Organization, Basis Of Presentation And Significant Accounting And Reporting Policies | 1. ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING AND REPORTING POLICIES Organization Vermillion, Inc. (“Vermillion”; Vermillion and its wholly-owned subsidiaries are collectively referred to as the “Company ,” “we” or “our ”) is incorporated in the state of Delaware, and is engaged in the business of developing and commercializing diagnostic tests for gynecologic disease. The Company sells OVA1™ and Overa™ risk of malignancy tests for ovarian cancer (“OVA1” and “Overa,” respectively) through Vermillion’s wholly-owned Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) certified clinical laboratory, ASPiRA LABS, Inc. (“ASPiRA LABS”). The Company also offers in-vitro diagnostic (“IVD”) trial services to third-party customers through its wholly-owned subsidiary, ASPiRA IVD, Inc. (“ASPiRA IVD”), which commenced operations in June 2016. ASPiRA IVD is a specialized, CLIA certified, laboratory provider dedicated to meeting the unique testing needs of IVD manufacturers seeking to commercialize high-complexity assays. Liquidity The Company has incurred significant net losses and negative cash flows from operations since inception, and as a result has an accumulated deficit of approximately $398,403,000 at March 31, 2018. The Company also expects to incur a net loss and negative cash flows from operations for the remainder of 2018. There can be no assurance that the Company will achieve or sustain profitability or positive cash flow from operations. However, management believes that the current working capital position will be sufficient to meet the Company’s working capital needs for at least the next 12 months. As discussed in Note 4, on April 17, 2018, the Company completed two public offerings, pursuant to which certain investors purchased Vermillion common stock and Vermillion Series B convertible preferred stock for net proceeds of approximately $13,300,000 after deducting offering expenses. As discussed in Note 4, on August 31, 2017, certain investors exercised outstanding warrants to purchase shares of Vermillion common stock for net proceeds of approximately $3,577,000 after deducting offering expenses. As discussed in Note 4, on February 17, 2017, the Company completed a private placement pursuant to which certain investors purchased Vermillion common stock and warrants to purchase shares of Vermillion common stock for net proceeds of approximately $5,127,000 after deducting offering expenses. As discussed in Note 3, in March 2016, the Company entered into an agreement (the “Loan Agreement”) pursuant to which it may borrow up to $4,000,000 from the State of Connecticut Department of Economic and Community Development (the “DECD”). An initial disbursement of $2,000,000 was made to the Company on April 15, 2016 under the Loan Agreement. The remaining $2,000,000 will be advanced if and when the Company achieves certain future milestones. The loan may be prepaid at any time without premium or penalty. 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 footnotes required by GAAP for complete financial statements. In the opinion of management of the Company, all adjustments, consisting of normal recurring adjustments necessary for the fair statement of results for the periods presented, have been included. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year or any other interim period. The unaudited condensed consolidated financial statements and related disclosures have been prepared with the presumption that users of the interim unaudited condensed consolidated financial statements have read or have access to the audited consolidated financial statements for the preceding fiscal year. The condensed consolidated balance sheet at December 31, 2017 included in this report has been derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by GAAP. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2017 included in Vermillion’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 13, 2018 (the “2017 Annual Report”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated results. Significant Accounting and Reporting Policies Revenue Recognition The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) , which it adopted on January 1, 2018 using the modified retrospective method. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods and services. Product Revenue Prior to January 1, 2018, the Company recognized product revenue in accordance with the provisions of ASC 954-605, Health Care Entities - Revenue Recognition . The Company's product revenue is generated by performing diagnostic services using its OVA1 and Overa tests, and the service is completed upon the delivery of the test result to the prescribing physician. The entire transaction price is allocated to the single performance obligation contained in a contract with a patient. Under the previous revenue recognition accounting methodology, certain product revenue was recognized upon the ultimate receipt of cash. Under ASC 606, all revenue is recognized upon completion of the OVA1 or Overa test based on estimates of amounts that will ultimately be realized. In determining the amount of revenue to be recognized for a delivered test result, the Company considers factors such as payment history and amount, payer coverage, whether there is a reimbursement contract between the payer and the Company, and any current developments or changes that could impact reimbursement. These estimates require significant judgment by management as the collection cycle on some accounts can be as long as one year. The Company also reviewed its patient account population and determined 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. There were no impairment losses on accounts receivable recorded during the three months ended March 31, 2018. Under the modified retrospective implementation method, the Company recorded a one-time cumulative effect adjustment at January 1, 2018 to reflect the aggregate effect of all open OVA1 and Overa tests performed prior to January 1, 2018 as i f revenue had been recognized under ASC 606. The cumulative effect adjustment was recorded increasing the opening balance of Accounts Receivable by $500,000 in the condensed consolidated balance sheets with an offsetting reduction to Accumulated Deficit. The Company’s right to receive payment on this balance is contingent only on the passage of time. The following tables show the impact of adoption to our consolidated statement of operations and balance sheet: Three Months Ended March 31, 2018 Impact of changes in accounting policies As Reported Balances without adoption of ASC 606 Effect of Change Higher/(Lower) Product revenue $ 613 $ 586 $ 27 Operating loss (2,835) (2,862) $ 27 Net loss $ (2,850) $ (2,877) $ 27 Net loss per share, basic and diluted $ (0.05) $ (0.05) $ - March 31, 2018 Impact of changes in accounting policies As Reported Balances without adoption of ASC 606 Effect of Change Higher/(Lower) Assets: Accounts receivable 763 236 $ 527 Stockholders' equity: Accumulated deficit $ (398,403) $ (398,930) $ 527 ASC 606 did not have an aggregate impact on the Company’s net cash provided by operating activities, but resulted in offsetting changes in certain assets and liabilities presented within net cash provided by operating activities in the Company’s condensed consolidated statement of cash flows, as reflected in the above tables. Other Practical E xpedients The Company does not adjust the transaction price for the effects of a significant financing component, as at contract inception, the Company expects the collection cycle to be one year or less. The Company expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses. Service Revenue The Company’s service revenue is generated by performing IVD trial services for third-party customers. Application of the modified retrospective method did not impact amounts previously reported by the Company, nor did it require a cumulative effect adjustment upon adoption, as the Company’s method of recognizing revenue under ASC 606 was analogous to the method utilized immediately prior to adoption. Accordingly, there is no need for the Company to disclose the amount by which each financial statement line item was affected as a result of applying the new standard and an explanation of significant changes. Measurement of progress on contracts with customers will generally be based on the input measurement of cost incurred relative to the total expected costs to satisfy the performance obligation. The Company has not disclosed the value of unsatisfied performance obligations for all service revenue contracts with an original expected length of one year or less, which is an optional exemption that is permitted under the adoption rules. The remainder are not material to the consolidated financial statements. Recent Accounting Pronouncements In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), Compensation - Stock Compensation (“ASU 2016-09”). The new guidance simplifies several aspects of the accounting for share-based payments, including immediate recognition of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees' maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows for the excess tax benefit and employee taxes paid when an employer withholds shares for tax-withholding purposes. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016 and interim periods within that reporting period. The adoption of this standard is not expected to have a material effect on our financial statements. In February 2016, the FASB issued ASU No. 2016-2, Leases (Topic 842 ) (“ASU 2016-2”) . This guidance is intended to make leasing activities more transparent and comparable, and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. ASU 2016-2 will be effective for interim and annual periods beginning after December 15, 2018. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited and early adoption is permitted. The Company expects to adopt this standard beginning in 2019. The Company is still evaluating the effect adoption will have on our financial statements. In May 2014, the FASB issued ASC 606, which superseded existing revenue recognition guidance. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company adopted ASC 606 effective on January 1, 2018 using the modified retrospective method. Please see the above “Revenue Recognition” section for a discussion of the Company’s revenue recognition under ASC 606. |