,716,852 | $ | 112 | $ | 498,199 | $ | (445,986) | $ | 52,325 | |||||||||||||||||
Balance at March 31, 2022 | 7,476,116 | $ | 7 | $ | 502,733 | $ | (480,996) | $ | 21,744 | |||||||||||||||||
Net loss | - | - | - | (7,074) | (7,074) | - | - | - | (8,243) | (8,243) | ||||||||||||||||
Common stock issued in conjunction with exercise of stock options | 305,090 | - | 304 | - | 304 | 1,333 | - | 11 | - | 11 | ||||||||||||||||
Common stock issued for restricted stock awards | 36,092 | - | 267 | - | 267 | 8,977 | - | 140 | - | 140 | ||||||||||||||||
Common stock issued in conjunction with public offering, net of issuance costs | - | - | 1 | - | 1 | |||||||||||||||||||||
Stock-based compensation expense | - | - | 1,015 | - | 1,015 | - | - | 470 | - | 470 | ||||||||||||||||
Balance at June 30, 2021 | 112,058,034 | $ | 112 | $ | 499,786 | $ | (453,060) | $ | 46,838 | |||||||||||||||||
Balance at June 30, 2022 | 7,486,426 | $ | 7 | $ | 503,354 | $ | (489,239) | $ | 14,122 | |||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Aspira Women’s Health Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(Amounts in Thousands)
(Unaudited)
Six Months Ended | Six Months Ended | |||||||||
June 30, | June 30, | |||||||||
2022 | 2021 | 2023 | 2022 | |||||||
Cash flows from operating activities: | ||||||||||
Net loss | $ | (17,511) | $ | (12,994) | $ | (8,384) | $ | (17,511) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||
Non-cash lease expense | 4 | 32 | 7 | 4 | ||||||
Depreciation and amortization | 128 | 172 | 122 | 128 | ||||||
Stock-based compensation expense | 1,448 | 1,771 | 621 | 1,448 | ||||||
Loss on sale and disposal of property and equipment | 3 | 1 | ||||||||
Forgiveness of PPP loan | - | (1,006) | ||||||||
Change in fair value of warrant liabilities | (968) | - | ||||||||
Loss on impairment and disposal of property and equipment | (3) | 3 | ||||||||
Forgiveness of DECD loan | (1,000) | - | ||||||||
Financing expense for entering into equity line of credit with Lincoln Park | 258 | - | ||||||||
Changes in operating assets and liabilities: | ||||||||||
Accounts receivable | (85) | (208) | (393) | (85) | ||||||
Prepaid expenses and other assets | 408 | 350 | 899 | 408 | ||||||
Inventories | (17) | (71) | 44 | (17) | ||||||
Accounts payable, accrued liabilities and other liabilities | (855) | 208 | (326) | (855) | ||||||
Net cash used in operating activities | (16,477) | (11,745) | (9,123) | (16,477) | ||||||
Cash flows from investing activities: | ||||||||||
Purchase of property and equipment | (105) | (136) | (12) | (105) | ||||||
Net cash used in investing activities | (105) | (136) | (12) | (105) | ||||||
Cash flows from financing activities: | ||||||||||
Principal repayment of DECD loan | (131) | (99) | (167) | (131) | ||||||
Proceeds from issuance of common stock from exercise of stock options | 13 | 621 | - | 13 | ||||||
Proceeds from public offering | - | 48,236 | ||||||||
Payment of offering costs for public offering | - | (515) | ||||||||
Net cash (used in) provided by financing activities | (118) | 48,243 | ||||||||
Net (decrease) increase in cash, cash equivalents and restricted cash | (16,700) | 36,362 | ||||||||
Proceeds from at the market offering | 211 | - | ||||||||
Payment of issuance costs for at the market | (134) | - | ||||||||
Proceeds from equity line of credit | 169 | - | ||||||||
Net cash provided by (used in) financing activities | 79 | (118) | ||||||||
Net decrease in cash, cash equivalents and restricted cash | (9,056) | (16,700) | ||||||||
Cash, cash equivalents and restricted cash, beginning of period | 37,430 | 16,631 | 13,557 | 37,430 | ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 20,730 | $ | 52,993 | $ | 4,501 | $ | 20,730 | ||
Reconciliation to Condensed Consolidated Balance Sheet: | ||||||||||
Reconciliation to Consolidated Balance Sheet: | ||||||||||
Cash and cash equivalents | $ | 20,480 | $ | 52,993 | $ | 4,246 | $ | 20,480 | ||
Restricted cash | 250 | - | 255 | 250 | ||||||
Unrestricted and restricted cash and cash equivalents | $ | 20,730 | $ | 52,993 | $ | 4,501 | $ | 20,730 | ||
Supplemental disclosure of cash flow information: | ||||||||||
Cash paid during the period for interest | 38 | 38 | $ | 33 | $ | 38 | ||||
Supplemental disclosure of noncash investing and financing activities: | ||||||||||
Net decrease in right-of-use assets | (31) | (30) | ||||||||
Forgiveness of PPP loan | - | (1,006) | ||||||||
Forgiveness of DECD loan | (1,000) | - | ||||||||
Commitment shares for equity line of credit | 258 | - | ||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Aspira Women’s Health Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Organization
Aspira Women’s Health Inc., formerly known as Vermillion, Inc. (“Aspira” and its wholly-owned subsidiaries are collectively referred to as the “Company”) is incorporated in the state of Delaware, and is engaged in the business of discovering, developing and commercializing risk assessment and diagnostic tests for gynecologic disease. The Company currently markets and sellsdistributes the following products and related services: (1) OVA1,Ova1Plus, a non-invasive blood test intended as an aidthat combines two FDA-cleared tests for women with pelvic masses who are planned for surgery: Ova1, leveraging its high sensitivity, and Overa, with its high specificity; and (2) OvaWatch, a non-invasive blood test used to further assess the likelihoodrisk of malignancy inovarian cancer for women with an ovarian adnexal mass for which surgery is planned when the physician’s independentmasses, evaluated by initial clinical and radiological evaluation does not indicate malignancy; (2) OVERA, a second-generation biomarker reflex intended to maintain OVA1’s high sensitivity while improving specificity; (3) OVA1plus, a reflex offering which uses OVA1assessment as the primary test and OVERA as a confirmation for OVA1 intermediate range results; (4) Aspira GenetiX, a genetic test for hereditary gynecologic cancer risk,likely benign or indeterminant with a core focus on hereditary female reproductive cancers, including breast, ovarian, endometrial, uterinenegative predictive value of 99%.
Collectively, these tests are referred to and cervical cancers; and (5) Aspira Synergy, the Company’s testing platform and cloud service for testing. The Company plans to make OVA1, OVERA, OVA1plus and Aspira GenetiX and future technology available through Aspira Synergy. In 2021, the Company began entering into decentralized arrangements with large healthcare networks and large practices for its Aspira Synergy platform offering specialty and genetic testing solutions.marketed as OvaSuite. Revenue from all of these sources is included in total revenue in the results of operations in total revenue for the three and six months ended June 30, 2022.2023 and 2022, respectively.
Reverse Stock Split
On May 9, 2023, the Company’s board of directors approved a one for fifteen reverse stock split (the “Reverse Stock Split”) of the Company’s common stock without any change to its par value, which became effective on May 12, 2023. All references to share and per share amounts for all periods presented in these unaudited condensed consolidated financial statements have been retrospectively restated to reflect the Reverse Stock Split and proportional adjustment of the preferred stock conversion ratio. Par values were not adjusted.
Liquidity
As of June 30, 2022,2023, the Company had $20,480,000approximately $4,246,000 of cash and cash equivalents (excluding restricted cash of $250,000)$255,000), an accumulated deficit of approximately ($489,239,000),$507,282,000, and working capital of $15,912,000.approximately $1,488,000. For the three and six months ended June 30, 2022,2023, the Company incurred a net loss of ($17,511,000)$2,317,000 and $8,384,000, respectively, and used cash in operations of ($16,477,000).$3,417,000 and $9,123,000, respectively. The Company has incurred significant net losses and negative cash flows from operations since inception and theinception. The Company also expects to continue to incur a net loss and negative cash flows from operations for 2022. the remainder of 2023. In the event that the Company’s existing cash on hand is not sufficient to fund operations, meet its capital requirements or satisfy the anticipated obligations as they become due, the Company expects to take further action to protect its liquidity position, which include, but are not limited to:
Raising capital through equity or debt offerings either in the public markets or via private placement offering, including through financing facilities described elsewhere in the financial statements; however, no assurance can be given that capital will be available on acceptable terms or at all;
Reducing executive bonuses or replacing cash compensation with equity grants;
Reducing professional services and consulting fees and eliminating non-critical projects;
Reducing, eliminating or deferring discretionary marketing programs; and
Reducing travel and entertainment expenses.
The Company has outstanding warrants to purchase shares of its common stock that may be exercised although there can be no assurance that the warrants will be exercised.
There can be no assurance that the Company will achieve or sustain profitability or positive cash flow from operations. Given the above conditions, there is substantial doubt about the Company’s ability to continue as
a going concern. The unaudited condensed consolidated financial statements have been prepared on a going concern basis and do not include any adjustments that might result from these uncertainties.
The Company expects to raise capital through sources that may include public or private equity offerings, debt financings, collaborations, licensing arrangements, grants and government funding and strategic alliances. However, additional funding may not be available when needed or on terms acceptable to the Company. If the Company is unable to obtain additional capital, it may not be able to continue sales and marketing, research and development, or other operations on the scope or scale of current activity, and that could have a material adverse effect on the Company’s business, results of operations and financial condition.
On June 1, 2022, the Company received a deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market notifying the Company that, for the preceding 30 consecutive business days, the closing bid price for the Company’s 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) (the “Minimum Bid Price Rule”). As provided inOn November 29, 2022, the Company was granted an additional 180-calendar day compliance period, or until May 29, 2023, to regain compliance with the minimum bid price requirement. On May 26, 2023, the Company was notified by Nasdaq that we had regained compliance.
On July 11, 2023, the Company received a new deficiency letter from the Listing Qualifications Department of the Nasdaq rules,Stock Market notifying the Company that, for the 30 consecutive business days prior to the date of the deficiency letter, the Company’s Market Value of Listed Securities was below the minimum of $35 million requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(2) (the “MVLS Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), Nasdaq has provided the Company with 180 calendar days, or until November 28, 2022,January 8, 2024, to regain compliance with the Minimum Bid Price Rule. The Company may achieve compliance during this period if the closing bid price of Aspira common stock is at least $1.00 per share for a minimum of 10 consecutive business days. If the Company fails to regain compliance on or prior to November 28, 2022, the Company may be eligible for an additional 180-calendar day compliance period.MVLS Requirement. There is no assurance that the Company will be able to
regain compliance by the November 28, 2022 deadline or the additional 180-calendar day extendedJanuary 8, 2024 deadline, and there is no assurance that the Company will otherwise maintain compliance with this or any of the other Nasdaq continued listing requirements.
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. The novel coronavirus has since spread to over 100 countries, including every state in the United States. In March 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic, and the United States declared a national emergency with respect to the coronavirus outbreak. This outbreak has severely impacted global economic activity, and many countries and many states in the United States have reacted to the outbreak by instituting quarantines, mandating business and school closures and restricting travel periodically throughout the pandemic. In order to reduce the impact of limitations on visiting physician offices due to closures and quarantines, the Company implemented other mechanisms for reaching physicians such as virtual sales representative meetings, Key Opinion Leader presentations, and increased digital sales and marketing. Patient enrollment for our planned clinical research studies has been slower than originally planned due to the impact of clinic closures and patients not seeking medical care in some states, which has led to delays in the completion of such studies. Given the uncertainties associated with potential resurgences of the COVID-19 pandemic, the Company is unable to estimate the extent of the impact of the COVID-19 pandemic on its operations or liquidity.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management of the Company, all adjustments, consisting of normal recurring adjustments necessary for the fair statement of results for the periods presented, have been included. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year or any other interim period.
The unaudited condensed consolidated financial statements and related disclosures have been prepared with the presumption that users of the interim unaudited condensed consolidated financial statements have read or have access to the audited consolidated financial statements for the preceding fiscal year. The condensed consolidated balance sheet at December 31, 20212022 included in this report has been derived from the audited consolidated financial statements at that date but does not include all the information and notes required by GAAP. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 20212022 included in Aspira’s Annual Report on Form 10-K, which was filed with the U.S. Securities and Exchange Commission, “SEC”), on March 31, 2022.30, 2023.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated results.
Significant Accounting Policies
Revenue Recognition
Product Revenue – OvaSuite – OVA1, OVERA and OVA1plus:: The Company recognizes product revenue in accordance with the provisions of ASCFinancial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Product revenue is recognized upon completion of the OVA1, OVERA or OVA1plus
OvaSuite test and delivery of results to the physician based on estimates of amounts that will ultimately be realized. In determining the amount of revenue to be recognized for a delivered test result, the Company considers factors such as payment history and amount, payer coverage, whether there is a reimbursement contract between the payer and the Company, and any developments or changes that could impact reimbursement. These estimates require significant judgment by management as the collection cycle on some accounts can be as long as one year. The effect of any change made
to an estimated input component and, therefore revenue recognized, would be recorded as a change in estimate at the time of the change.
The Company also reviews its patient account population and determines an appropriate distribution of patient accounts by payer (i.e., Medicare, patient pay, other third-party payer, etc.) into portfolios with similar collection experience. The Company has elected this practical expedient that, when evaluated for collectability, results in a materially consistent revenue amount for such portfolios as if each patient account were evaluated on an individual contract basis. During the period ended June 30, 2022,2023, there were no adjustments to estimates of variable consideration to derecognize revenue for services provided in a prior period.period; however, additional revenue of approximately $96,000 and $110,000 was recognized for amounts collected in excess of revenue estimated for prior periods during the three and six months ended June 30, 2023, respectively. There were 0no impairment losses on accounts receivable recorded during the periodsthree and six months ended June 30, 2023 and 2022, and 2021.respectively.
Genetics Revenue – Aspira GenetiX: Under ASC 606, the Company’s genetics revenue iswas recognized upon completion of the Aspira GenetiX test and delivery of results to the physician based on estimates of amounts that will ultimately be realized. In determining the amount of revenue to be recognized for a delivered test result, the Company considersconsidered factors such as payment history and amount, payer coverage, whether there iswas a reimbursement contract between the payer and the Company, and any developments or changes that could impact reimbursement. These estimates require significant judgment by management asmanagement.
In September 2022, the Company received a notice of cancellation from its only Aspira Synergy genetics carrier screening customer, Axia Women’s Health. As a result of this cancellation, along with the general deterioration of commercial opportunities in the genetics carrier screening market, has limited experience with such factors relatingled the Company to cease providing Aspira GenetiX.GenetiX, including genetics carrier screening, on our Aspira Synergy platform, effective as of September 30, 2022. The Company had previously recognized genetics revenue under ASC 606 upon completion of the Aspira GenetiX test and delivery of results to the physician based on estimates of amounts that would ultimately have been realized. The Company did not incur any termination penalties nor did the Company accrue any expenses as a result of the cancellation. This is not expected to have a material impact on the Company’s revenues in any future periods.
Accounts Receivable: Virtually all accounts receivable are derived from sales made to customers located in North America. The Company performs ongoing credit evaluations of its customers’ financial condition and generally does not require collateral. The Company maintains an allowance for credit losses based upon the expected collectability of accounts receivable.In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status and make judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company also considers customer-specific information, current market conditions, and reasonable and supportable forecasts of future economic conditions.
Correction of Immaterial Errors
During the three months ended March 31, 2023, we identified an immaterial error related to the accounting for forfeitures in stock-based compensation that impacted previously issued 2022 consolidated financial statements. Management evaluated the impact on the 2022 and 2023 consolidated financial statements and concluded it was not material. As a result, the Company recorded an out of period adjustment to reduce stock-based compensation in the amount of $262,000 during the three months ended March 31, 2023. The adjustment resulted in a reduction to additional paid-in capital of $262,000 as of June 30, 2023.
In addition, the Company omitted the disclosure of the fair value hierarchy for the insurance promissory note and DECD loan as Level 2 and Level 3, respectively, within the fair value hierarchy and the fair value
disclosures for the DECD loan. These immaterial errors have been corrected in Note 2 to our unaudited condensed consolidated financial statements.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board issued Accounting Standard Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This update changesASU requires timelier recording of credit losses on loans and other financial instruments held. Instead of reserves based on a current probability analysis, Topic 326 requires the impairment model frommeasurement of all expected credit losses for financial assets held at the currentlyreporting date based on historical experience, current conditions, and reasonable and supportable forecasts. All organizations will now use forward-looking information to better inform their credit loss estimates. Topic 326 requires enhanced disclosures regarding significant estimates and judgments used incurred loss methodologyin estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide information about the amounts recorded in the financial statements. In addition, Topic 326 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to an expected loss methodology,Topic 326 Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825,Financial Instruments, to introduce amendments which will resultaffect the recognition and measurement of financial instruments, including derivatives and hedging. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments – Credit Losses (Topic 326); Targeted Transition Relief. The amendments in this ASU provide entities that have certain instruments within the scope of Subtopic 326-20 with an option to irrevocably elect the fair value option in Subtopic 825-10, applied on an instrument-by-instrument basis for eligible instruments upon adoption of Topic 326. This standard and related amendments are effective for the Company’s fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The ASU is effective January 1, 2023 for smaller reporting companies, which includes the Company. The adoption of ASU 2016-13 did not have a material impact on the Company’s results of operations, financial position, or cash flows.
In March 2020, FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments. This ASU improves and clarifies various financial instruments topics, including the current expected credit losses standard issued in 2016 (ASU No. 2016-13). The ASU includes seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments have different effective dates. The issues 1-5 are conforming amendments, which are effective upon issuance of this final update. The Company determined that issues 1-5 have no impact on its financials. The amendments related to issue 6 and 7 effect ASU No. 2016-13, Financial instruments – credit losses (Topic 326): measurement of credit losses on financial statements. Effective dates of issue 6 and 7 are the same as the effective date of ASU No. 2016-13. The Company has adopted the new standard in the more timely recognitionfirst quarter of losses.fiscal year 2023. The adoption of this standard by the Company did not have a material impact on the Company’s results of operations, financial position, or cash flows.
In August 2020, the Financial Accounting Standards Board issued Accounting Standard Update No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). This update was issued to assist in simplifying the accounting for convertible instruments. This ASU 2016-132020-06 is scheduled to be effective infor fiscal years beginning after December 15, 2023, for smaller reporting companies.including interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements.
2. FAIR VALUE MEASUREMENTS
Fair Value of Financial Instruments
Financial instruments of the Company consist primarily of cash and cash equivalents, restricted cash accounts, receivable, and accounts payable, and warrant liability. These items are considered Level 1 due to their short-term nature and their market interest rates, except for warrant liability, which is considered Level 2 and is recorded at fair value at the end of each reporting period.
2.The Company records Warrants in connection with the 2022 offering, discussed in Note 6 to our unaudited condensed consolidated financial statements, as a liability. The fair values of the Warrants as of June 30, 2023 and December 31, 2022 were approximately $1,312,000 and $2,280,000, respectively. The fair value of the warrants was estimated using Black-Scholes pricing model based on the following assumptions:
June 30, 2023 | December 31, 2022 | ||||||
Dividend yield | - | % | - | % | |||
Volatility | 101.1 | % | 96.8 | % | |||
Risk-free interest rate | 4.31 | % | 3.99 | % | |||
Expected lives (years) | 4.15 | 4.64 | |||||
Weighted average fair value | $ | 1.636 | $ | 2.850 | |||
The fair value of the Warrants was deemed to be derivative instruments due to certain contingent put feature, was determined using the Black-Scholes option pricing model, deemed to be an appropriate model due to the terms of the Warrants issued, including a fixed term and exercise price.
The fair value of Warrants was affected by changes in inputs to the Black-Scholes option pricing model including the Company’s stock price, expected stock price volatility, the contractual term, and the risk-free interest rate. This model uses Level 2 inputs, including stock price volatility, in the fair value hierarchy established by ASC 820 Fair Value Measurement. At June 30, 2023, the fair value of all Warrants was approximately $1,312,000, which are classified as a long-term Warrant liability on the Company’s balance sheet.
The carrying value of the Company’s insurance promissory note approximates fair value as of June 30, 2023 and December 31, 2022, due to the short-term nature of the insurance note and are classified as Level 2 within the fair value hierarchy.
The DECD loan is classified within Level 3 of the fair value hierarchy. The following table presents the carrying value and fair value of the DECD loan. The fair value of the DECD loan is estimated based on discounted cash flows using the prevailing market interest rates.
June 30, | December 31, | ||||||||||||
2023 | 2022 | ||||||||||||
(in thousands) | Fair Value Hierarchy | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||
DECD loan | Level 3 | 1,593 | $ | 1,357 | $ | 2,729 | $ | 2,110 | |||||
3. PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets at June 30, 2023 and December 31, 2022 consist of the following:
June 30, | December 31, | ||||
(in thousands) | 2023 | 2022 | |||
Prepaid insurance | $ | 308 | $ | 767 | |
Software licenses | 157 | 269 | |||
Subscriptions | 32 | 211 | |||
Other | 209 | 195 | |||
Total prepaid and other current assets | $ | 706 | $ | 1,442 | |
4. COMMITMENTS AND CONTINGENCIES
Coronavirus Aid, Relief, and Economic Security (CARES) Act and Paycheck Protection Program Loan
On May 1, 2020, the Company obtained the Paycheck Protection Program loan (the “PPP Loan”) from BBVA USA in the aggregate amount of approximately $1,006,000. The Company applied for forgiveness of the PPP Loan in March 2021, and, effective May 27, 2021, the U.S. Small Business Administration confirmed the waiver of the Company’s repayment of the PPP Loan which was recognized as a gain in other income in 2021. The Company remains subject to an audit of the PPP loan. There is no assurance that the Company will not be required to repay all or a portion of the PPP Loan, as a result of any such audit.
Loan Agreement
On March 22, 2016, the Company entered into a loan agreement (as amended, the “DECD Loan Agreement”) with the State of Connecticut Department of Economic and Community Development (the “DECD”), pursuant to which the Company may borrow up to $4,000,000 from the DECD. The loan bears interest at a fixed rate of 2.0% per annum and requires equal monthly payments of principal and interest until maturity, which occurs on April 15, 2026. As security for the loan, the Company has granted the DECD a blanket security interest in the Company’s personal and intellectual property. The DECD’s security interest in the Company’s intellectual property may be subordinated to a qualified institutional lender.
The loan may be prepaid at any time without premium or penalty. An initial disbursement of $2,000,000 was made to the Company on April 15, 2016 under the DECD Loan Agreement. On December 3, 2020, the Company received a disbursement of the remaining $2,000,000 under the DECD Loan Agreement, as the Company had achieved the target employment milestone necessary to receive an additional $1,000,000 under the DECD Loan Agreement and the DECD determined to fund the remaining $1,000,000 under the DECD Loan Agreement after concluding that the required revenue target would likely have been achieved in the first quarter of 2020 in the absence of the impacts of COVID-19.
Under the terms of the DECD Loan Agreement, the Company may bewas eligible for forgiveness of up to $1,500,000 of the principal amount of the loan if the Company achievesit was able to achieve certain job creation and retention milestones by December 31, 2022. Conversely, ifOn June 26, 2023, the Company is either unablewas notified by the DECD that the Company satisfied all job creation and retention requirements under the loan agreement to retain 25 full-time employees with a specified average annual salary for a consecutive two-year period or does notreceive forgiveness of $1,000,000. During the three months ended June 30, 2023, the Company recorded the $1,000,000 as other income in the unaudited condensed statement of operations. If the Company fails to maintain the Company’sits Connecticut operations through March 22, 2026, the DECD may require early repayment of a portion or all of the remaining amount of the loan plus a penalty of 5% of the total funded loan. The carrying value approximates fair value, as the interest represents market prices for similar types of borrowing arrangements.
Long-term debt consisted of the following:
June 30, | December 31, | June 30, | December 31, | |||||||
2022 | 2021 | 2023 | 2022 | |||||||
(in thousands) | ||||||||||
DECD loan, net of issuance costs | $ | 2,819 | $ | 2,919 | $ | 1,593 | $ | 2,718 | ||
Less: Current portion, net of issuance costs | (283) | (201) | (259) | (403) | ||||||
Total long-term debt, net of issuance costs | $ | 2,536 | $ | 2,718 | $ | 1,334 | $ | 2,315 | ||
On June 6, 2023, the Company was granted a deferral of interest and principal payments on a portion of the remaining outstanding balances through December 1, 2023. As of June 30, 2022,2023, the annual amounts of future
minimum principal payments due under the Company’s contractual obligation are shown in the table below. Unamortized debt issuance costs for the DECD loan were $13,000. Debt related to the insurance promissory note of $260,000, as described below, is not included in the following table due to the insurance promissory note being cancelable.$10,000.
Payments Due by Period | |||||||||||||||||||||
(in thousands) | Total | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | ||||||||||||||
DECD Loan | $ | 2,832 | $ | 103 | $ | 406 | $ | 452 | $ | 461 | $ | 341 | $ | 1,069 | |||||||
Total | $ | 2,832 | $ | 103 | $ | 406 | $ | 452 | $ | 461 | $ | 341 | $ | 1,069 | |||||||
Accrued Liabilities
The following table describes the principal components of accrued liabilities on the Company’s condensed consolidated balance sheet as of:
June 30, | December 31, | ||||
(in thousands) | 2022 | 2021 | |||
Payroll and benefits related expenses | $ | 2,786 | $ | 2,652 | |
Collaboration and research agreements expenses | 429 | 382 | |||
Professional services | 1,221 | 1,992 | |||
Other accrued liabilities | 623 | 273 | |||
Total accrued liabilities | $ | 5,059 | $ | 5,299 | |
Payments Due by Period | |||||||||||||||||||||
(in thousands) | Total | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | ||||||||||||||
DECD Loan | $ | 1,603 | $ | 26 | $ | 475 | $ | 485 | $ | 477 | $ | 140 | $ | - | |||||||
Total | $ | 1,603 | $ | 26 | $ | 475 | $ | 485 | $ | 477 | $ | 140 | $ | - | |||||||
Insurance Notes
During 2021,2022, the Company entered into an insurance promissory note for the payment of insurance premiums at an interest rate of 3.74%5.48%, with an aggregate principal amount outstanding of approximately $260,000$306,000 and $779,000$764,000 as of June 30, 20222023 and December 31, 2021,2022, respectively.The amount outstanding in 2023 could be substantially offset by the cancellation of the related insurance coverage which is classified in prepaid insurance. This note is payable in ten monthly installments with a maturity date of October 1, 20222023 and has no financial or operational covenants.
Operating Leases
The Company leases facilities to support its business of discovering, developing and commercializing diagnostic tests in the fields of gynecologic disease.business. The Company’s principal facility, including the Clinical Laboratory Improvements Amendments of 1988 (“CLIA”) laboratory used by Aspira Labs, Inc., is located in Austin, Texas, and the CLIA laboratory used for research and development services isadministrative offices are located in Trumbull, Connecticut. Connecticut and Palo Alto, Califonia.
In October 2021,December 2022, the Company renewed the Austin, Texas lease for one additional year. The Company’s renewed lease expires on January 31, 2023,2024, with no automatic renewal or renewal option. The Company’s Texas lease has a term of 12 months.months, and the Company has elected the policy of not recording leases on the balance sheet when the leases have terms of 12 months or less. The Company recognizedrecognizes the lease payments in profit and loss on a straight-line basis over the term of the lease, and variable lease payments in the period in which the obligation for the payments was incurred.Variable lease costs represent the Company’s share of the landlord’s operating expenses.
In October 2015, the Company entered into a lease agreement for a facility in Trumbull, Connecticut. The lease required initial payments for the buildout of leasehold improvements to the office space, which were approximately $596,000. In September 2020, the Company exercised the renewal option for its Trumbull, Connecticut lease. The Company’s renewed lease expires on June 30, 2026, with a five yearfive-year renewal option. The Company is not reasonably certain that it will exercise the five yearfive-year renewal option beginning on July 1, 2026. On May 30, 2023, the Company entered into an agreement with the owner of its Trumbull, CT offices to move to a more economical location in Shelton, CT. The new lease term is for five years, and its commencement date is conditioned upon suitability of the existing space for a subtenant. Upon relocation, the fixed lease payment will be reduced to $5,000 per month for the first year, $5,383 per month for years two through four and $5,768 per month for the fifth year.
In January 2023, the Company entered into a new sublease agreement for an administrative facility in Palo Alto, California. The Company’s sublease term commenced in April 2023 and expires on May 31, 2024, with no option for renewal. The fixed lease payment will initially be approximately $9,000 per month and will increase to approximately $10,000 per month for the remainder of the lease beginning in January 2024. Future undiscounted lease payments are approximately $125,000.
The expense associated with these operating leases for the three and six months ended June 30, 20222023 and 20212022 is shown in the table below (in thousands).
Three Months Ended June 30, | Three Months Ended June 30, | |||||||||||
Lease Cost | Classification | 2022 | 2021 | Classification | 2023 | 2022 | ||||||
Operating rent expense | ||||||||||||
Cost of revenue | $ | 19 | $ | 15 | Cost of revenue | $ | 24 | $ | 19 | |||
Research and development | 7 | 13 | Research and development | 18 | 7 | |||||||
Sales and marketing | 10 | 6 | Sales and marketing | 2 | 10 | |||||||
General and administrative | 17 | 17 | General and administrative | 34 | 17 | |||||||
Variable rent expense | ||||||||||||
Cost of revenue | $ | 10 | $ | 8 | Cost of revenue | $ | 15 | $ | 10 | |||
Research and development | 5 | 9 | Research and development | 3 | 5 | |||||||
Sales and marketing | 9 | 7 | Sales and marketing | 2 | 9 | |||||||
General and administrative | 17 | 14 | General and administrative | 22 | 17 | |||||||
Six Months Ended June 30, | ||||||||||||
Lease Cost | Classification | 2022 | 2021 | |||||||||
Operating rent expense | ||||||||||||
Cost of revenue | $ | 39 | $ | 28 | ||||||||
Research and development | 14 | 22 | ||||||||||
Sales and marketing | 19 | 17 | ||||||||||
General and administrative | 33 | 35 | ||||||||||
Variable rent expense | ||||||||||||
Cost of revenue | $ | 20 | $ | 15 | ||||||||
Research and development | 11 | 13 | ||||||||||
Sales and marketing | 18 | 19 | ||||||||||
General and administrative | 35 | 30 | ||||||||||
Based on the Company’s leases as of June 30, 2022,2023, the table below sets forth the approximate future lease payments related to operating leases with initial terms of one year or more (in thousands).
2022 | $ | 50 | |||
2023 | 106 | ||||
Year | Payments | ||||
2023 (remaining six months) | $ | 112 | |||
2024 | 116 | 164 | |||
2025 | 124 | 124 | |||
2026 | 64 | 64 | |||
Total Operating Lease Payments | 460 | 464 | |||
Less: Interest | (78) | ||||
Less: Imputed Interest | (48) | ||||
Present Value of Lease Liabilities | $ | 382 | 416 | ||
Weighted-average lease term and discount rate were as follows:
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Three Months Ended June 30, | ||||||
2023 | 2022 | |||||
Cash paid for amounts included in measurement of lease liabilities: | ||||||
Operating cash outflows relating to operating leases | $ | 57 | $ | 51 | ||
Weighted-average remaining lease term (in years) | 2.5 | 4.0 | ||||
Weighted-average discount rate | 8.71% | 9.32% | ||||
Non-cancelableNon-cancellable Royalty Obligations
The Company is a party to an amended research collaboration agreement with The Johns Hopkins University School of Medicine under which the Company licenses certain of its intellectual property directed at the discovery and validation of biomarkers in human subjects, including but not limited to clinical application of biomarkers in the understanding, diagnosis and management of human disease. Under the terms of the amended research collaboration agreement, Aspira is required to pay the greater of 4% royalties on net sales of diagnostic tests using the assigned patents or annual minimum royalties of $57,500. Royalty expense for the three months ended June 30, 2023 and 2022 totaled $88,000 and 2021 totaled $81,000, and $69,000, respectively, and royalty expense for the six months ended June 30, 2023 and 2022 totaled $178,000 and 2021 totaled $154,000, and $126,000, respectively, as recorded in cost of revenue in the unaudited condensed consolidated statements of operations.
Commercial Reorganization
Business Agreements
On August 8, 2022, the Company entered into a sponsored research agreement with Harvard’s Dana-Farber Cancer Institute, Brigham & Women’s Hospital, and Medical University of Lodz, (the “Dana-Faber,
Brigham, Lodz Research Agreement”), for the generation of a multi-omic, non-invasive diagnostic aid to identify endometriosis based on circulating microRNAs and proteins. The Dana-Faber, Brigham, Lodz Research Agreement requires payments to be made upon the achievement of certain milestones. Under the terms of and as further described in the Dana-Faber, Brigham, Lodz Research Agreement, payments of approximately $1,252,000 have or will become due from the Company to the counterparties upon successful completion of certain deliverables in 2022 and 2023 as follows: 68% was paid in August 2022, with two additional payments of 15% and 17% to become payable upon completion of certain deliverables defined in the contract. During the three and six months ended March 31, 2022, the Company executed a commercial reorganization resultingJune 30, 2023 approximately $24,000 and $47,000, respectively, has been recorded as research and development expense in the separation of a number of employees. The organizational changes resulted in the recording within theunaudited condensed consolidated financial statement of operations in sales and marketing,for the project. From the inception of the Dana-Faber, Brigham, Lodz Research Agreement through June 30, 2023, research and development and general and administrative expenses in the cumulative amount of one-time severance, separation, and settlement charges of approximately $1,284,000. These amounts$914,000 have been partially offset by insurance reimbursementrecorded.
On March 20, 2023, the Company entered into a licensing agreement (“Dana-Faber, Brigham, Lodz License Agreement”) with Harvard’s Dana-Farber Cancer Institute, Brigham & Women’s Hospital, and Medical University of $523,000,Lodz under which the Company will license certain of which $433,000 has been received duringits intellectual property to be used in the six months ended June 30, 2022Company’s OvaSuite product portfolio. Under the Dana-Faber, Brigham, Lodz License Agreement, the Company paid an initial license fee of $75,000 and $90,000 is included in Prepaid expensesthen will pay a license maintenance fee of $50,000 on each anniversary of the date of the Dana-Faber, Brigham, Lodz License Agreement. The Dana-Faber, Brigham, Lodz License Agreement also requires non-refundable royalty payments of up to $1,350,000 based on certain regulatory approvals and other current assetscommercialization milestones and further royalty payments based on the condensed consolidated balance sheetnet sales of the Company’s products included under the Dana-Faber, Brigham, Lodz License Agreement. No milestones have been reached as of June 30, 2022. As of June 30, 2022, remaining unpaid estimated charges in the amount of $90,000 are included in Accrued liabilities on the condensed consolidated balance sheet. The Company paid the remaining charges in July 2022, and the Company expects to be reimbursed by the insurance company within 3 months of payment. 2023.
Contingent Liabilities
From time to time, the Company is involved in legal proceedings and regulatory proceedings arising from operations. The Company establishes reserves for specific liabilities in connection with legal actions that management deems to be probable and estimable. The Company is not currently a party to any proceeding, the adverse outcome of which would have a material adverse effect on the Company’s financial position or results of operations.
5. ACCRUED LIABILITIES
3. STOCKHOLDERS’ EQUITY
The following table describes the principal components of accrued liabilities on the Company’s unaudited condensed consolidated balance sheet as of:
2021 Public Offering
June 30, | December 31, | ||||
(in thousands) | 2023 | 2022 | |||
Payroll and benefits related expenses | $ | 1,430 | $ | 2,051 | |
Collaboration and research agreements expenses | 207 | 404 | |||
Professional services | 1,198 | 556 | |||
Other accrued liabilities | 714 | 639 | |||
Total accrued liabilities | $ | 3,549 | $ | 3,650 | |
6. STOCKHOLDERS’ EQUITY (DEFICIT)
Additional Shares Authorized
On February 4, 2021,6, 2023, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to the Company’s Fourth Amended and Restated Certificate of Incorporation, as amended, to increase the authorized number of shares of the Company’s common stock from 150,000,000 shares to 200,000,000 shares.
2023 Reverse Stock Split
At the Company’s annual meeting on May 9, 2023, the stockholders of the Company approved the proposal to authorize the Board of Directors in its discretion, without further authorization of the Company’s stockholders, to amend the Company’s Certificate of Incorporation to effect a reverse split of the Company’s common stock by a ratio of between one for ten and one for twenty. On May 9, 2023, the Company’s board of directors approved a one for fifteen reverse stock split of the Company’s common stock without any change to its par value, which became effective on May 12, 2023.
2023 At the Market offering
On February 10, 2023, the Company entered into a Controlled Equity OfferingSM Sales Agreement, (the “Cantor Sales Agreement”), with Cantor Fitzgerald & Co., (“Cantor”), as agent, pursuant to which it may offer and sell, from time to time, through Cantor, shares of the Company’s common stock, par value $0.001 per share, having an aggregate offering price of up to $12.5 million, (the “Placement Shares”). The Placement Shares will be issued and sold pursuant to the Company’s effective registration statement on Form S-3 (Registration Statement No. 333-252267), as previously filed with, and declared effective by, the SEC. The Company filed a prospectus supplement, dated February 10, 2023, with the SEC in connection with the offer and sale of the Placement Shares.
Under the Cantor Sales Agreement, Cantor may sell the Placement Shares by any method permitted by law and deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, or the Securities Act, including sales made directly on the Nasdaq Capital Market, on any other existing trading market for our common stock or to or through a market maker or in privately negotiated transactions. From time to time, the Company may instruct Cantor not to sell the Placement Shares if the sales cannot be effected at or above the price designated by the Company.Cantor receives a Placement Fee of 3% for each completed sale of Placement Shares under the Cantor Sales Agreement.
The Company is not obligated to make any sales of the Placement Shares under the Cantor Sales Agreement. The offering of the Placement Shares pursuant to the Cantor Sales Agreement will terminate upon the earlier of (a) the sale of all of the Placement Shares subject to the Cantor Sales Agreement or (b) the termination of the Cantor Sales Agreement by Cantor or the Company, as permitted therein.As of June 30, 2023 and December 31, 2022 the Company had $0 and $150,000, respectively, of deferred transaction-related offering costs recorded in other assets in the unaudited condensed consolidated balance sheet.
The Company incurred incremental transaction-related offering costs of approximately $11,000 and $143,000 in connection with the execution of the Cantor Sales Agreement during the three and six months ended June 30, 2023, respectively.
During the three and six months ended June 30, 2023, the Company sold 12,335 and 35,552, respectively, of the Placement Shares, as adjusted for the Reverse Stock Split, for gross proceeds of approximately $49,000 and $211,000, respectively. For the three and six months ended June 30, 2023, the Company recorded $2,000 and $134,000, respectively, as an offset to additional paid-in capital representing transaction-related offering costs of the Placement Shares.
As a result of a registered direct offering on July 24, 2023, the Company delivered written notice to Cantor on July 19, 2023 that it would place the Cantor Sales Agreement on suspension. During the suspension, the Company will not make any sales of common stock pursuant to the Cantor Sales Agreement unless and until a new prospectus supplement is filed with the SEC. The Cantor Sales Agreement remains in full force and effect during the suspension.
2023 Equity Line of Credit
On March 28, 2023, the Company entered into a purchase agreement (the “LPC Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”) and a registration rights agreement (the “LPC Registration Rights Agreement”), pursuant to which the Company has the right, in its sole discretion, to sell to Lincoln Park shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), having an aggregate
value of up to $10,000,000 (the “Purchase Shares”), subject to certain limitations and conditions set forth in the LPC Purchase Agreement. The Company will control the timing and amount of any sales of Purchase Shares to Lincoln Park pursuant to the LPC Purchase Agreement.
Under the LPC Purchase Agreement, on any business day after March 28, 2023 selected by the Company over the 36-month term of the LPC Purchase Agreement (each, a “Purchase Date”), the Company may direct Lincoln Park to purchase up to 6,666 shares of Common Stock on such Purchase Date (a “Regular Purchase”); provided, however, that (i) a Regular Purchase may be increased to up to 13,333 shares, if the closing sale price per share of the Common Stock on Nasdaq is not below $7.50 on the applicable Purchase Date; (ii) a Regular Purchase may be increased to up to 16,666 shares, if the closing sale price per share of the Common Stock on Nasdaq is not below $11.25 on the applicable Purchase Date; and (iii) a Regular Purchase may be increased to up to 20,000 shares, if the closing sale price per share of the Common Stock on Nasdaq is not below $15.00 on the applicable Purchase Date. All terms of the LPC Purchase Agreement have been adjusted for the Reverse Stock Split. In any case, Lincoln Park’s maximum obligation under any single Regular Purchase will not exceed $1,000,000. The above-referenced share amount limitations and closing sale price thresholds are subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the LPC Purchase Agreement. The purchase price per share for each such Regular Purchase will be equal to the lesser of:
1.the lowest sale price for the Common Stock on the Nasdaq Capital Market on the date of sale; and
2.the average of the three lowest closing sale prices for the Common Stock on the Nasdaq Capital Market during the 10 consecutive business days ending on the business day immediately preceding the purchase date.
The Company also has the right to direct Lincoln Park, on any business day on which the Company has properly submitted a Regular Purchase notice for the maximum amount the Company is then permitted to sell to Lincoln Park in such Regular Purchase, to purchase an additional amount of the Common Stock (an “Accelerated Purchase”) of additional shares based on criteria established in the LPC Purchase Agreement. An Accelerated Purchase, which is at the Company’s sole discretion, may be subject to additional requirements and discounts if certain conditions are met as defined in the LPC Purchase Agreement.
During both the three and six months ended June 30, 2023, the Company sold 53,335 shares under the LPC Purchase Agreement for gross proceeds of approximately $170,000. The Company incurred approximately $326,000 of costs related to the execution of the LPC Purchase Agreement, all of which are reflected in the unaudited condensed consolidated financial statements. Of the total costs incurred, approximately $258,000 was paid in common stock to Lincoln Park for a commitment fee and $30,000 was accrued for Lincoln Park expenses. These transaction costs were included in other expense in the unaudited condensed statement of operations. Approximately $10,000 and $38,000 was incurred for legal fees during the three and six months ended June 30, 2023, respectively, and were included in general and administrative expenses on the unaudited condensed statement of operations.
2022 Public Offering
On August 22, 2022, the Company, entered into an underwriting agreement (the “2021“2022 Underwriting Agreement”) with William Blair & Company, L.L.C. and Truist Securities, Inc., as representatives of several underwritersthe sole underwriter (the “2021 Underwriters”“2022 Underwriter”),. Pursuant to the 2022 Underwriting Agreement, the Company agreed to issue and sell, in connection with thean underwritten public offering (the “2022 Offering”), 799,985 shares, as adjusted for the reverse stock split, of 6,000,000the Company’s common stock, par value $0.001 per share and warrants to purchase up to 799,985 shares of Aspira common stockCommon Stock (the “Warrants”). Each share of Common Stock was sold at a price to the public of $7.50 per share. The 2021 Underwriters purchased these 6,000,000 shares at the public offering price$11.25 per share, lessas adjusted for the underwriting discountreverse stock split, together with one Warrant to purchase one share of $0.4875 per share.Common Stock and related Warrant.
UnderThe Warrants were issued pursuant to a common stock purchase warrant (the “Form of Warrant”). Each Warrant has an initial exercise price equal to $13.20 per share of Common Stock, as adjusted for the 2021 Underwriting Agreement,reverse stock split, and are exercisable for five years from the date of issuance. The exercise price and the number of shares of Common Stock issuable upon exercise of the Warrants are subject to adjustment in the event of certain
subdivisions and combinations, including by any stock split or reverse stock split, stock dividend, recapitalization or otherwise. The exercise of the Warrants may be limited in certain circumstances if, after giving effect to such exercise, the holder or any of its affiliates would beneficially own (as determined in accordance with the terms of the Warrants) more than 4.99% (or, at the election of the holder, 9.99%) of the outstanding Common Stock immediately after giving effect to the exercise. There is no established trading market available for the Warrants on any securities exchange or nationally recognized trading system.
The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in ASC480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815-40, including whether the warrants are indexed to the Company’s own stock and whether the events where holders of the warrants could potentially require net cash settlement are within the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. The Form of Warrant requires that, if the Company grantedconsummates any merger, consolidation, sale or other reorganization event, including the 2021 Underwriters ansale of all or substantially all of the Company’s assets, in which its common stock is converted into or exchanged for securities, cash or other property (“Fundamental Transaction”), then the Company shall pay at the holder’s option, to purchaseexercisable at any time commencing on the occurrence or the consummation of the Fundamental Transaction (or, if later, the date of public announcement) and continuing up to 30 days, an additional 900,000 sharesamount of Aspira common stockcash equal to the value of the remaining unexercised portion of the Warrant as determined in accordance with the Black-Scholes option pricing model on the date of such Fundamental Transaction provided; however, that if the Fundamental Transaction is not within the Company’s control, including not approved by the Board of Directors, the holder of the Warrant shall only be entitled to receive the same type or form of consideration (and in the same proportion), at the public offering price, lessBlack Scholes Value of the underwriting discountunexercised portion of $0.4875 per share. On February 5, 2021, the 2021 Underwriters notifiedWarrant, that is being offered and paid to the holder of the Common Stock of the Company that they were exercising this option in connection with the closingFundamental Transaction. The Black-Scholes option pricing model, as defined in the Form of Warrant, includes as an input, the 2021 Offering.highest volume weighted average price (“VWAP”) for a period of one trading day preceding the consummation or announcement of a Fundamental Transaction up to 30 days after a Fundamental Transaction. The 2021Company has determined that an adjustment based on this input is not limited to the effect that is attributable to the Fundamental Transaction and therefore causes the Warrants to fail the indexation guidance under ASC 815-40. As a result, the Company has determined that the Warrants must be recorded as derivative liabilities upon issuance and marked to market on a quarterly basis in the Company’s unaudited condensed consolidated statement of operations until their exercise or expiration.
The 2022 Offering including the additional 900,000 shares of Aspira common stock, closed on February 8, 2021 and resulted in net proceeds to the Company of approximately $47,720,000,$7,675,000, after deducting underwriting discounts and offering expenses of $516,000. There was a change in estimate$1,325,000. Offering costs were allocated between liability expense and equity based on the fair value of the Warrants of $7,752,000 and the total gross proceeds of $9,000,000. $1,117,000 of offering costs were allocated to the Warrants and were expensed immediately and recorded as selling, general and administrative expense in the third quarterconsolidated statement of 2021operations for the year ended December 31, 2022, resulting in a net impact to the amountCompany’s equity of $138,000 relating$208,000.
2010 Stock Incentive Plan
The Company’s employees, directors, and consultants were eligible to an expense reversalreceive awards under the Vermillion, Inc. Second Amended and Restated 2010 Stock Incentive Plan (the “2010 Plan”), which was replaced by the 2019 Plan (as defined below) with respect to future equity grants. As of offering costs.June 30, 2023, there were no shares of Aspira common stock available for future grants under the 2010 Plan.
As of June 30, 2023, a total of 270,529 shares of Aspira common stock were subject to outstanding stock options under the 2010 Plan.
2019 Stock Incentive Plan
At the Company’s 2019 annual meeting of stockholders, the Company’s stockholders approved the Vermillion, Inc. 2019 Stock Incentive Plan, the name of which was subsequently changed to the Aspira Women’s Health Inc. 2019 Stock Incentive Plan (the “2019 Plan”). The purposes of the 2019 Plan are (i) to align the
interests of the Company’s stockholders and recipients of awards under the 2019 Plan by increasing the proprietary interest of such recipients in the Company’s growth and success; (ii) to advance the interests of the Company by attracting and retaining non-employee directors, officers, other employees, consultants, independent contractors and agents; and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders. The 2019 Plan allows the Company to grant stock options, stock appreciation rights, restricted stock, restricted stock units and performance awards to participants.
Subject to the terms and conditions of the 2019 Plan, the initial number of shares authorized for grants (as adjusted for the reverse stock split) under the 2019 Plan is 10,492,283.699,485. On May 9, 2023, the Company’s stockholders approved an increase of 5,000,000 shares (333,333 shares as adjusted for the reverse stock split) in the number of shares available for issuance under the 2019 Plan for a total of 1,032,818 shares. To the extent an equity award granted under the 2019 Plan expires or otherwise terminates without having been exercised or paid in full, or is settled in cash, the shares of common stock subject to such award will become available for future grant under the 2019 Plan. As of June 30, 2022, 10,087,2992023, 462,322 shares of Aspira common stock were subject to outstanding stock options, and 298,50080,830 shares of Aspira common stock were subject to unvested restricted stock awards and a total of 3,336,361357,669 shares of Aspira common stock were reserved for future issuance under the 2019 Plan.
Stock-Based Compensation
During the three months ended March 31, 2022,2023, the Company granted the following awards under the 2019 Plan. In addition, assumptionsAssumptions included in the fair value per share calculations were (i) expected terms of one to four years, (ii) one- to five-year treasury interest rates of 1.38%4.01% to 3.28%4.87% and (iii) market close prices ranging from $1.04$4.80 to $1.08.$8.70, as adjusted for the reverse stock split. The Company recorded $334,000$598,000 in forfeitures for the three months ended March 31, 2022.2023.
Grant Date | Number of Shares | Type of Award | Exercise Price / Share | Fair Value / Share | ||||
1/28/2022 | 222,000 | Options | $ 1.08 | $ 0.70 | ||||
3/1/2022 | 5,000 | Options | $ 1.05 | $ 0.31 | ||||
3/31/2022 | 1,706,282 | Options | $ 1.04 | $ 0.51 | ||||
3/31/2022 | 269,297 | Restricted Stock Units | $ - | $ - | ||||
2,202,579 |
Grant Date | Number of Shares (post-reverse stock split) | Type of Award | Exercise Price / Share | Fair Value / Share | ||||
1/3/2023 | 333 | Options | $ 4.80 | $ 1.95 | ||||
1/20/2023 | 24,333 | Options | $ 7.50 | $ 4.16 | ||||
2/1/2023 | 333 | Options | $ 7.65 | $ 3.08 | ||||
2/8/2023 | 99,166 | Options | $ 8.70 | $ 4.83 | ||||
2/8/2023 | 13,333 | Options | $ 15.30 | $ 5.92 | ||||
2/8/2023 | 5,737 | Restricted Stock Units | $ - | $ - | ||||
2/9/2023 | 25,964 | Options | $ 8.55 | $ 4.76 | ||||
2/9/2023 | 64,611 | Options | $ 8.55 | $ 6.08 | ||||
2/9/2023 | 11,675 | Restricted Stock Units | $ - | $ - | ||||
245,485 |
During the three months ended June 30, 2022,2023, the Company granted the following awards under the 2019 Plan. In addition, assumptionsAssumptions included in the fair value per share calculations were (i) expected terms of one to twofour years, (ii) one- to five-year treasury interest rates of 1.72%3.74% to 3.13%5.02% and (iii) market close prices ranging from $0.52$2.99 to $1.05.$4.25. The Company recorded $109,000$51,000 in forfeitures for the three months ended June 30, 2022.2023.
Grant Date | Number of Shares | Type of Award | Exercise Price | Fair Value / Share | |||||
4/1/2022 | 5,000 | Options | $ 1.05 | $ 0.33 | |||||
5/2/2022 | 5,000 | Options | $ 0.70 | $ 0.22 | |||||
5/19/2022 | 60,000 | Options | $ 0.55 | $ 0.28 | |||||
6/1/2022 | 5,000 | Options | $ 0.56 | $ 0.22 | |||||
6/23/2022 | 15,000 | Options | $ 0.52 | $ 0.21 | |||||
6/23/2022 | 78,000 | Options | $ 0.52 | $ 0.27 | |||||
6/23/2022 | 83,799 | Options | $ 0.52 | $ 0.36 | |||||
6/23/2022 | 169,043 | Restricted Stock Units | $ - | $ - | |||||
420,842 |
Grant Date | Number of Shares | Type of Award | Exercise Price | Fair Value / Share | |||||
5/18/2023 | 4,400 | Options | $ 4.25 | $ 3.76 | |||||
5/18/2023 | 7,415 | Options | $ 4.25 | $ 2.02 | |||||
6/1/2023 | 30,342 | Options | $ 2.99 | $ 2.14 | |||||
6/1/2023 | 102,388 | Restricted Stock Units | $ - | $ - | |||||
144,545 |
The allocation of employee stock-based compensation expense, including expense reversals due to forfeitures, by functional area for the three and six months ended June 30, 20222023 and 20212022 was as follows:
Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | |||||||||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2022 | 2021 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||
Cost of revenue | $ | 33 | $ | 48 | $ | 79 | $ | 79 | $ | 2 | $ | 33 | $ | 9 | $ | 79 | ||||||||
Research and development | 20 | 93 | (10) | 118 | 52 | 20 | 127 | (10) | ||||||||||||||||
Sales and marketing | 58 | 325 | 205 | 464 | 2 | 58 | (15) | 205 | ||||||||||||||||
General and administrative | 441 | 601 | 1,017 | 791 | 295 | 441 | 262 | 1,017 | ||||||||||||||||
Total | $ | 552 | $ | 1,067 | $ | 1,291 | $ | 1,452 | $ | 351 | $ | 552 | $ | 383 | $ | 1,291 | ||||||||
4.7. LOSS PER SHARE
The Company calculates basic loss per share using the weighted average number of shares of Aspira common stock outstanding during the period. Because the Company is in a net loss position, diluted loss per share is calculated using the weighted average number of shares of Aspira common stock (as adjusted for the reverse stock split) outstanding and excludes the anti-dilutive effects of 10,385,7991,613,666 potential shares of Aspira common stock for the three and 10,272,785six month ending June 30, 2023 and 692,387 potential shares of Aspira common stock as of June 30 2022, inclusive of 799,985 and 2021, respectively, that are anti-dilutive.0 shares of Aspira common stock issuable upon the exercise of the warrants outstanding as of June 30, 2023 and 2022, respectively. Potential shares of Aspira common stock and warrants include incremental shares of Aspira common stock issuable upon the exercise of stock options and warrants and the vesting of unvested restricted stock units.
5.
Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||
Numerator: | |||||||||||
Net Loss | $ | (2,317) | $ | (8,243) | $ | (8,384) | $ | (17,511) | |||
Denominator: | |||||||||||
Shares used in computing net loss per share, basic and diluted | 8,400,157 | 7,482,860 | 8,357,013 | 7,479,435 | |||||||
Net loss per share, basic and diluted | $ | (0.28) | $ | (1.10) | $ | (1.00) | $ | (2.34) | |||
8. SUBSEQUENT EVENTS
On August 8, 2022,July 20, 2023, the Company entered into a sponsored researchsecurities purchase agreement, with Harvard’s Dana-Farber Cancer Institute (“DFCI”(the “2023 Securities Purchase Agreement”), Brighamwith several investors, (the “Purchasers”), in a registered direct offering (“July 2023 Registered Direct Offering”), relating to the issuance and Women’s Hospital (“BWH”)sale of an aggregate of 1,694,820 shares, and Medical Universitypar value $0.001 per share, of Lodzits common stock for the generation of a multi-omic, non-invasive diagnostic aid to identify endometriosis based on circulating microRNAs and proteins. This collaboration is expected to accelerate the Company’s development and commercialization of future endometriosis products, such as EndoCheck. Under the terms of the agreement, paymentsan aggregate gross proceeds of approximately $1.2$4.7 million will become due from the Company to the counterparties upon the achievement of certain milestones in 2022before deducting placement agent fees and 2023 as follows: 68% will becomeother estimated offering expenses payable within seven days of the execution of the agreement, 15% will become payable upon completion of certain milestones estimated to occur in the fourth quarter of 2022, and 17% will become payable upon completion of certain milestones estimated to occur in the second quarter of 2023.by Aspira
.
Under the 2023 Securities Purchase Agreement, Aspira issued 1,650,473 shares of common stock to certain Purchasers at an offering price of $2.75 per share, and 44,347 shares of common stock to Aspira’s directors and executive officers at an offering price of $3.98 per share.
Aspira engaged A.G.P./Alliance Global Partners to act as sole placement agent (the “Placement Agent”) in the July 2023 Registered Direct Offering. Aspira paid the Placement Agent a cash fee equal to 7.0% of the aggregate gross proceeds generated from the July 2023 Registered Direct Offering, except that, with respect to proceeds from the sale of 182,447 shares of common stock to certain Purchasers, including directors and executive officers of Aspira, the Placement Agent’s cash fee was 3.5%. Aspira also agreed to reimburse the Placement Agent for its accountable offering-related legal expenses in an amount up to $75,000 and to pay the Placement Agent a non-accountable expense allowance of $30,000. After deducting placement agent costs and other expenses, the net proceeds to the Company were approximately $4.2 million.
On August 3, 2023, Dr. Ryan Phan notified the Company of his intent to resign as Chief Scientific and Operating Officer of the Company effective September 15, 2023.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995.
These statements involve a number of risks and uncertainties. Words such as “may,” “expects,” “intends,” “anticipates,” “believes,” “estimates,” “plans,” “seeks,” “could,” “should,” “continue,” “will,” “potential,” “targeted,” “projects”“projects,” “aim” and similar expressions are intended to identify such forward-looking statements. Readers are cautioned that these forward-looking statements speak only as of the date on which this Quarterly Report on Form 10-Q is filed with the Securities and Exchange Commission (the “SEC”), and, except as required by law, Aspira Women’s Health Inc. (“Aspira” and, together with its subsidiaries, the “Company,” “we,” “our,” or “us”) does not assume any obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after such date.
Examples of forward-lookingforward-looking statements include, without limitation:
projections or expectations regarding our future test volumes, revenue, price, cost of revenue, operating expenses, research and development expenses, gross profit margin, cash flow, results of operations and financial condition;
listing of our common stock on the Nasdaq Capital Market;
our plan to broaden our commercial focus from ovarian cancer to differential diagnosis of women with a range of gynecological diseases, including additional pelvic disease conditions such as endometriosis and, benign pelvic mass monitoring in addition to genetics risk assessment, including breast and ovarian cancer hereditary risk assessment and carrier screening;monitoring;
our planned business strategy and strategic business drivers and the anticipated effects thereof, including partnerships such as those based on our Aspira Synergy product, as well as other strategies,platform, specimen collaborationor research collaborations, licensing arrangements and licensing;distribution agreements;
plans to expand our existing products OVA1, OVERA, OVA1plus, Aspira GenetiX and Aspira Synergy on a global level, and to launch and commercialize our new products, OVAWatch, EndoCheck and OVAInherit;markets outside of the United States;
plans to develop new algorithms, molecular diagnostic tests, products and tools and otherwise expand our product offerings, including offerings;
plans related to develop a product using genetics, proteinsour registry study for OvaWatch longitudinal monitoring and other modalities to assess the risk of developing cancer when carrying a pathogenic variant associated with hereditary breast and ovarian cancer that is difficult to detect through a diagnostic test;testing;
plans to establish payer coverage and secure contracts for current and new products, including OVA1, OVERA, OVA1plus, Aspira GenetiX, OVAWatch, EndoCheck and OVAInherit separately and expand current coverage and secure contracts for OVA1;EndoCheck;
plans that would address clinical questions related to early disease detection, treatment response, monitoring of disease progression, prognosisexpand coverage and other issues insecure additional contracts for OvaSuite offerings;
expectations regarding local and/or national coverage under Novitas, the fields of oncology and women’s health;Company’s Medicare Administrative Carrier;
anticipated efficacy of our products, product development activities and product innovations, including our ability to improve sensitivity and specificity over traditional diagnostic biomarkers;diagnostics;
expected competition in the markets in which we compete;operate;
plans with respect to Aspira Labs, Inc. (“ASPiRA LABS”Aspira Labs”), including plans to expand or consolidate ASPiRA LABS’Aspira Labs’ testing capabilities;
expectations regarding continuing future services provided by Quest Diagnostics Incorporated;
plans to develop informatics products and develop and perform laboratory developed tests (“LDTs”);
FDA oversight changes of LDTs;expectations regarding continuing future services provided by BioReference Health, LLC;
plans to develop a race or ethnicity-specific pelvic mass risk assessment;
informatics products as laboratory developed tests (“LDTs”) and Food and Drug Administration (“FDA”) oversight changes of LDTs;
expectations regarding existing and future collaborations and partnerships for our products, including plans to enter into decentralized arrangements for our Aspira Synergy productplatform to and provide and expand access to our risk assessment tests;
plans regarding future publications;
expectations regarding potential collaborations with governments, legislative bodies and advocacy groups to enhance awareness and drive policies to provide broader access to our tests;
our ability to continue to comply with applicable governmental regulations, including regulations applicable to the operation of our clinical lab, expectations regarding pending regulatory submissions and plans to seek regulatory approvals for our tests within the United States and internationally, as applicable;
our continued ability to expand and protect our intellectual property portfolio;
anticipated liquidity and capital requirements;
anticipated future losses and our ability to continue as a going concern;
expectations regarding raising capital and the amount of financing anticipated to be required to fund our planned operations;
our ability to attract and retain top talent;
expectations regarding the results of our clinical research studies and our ability to recruit patients to participate in such studies;
our ability to use our net operating loss carryforwards and anticipated future tax liability under U.S. federal and state income tax legislation;
expected market adoption of our diagnostic tests, including OVA1, OVERA, OVA1plus,Ova1, Overa, Ova1Plus and OvaWatch, as well as our offerings of Aspira GenetiX and Aspira Synergy platform;
expected market adoption of future products, including EndoCheck;
expectations regarding our ability to launch new products we develop, or license, co-market or acquire new products;acquire;
expectations regarding the size of the markets for our products;
expectations regarding reimbursement for our products, and our ability to obtain such reimbursement, from third-party payers such as private insurance companies and government insurance plans;
plans to use each of AbbVie Inc. serum samples and ObsEva S.A. plasma samples in EndoCheck product validation studies;
potential plans to pursue clearance designation with the FDA with respect to EndoCheck;EndoCheck and OvaWatch;
expected target launch timing for OVAWatchOvaWatch longitudinal testing and EndoCheck;
expectations regarding compliance with federal and state laws and regulations relating to billing arrangements conducted in coordination with laboratories;
plans to advocate for legislation and professional society guidelines to broaden access to our products and services;
expectations regarding the impacts resulting from or attributable to the COVID-19 pandemic and actions taken to contain it; and
expectations regarding the results of our academic research agreements.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
Other sections of this Quarterly Report on Form 10-Q may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.
Forward-looking statements are subject to significant risks and uncertainties, including those discussed in Part I Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2021,2022, as supplemented by the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q, that could cause actual results to differ materially from those projected in such forward-looking statements due to various factors, including our ability to continue as a going concern; our ability to comply with Nasdaq’s continued listing requirements; impacts resulting from potential changes to coverage of Ova1 through our Medicare Administrative Carrier for Ova1; impacts resulting from or relating to the COVID-19 pandemic and actions taken to contain it; anticipated use of capital and its effects; our ability to increase the volume of our product sales; failures by third-party payers to reimburse for our products and services or changes to reimbursement rates; our ability to continue developing existing technologies and to develop, protect and promote our proprietary technologies; plans to develop and perform LDTs; our ability to comply with Food and Drug Administration (“FDA”)FDA regulations that relate to our products and to obtain any FDA clearance or approval required to develop and commercialize medical devices; our ability to develop and commercialize additional diagnostic products and achieve market acceptance with respect to these products; our ability to compete successfully; our ability to obtain any regulatory approval required for our future diagnostic
products; or our suppliers’ ability to comply with FDA requirements
for production, marketing and post-market monitoring of our products; our ability to maintain sufficient or acceptable supplies of immunoassay kits from our suppliers; in the event that we succeed in commercializing our products outside the United States, the political, economic and other conditions affecting other countries; changes in healthcare policy; our ability to comply with environmental laws; our ability to comply with the additional laws and regulations that apply to us in connection with the operation of ASPiRA LABS;Aspira Labs; our ability to use our net operating loss carryforwards; our ability to use intellectual property; our ability to successfully defend our proprietary technology against third parties; our ability to obtain licenses in the event a third party successfully asserts proprietary rights; the liquidity and trading volume of our common stock; the concentration of ownership of our common stock; our ability to retain key employees; our ability to secure additional capital on acceptable terms to execute our business plan; business interruptions; the effectiveness and availability of our information systems; our ability to integrate and achieve anticipated results from any acquisitions or strategic alliances; future litigation against us, including infringement of intellectual property and product liability exposure; and additional costs that may be required to make further improvements to our laboratory operations.
Company Overview
Corporate Vision
Our core mission is to transform women’s gynecologic health through the statedevelopment of women’s health, globally,technology-enabled diagnostic tools, starting with ovarian cancer. We aim to eradicate late-stage detection of ovarian cancer and to ensure that ourwith diagnostic solutions will meet the needs offor women of all ages, races, ethnicities and stages of the disease. Our core patient goal is to develop a lifelong relationship with each patient, ensuring each woman has access to best-in-class risk assessment tools.
OurWe plan is to broaden our commercial focus from ovarian cancer to the differential diagnosis of women with a range of gynecological diseases.other gynecologic diseases that typically cannot be assessed through traditional non-invasive clinical procedures. We planexpect to continue commercializing our existing and new generation of technology as well asand to distribute our technologytests through our decentralized technology transfer service platform, known as “AspiraAspira Synergy.” We also intend to continue to raise public awareness regarding the diagnostic superiority of OVA1plusthe OvaSuite portfolio of testing as compared to cancer antigen 125 (“CA125”CA-125”) on its own for all women, but especially for racially diverse women with adnexal masses, as well as the importancesuperior performance of machine learning algorithm developmentalgorithms in detecting ovarian cancer in different racial and ethnic populations. We also plan to advocate for legislation and professional society guidelinescontinue to provide broad access to our products and services.
All of our products are focused on gynecologic diseases that cannot be assessed through a traditional biopsy, or can only be detected by invasive procedures in the case of endometriosis, making our non-invasive blood biopsy more efficient and patient friendly. We maintain medical and advisory support and a Key Opinion Leader Network aligned with our territories in the U.S. In addition to adding to our direct salesforce, in 2021, we added OVA1 and OVA1plus on our technology transfer platform, Aspira Synergy. In 2022, we have continued to commercialize OVA1plus by utilizing select partnerships for distribution, expanding our managed care coverage and contracts in select markets, growing our sales force, increasing adoption with our existing and new customers, and further deploying our Aspira Synergy technology transfer platform. We also plan to develop an LDT series of diagnostic algorithms. In 2021, we expandedexpand access to our tests among Medicaid patients as part of our corporate mission to make the best care available to all women.women, and we plan to advocate for legislation and the adoption of our technology in professional society guidelines to provide broad access to our products and services.
Throughout 2022, we have been focusedWe continue to focus on our three key initiatives: growth, innovation, and operational excellence:
Growth. In 2022, we have continued to growThe steady adoption of Ova1Plus creates a solid foundation for the top lineintroduction of new products. The OvaSuite portfolio has demonstrated sustained growth including a 16% increase in terms of both product volume and revenue. Our focusa 23% increase in revenue in the second quarter of 2023 when compared with the same period in 2022. OvaWatch volume grew by more than 80% sequentially in the second quarter, as physicians recognized its ability to fill an unmet need in the management of adnexal masses. OvaWatch’s contribution to revenue has also increased since we began billing with its unique Proprietary Laboratory Assay, (“PLA Code”), on April 1, 2023. The average selling price for OvaWatch increased 142% sequentially in the second quarter of 2023 to $326 as payments have generally been on OVA1plus, and,consistent with the Ova1Plus historical reimbursement experience.
During the seasonally slow summer months, unprofitable sales territories were reviewed for remediation or elimination, resulting in consolidations that continued a trend that started in the spring of 2022. For the six months ended June 30, 2023, salesperson efficiency nearly doubled when compared to the same period of 2022 with each salesperson driving sales of 598 OvaSuite units in 2023 versus 354 in 2022. This trend is expected to continue in the second half of 2022, we plan to drive OVA1plusthe year through accelerated commercial activities including point-of-care and print marketing, expansion of remote and national sales, volume not only throughand broad education and awareness events during Ovarian Cancer Awareness month in September 2023 as well as the continued focus on our own commercial team but also through our collaborationmarketing and distribution relationship with BioReference Health LLC, formerly(formerly known as BioReference Laboratories, Inc. (“BRL”). We believe Aspira GenetiX and Aspira Synergy should also contribute to increased revenue. In addition, positive trends in the tenure of our sales professionals should lead to volume growth. As of June 30, 2022, 67% of our sales professionals had been with us for more than three months and 58% had been with us for more than six months. We aim not only to increase the number of physicians ordering for the first time but also to increase repeat orders from existing physician customers.
Innovation. Innovation is fundamental to the long-term success of any diagnostics company. We believe the Company’s competitive positioning is superior as our industry,processes to develop and validate new Lab Developed Tests (“LDTs”) are performed in a CLIA laboratory environment. This allows for us, it starts withthe acceleration of assay commercialization and outstanding patient care.
During the second quarter of 2023, the American Society of Clinical Oncology published three abstracts related to our OvaSuite ovarian cancer pipeline advancement. In particular,portfolio, providing further evidence of the clinical usefulness of our proprietary multivariate index assays. OvaWatch,a non-invasive ovarian cancer risk assessment for women with adnexal masses to be used by physicians as part of initial clinical assessment, significantly expands the patient population that will benefit from our testing. OvaWatch was designed to be launched in two phases. The first phase, a one-time use test for initial clinical assessment, was launched in the third or fourth quarter this year, we planof 2022. We intend to launch the second phase, which will be used for longitudinal testing, later in 2023.
We remain committed to launching EndoCheck, the first-of-its-kind noninvasive blood test for the diagnosis of endometriosis later this year. We have completed the development phase of the test, achieving preliminary performance that is superior to invasive laparoscopy, the current standard of care. While sample acquisition remains a challenge due to our OVAWatch product, whichintention to use only histologically confirmed cases for clinical validation, we believe haswe will be successful in obtaining sufficient evidence to support provider and payer adoption. We believe that the proliferation of commercially available and in-development therapeutics for the treatment of endometriosis will create even greater demand for the diagnosis of a total addressable marketdisease that effects six and a half million American women according to the U.S. Department of at least three times that of OVA1plus. Health and Human Services.
We also plan to accelerate the development of our EndoCheckendometriosis product as we work on the discovery state for proteinsportfolio by supplementing our internal development and proteins plus miRNA. We are partneringvalidation program with our partnership Harvard’s Dana-Farber Cancer Institute (“DFCI”), Brigham & Women’s Hospital (“BWH”), and Medical University of Lodz for this diagnostic aid. In addition,through a sponsored research agreement that we plan to continue our efforts to support research related to the impact of race on the detection of ovarian cancer. In June 2022, a manuscript arising from clinical research effortsentered into in the Philippines, which was sponsored by the Company, was accepted for publication in the International Journalthird quarter of Environmental Research and Public Health. The study focuses on the assessment of ovarian cancer risk in Filipino women.2022.
Operational Excellence. In the second half of 2022, we planWe expect to achieve our cash utilization goals and focusfor 2023 by focusing on spendspending that fuels both innovation and growth. We planhave achieved significant reductions in cash used in operations during the six months ended June 30, 2023, while simultaneously increasing sales and accelerating product development. Gross margins increased to over 60% for the second quarter of 2023. This prudent use of resources will continue through the end of the year as will trends related to hire individualsthe declining usage of cash. We raised gross capital of $4.7 million in July 2023 in a registered direct offering, and intend to fill key roles, especially inutilize existing facilities and non-dilutive sources of liquidity to provide the commercial and research and development departments. For us, this type of commercial spend generates high returns on investment.resources needed to execute our strategic priorities.
Our first LDT algorithm, branded as OVAWatch, focuses on monitoring women with pelvic masses. The OVAWatch manuscript, "Analytical Validation of a Deep Neural Network Algorithm for the Detection of Ovarian Cancer," has been published online in the Journal of Clinical Oncology Clinical Cancer Informatics. This study was a critical step toward the launch of OVAWatch and, as a result, we have proceeded toward finalizing the commercialization plan for OVAWatch, which will occur in two phases. Phase I is a single use point-in-time product and Phase II will allow for serial monitoring. We plan to focus on the commercial phase of OVAWatch, including driving provider adoption, during the third and fourth quarter of 2022. We believe OVAWatch has the potential to expand the addressable market by three or more times over OVA1plus.
We expect that our second LDT diagnostic algorithm, EndoCheck, will aid in the diagnosis of endometriosis. We also plan to expand our portfolio of products to include OVAInherit, which aims to identify risk of malignancy in those patients who are genetically predisposed to ovarian cancer. This algorithm will include genetics, proteins and other modalities to assess such risk.
Our Business and Products
We currently market and selldistribute the following products and related services: (1) OVA1, Ova1Plus, a non-invasive blood test intended as an aid to further assess the likelihood of malignancy inthat combines two FDA-cleared tests for women with an ovarian adnexal masspelvic masses who are planned for surgery: Ova1, a highly sensitive multivariate index assay, and Overa, which surgery is planned when the physician’s independent clinical and radiological evaluation does not indicate malignancy; (2) OVERA, a second-generation biomarker reflex intended to maintain OVA1’s high sensitivity while improving specificity; (3) OVA1plus, a reflex offering which uses OVA1 as the primary test and OVERA as a confirmation for OVA1 intermediate range results and leverages the strengths of OVA1’s MIA sensitivity and OVERA’s (MIA2G)demonstrates higher specificity and as a result reduces false elevations by over 40%; (4) Aspira GenetiX,and (2) OvaWatch, a geneticnon-invasive lab developed blood test used to assess the risk of ovarian cancer for hereditary gynecologic cancer risk,women with adnexal masses, evaluated by initial clinical assessment as likely benign or indeterminant with a core focus on hereditary female reproductive cancers, including breast, ovarian, endometrial, uterinenegative predictive value of 99%. Collectively, these tests are referred to and cervical cancers;marketed as OvaSuite.Revenue from these sources is included in total revenue in the results of operations for the three and (5) Aspira Synergy,six months ended June 30, 2023 and 2022, respectively.
Our products are distributed through our own national sales force, through our proprietary decentralized testing platform and cloud service, for decentralized global access(“Aspira Synergy”), and through a marketing and distribution agreement with BioReference Health, LLC (formerly known as BioReference Laboratories, Inc.), a subsidiary of both protein biomarker and hereditary genetic testing. We plan to make OVA1, OVERA, OVA1plus and Aspira GenetiX and future technology available through Aspira Synergy. OPKO Health, Inc.
Our OVA1Ova1 test received FDA de novo classification in September 2009. OVA1Ova1 comprises instruments, assays, reagents, and the OVACALCOvaCalc software, which includes a proprietary algorithm that produces a risk score. Our OVERAOvera test, which includes an updated version of OVACALC,OvaCalc, received FDA 510(k) clearance in March 2016. OVA1Ova1, Overa and OVERAOvaWatch each use the Roche cobasCobas 4000, 6000 and 8000 platforms for analysis of proteins. Revenue from all of these sources is included in the results of operations in total revenue for the six months ended June 30, 2022.2023.
OvaWatch has been developed and is validated for use in Aspira’s CLIA-certified lab as a non-invasive blood-based risk assessment test for use in conjunction with clinical assessment and imaging to determine ovarian cancer risk for patients with an adnexal mass whose adnexal mass has been determined by an initial clinical assessment as indeterminate or benign. The commercialization plan for OvaWatch will occur in two phases. Phase I was completed in the fourth quarter of 2022 with the launch of OvaWatch, a single use risk assessment test. Phase II will allow for longitudinal testing and is targeted for the second half of 2023 following the expected publication of data from the ongoing prospective clinical study.
With the addition of OvaWatch to the OvaSuite portfolio, we now offer a comprehensive set of high performing non-invasive diagnostic technologies for the 1.2 to 1.5 million women per year that present with an adnexal pelvic mass. No other diagnostic tools exist for the assessment of malignancy risk in the entire patient population.
In 2021, we began entering into decentralized arrangements with large healthcare networks and physician practices for our Aspira Synergy platform, offering specialtyour decentralized testing platform and genetic testing solutions. The modulescloud service for decentralized global access of protein biomarker testing. Ova1, Overa, and Ova1Plus continue to be available underthrough the Aspira Synergy include our flagship OVA1plus risk assessment and Genetics Carrier Screening. The Company hasplatform. We have entered into foura technology transfer agreements since the launch of Aspira Synergy. The first two
agreements areagreement with twoone of the nation’s largest and leading independent women’s healthcare groups which together include approximately 750 providers and serve approximately 950,000 patients annually. The other agreements are with independent regional laboratories. In the fourth quarter of 2021, wehas launched the Aspira Synergy product with a national women’s healthcare group.
We are developing three additional products and related services, including two diagnostic algorithms, OVAWatch and EndoCheck, as well as a high-risk diagnostic algorithm, OVAInherit. These products may be launched as LDTs or FDA-cleared tests.
OVAWatch has been developed and is validated for use in Aspira’s CLIA-certified high complexity lab as a non-invasive risk assessment test for use in conjunction with clinical assessment and imagingcontributing to determine ovarian cancer risk for patients with an adnexal mass who are not yet scheduled for surgery. The commercialization plan for OVAWatch will occur in two phases. Phase I is a single use, point-in-time risk assessment test and Phase II will allow for serial monitoring. We will focus on the commercial phase of the OVAWatch single use risk assessment test, including driving provider adoption, during the third and fourth quarter of 2022. The timing will depend on the results of a clinical validation study that we expect to complete this summer. We believe OVAWatch has the potential to significantly expand the addressable market over OVA1plus. The launch of the serial monitoring test is targeted for the second half of 2023 following the expected publication of data from the ongoing prospective serial monitoring clinical study.our Ova1Plus volume.
EndoCheck, an in-development non-invasive blood test to be used in conjunction with other non-surgical modalities, is designed to be an aid in the detection of endometriosis and address the patient population of women who are experiencing moderate to severe pelvic pain to provide non-invasive confirmation that their symptoms are indicative of endometriosis. The goal of this test is to support an early diagnosis and direct appropriate medical management that potentially reduces the progression of disease. Current detection methods for endometriosis require surgery and a surgical biopsy diagnosis and/or visualization diagnosis. EndoCheck is intended to address this large patient population by using a non-invasive solution with comparable sensitivity and specificity when compared to surgical biopsy and/or visualization. We expect that our research collaboration agreement with Harvard’s Dana-Farber Cancer Institute, Brigham and Women’s Hospital, and Medical University of Lodz will bolster our research and development efforts and scientific resources to accelerate commercialization of EndoCheck. Our goal is to launch EndoCheck in the second half of 2023 as an LDT.
OVAInherit will be designed as a non-invasive high-risk diagnostic tool, intended for those patients with or without a pelvic mass who are genetically predisposed to ovarian cancer. It will use genetics, proteins and other modalities to assess the likelihood that a woman has an early-stage gynecological cancer that is not visible using traditional ultrasound methodologies, and thereby to aid in early diagnoses. Our OVAInherit related clinical studies, OVANex and OVA360, initiated in late 2019 and early 2020, respectively, are focused on developing data to support a diagnostic test for the early detection of ovarian cancer. Our collaboration work with Harvard's Dana-Farber Cancer Institute, Brigham and Women’s Hospital, and Medical University of Lodz resulted in a Phase 1 Proof of Concept evaluation, which surpassed all required metrics. Based on the outcome data, we have begun implementing Phase 2 of the study. In Phase 2, the team is evaluating the combined potential impact of our protein biomarker algorithms and the investigators’ miRNA technology in the development of this assay and platform.
We ultimately plan to commercialize each of OVA1, OVERA, OVA1plus, Aspira GenetiX, OVAWatch, EndoCheck, OVAInherit and Aspira Synergy on a global level. We currently hold CE marks for OVA1 and OVERA. In addition, each of OVA1 and OVERA, and the reflex offering, OVA1plus, will be offered on our global testing platform, which will allow both tests to be deployed worldwide.
Outside of the United States, we have studies in process to validate OVERA and OVA1 in specific populations. This includes active international distribution agreements for OVERA with Pro-Genetics LTD in Israel and MacroHealth, Inc. in the Philippines. The MacroHealth, Inc. agreement was our first agreement regarding our decentralized technology, Aspira Synergy, for OVERA specimen testing.
We own and operate ASPiRA LABS,Aspira Labs, based in Austin, Texas, a Clinical Chemistry and Endocrinology Laboratory accredited by the College of American Pathologists, which specializes in applying biomarker-based technologies to address critical needs in the management of gynecologic cancers and disease. ASPiRA LABSAspira Labs provides expert diagnostic services using a state-of-the-art biomarker-based risk assessment to aid in clinical decision making and advance personalized treatment plans. The lab currently processesperforms our OVA1Ova1, Overa, Ova1Plus and OVERAOvaWatch testing as well as additional tumour and hormone 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 LABSAspira Labs holds a CLIA Certificate of Accreditation and a state laboratory license in California, Maryland, New York, Pennsylvania and Rhode Island. The Centers for Medicare & Medicaid Services (“CMS”) issued a supplier number to ASPiRA LABSAspira Labs in 2015.Aspira labs also hold a current ISO 13485 certification which is the most accepted standard worldwide for medical device.
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 OVA1Ova1 tests performed in certain states, including Texas. Due to OVA1Ova1 tests billed by the Company being performed exclusively at ASPiRA LABSAspira Labs in Texas, the local coverage determination from Novitas Solutions essentially provides national coverage for patients enrolled in Medicare as well as Medicare Advantage health plans. ASPiRA LABSAspira Labs also bills third-party commercial and other government payers as well as client bill accounts and patients for OVA1.Ova1.
In November 2016, the American College of Obstetricians and Gynecologists (“ACOG”) issued Practice Bulletin Number 174 which included OVA1,Ova1, defined as the “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 risklow-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 CA125CA-125 technology or OVA1Ova1 (“Multivariate Index Assay”) as listed in the bulletin. Based on this, OVA1Ova1 achieved parity with CA125CA-125 as a Level B clinical recommendation for the management of adnexal masses.
Practice Bulletins summarize current information on techniques and clinical management issues for the practice of obstetrics and gynecology. Practice Bulletins are evidence-based documents, and recommendations are based on the evidence. This is also the only clinical management tool used for adnexal masses. Although there are Practice Bulletins, guidelines do not exist for adnexal masses. ACOG guidelines do exist, however, for ovarian cancer management.
Recent DevelopmentsProduct Pipeline
Leadership UpdatesWe are well positioned to introduce new gynecologic diagnostic products and we plan to expand our product offerings to additional women’s gynecologic health diseases by adding additional gynecologic bio-analytic solutions involving biomarkers, genetics, other modalities (e.g., imaging), clinical risk factors and patient data to aid diagnosis and risk stratification. Future product expansions will be accelerated by the development of lab developed testing in a CLIA environment, or relationships with strategic research and development partners, and access to specimens in our biobank.
On June 23, 2022, the Company’s stockholders elected Robert Auerbach, M.D.About OvaWatch longitudinal testing: OvaWatch is a non-invasive blood-based risk assessment test to determine ovarian cancer risk for patients with an adnexal mass which has been determined by an initial clinical assessment as indeterminate or benign. Indeterminate masses, which make up between 18 and Ruby Sharma to the Company’s board of directors. The Company’s board of directors has appointed Dr. Robert Auerbach as a member50% of the Compensation Committeecases in practice, are those for which a provider is unable to assess the risk of malignancy based on an ultrasound and Nominatingphysical examination alone. With a 99% negative predictive value, OvaWatch is designed to support a physician’s planned clinical management when traditional methods are inadequate. In addition to supporting earlier identification of ovarian cancer, OvaWatch may reduce unnecessary or premature surgery and Corporate Governance Committee and has appointed Ruby Sharma as Audit Committee Chair, replacing James T. LaFrance, who stepped down as Audit Committee Chair, each effective June 23, 2022.the related long-term health risks associated with surgical menopause.
On July 5,The test was developed through a rigorous scientific and clinical-based process and validated in a CLIA environment utilizing large retrospective cohorts of over 3,000 patients and multi-site prospective clinical studies. OvaWatch technology was validated for this application in two separate prospective cohorts of women. The first cohort was patients with an identified pelvic mass and symptoms. The second cohort was women whose pelvic mass was found incidentally and are asymptomatic, and that are also not scheduled for surgery.
OvaWatch was designed for launch in two stages. Phase I, which was launched during the fourth quarter of 2022 Ryan Phan, Ph.D. joinedis a single use point in time test, and Phase II will allow Aspira to market the Companytest for longitudinal testing and is targeted for the second half of 2023 upon obtaining sufficient data from the ongoing prospective clinical study.
In 2022, we published two OvaWatch manuscripts: “Analytical Validation of a Deep Neural Network Algorithm for the Detection of Ovarian Cancer,” published online in the Journal of Clinical Oncology Clinical Cancer Informatics; and “Validation of Deep Neural Network-based Algorithm Supporting Clinical Management of Adnexal Mass,” published in the high impact, peer-reviewed journal, Frontiers in Medicine.
About Endocheck: EndoCheck, an in-development non-invasive blood test to be used in conjunction with other non-surgical modalities, is designed as Chief Operatingan aid in the identification of endometriosis to guide clinical care for patients with suspected endometriosis earlier in their prognosis journey. Current detection methods for endometriosis require surgery and Scientific Officer. Dr. Phan previously workeda surgical biopsy diagnosis and/or visualization diagnosis. EndoCheck is intended to address this large patient population by using a non-invasive solution with comparable sensitivity and specificity when compared to invasive methods such as surgical biopsy and/or visualization. Our goal is to launch an EndoCheck LDT in the second half of 2023.
We ultimately plan to commercialize OvaSuite and EndoCheck on a global scale and hold CE marks for CareDx where he servedOva1 and Overa. In June 2022, in connection with our global expansion plans, a manuscript arising from clinical research efforts in the Philippines, which we sponsored, was accepted for publication in the International Journal of Environmental Research and Public Health. The study was designed to validate the effectiveness of a multivariate index assay (“MIA2G”) Overa in the assessment of ovarian cancer in Filipino women. The resulting data indicated that MIA2G (Overa) exhibited better overall performance in detecting ovarian cancer, regardless of menopausal status, compared to CA-125 test measures. Notably, MIA2G (Overa) was shown to be more sensitive
in detecting early-stage disease for this population than CA-125. The study also showed that MIA2G (Overa) had the best overall performance of all individual classifiers, including in some of the most difficult to detect cancers cohorts such as Senior Vice President of Lab Servicespremenopausal women, and Medical Director.early-stage disease.
Recent Developments
Business and Listing Updates
On August 8, 2022, we entered into a sponsored research agreement with DFCI, BWH, and Medical University of Lodz for the generation of a multi-omic, non-invasive diagnostic aid to identify endometriosis based on circulating microRNAs and proteins. Under the terms of the agreement, payments of approximately $1,252,000 have or will become due from us to the counterparties upon the successful completion of deliverables as defined in the agreement in 2022 and 2023 as follows: 68% was paid in August 2022, 15% will become payable upon completion of certain deliverables which occurred in the second quarter of 2023, and 17% will become payable upon completion of certain deliverables estimated to occur in the fourth quarter of 2023. During the three and six months ended June 30, 2023, approximately $23,000 and $47,000, respectively, has been recorded as research and development expense in the unaudited condensed consolidated statement of operations for the project. From the inception of the agreement through June 30, 2023, research and development expenses in the cumulative amount of $914,000 have been recorded.
We prepared an application for a Proprietary Laboratory Analyses, (“PLA code”), with the American Medical Association for OvaWatch to distinguish it from Ova1Plus with the expectation that Novitas and other payers will apply the Ova1Plus Centers for Medicare & Medicaid Services fee to OvaWatch, ensuring consistent coverage and pricing for both Ova products. In December 2022, we received the approval of PLA Code for OvaWatch from the American Medical Association. Since we began billing OvaWatch with the PLA Code on April 1, 2023, our reimbursement has been consistent with historical Ova1Plus experience, resulting in a sequential quarter over quarter increase of 142% in the OvaWatch average unit price, (“AUP”), to $326.
On June 1, 2022, the Companywe received a deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market notifying the Companyus that, for the preceding 30 consecutive business days, the closing bid price for the Company’sour 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) (the “Minimum Bid Price Rule”). As provided in
On November 29, 2022, we were granted an additional 180-calendar day compliance period, or until May 29, 2023, to regain compliance with the minimum bid price requirement. On May 26, 2023, we were notified by Nasdaq that we had regained compliance. There is no assurance that we will maintain compliance with this or any of the other Nasdaq continued listing requirements.
On July 11, 2023, we received written notice from the Listing Qualifications Department of the Nasdaq rules, we haveStock Market notifying us that, for the last 30 consecutive business days, our Market Value of Listed Securities was below the minimum of $35 million requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), Nasdaq has provided the Company with 180 calendar days, or until November 28, 2022,January 8, 2024 (the “Compliance Date”), to regain compliance with the Minimum Bid Price Rule. We may achieveMVLS Requirement. If the Company regains compliance during this period ifwith the closing bid
price of Aspira common stock is at least $1.00 per share for a minimum of 10 consecutive business days. If we failMVLS Requirement, Nasdaq will provide written confirmation to the Company and close the matter. In the event the Company does not regain compliance on or prior to November 28, 2022, wethe Compliance Date, the Company will receive written notification that its securities are subject to delisting, at which point the Company may be eligible for an additional 180-calendar day compliance period.appeal the delisting determination. There is no assurance that wethe Company will be able to regain compliance by the November 28, 2022 deadline or the additional 180-calendar day extendedJanuary 8, 2024 deadline, and there is no assurance that wethe Company will otherwise maintain compliance with this or any of the other Nasdaq continued listing requirements.
On June 4, 2022, we entered intoAt our annual meeting on May 9, 2023, the stockholders of Aspira approved the proposal to authorize the Board of Directors in its discretion, without further authorization of Aspira’s stockholders, to amend Aspira’s Certificate of Incorporation to effect a new, exclusive agreementreverse split of Aspira’s common stock by a ratio of between one for ten to one for 20. To regain compliance with BioReference Health, LLC, formerly known as BioReference Laboratories, Inc. (“BRL”Marketplace Rule 4310I(4), the Board of Directors approved on May 9,
2023, a one for fifteen reverse stock split (the “Reverse Stock Split”) whereby BRL will jointly sell OVA1plus along with our direct salesforce, thus expandingof Aspira’s common stock. Cash was paid for post-split fractional shares equal to the scope, reach, and breadthproduct obtained by multiplying (i) the closing sales price of the combined geographic sales footprint. common stock as reported on The Nasdaq Capital Market on the effective date of the certificate of amendment to the certificate of incorporation by (ii) the number of shares of common stock held by such stockholder before the Reverse Stock Split that would otherwise have been exchanged for such fractional share interest.
On August 8, 2022, we entered into a sponsored research agreement with Harvard’s Dana-Farber Cancer Institute, Brigham andAlso, on May 9, 2023 at our annual meeting, our stockholders approved the an amendment to the Aspira Women’s Hospital, and Medical UniversityHealth Inc. 2019 Plan to increase the number of Lodzshares of common stock available for future awards under the 2019 Plan as of the date of stockholder approval of the Amendment by 5,000,000 shares (333,333 shares as adjusted for the generationreverse stock split).
Also at our annual meeting on May 9, 2023, the stockholders of a multi-omic, non-invasive diagnostic aidthe Company elected three new members to identify endometriosis basedthe Company’s board of directors, (the “Board”), which includes Stefanie Cavanaugh, Jannie Herchuk and Lynn O’Connor. Robert Auerbach, M.D. and Ruby Sharma stepped down as members of the Board effective on circulating microRNAs and proteins. This collaboration aimsMay 9, 2003.
Effective May 31, 2023, Marlene McLennan’s term as Interim Chief Financial Officer ended, pursuant to develop a technology to guide medical and clinical management of women without a pelvic mass presenting with symptoms of endometriosis and to limit surgical evaluation for those cases where non-invasive tests are equivocal or in patients for whom surgical excision of endometriosis is clinically indicated. This research collaboration agreement will buildher employment agreement. She was replaced by Torsten Hombeck on our extensive prior research and development efforts and will expand our access to appropriate samples as well as scientific resources required to accelerate the commercialization of our EndoCheck diagnostic test. We believe this agreement will help to ensure a launch of an endometriosis diagnostic test in the second half ofJune 15, 2023.
On June 29, 2022, we entered into1, 2023, the Board appointed Winfred Parnell, M.D. as a standalone agreement with Scarlet Health, an innovative mobile phlebotomy solution providing collections for Aspira’s patients from the comfort of their home.director.
Recent Publications
Pipeline Expansion Strategy: We are focused on executionOn January 6, 2023, we announced that a manuscript, “Validation of Deep Neural Network-based Algorithm Supporting Clinical Management of Adnexal Mass,” had been published in the peer-reviewed journal, Frontiers in Medicine. The paper presents findings from the multi-site clinical study of the following core strategic business drivers in delivering state-of-the-art gynecologic health solutions company’s new assay, OvaWatch, describing real-world evidence supporting the use of OvaWatch for the clinical management of adnexal masses.starting
For the 2023 American Society of Clinical Oncology (ASCO) Meeting, which took place on June 2-6, 2023, we published three abstracts online. These are (1) withMultivariate index assay (MIA3G) to reduce preventive surgery for ovarian cancer, (2) Serial monitoring of ovarian cancer diagnostics,risk in women with adnexal mass, and specialized laboratory services to build long-term value(3) Multivariate index assay MIA3G vs other assessment tools for our investors:
1)Maximizing the existing OVA1plus opportunity by actively pursuing broad physician adoption and payer coverage;
2)Leveraging our existing database and specimen bank while building our specimen and data repository of gynecologic pelvic mass patients;
3)Expanding our product offerings to aid in diagnostic and risk stratification for additional women’s health diseases with a focus on pelvic disease conditions such as pelvic mass monitoring and endometriosis by adding additional gynecologic bio-analytic solutions involving biomarkers, genetics, other modalities (e.g., imaging), clinical risk factors and patient data; this may occur via licensing or other business development and merger and acquisition opportunities that represent synergistic offerings in women’s health;
4)Coupling our OVA products with an individual’s hereditary genetic risk to refine ovarian cancer risk assessment for high-risk populations; and
5)Expanding our proprietary decentralization platform, Aspira Synergy, to allow more large healthcare networks and physician practices to access OVA and Aspira GenetiX algorithms as a technology transfer service, while also obtaining access to de-identified data through these arrangements to allow us to enhance our algorithm development on a cost-effective basis.
We believe that these business drivers will contribute significantly to addressing unmet medical needs for women facing gynecologic disease and conditions and the continued development of our business.
Recent Publications
In parallel to building our OVA platform offering and our commercial deployment, we have been working on several key publications and product extensions.
The OVAWatch manuscript, "Analytical Validation of a Deep Neural Network Algorithm for the Detection of Ovarian Cancer," has been published online in the Journal of Clinical Oncology Clinical Cancer Informaticsindeterminate masses. The Company has prepared an application for a Proprietary Laboratory Analyses code withabstracts support the
American Medical Association for the OVAWatch test to distinguish it from OVA1plus with an expectation that Novitas and other payers will apply the OVA1plus Centers for Medicare & Medicaid Services fee to OVAWatch, ensuring consistent coverage and pricing for both OVA products.
COVID-19 Pandemic
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. The novel coronavirus has since spread to over 100 countries, including every state in the United States. In March 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic, and the United States declared a national emergency with respect to the coronavirus outbreak. This outbreak has severely impacted global economic activity, and many countries and many states in the United States have reacted to the outbreak by instituting quarantines, mandating business and school closures and restricting travel periodically throughout the pandemic. In order to reduce the impact of limitations on visiting physician offices due to closures and quarantines, we implemented other mechanisms for reaching physicians such as virtual sales representative meetings, Key Opinion Leader presentations, and increased digital sales and marketing. Patient enrollment for our planned clinical research studies has been slower than originally planned due to the impact of clinic closures and patients not seeking medical care in some states, which has led to delays in the completion of such studies.
Given the potential for future resurgences of COVID-19 cases and the variety of federal and state actions taken to contain them, we are unable to estimate the potential future impactefficacy of the COVID-19 pandemic on our business, resultsnewly released OvaWatchby confirming OvaWatch as an industry-leading ovarian cancer risk assessment test that can safely reduce premature surgeries in theanagementt of operations or cash flowsadnexal masses. Reported data from a multi-center clinical study also indicate that OvaWatch may be utilized as of the date of the filing of this Form 10-Q.
In addition, as of the date of the filing of this Form 10-Q, we have approximately four months of reagents, one of our key testing supplies, in stock, depending on volume of tests performed, and wea serial monitoring tool for women with adnexal masses that are working with the manufacturer to ensure a consistent supply over the next six months. As previously disclosed, we have put in place staffing and reagent contingency plans to ensure there is no down time at our lab. We believe the lab could continue to operate in the event any isolated infection were to impact a portion of the workforce. The full impact of the COVID-19 pandemic continues to evolve as of the date of the filing of this Form 10-Qnot candidates for surgical intervention.
Critical Accounting Policies and Estimates
There have been no material changes to the Company’s critical accounting estimates described in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 30, 2023.
Our product revenue is generated by performing diagnostic services using our OVA1, OVERA, OVA1plus or Aspira GenetiXOvaSuite tests, and the service is completed upon the delivery of the test result to the prescribing physician. The entire transaction price is allocated to the single performance obligation contained in a contract with a patient. Under ASC Topic 606, Revenue from Contracts with Customers, all revenue is recognized upon completion of the OVA1, OVERA, OVA1plus or Aspira GenetiXOvaSuite test and delivery of test results to the physician based on estimates of amounts that will ultimately be realized. In determining the amount of revenue to be recognized for a delivered test result, we consider factors such as payment history and amount, payer coverage, whether there is a reimbursement contract between the payer and us, and any developments or changes that could impact reimbursement. These estimates require significant judgment by management. For OVA1, OVERA, OVA1plus and Aspira GenetiXOvaSuite tests, we also review our patient account population and determine an appropriate distribution of patient accounts by payer (i.e., Medicare, patient pay, other third-party payer, etc.) into portfolios
with similar collection experience. When evaluated for collectability, this results in a materially consistent revenue amount for such portfolios as if each patient account were evaluated on an individual contract basis.
Results of Operations -– Three Months Ended June 30, 20222023 Compared to Three Months Ended June 30, 20212022
The selected summary financial and operating data of the Company for the three months ended June 30, 20222023 and 20212022 were as follows:
Three Months Ended | Three Months Ended | |||||||||||||||||||||
June 30, | Increase (Decrease) | June 30, | Increase (Decrease) | |||||||||||||||||||
(dollars in thousands) | 2022 | 2021 | Amount | % | 2023 | 2022 | Amount | % | ||||||||||||||
Revenue: | ||||||||||||||||||||||
Product | $ | 2,018 | $ | 1,720 | $ | 298 | 17 | $ | 2,491 | $ | 2,018 | $ | 473 | 23 | ||||||||
Genetics | 48 | 79 | (31) | (39) | - | 48 | (48) | - | ||||||||||||||
Total revenue | 2,066 | 1,799 | 267 | 15 | 2,491 | 2,066 | 425 | 21 | ||||||||||||||
Cost of revenue: | ||||||||||||||||||||||
Product | 1,036 | 839 | 197 | 23 | 941 | 1,036 | (95) | (9) | ||||||||||||||
Genetics | 64 | 264 | (200) | (76) | - | 64 | (64) | - | ||||||||||||||
Total cost of revenue | 1,100 | 1,103 | (3) | (0) | 941 | 1,100 | (159) | (14) | ||||||||||||||
Gross profit | 966 | 696 | 270 | 39 | 1,550 | 966 | 584 | 60 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||
Research and development | 1,410 | 1,471 | (61) | (4) | 693 | 1,410 | (717) | (51) | ||||||||||||||
Sales and marketing | 3,580 | 4,018 | (438) | (11) | 1,772 | 3,580 | (1,808) | (51) | ||||||||||||||
General and administrative | 4,196 | 3,279 | 917 | 28 | 3,406 | 4,196 | (790) | (19) | ||||||||||||||
Total operating expenses | 9,186 | 8,768 | 418 | 5 | 5,871 | 9,186 | (3,315) | (36) | ||||||||||||||
Loss from operations | (8,220) | (8,072) | (148) | 2 | (4,321) | (8,220) | 3,899 | (47) | ||||||||||||||
Interest (expense) income, net | (10) | 3 | (13) | 433 | ||||||||||||||||||
Other (expense) income, net | (13) | 995 | (1,008) | 101 | ||||||||||||||||||
Change in fair value of warrant liabilities | 992 | - | 992 | - | ||||||||||||||||||
Interest income (expense), net | 8 | (10) | 18 | 180 | ||||||||||||||||||
Other income (expense), net | 1,004 | (13) | 1,017 | 7,823 | ||||||||||||||||||
Net loss | $ | (8,243) | $ | (7,074) | $ | (1,169) | 17 | $ | (2,317) | $ | (8,243) | $ | 5,926 | (72) | ||||||||
Product Revenue. Product revenue was $2,018,000$2,491,000 for the three months ended June 30, 2022,2023, compared to $1,720,0002,018,000 for the same period in 2021.2022. Revenue for ASPiRA LABSAspira Labs is recognized when the OVA1, OVERA,Ova1, Overa, Ova1Plus or OVA1plusOvaWatch test is completed based on estimates of what we expect to ultimately realize. The 17%23% product revenue increase is due to an increase in OVA1OvaSuite test volume compared to the prior year partially offset by a lowerand the addition of our OvaWatch product, as well as an increased revenue average unit price (“AUP”), which decreasedincreased from $378 in the second quarter of 2021 to $373 in the second quarter of 2022. The product revenue increase was also driven by an increased volume of tests performed for higher AUP payers, such as those for Medicare and insurance carriers.
Medicaid represents approximately 12.0% of volume2022 to $396 in the three months ended June 30, 2022, at an AUP of $90. This is compared to 12.2% of volume in the same period in 2021, at an AUP of $92. Our OVA1plus AUP without Medicaid was $414 for the three months ended June 30, 2022, compared to $417 for the same period in 2021. Product revenue increased 10% sequentially for the second quarter of 20222023. We expect product pricing to be volatile during 2023, as compared towe seek broad payer adoption of the firstOvaWatch test launched in the fourth quarter of 2022.
The number of ProductOvaSuite tests performed increased 19%16% to 5,4116,289 during the three months ended June 30, 2022,2023, compared to 4,553 Product5,411 product tests for the same period in 2021.2022. The numberThis increase is a result of Product884 OvaWatch tests performed increased 12% sequentially duringin the second quarter 2022 as compared to the first quarter 2022. These increases are a result of 2023, increased access to provider offices following COVID-19 restrictions in place in 2022 and increasedour focus on improving field sales efficiencies. investment in our current commercial channel. We expect revenue to continue to increase in 20222023 due to our investment in key salesforce hires and strategic product development.
The volume and AUP for the three months ended June 30, 2023 and 2022 were as follows:
Three Months Ended | |||||
June 30, | |||||
2023 | 2022 | ||||
Product Volume: | |||||
Ova1Plus | 5,405 | 5,411 | |||
OvaWatch | 884 | - | |||
Total OvaSuite | 6,289 | 5,411 | |||
Average Unit Price (AUP): | |||||
Ova1Plus | $ | 408 | $ | 373 | |
OvaWatch | 326 | - | |||
Total OvaSuite | $ | 396 | $ | 373 | |
Genetics Revenue. Genetics revenue was $48,000$0 for the three months ended June 30, 2022,2023, compared to $79,000$48,000 for the same period in 2021.2022. Revenue for Aspira GenetiX iswas recognized when the Aspira GenetiX test iswas completed based on estimates of what we expect to ultimately realize. The 39%Company has discontinued offering genetics revenue decrease is primarily due to decreased volumes and decreased AUP as compared to the same period in 2021.
testing effective September 30, 2022.
Cost of Revenue – Product. Cost of product revenue was $1,036,000$941,000 for the three months ended June 30, 2022,2023, compared to $839,000$1,036,000 for the same period in 2021,2022, representing an increasea decrease of $197,000,$95,000, or 23%9%, due primarily to increaseddecreased software and personnel costs, lab supplyoffset by an increase in consulting costs and software license fees resulting from the increase in tests performed compared to the prior year.year, as well as the launch of OvaWatch. As a percentage of product revenue, cost of product revenue decreased by more than 13% as a result of laboratory efficiencies, cost containment, and elimination of redundant software.
Cost of Revenue – Genetics. Cost of genetics revenue, which consisted primarily of personnel costs and consulting expense afterrelated to the launch of Aspira GenetiX, was $64,000$0 for the three months ended June 30, 2022,2023, compared to $264,000$64,000 for the same period in 2021.2022. The decrease in cost was due to a decrease of $111,000 in personnel costs, and a decrease in volume of tests performed as compared toCompany discontinued the same period in 2021.genetics testing offering effective September 30, 2022.
Gross Profit Margin. Gross profit margin for OVA1plus decreasedproduct revenue increased to 48.6%62.2% for the three months ended June 30, 2022,2023, compared to 52.0%46.8% for the same period in 2021. This decrease was primarily related to increased personnel costs, lab supply costs, and software license fees.2022.
Research and Development Expenses. Research and development expenses represent costs incurred to develop our technology and carry out clinical studies, and include personnel-related expenses, regulatory costs, reagents and supplies used in research and development laboratory work, infrastructure expenses, contract services and other outside costs. Research and development expenses for the three months ended June 30, 20222023 decreased by $61,000,$717,000, or 4%51%, compared to the same period in 2021. Compared to the first quarter of 2022 research and development expenses increased $62,000, or 5%.2022. This increasedecrease was primarily due to decreases in consulting costs of $318,000, collaborations costs of $183,000 and clinical validitytrials and product development costs related to OVAWatch.supplies of $158,000. We expect research and development expenses to increase in 2022, sequentially as well as relative to 2021,over the remainder of 2023, as a result of increased projects,the addition of sites in our EndoCheck clinical studiesstudy and anticipated milestones in our research collaboration agreements.
Sales and Marketing Expenses. Our sales and marketing expenses consist primarily of personnel-related expenses, education and promotional expenses. These expenses include the costs of educating physicians and other healthcare professionals regarding OVA1, OVERA, OVA1plus and Aspira GenetiX.our products. Sales and marketing expenses also include the costs of sponsoring continuing medical education, medical meeting participation, and dissemination of scientific and health economic publications. Sales and marketing expenses for the three months ended June 30, 20222023 decreased by $438,000,$1,808,000, or 11%51%, compared to the same period in 2021.2022. This decrease was primarily due to decreased personnel recruitingcosts of $1,612,000, travel costs of $144,000 and consulting expenses.costs of $72,000. We expect sales and
marketing expenses to modestly increase sequentially in 2022over the remainder of 2023 as we preparecontinue to launch OVAWatch.focus on the commercialization of OvaWatch.
General and Administrative Expenses. General and administrative expenses consist primarily of personnel-related expenses, professional fees and other costs, including legal, finance and accounting expenses and other infrastructure expenses. General and administrative expenses for the three months ended June 30, 2022 increased2023 decreased by $917,000,$790,000, or 28%19%, compared to the same period in 2021.2022. This increasedecrease was primarily due to increaseda decrease in personnel expenses of $915,000.$889,000 and outside legal costs of $258,000, partially offset by increased consulting fees of $290,000 and audit fees of $60,000. We expect general and administrative expenses to remain relatively flat sequentially in 2022.for the remainder of 2023.
Change in fair value of warrant liabilities. The decrease in the fair value of warrant liabilities for the three months ended June 30, 2023 and 2022 was approximately $992,000 and $0, respectively. The change in fair value was primarily due to a decrease in the Company’s stock price.
Results of Operations –- Six Months Ended June 30, 20222023 Compared to Six Months Ended June 30, 20212022
The selected summary financial and operating data of the Company for the six months ended June 30, 20222023 and 2021 2022 were as follows:
follows.
Six Months Ended | Six Months Ended | |||||||||||||||||||||
June 30, | Increase (Decrease) | June 30, | Increase (Decrease) | |||||||||||||||||||
(dollars in thousands) | 2022 | 2021 | Amount | % | 2023 | 2022 | Amount | % | ||||||||||||||
Revenue: | ||||||||||||||||||||||
Product | $ | 3,853 | $ | 3,136 | $ | 717 | 23 | $ | 4,806 | $ | 3,853 | $ | 953 | 25 | ||||||||
Genetics | 106 | 159 | (53) | (33) | 1 | 106 | (105) | (99) | ||||||||||||||
Total revenue | 3,959 | 3,295 | 664 | 20 | 4,807 | 3,959 | 848 | 21 | ||||||||||||||
Cost of revenue: | ||||||||||||||||||||||
Product | 1,893 | 1,494 | 399 | 27 | 2,066 | 1,893 | 173 | 9 | ||||||||||||||
Genetics | 139 | 502 | (363) | (72) | - | 139 | (139) | - | ||||||||||||||
Total cost of revenue | 2,032 | 1,996 | 36 | 2 | 2,066 | 2,032 | 34 | 2 | ||||||||||||||
Gross profit | 1,927 | 1,299 | 628 | 48 | 2,741 | 1,927 | 814 | 42 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||
Research and development | 2,758 | 2,343 | 415 | 18 | 1,924 | 2,758 | (834) | (30) | ||||||||||||||
Sales and marketing | 8,077 | 7,126 | 951 | 13 | 4,334 | 8,077 | (3,743) | (46) | ||||||||||||||
General and administrative | 8,559 | 5,788 | 2,771 | 48 | 6,573 | 8,559 | (1,986) | (23) | ||||||||||||||
Total operating expenses | 19,394 | 15,257 | 4,137 | 27 | 12,831 | 19,394 | (6,563) | (34) | ||||||||||||||
Loss from operations | (17,467) | (13,958) | (3,509) | 25 | (10,090) | (17,467) | 7,377 | (42) | ||||||||||||||
Interest (expense) income, net | (28) | (21) | (7) | 33 | ||||||||||||||||||
Other (expense) income, net | (16) | 985 | (1,001) | (102) | ||||||||||||||||||
Change in fair value of warrant liabilities | 968 | - | 968 | - | ||||||||||||||||||
Interest income (expense), net | 34 | (28) | 62 | (221) | ||||||||||||||||||
Other income (expense), net | 704 | (16) | 720 | (4,500) | ||||||||||||||||||
Net loss | $ | (17,511) | $ | (12,994) | $ | (4,517) | 35 | $ | (8,384) | $ | (17,511) | $ | 9,127 | (52) | ||||||||
Product Revenue. Product revenue was $3,853,000$4,806,000 for the six months ended June 30, 2022,2023, compared to $3,136$,0003,853,000 for the same period in 2021.2022. Revenue for ASPiRA LABSAspira Labs is recognized when the OVA1, OVERA,Ova1, Overa, Ova1Plus or OVA1plusOvaWatch test is completed based on estimates of what we expect to ultimately realize. The 23%25% product revenue increase is primarily due to an increase in OVA1OvaSuite test volume compared to the prior year partially offset by a modest decreaseand the addition of our OvaWatch product, as well as an increase in AUP,average unit price (“AUP”), which decreased from $377 in the first half of 2021increased to $376 in the first half of 2022.
Medicaid represents approximately 11.8% of volume in the six months ended June 30, 2022, at an AUP of $90. This is compared to 11.7% of volume in the first half of 2021, at an AUP of $90. Our OVA1plus AUP without Medicaid was $415$383 for the six months ended June 30, 2022,2023, compared to $417$376 for the same period in 2021.2022.
The number of ProductOvaSuite tests performed increased 23%22% to 12,548 during the six months ended June 30, 2023, compared to 10,257 duringproduct tests for the same period in 2022. This increase is a result of 1,375 OvaWatch tests performed in 2023, increased access to provider offices following COVID-19 restrictions in place in 2022 and our focus on improving field sales efficiencies.
The volume and AUP for the six months ended June 30, 2023 and 2022 compared to 8,328 Product tests for the same period in 2021. This increase was due to increased access to provider offices and increased investment in our current commercial channel.were as follows:
Six Months Ended | |||||
June 30, | |||||
2023 | 2022 | ||||
Product Volume: | |||||
Ova1Plus | 11,173 | 10,257 | |||
OvaWatch | 1,375 | - | |||
Total OvaSuite | 12,548 | 10,257 | |||
Average Unit Price (AUP): | |||||
Ova1Plus | $ | 398 | $ | 376 | |
OvaWatch | 257 | - | |||
Total OvaSuite | $ | 383 | $ | 376 | |
Genetics Revenue. Genetics revenue was $106,000$1,000 for the six months ended June 30, 2022,2023, compared to $159,000$106,000 for the same period in 2021.2022. Revenue for Aspira GenetiX iswas recognized when the Aspira GenetiX test iswas completed based on estimates of what we expect to ultimately realize. The 33%Company has discontinued offering genetics revenue decrease is primarily due to decreased volumes as compared to the same period in 2021, in addition to the AUP decreasing to $424 from $483 from the same period in 2021.testing effective September 30, 2022.
Cost of Revenue – Product. Cost of product revenue was $1,893,000$2,066,000 for the six months ended June 30, 2022,2023, compared to $1,494,000$1,893,000 for the same period in 2021,2022, representing an increase of $399,000,$173,000, or 27%9%, due primarily to increased personnel costs,postage, lab supply costs, and software license feesblood draw costs resulting from the increase in tests performed compared to the prior year.year, as well as the launch of OvaWatch, partially offset by a decrease in software costs. As a percentage of product revenue, cost of product revenue decreased by more than 6% as a result of laboratory efficiencies, cost containment, and elimination of redundant software.
Cost of Revenue – Genetics. Cost of genetics revenue, which consisted primarily of personnel costs and consulting expense afterrelated to the launch of Aspira GenetiX, was $139,000$0 for the six months ended June 30, 2022,2023, compared to $502,000$139,000 for the same period in 2021.2022. The decrease in cost was due to a decrease of $219,000 in personnel costs and a decrease in volume of tests performed as compared toCompany discontinued the same period in 2021.genetics testing offering effective September 30, 2022.
Gross Profit Margin. Gross profit margin for OVA1plus decreased slightlyproduct revenue increased to 50.8%57.0% for the six months ended June 30, 2022,2023, compared to 53.0%48.7% for the same period in 2021. This decrease was primarily related to increased personnel costs, lab supply costs, and software license fees.2022.
Research and Development Expenses. Research and development expenses represent costs incurred to develop our technology and carry out clinical studies, and include personnel-related expenses, regulatory costs, reagents and supplies used in research and development laboratory work, infrastructure expenses, contract services and other outside costs. Research and development expenses for the six months ended June 30, 2022 increased2023 decreased by $415,000,$834,000, or 18%30%, compared to the same period in 2021.2022. This increasedecrease was primarily due to decreases in consulting costs of $384,000, clinical validitytrials and product developmentsupplies of $276,000 and collaboration costs related to OVAWatch, our third-generation product, as well as investments in Aspira Synergy, increased personnel expenses, associated with EndoCheck regulatory clearance and severance paid in relation to our reorganization of $132,000. We expect research and development expenses to increase in 2022, sequentially as well as relative to 2021, as a result of increased projects and clinical studies.$108,000.
Sales and Marketing Expenses. Our sales and marketing expenses consist primarily of personnel-related expenses, education and promotional expenses. These expenses include the costs of educating physicians and other healthcare professionals regarding OVA1, OVERA, OVA1plus and Aspira GenetiX.our products. Sales and marketing expenses also include the costs of sponsoring continuing medical education, medical meeting participation, and dissemination of scientific and health economic publications. Sales and marketing expenses for the six months ended June 30, 2022 increased2023 decreased by $951,000,$3,743,000, or 13%46%, compared to the same period in 2021.2022. This increasedecrease was primarily due to increaseddecreased personnel costs of $3,636,000, which included severance paid in relationand other costs related to our reorganization, commissions, marketing expenses, sales meetings and travel and entertainment costs. We expect sales and marketing expenses to increase sequentiallyforce reorganization in 2022, due to investingand other travel costs of $151,000, partially offset by an increase in key strategic hires and product portfolio expansion.consulting costs of $162,000.
General and Administrative Expenses. General and administrative expenses consist primarily of personnel-related expenses, professional fees and other costs, including legal, finance and accounting expenses and other infrastructure expenses. General and administrative expenses for the six months ended June 30, 2022 increased2023 decreased by $2,771,000,$1,986,000, or 48%23%, compared to the same period in 2021.2022. This increasedecrease was primarily due to increaseda decrease in personnel expenses of $2,311,000$2,016,000 and legal costs of $268,000, partially offset by increased audit fees of $322,000. Severance paid to general and administrative-related personnel was immaterial. We expect general and administrative expenses to remain relatively flat sequentially in 2022.$214,000.
The decrease in the fair value of warrant liabilities for the six months ended June 30, 2023 and 2022 was approximately $968,000 and $0, respectively. The change in fair value was primarily due to a decrease in the Company’s stock price.
Liquidity and Capital Resources
We plan to continue to expend resources selling and marketing OVA1, OVERA, OVA1plus and Aspira GenetiXOvaSuite and developing additional diagnostic tests and service capabilities. We plan to launch our next generation ovarian cancer risk assessment test, OVAWatch, in the second half of 2022.
We have incurred significant net losses and negative cash flows from operations since inception, and as a result have an accumulated deficit of approximately $489,239,000$507,282,000 as of June 30, 2022.2023. We also expect to incur a net loss and negative cash flows from operations for 2022.the remainder of 2023. Working capital levels may not be sufficient to fund operations as currently planned through the next twelve months, absent a significant increase in revenue over historic revenue or additional financing. Given the above conditions, there is substantial doubt about our ability to continue as a going concern.
We expect to raise capital through sources that may include public or private equity offerings, debt financings, the exercise of common stock warrants, collaborations, licensing arrangements, grants and government funding and strategic alliances.alliances, as well as our existing at-the-market and equity line of credit facilities. However, additional funding may not be available when needed or on terms acceptable to us. If we are unable to obtain additional capital, we may not be able to continue sales and marketing, research and development, or other operations on the scope or scale of current activity, and that could have a material adverse effect on our business, results of operations and financial condition.
As discussed in Note 24 to theour unaudited condensed consolidated financial statements, in March 2016, we entered into a loan agreement (as amended on March 7, 2018 and April 3, 2020, the “DECD Loan Agreement”) with the State of Connecticut Department of Economic and Community Development (the “DECD”), pursuant to which we may borrow up to $4,000,000 from the DECD.
The loan may be prepaid at any time without premium or penalty. An initial disbursement of $2,000,000 was made to us on April 15, 2016 under the DECD Loan Agreement. On December 3, 2020, we received a disbursement of the remaining $2,000,000 under the DECD Loan Agreement, as we had achieved the target employment milestone necessary to receive an additional $1,000,000 under the DECD Loan Agreement and the DECD determined to fund the remaining $1,000,000 under the DECD Loan Agreement after concluding that the required revenue target would likely have been achieved in the first quarter of 2020 in the absence of the impacts of COVID-19.
Under the terms of the DECD Loan Agreement, we may be eligible for forgiveness of up to $1,500,000 of the principal amount of the loan if we achieve certain job creation and retention milestones by December 31, 2022. Conversely, ifOn June 26, 2023, the Company was notified by the DECD that we are either unablehad satisfied all job creation and retention requirements under the loan agreement to retain 25 full-time employees with a specified average annual salary for a consecutive two-year period or do notreceive forgiveness of $1,000,000. If we fail to maintain our Connecticut operations through March 22, 2026, the DECD may require early repayment of a portion or all of the loan plus a penalty of 5% of the total funded loan. For additional information, see Note 2 of4 to our unaudited condensed consolidated financial statements.
As discussed in Note 2 to the condensed consolidated financial statements, on May 1, 2020, we obtained the Paycheck Protection Program loan (the “PPP Loan”) from BBVA USA in the aggregate amount of approximately $1,006,000. We applied for forgiveness of the PPP Loan in March 2021, and, effective May 27, 2021, the SBA confirmed the waiver of our repayment of the PPP Loan, which was recognized as a gain in other income in 2021. We remain subject to an audit of the PPP loan. There is no assurance that we will not be required to repay all or a portion of the PPP Loan as a result of any such audit.
As discussed in Note 36 to theour unaudited condensed consolidated financial statements, on February 8, 2021,August 22, 2022, the Company completed a public offering (the “2021“2022 Offering”) resulting in net proceeds of approximately $47,720,000,$7,675,000, after deducting underwriting discounts and offering expenses. There was a change in estimate in the third quarterexpenses of 2021 in the amount of $138,000 relating to an expense reversal of offering costs.$1,325,000.
In connection with a private placement offering of common stock and warrants we completed in May 2013, we entered into a stockholders agreement which, among other things, givesgranted two of the primary investors in that offering the right to participate in any future equity offerings by the Company on the same price and terms as
other investors. In addition, the stockholders agreement prohibits us from taking certain material actions without the consent of at least one of the two primary investors in that offering. These material actions include:
Making any acquisition with a value greater than $2 million;
Offering, selling or issuing any securities senior to Aspira’s common stock or any securities that are convertible into or exchangeable or exercisable for securities ranking senior to Aspira’s common stock;
Taking any action that would result in a change in control of the Company or an insolvency event; and
Paying or declaring dividends on any securities of the Company or distributing any assets of the Company other than in the ordinary course of business or repurchasing any outstanding securities of the Company.
The foregoing rights terminate for a primary investor when that investor ceases to beneficially own less than 50% of the shares and warrants (taking into account shares issued upon exercise of the warrants), in the aggregate, that were purchased at the closing of the 2013 private placement. We believe that the rights of one of the primary investors have so terminated.
As discussed in Note 6 to our unaudited condensed consolidated financial statements, on February 10, 2023, we entered into a Controlled Equity Offering Sales Agreement with Cantor, as agent, pursuant to which we may offer and sell, from time to time, through Cantor, shares of our common stock, par value $0.001 per share, having an aggregate offering price of up to $12.5 million.
As discussed in Note 6 to our unaudited condensed consolidated financial statements, on March 28, 2023, we entered into an agreement with Lincoln Park, pursuant to which we have the right to sell to Lincoln Park shares of our common stock, having an aggregate value of up to $10 million, subject to certain limitations and conditions, at our sole discretion during a 36-month period ending March 27, 2026.
As discussed in Note 8 to our unaudited condensed consolidated financial statements, on July 24, 2023, we completed a direct offering resulting in net proceeds of approximately $4.2 million.
As mentioned, we have incurred significant net losses and negative cash flows from operations since inception, and we expect to continue to incur a net loss and negative cash flows from operations in 2022.2023. At June 30, 20222023 we had an accumulated deficit of ($489,239,000)$507,282,000 and stockholders’ equitydeficit of $14,122,000.$528,000. As of June 30, 2022,2023, we had $20,480,000$4,246,000 of cash and cash equivalents (excluding restricted cash of $250,000)$255,000), $7,044,000$5,374,000 of current liabilities, and working capital of $15,912,000.$1,488,000. There can be no assurance that we will achieve or sustain profitability or positive cash flow from operations. While we expect to grow revenue through ASPiRA LABS,Aspira Labs, there is no assurance of our ability to generate substantial revenues and cash flows from ASPiRA LABS’Aspira Labs’ operations. We expect revenue from our products to be our only material, recurring source of cash in 20222023.In addition, the impact of the COVID-19 pandemic and actions taken to contain it on our liquidity for 2022 cannot be estimated as of the date of the filing of this Form 10-Q.
Our future liquidity and capital requirements will depend upon many factors, including, among others:
resources devoted to sales, marketing and distribution capabilities;
the rate of OVA1, OVERA, OVA1plus and Aspira GenetiXOvaSuite product adoption by physicians and patients;
the rate of product adoption by healthcare systems and large physician practices of the decentralized distribution agreements for OVA1, OVERA and OVA1plus;OvaSuite;
the insurance payer community’s acceptance of and reimbursement for our products;
our plans to acquire or invest in other products, technologies and businesses; and
the potential need to add study sites to access additional patients to maintain clinical timelines; and
the impact of the COVID-19 pandemic and the actions taken to contain it, as discussed above.timelines.
We expectNet cash utilizationused in operating activities was $9,123,000 for the six months ended June 30, 2023, resulting primarily from the net loss reported of $8,384,000, which includes non-cash expenses in the second halfamount of 2022 to decrease from the first half of 2022. Note that the first quarter of 2022 had personnel costs, including those associated with our commercial reorganization. In addition, we had our annual performance plan payout in the first quarter, a cost that will not be incurred in the remaining three quarters of 2022. In the second quarter of 2022, the impact of our operational excellence strategic initiatives began, most notably with respect to reduced consulting costs as we focused on innovation focused on OVAWatch and EndoCheck. We also enhanced our sales and marketing in preparation for the BRL collaboration and the launch of OVAWatch. We expect cash utilization to increase in the third quarter of 2022 in connection with our research and collaboration commitments. In addition, we expect increased costs in commercial and research and development during the third quarter of 2022, as we invest in talent to deliver on our goals. We expect to see sequential improvement in net cash utilization in the fourth quarter of 2022 as we do not plan to incur one-time research and collaboration costs, which may be incurred in the third quarter, and as we start to see the impact of our anticipated top line growth.
$899,000
related to changes in prepaid expense, $621,000 related to stock compensation expense, $258,000 related to commitment shares for the equity line and $122,000 related to depreciation and amortization, offset by the DECD loan forgiveness of $1,000,000, changes in fair value of warrant liabilities of $968,000, changes in accounts receivable of $393,000 and changes in accounts payable, accrued liabilities and other liabilities of $326,000.
Net cash used in operating activities was $16,477,000 for the six months ended June 30, 2022, resulting primarily from the net loss reported of $17,511,000, which includes non-cash expensesitems in the amount of $1,448,000 related to stock compensation expense and $128,000 related to depreciation and amortization, offset by changes in prepaid expense and other assets of $408,000 and changes in accounts payable, accrued liabilities and other liabilities of $855,000, consisting of a decrease in short-term debt of $519,000, partially offset by changes in accounts receivable of $85,000 and inventory of $17,000.
Net cash used in operating activities was $11,745,000 for the six months ended June 30, 2021, resulting primarily from the net loss reported of $12,994,000, which includes non-cash items such as stock compensation expense of $1,771,000, PPP loan forgiveness of $1,006,000 and depreciation and amortization of $172,000, offset by changes in prepaid expense and other assets of $350,000 and changes in accounts payable, accrued liabilities and other liabilities of $208,000, partially offset by changes in accounts receivable of $208,000 and inventory of $71,000.$85,000.
Net cash used in investing activities was $105,000$12,000 and $136,000$105,000 for the six months ended June 30, 20222023 and 2021,2022, respectively, which consisted of property and equipment purchases.
Net cash provided by financing activities was $79,000 for the six months ended June 30, 2023, stemming primarily from an at the market offering resulting in gross proceeds of $211,000 and an equity line of credit offering of $169,000, partially offset by principal payments on the DECD loan of $167,000 and transaction-related offering costs of $134,000. Net cash used in financing activities was $118,000 for the six months ended June 30, 2022, which resulted primarily includedfrom principal payments on the DECD loan. Net cash provided by financing activities was $48,236,000 for the six months ended June 30, 2021, loanwhich resulted primarily from the February 2021 public offering, resulting in net proceeds to the Company of approximately $47,721,000, after deducting underwriting discounts and offering expenses of $515,000. There was a change in estimate in the third quarter of 2021 in the amount of $137,000 relating to an expense reversal of offering costs..
WeBased on the available objective evidence, we believe it is more likely than not that net deferred tax assets will not be fully realizable. Accordingly, we have significant NOL carryforwards as of June 30, 2022 for whichprovided a full valuation allowance has been provided due to our history of operating losses. Section 382against the Company’s net deferred tax assets. This was also the case at the beginning of the Internal Revenue Code of 1986, as amended (“Section 382”), as well as similar state provisions may restrict our ability to use our NOL credit carryforwards due to ownership change limitations occurring inperiod, therefore, there was no deferred income tax expense or benefit for the past or that could occur in the future. These ownership changes may also limit the amount of NOL credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively.period.
Legislation commonly referred to as the Tax Cuts and Jobs Act was enacted in December 2017. As a result of the Tax Cuts and Jobs Act of 2017, federal NOLs arising before January 1, 2018, and federal NOLs arising after January 1, 2018, are subject to different rules. The Company's pre- 2018Company’s pre-2018 federal NOLs will expire in varying amounts from 20222023 through 2037, if not utilized; and can offset 100% of future taxable income for regular tax purposes. Any federal NOLs arising after January 1, 2018, can generally be carried forward indefinitely and can offset up to 80% of future taxable income. State NOLs will expire in varying amounts from 20222023 through 20372042 if not utilized. Our ability to use our NOLs during this period will be dependent on our ability to generate taxable income, and the NOLs could expire beforeor remain unutilized if the Company generatesdoes not generate sufficient taxable income to use them.
. The Company’s
Our ability to use NOLthe Company’s net operating loss and credit carryforwards may beto offset future taxable income is restricted due to ownership change limitations occurringthat have occurred in the past, or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”), as well as similar state specific provisions. These ownership changes may also limit the amount of NOL carryforwards that can be utilized annually to offsetNet operating losses which are limited from offsetting any future taxable income and tax, respectively.
Our management believes thatunder Section 382 ownership changes occurred as a result of our follow-on public offerings in 2011, 2013 and 2015. Any limitation may resultare not included in the expiration of a portion of the NOL carryforwards before utilization and any NOL carryforwards that expire prior to utilization as a result of such limitations will be removed fromgross deferred tax assets with a corresponding reduction of our valuation allowance.assets. Due to the existence of a valuation allowance, it is not expected that such limitations, if any, will have an impact on our results of operations or financial position.
Off-Balance Sheet Arrangements
As of June 30, 2022, we had no off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our condensed consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Per Item 305(e) of Regulation S-K, the information called for by this Item 3 is not required.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
Our senior management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2022.2023. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2022,2023, our disclosure controls and procedures were not effective. This was due to two material weaknesses in the internal control over financial reporting that were identified as of December 31, 2022 and disclosed in our Annual Report on Form 10-K related to multiple deficiencies and a lack of timely operation of certain internal controls over financial reporting and disclosures that continue to exist as of June 30, 2023.
Material Weaknesses.
We are responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our management has assessed the effectiveness of internal control over financial reporting as of December 31, 2022. Our assessment was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) entitled “Internal Control - Integrated Framework (2013).”
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
(i)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;
(ii)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and
(iii)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
We did not design general information technology controls, including user access and program change-management controls, nor did we adequately assess the controls of service organizations related to certain information technology systems that are used to process and record certain revenue and expense transactions and support the Company’s financial reporting processes or over data and reports accumulated in such information technology systems. Additionally, certain internal controls over financial reporting that ensure the completeness and accuracy of the consolidated financial statements were not performed timely in connection with the year-end close and reporting process. These have resulted in material weaknesses in our internal control over financial reporting as of June 30, 2023. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Remediation Activities
In order to address the material weaknesses in internal control over financial reporting described above, management is performing, with direction from the audit committee, the following remediation activities:
Retain an internal controls specialist to complement the skills of the existing accounting and financial reporting staff.
Complete a preliminary process to identify all information technology applications that support the Company’s financial reporting processes and assess the risk of misstatement associated with each.
Perform a comprehensive review of the design and performance of internal controls related to information technology applications, including user access and program change controls.
Enhance controls that require the assessment of service organization controls prior to implementation and on an annual basis.
Implement additional consultation requirements for new contracts that involve information technology applications to ensure internal controls are designed and implemented at the time of integration.
Enhance procedures designed to annually review of the materiality of transactions that are processed by applications implemented in prior years to identify programs that have become material subsequent to their initial implementation.
Review timelines within our documented disclosure controls and procedures and adjust dates accordingly.
Retain additional accounting and financial reporting resources during the year end close to improve our ability to perform our disclosure controls and procedures on a timely basis.
Provide additional training and continuing education to accounting staff regarding SEC requirements and required disclosures under generally accepted accounting principles.
Management will continue to review and make necessary changes to the overall design of our internal control environment, as well as policies and procedures to improve the overall effectiveness of internal control over financial reporting. The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in internal controls over financial reporting.
ThereOther than the steps to remediate the weaknesses discussed above, there was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Qended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of business, we may periodically become subject to legal proceedings and claims arising in connection with ongoing business activities. The results of litigation and claims cannot be predicted with certainty, and unfavorable resolutions are possible and could materially and adversely affect our results of operations, cash flows and financial position. In addition, regardless of the outcome, litigation could have an adverse impact on us because of defense costs, diversion of management resources and other factors. While the outcome of these proceedings and claims cannot be predicted with certainty, there are no matters, as of June 30, 2022,2023, that, in the opinion of management, will have a material adverse effect on our financial position, results of operations or cash flows.
ITEM 1A. RISK FACTORS
Except as set forth below, there have been no material changes to our risk factors from those disclosed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 31, 202230, 2023 (the “2021“2022 Annual Report”). The risks and uncertainties described below and in our 20212022 Annual Report are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also materially adversely affect our business, financial condition or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Failure to meet Nasdaq’s continued listing requirements could result in the delisting of Aspira common stock, negatively impact the price of Aspira common stock and negatively impact our ability to raise additional capital.
On June 1, 2022,July 11, 2023, we received a deficiency letter (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market, LLC stating that for the preceding 30 consecutive business days prior to the closing bid price for Aspira common stockdate of the Notice, our Market Value of Listed Securities was below the minimum $1.00 per share requirementof $35 million required for continued inclusionlisting on Thethe Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)5550(b)(2) (the “Minimum Bid Price Rule”). AsNasdaq has provided in the Nasdaq rules, we haveus with 180 calendar days, or until November 28, 2022,January 8, 2024, to regain compliance with the Minimum Bid Price Rule. We may achieveMVLS Requirement. If we regain compliance during this period ifwith the closing bid priceMVLS Requirement prior to January 8, 2024, Nasdaq will provide written confirmation to us and close the matter.
To regain compliance with the MVLS Requirement, the market value of Aspiraour common stock is at least $1.00 per sharemust meet or exceed $35.0 million for a minimum of 10 consecutive business days. days during the 180-day grace period ending on the Compliance Date, unless the Staff exercises its discretion to extend this ten consecutive business day period. We are evaluating potential actions to regain compliance with the MVLS Requirement and are actively monitoring the market value of our listed securities. We may also, if appropriate, consider other options to regain compliance with Nasdaq’s continued listing standard such as by increasing our stockholders’ equity to at least $2.5 million. In the event we do not regain compliance prior to the Compliance Date, we will receive written notification that our securities are subject to delisting, at which point then we may appeal the delisting determination. There can be no assurance that we will be successful in maintaining the listing of our common stock on the Nasdaq Capital Market.
If we fail to regain compliance, on or prior to November 28, 2022, we may be eligible for an additional 180-calendar day compliance period. There is no assurance that we will be able to regain compliance by the November 28, 2022 initial deadline or any extension thereof, and there is no assurance that we will otherwise maintain compliance with any of the other Nasdaq listing requirements.
If we fail to comply with Nasdaq’s continued listing requirements, Aspiraour common stock will be subject to delisting. If that wereDelisting from The Nasdaq Capital Market could adversely affect our ability to occur, Aspira common stockraise additional financing through the public or private sale of equity securities, would be subject to rules that impose additional sales practice requirements on broker-dealers who sell Aspira securities. The additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from effecting transactions in Aspira common stock. This would adverselysignificantly affect the ability of investors to trade Aspiraour securities and would adverselynegatively affect the value and liquidity of Aspiraour common stock. These factorsDelisting could contributealso have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities.
Failure to lower pricescontinue coverage of Ova1 through Novitas, the Company’s Medicare Administrative Carrier for Ova1, could materially and larger spreads in the bidadversely affect our business, financial condition and ask prices for Aspira common stock. If we seek to implement a reverse stock split in order to remain listed on The Nasdaq Capital Market, the announcement or implementationresults of such a reverse stock split could negatively affect the price of Aspira common stock.operations.
There is substantial doubt about our ability to continueSince 2013, Ova1 has been listed as a going concern,covered service in the Biomarkers for Oncology Local Coverage Determination (the “Biomarkers for Oncology LCD”) issued by Novitas, a Medicare Administrative Carrier. In June of 2023, in conjunction with the publication of a final “Genetic Testing for Oncology” LCD (the “Genetic Testing LCD”), Novitas announced that it intended to retire the Biomarkers for Oncology LCD effective July 17, 2023, and this may adversely affect our stock pricethat at that time, non-genetic tests currently identified as covered in that LCDs (like Ova1) would be considered for payment based on Medicare medically reasonable and our ability to raise capital.necessary threshold for coverage.
We have incurred significant lossesOn July 6, 2023, Novitas issued a statement announcing that the Genetic Testing LCD would not go into effect on July 17, 2023 as planned, and negative cash flows from operations since inception and have an accumulated deficit of nearly $489 million as of the end of the period covered by this report. We also expect to incurthat a net loss and negative cash flows from operationsnew proposed LCD would be published for public comment. Novitas has issued a replacement proposed LCD for public comment on July 27, 2023. The Biomarkers for Oncology LCD remains in 2022. Given these conditions, there is substantial doubt about our ability to continue as a going concern.effect.
All OvaSuite tests (Ova1, Overa, Ova1Plus and OvaWatch) are protein-based multivariate index assays and were not impacted by the now-withdrawn Genetic Testing LCD. While we do not believe Novitas intends to eliminate Ova1 coverage, it is impossible to assess the likelihood or potential impact, if any, of future actions to be taken by Novitas with respect to the release of a replacement GeneticWe believe that successful achievements Testing LCD, or a change to the content or status of the business objectives will require additional financing. We expect to raise capital through sources that may include public or private equity offerings, debt financings, collaborations, licensing arrangements, grants and government funding and strategic alliances. However, additional funding may not be available when needed or on terms acceptable to us. If we are unable to obtain additional capital, we may not be able to continue sales and marketing, research and development, distribution or other operationsBiomarkers for Oncology LCD, on the scope or scalecoverage and related revenue of current activityOva1, and that could have asuch impact may be material adverse effect onto our business, results of operations and financial condition. We are monitoring developments closely and believe additional due process would be required if the activities contemplated by Novitas change the coverage determination for Ova1.
Failure to secure Medicare coverage for OvaWatch could materially and adversely affect our business, financial condition and results of operations.
In August of 2022, we submitted a request to CMS to provide pricing for OvaWatch that is consistent with Ova1Plus, commonly referred to as a crosswalk request. As of the date of this filing, this request has not been approved. While we can make no assurances that CMS will approve our pricing request. Since April 1, 2023, we have billed Medicare for OvaWatch tests performed using a unique Proprietary Laboratory Analyses Code, (the “PLA Code”), assigned by the American Medical Association and have generally received payment for $897 from Novitas, an amount equal to reimbursement for Ova1Plus.
Enactment of legislation directing FDA to regulate LDTs or promulgation of new regulations for LDT oversight by FDA could materially and adversely affect our business, financial condition and results of operations.
The FDA has historically taken the position that it has the authority to regulate LDTs as medical devices under the FDC Act, but it has generally exercised enforcement discretion with regard to LDTs. This means that even though the FDA believes it can impose regulatory requirements on LDTs, such as requirements to obtain premarket approval, de novo classification or 510(k) clearance of LDTs, it has generally chosen not to enforce those requirements to date. FDA has indicated that it may seek to increase its regulation of LDTs through rulemaking. The Spring 2023 Agenda of Regulatory and Deregulatory Actions, published semi-annually by the Office of Management and Budget (OMB), indicates that FDA plans to issue a Notice of Proposed Rulemaking in the Federal Register in August 2023 “to make explicit that laboratory developed tests (LDTs) are devices under the Federal Food, Drug, and Cosmetic Act,” although it is unclear whether this will occur. Any future rulemaking, guidance, or other oversight of LDTs and clinical laboratories that develop and perform them, if and when finalized, may affect the sales of our products and how customers use our products, and may require us to change our business model in order to maintain compliance with these laws.
In June 2021, legislation was introduced in Congress called the Verifying Accurate, Leading-edge IVCT Development Act (the “VALID Act”), which would have established a new risk-based regulatory framework for in vitro clinical tests (“IVCTs”), a category which would have included IVDs, LDTs, collection devices and
instruments used with such tests. This legislation was not enacted during that session of Congress but was re-introduced in March 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS The following exhibits are filed or incorporated by reference with this report as indicated below:
Incorporated by Reference | ||||||||||||||
Exhibit | Filing | Filed | ||||||||||||
Number | Exhibit Description | Form | File No. | Exhibit | Date | Herewith | ||||||||
Fourth Amended and Restated Certificate of Incorporation of Vermillion, Inc. dated January 22, 2010 | 8-K | 000-31617 | 3.1 | January 25, 2010 | ||||||||||
10-Q | 001-34810 | 3.2 | August 14, 2014 | |||||||||||
8-K | 001-34810 | 3.1 | June 11, 2020 | |||||||||||
8-K | 001-34810 | 3.1 | February 7, 2023 | |||||||||||
Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock | 8-K | 001-34810 | 4.1 | April 17, 2018 | ||||||||||
Amended and Restated Bylaws of Aspira Women's Health Inc., effective February 23, 2022 | 8-K | 001-34810 | 3.1 | February 28, 2022 | ||||||||||
8-K | 001-34810 | 3.1 | May 11, 2023 | |||||||||||
8-K | 001-34810 | 10.1 | July 24, 2023 | |||||||||||
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101.SCH | Inline XBRL Taxonomy Extension Schema Document | √ | ||||||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | √ | ||||||||||||
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101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | √ | ||||||||||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | √ | ||||||||||||
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Exhibit | Incorporated by Reference | Filing | Filed | |||||||||||
Number | Exhibit Description | Form | File No. | Exhibit | Date | Herewith | ||||||||
Fourth Amended and Restated Certificate of Incorporation of Vermillion, Inc. dated January 22, 2010 | 8-K | 000-31617 | 3.1 | January 25, 2010 | ||||||||||
10-Q | 001-34810 | 3.2 | August 14, 2014 | |||||||||||
8-K | 001-34810 | 3.1 | June 11, 2020 | |||||||||||
Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock | 8-K | 001-34810 | 4.1 | April 17, 2018 | ||||||||||
Amended and Restated Bylaws of Aspira Women's Health Inc., effective February 23, 2022 | 8-K | 001-34810 | 3.1 | February 28, 2022 | ||||||||||
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Form of Aspira Women’s Health Inc. Stock Option Award Agreement # | √ | |||||||||||||
Form of Aspira Women’s Health Inc. Restricted Stock Award Agreement # | √ | |||||||||||||
Form of Vermillion, Inc. Stock Option Award Agreement (non-employee) # | √ | |||||||||||||
Form of Aspira Women’s Health Inc. Stock Option Award Agreement (non-employee) # | √ | |||||||||||||
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104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | √ | ||||||||||||
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# | Management contract or compensatory plan or arrangement. | |||||||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Aspira Women’s Health Inc. | |
Date: August | /s/ Nicole Sandford |
Nicole Sandford President and Chief Executive Officer (Principal Executive Officer) and Director | |
Date: August | /s/ |
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |