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,” “projects” and similar expressions are intended to identify such forward-looking statements.  Readers are cautioned that these forward-looking statements speak only as of the date on which this Quarterly Report on Form 10-Q  is filed with the Securities and Exchange Commission (the “SEC”), and, except as required by law, 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-looking statements include, without limitation:





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, 2020, that could cause actual results to differ materially from those projected in such forward-looking statements due to various factors, including impacts resulting from or relating to the COVID-19 pandemic and actions taken to contain it; expectations regarding the forgiveness of the PPP Loan, 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”) 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; our ability to use our net operating loss carryforwards; our ability to use intellectual property directed to diagnose biomarkers; 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 manufacturing operations.     



Overview

Our core mission is to transform the state of women’s health, globally, starting with ovarian cancer.    We aim to eradicate late-stage detection of ovarian  cancer and to ensure that all our solutions will meet the needs of 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 the best-in-class diagnostics.



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



We currently market and sell the following products and related services: (1) OVA1, a blood test designed to, in addition to a physician’s clinical assessment of a woman with a pelvic mass, identify women who are at high-risk of having a malignant ovarian tumor prior to planned surgery; (2) OVERA, a second-generation biomarker panel intended to maintain OVA1’s high sensitivity while improving specificity; (3) OVA1plus, a reflex offering which uses OVA1 and OVERA as a confirmation for OVA1 intermediate range results and leverages the strengths of OVA1’s Multivariate Index Assay (“MIA”) sensitivity and OVERA’s (MIA2G) specificity and as a result reduces false elevations by over 40%; (4) Aspira GenetiX, a genetic test for gynecologic cancer risk, with a core focus on female reproductive cancers, including breast, ovarian, endometrial, uterine and cervical cancers; and (5) Aspira Synergy, our new decentralized platform and cloud service technology, which we plan to house our algorithms for decentralized global access. We plan to make OVA1, OVERA, OVA1plus and Aspira GenetiX available through Aspira Synergy. Our OVA1 algorithm received FDA de novo classification in September 2009, and our OVERA algorithm received FDA 501(k) clearance in March 2016. OVA1 and OVERA each use the Roche cobas 4000, 6000 and 8000 platforms for analysis of proteins. Through March 31, 2021, our product and related services revenue has been limited to revenue generated by sales of OVA1, OVA1plus and Aspira GenetiX.  In 2021, we have begun to enter into decentralized arrangements with large healthcare networks and large practices for our Aspira Synergy product.



We are developing three additional products and related services, including two diagnostic algorithms, OVASight (previously OVANex) and EndoCheck, and a high-risk diagnostic algorithm, OVAInherit, for patients with or without a pelvic mass who are genetically predisposed to ovarian cancer. These products may be launched as LDTs or FDA-cleared tests.





In addition, we have reaffirmed the acceleration of the target launch date of OVASight to the fourth quarter of 2021. This test initially will allow physicians to assess benign pelvic masses with much better performing technology than CA125, and our next revision will allow a mass to be monitored over time. This new test will leverage its high negative predictive value to rule out ovarian cancer risk, as well as high positive predictive value to rule in the risk of ovarian cancer. We expect that the first review of this OVASight test will occur at the American Society of Clinical Oncology 2021 meeting, which is scheduled to be held virtually on June 4, 2021. 

We ultimately plan to commercialize each of OVA1, OVERA, OVA1plus, Aspira GenetiX, OVASight, EndoCheck and OVAInherit 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 allows 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, Inc. (“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 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 processes our OVA1 and OVERA tests, and we plan to expand the testing to other gynecologic conditions with high unmet need. We also plan to develop and perform LDTs at ASPiRA LABS. ASPiRA LABS holds a Clinical Laboratory Improvements Amendments of 1988 (“CLIA”) Certificate of Accreditation and a state laboratory license in California, Maryland, New York, Pennsylvania and Rhode Island. This allows the lab test OVA1 and OVERA to be performed on a national basis. The Centers for Medicare & Medicaid Services (“CMS”) issued a supplier number to ASPiRA LABS in 2015.



Recent Developments

Leadership Developments

On May 11, 2021, the Company announced the appointment of Greg Richard as Aspira’s Head of Corporate Strategy, Reimbursement and Managed Care.  Mr. Richard will be responsible for our overall corporate strategy and enhancing our blueprint for reimbursement for our current products as well as the new products and services in our robust pipeline.  In addition, he will be responsible for leading our Revenue Cycle Management and supporting the Company’s strategic business development initiatives.



In February 2021, the Company announced the appointment of Nicole Sandford to Aspira’s board of directors.  Ms. Sandford has extensive corporate governance and accounting experience from her 17 years at Deloitte, including most recently as the national managing partner for its Regulatory and Operational Risk practice.  She currently serves as Executive Vice President and Global Board Services Leader at Ellig Group, LLC, where she advises boards and senior executives on matters related to governance.



In the first quarter of 2021, we formed our own internal patient advisory board, led by our Chief Spokeswoman, Dr. Diane Powis. This board includes ovarian cancer patients and survivors whose mission is to lead how we serve and educate patients early in the process.



Business, Product and Coverage Developments



On May 12, 2021, the Company announced the execution an Aspira Synergy agreement with one of the largest women’s health networks whereby the OVA1plus testing will be performed in its laboratory with data interpretation by Aspira.  The health network employs 300+ physicians and is responsible for 500,000 patient visits per year.



On May 12, 2021, we announced the initiation of a large prospective study with The Feinstein Institutes for Medical Research, the science arm of Northwell Health, the largest private healthcare provider in New York State.  Northwell Health treats over 2 million patients annually and employs over 16,000 credentialled physicians. The study will further support longitudinal studies for the use of OVASight as a serial monitoring test for high-risk women predisposed for hereditary ovarian cancer.



The FDA’s Breakthrough Devices Program provides patients and health care providers with timely access to medical devices and device-led combination products that provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions by speeding up their development, assessment and review.  In the first quarter of 2021, we submitted to the FDA a Breakthrough Device designation request with respect to EndoCheck, and we have been in communications with the FDA regarding our request and [we plan?] to update the submission based on the guidance we have received thus far.  There is no assurance that the FDA will grant our request for EndoCheck to be designated as a Breakthrough Device.  If our device is granted a Breakthrough Device designation in the next six months, we plan to move forward with interacting with the FDA through a variety of options including sprint discussions, a request for a discussion on a data development plan, and a request for clinical protocol agreement, and any final submission will be a de novo submission. If the FDA denies our request for a Breakthrough Device designation in the next six months, we plan to proceed with a LDT.



In the first quarter of 2021, we announced that we entered into an agreement with Dana Farber Cancer Institute, Brigham and Women’s Hospital and Medical University Lodz to evaluate their jointly-developed novel microRNA technology in combination with current Aspira technologies, for the development of a highly sensitive and specific early detection test for women with a high-risk of ovarian cancer.



In the first quarter of 2021, we are continuing to increase our investment in research and development, and one of our key investments is our efforts on closing the racial and ethnic  gap in women’s healthcare specific to the diagnostic accuracy of ovarian cancer detection.  We have five active sites enrolled in our disparity clinical study; the most recent addition was Wayne State University in Detroit, Michigan as our first National Cancer Institute site.



In the first quarter of 2021, we submitted an abstract to the American Society for Clinical Oncology for their early June 2021 conference, and will be publishing both the analytical and clinical validation findings in the third quarter of 2021.



In the first quarter of 2021, we announced coverage by New York State Medicaid – one of the larger Medicaid populations in the U.S., covering 33% of the population in the state. This brought our total covered lives to approximately 179M or 54% of the U.S. population as of April 1, 2021.



In the first quarter of 2021, we presented at a Congressional Briefing “Advancing Health Outcomes for Women and Minorities.”  We delivered a call to action for OVA1 as the standard of care for ovarian cancer risk assessment for Caucasian and non-Caucasian women and the need for funding large race and ethnicity-based trials.



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. On March 11, 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to the coronavirus outbreak. This outbreak has severely impacted global economic activity, and many countries and

many states in the United States have reacted to the outbreak by instituting quarantines, mandating business and school closures and restricting travel. Patient enrollment for our planned research studies has been lower due to the impact of closures and restricted travel, which has led to delays in the completion of such studies. Our commercial efforts to enter into decentralized arrangements with large healthcare networks and supergroups have continued to move forward. However, finalization of such deals have been slowed by the pandemic. In addition, many conventions and industry conferences have been cancelled.



As a result of the COVID-19 pandemic and actions taken to contain it, the majority of our non-laboratory employees have been working remotely since March 2020, and we expect that they will continue to do so until the number of daily COVID-19 cases in the areas surrounding our offices consistently level off or declines.  In terms of business continuity, our lab operations require on site essential employees. 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. In addition, as of the date of the filing of this Form 10-Q, we have approximately five months of reagents, one of our key testing supplies, in stock, depending on volume of tests performed, and we are working with the manufacturer to ensure a consistent supply over the next six months. 



We are committed to following recommended physical and social distancing guidelines in order to reduce the risk of infection for our employees. We have also decreased our travel and convention-related expenses. We have taken several measures to reduce the impact of the COVID-19 related closures and quarantines. For example, because our salespeople have experienced limitations on their ability to physically visit physician offices, we have implemented other means of coverage such as virtual sales representative meetings and increased digital sales and marketing. In March 2020, our sales team began making in-person calls to customers as determined on a state-by-state basis, in accordance with local guidelines. We have developed protocols and training for our team where physical visits are allowed to help ensure employee, customer and patient safety.



In the first quarter 2021, our test volume remained relatively flat compared to the fourth quarter of 2020. 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 impact of the COVID-19 pandemic on our business, results of operations or cash flows as of the date of this filing.



On March 27, 2020, the U.S federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act is an emergency economic stimulus package in response to the coronavirus outbreak which, among other things, provided loans, guarantees and subsidies to qualifying businesses and contained numerous income tax provisions. Some of these tax provisions are expected to be effective retroactively for years ending before the date of enactment. We do not expect these tax provisions to have a material impact on our financial statements.



On April 10, 2020, we received a stimulus check of approximately $89,000 from the U.S. Department of Health and Human Services pursuant to the CARES Act.



On May 1, 2020, we were granted the PPP Loan from BBVA USA in the aggregate amount of $1,005,767, pursuant to the PPP, which was established under the CARES Act as administered by the SBA. We believe we are using the proceeds of the PPP Loan in a manner that qualifies for complete forgiveness of the PPP Loan but caution that there can be no assurance that all or any portion of the PPP Loan will be forgiven. In March 2021, we applied for forgiveness of the PPP Loan.  See “Liquidity and Capital Resources” for more information.



Strategy



We are focused on execution of the following core strategic business drivers in women’s pelvic mass assessment, starting with ovarian cancer diagnostics, and specialized laboratory services to build long-term value for our investors:  





We believe that these business drivers will contribute significantly to addressing unmet medical needs for women faced with gynecologic disease and other conditions and the continued development of our business.



We have active international distribution agreements for OVERA with Pro-Genetics LTD in Israel and MacroHealth, Inc. in the Philippines. The MacroHealth, Inc. agreement was our first agreement regarding decentralized technology transfer for OVERA specimen testing.



In the United States, revenue for diagnostic tests comes from several sources, including third-party payers such as insurance companies, government healthcare programs, such as Medicare and Medicaid, client bill accounts and patients. Novitas Solutions, a Medicare contractor, covers and reimburses for OVA1 tests performed in certain states, including Texas. Due to OVA1 tests being performed exclusively at ASPiRA LABS in Texas, the local coverage determination from Novitas Solutions essentially provides national coverage for patients enrolled in Medicare as well as Medicare Advantage health plans. ASPiRA LABS also bills third-party commercial and other government payers as well as client bill accounts and patients for OVA1.



In November 2016, the ACOG issued Practice Bulletin Number 174 which included OVA1 as a “Multivariate Index Assay”, outlining ACOG’s clinical management guidelines for adnexal mass management. Practice Bulletin Number 174 recommends that obstetricians and gynecologists evaluating women with adnexal masses who do not meet Level A criteria of a low risk transvaginal ultrasound should proceed with Level B clinical guidelines. Level B guidelines state that the physician may use risk assessment tools such as existing CA125 technology or OVA1 (“Multivariate Index Assay”) as listed in the bulletin. Based on this, OVA1 achieved parity with CA125 as a Level B clinical recommendation for the management of adnexal masses.



Practice Bulletins summarize current information on techniques and clinical management issues for the practice of obstetrics and gynecology. Practice Bulletins are evidence-based documents, and recommendations are based on the evidence. This is also the only clinical management tool used for adnexal masses. Although there are Practice Bulletins, guidelines do not exist for adnexal masses. ACOG guidelines do exist, however, for ovarian cancer management.  



In October 2018, ASPiRA LABS launched OVA1plus, a clinical pathway which combines the strengths of OVA1 and OVERA. This offering helps drive earlier ovarian cancer risk detection, which in turn lowers overall healthcare costs and reduces inefficiencies in the care pathway.



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.



In March 2021, the results of an OVA1plus study were presented as a poster at the Society of Gynecologic Oncology’s 2021 Annual Meeting on Women’s Cancer (the “SGO Meeting”). The objective of the study was to determine whether using OVERA to perform reflex testing on test results with a high OVA1 score can improve specificity in detection of malignancy in women with adnexal masses, a testing process we refer to as our OVA1plus test. These results indicate that the OVA1plus test did improve specificity in detection of ovarian cancers. Although the SGO Meeting was cancelled due to the COVID-19 pandemic, the abstract was made available on the SGO Meeting’s website.



Critical Accounting Policies and Estimates

Our product revenue is generated by performing diagnostic services using our OVA1, OVERA, OVA1plus or ASPiRA GenetiX 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 GenetiX 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 and OVA1plus 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.



Product Revenue.  Product revenue was $1,416,000 for the three months ended March 31,  2021 compared to $1,185,000 for the same period in 2020.  Revenue for ASPiRA LABS is recognized when the OVA1, OVERA, or OVA1plus test is completed based on estimates of what we expect to ultimately realize. The 19% product revenue increase is primarily due to an increase in OVA1 average revenue per test compared to the prior year, as well as higher test volume.  



The number of OVA1plus tests performed increased 3% to 3,775 OVA1plus tests during the three months ended March 31, 2021 compared to 3,654 OVA1plus tests for the same period in 2020.  We expect revenue to continue to improve in 2021 due to:   increased access to offices, patients’ return to physician visits, increased investment in our current commercial channel and new investment in our new healthcare system and Aspira Synergy commercial channels, provided that the COVID-19 pandemic does not further escalate and result in new quarantines and state closures.  The duration of the pandemic and efforts to contain it remains uncertain.



The revenue per OVA1plus test performed increased to approximately $375 compared to $324 for the same period in 2020, an increase of 16%. This increase was primarily driven by an increase in payments by contracted payers.



Genetics Revenue. Genetics revenue was $80,000 for the three months ended March 31, 2021, compared to $25,000 for the same period in 2020. Revenue for Aspira GenetiX is recognized when the Aspira GenetiX test is completed based on estimates of what we expect to ultimately realize. The 220% genetics revenue increase is primarily due to an increase in Aspira GenetiX test volume as we continued to market this product in 2021,  as well as a higher revenue per test. The revenue per test performed increased to approximately $456 compared to $230, and increase of 98%, for the same period in 2020. This increase was primarily driven by an increase in payments by contracted payers. We expect revenue to improve in 2021 due to continued commercialization investment for the Aspira GenetiX product, provided that the COVID-19 pandemic does not further escalate and

result in new quarantines and state closures.  The duration of the pandemic and efforts to contain it remains uncertain.



Service Revenue.  Service revenue was $0 for the three months ended March 31,  2021 compared to $10,000 for the same period in 2020. Substantially all projects with ASPiRA IVD were finalized during 2019 and the subsidiary’s operations were largely completed. Revenue for ASPiRA IVD was recognized once certain revenue recognition criteria had been met. We do not expect to have any significant service revenue in 2021 as the IVD trial services were largely wound down in 2019. However, the Company may continue to have some future legacy IVD activity in 2021. 



Cost of Revenue – Product.   Cost of product revenue was $648,000 for the three months ended March 31, 2021 compared to $665,000 for the same period in 2020, representing a decrease of $17,000, or 3%, due primarily to decreased blood draw fees.



Cost of Revenue - Genetics. Cost of genetics revenue, which consisted primarily of personnel costs and consulting expense after the launch of Aspira GenetiX, was $245,000 for the three months ended March 31, 2021 compared to $130,000 for the same period in 2020. The increase in cost represented personnel and consulting costs, as well as increase in volume as compared to the same period in 2020. We expect the cost of genetics revenue to increase in the second quarter of 2021.



Cost of Revenue - Service.   Cost of service revenue was $0 for the three months ended March 31, 2021 compared to $5,000 for the same period in 2020. These costs related to project closure support and legacy IVD contracts.  



Gross Profit Margin.   Gross profit margin for OVA1plus was 54.2% for the three months ended March 31, 2021 compared to 43.9% for the same period in 2020, an increase of 10.3%.  Overall gross profit margin was 40.3% for the three months ended March 31, 2021 compared to 34.4% for the same period in 2020, an increase of 5.9%, due primarily to lower blood draw fees and consulting expenses.



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 March 31, 2021 increased by $477,000, or 121%, compared to the same period in 2020. This increase was primarily due to clinical utility and product development costs related to OVASight, our third-generation product, as well as investments in bioinformatics and Aspira Synergy. We expect research and development expenses to increase in 2021, as a result of increased projects and clinical studies.



Sales and Marketing Expenses.  Our sales and marketing expenses consist primarily of personnel-related expenses, education and promotional expenses, and infrastructure expenses. These expenses include the costs of educating physicians and other healthcare professionals regarding OVA1, OVERA, OVA1plus and Aspira GenetiX. Sales and marketing expenses also include the costs of sponsoring continuing medical education, medical meeting participation, and dissemination of scientific and health economic publications. Sales and marketing expenses for the three months ended March 31, 2021 increased by $993,000, or 47%, compared to the same period in 2020. This increase was primarily due to increased personnel related and public relations costs, partially offset by lower travel costs due to the COVID-19 pandemic. We expect sales and marketing expenses to increase in 2021, due to investing in key strategic hires and product portfolio expansion, as well as the continued re-openings relating to the COVID-19 pandemic, provided that the COVID-19 pandemic does not further escalate and result in new quarantines and state closures.



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 March 31, 2021 increased by $799,000, or 47%, compared to the same period in 2020. This increase was primarily due to an

increase in legal expenses of $284,000, headcount and personnel expenses of $374,000 and board of director fees of $185,000. We expect general and administrative expenses to increase in 2021 due to higher personnel costs.



Net Other Income (Expense).  Net other income (expense) for the three months ended March 31, 2021 decreased by $96,000, compared to the same period in 2020.  Other expense in the first quarter of 2021 consisted primarily of franchise taxes, whereas other income in the first quarter of 2020 consisted primarily of the stimulus check received from the U.S. Department of Health and Human Services of approximately $89,000.



Liquidity and Capital Resources



We plan to continue to expend resources selling and marketing OVA1, OVERA, OVA1plus and Aspira GenetiX and developing additional diagnostic tests and service capabilities.



On February 8, 2021, the Company completed a public offering (the “2021 Offering”), resulting in net proceeds to the Company of approximately $47.7 million, after deducting underwriting discounts and offering expenses.

On July 20, 2020, the Company completed a private placement pursuant to which certain investors purchased 3,150,000 shares of Aspira common stock at a per share price of $3.50.  Net proceeds of the private placement were approximately $10.6 million, after deducting underwriting discounts and offering expenses.



In early June 2020, we issued 2,810,338 shares of Aspira common stock upon the exercise of all of our outstanding warrants and received approximately $5.1 million in aggregate proceeds therefrom.



On May 1, 2020, the Company obtained the PPP Loan from BBVA USA in the aggregate amount of $1,005,767. The application for these funds required the Company to, in good faith, certify that the described economic uncertainty at the time made the loan request necessary to support the ongoing operations of the Company. This certification further required the Company to consider its current business activity and its ability to access other sources of liquidity sufficient to support ongoing operations in a manner that was not significantly detrimental to the business. Under the terms of the CARES Act and the PPP Loan, all or a portion of the principal amount of the PPP Loan is subject to forgiveness so long as, over the 24-week period following the Company’s receipt of the proceeds of the PPP Loan, the Company used those proceeds for payroll costs, rent, utility costs or the maintenance of employee and compensation levels. The PPP Loan, which was granted pursuant to a promissory note, matures on May 1, 2022. Any unforgiven portion of the PPP Loan bears interest at a rate of 1.000% per annum, payable monthly in equal installments commencing in August 2021.  The Company applied for forgiveness of the PPP Loan in March 2021, but there is no assurance that all or a portion of the PPP Loan will be forgiven.  The PPP Loan is subject to any new guidance and new requirements released by the Department of the Treasury.



On March 22, 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 bears interest at a fixed rate of 2.0% per annum and requires equal monthly payments of principal and interest until maturity, which occurs on April 15, 2026. As security for the loan, we have granted the DECD a blanket security interest in our personal and intellectual property. The DECD’s security interest in our intellectual property may be subordinated to a qualified institutional lender. 



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, the Company received a disbursement of the remaining $2,000,000 under the DECD Loan Agreement, as we 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, if we are either unable to retain 25 full-time employees with a specified average annual salary for a consecutive two-year period or does not 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 3 of our consolidated financial statements.



The Company has incurred significant net losses and negative cash flows from operations since inception. At March 31, 2021 we had an accumulated deficit of $445,986,000 and stockholders’ equity of $52,325,000. As of March 31, 2021, we had $59,369,000 of cash and cash equivalents and $6,148,000 of current liabilities. Working capital was $55,225,000 and $12,603,000 at March 31, 2021 and December 31, 2020, respectively. There can be no assurance that we will achieve or sustain profitability or positive cash flow from operations. In addition, while we expect to grow revenue through ASPiRA LABS, there is no assurance of our ability to generate substantial revenues and cash flows from ASPiRA LABS’ operations. We expect cash from our products and services to be our only material, recurring source of cash in 2021.



Net cash used in operating activities was $5,255,000 for the three months ended March 31, 2021, resulting primarily from the net loss reported of $5,920,000, which includes non-cash items such as stock compensation expense of $489,000 and depreciation and amortization of $90,000, offset by changes in accounts payable, accrued and other liabilities of $291,000, partially offset by changes in prepaid expense of $94,000 and accounts receivable of $87,000.  



Net cash used in investing activities was $41,000 and $23,000 for the three months ended March  31, 2021 and 2020, respectively, which consisted of property and equipment purchases.



Net cash provided by financing activities was $48.0 million for the three months ended March 31, 2021, which resulted primarily from the February 2021 public offering, resulting in net proceeds to the Company of approximately $47.7 million, after deducting underwriting discounts and offering expenses.  Net cash used in financing activities was $47,000 for the same period in 2020.



We expect to incur a net loss and negative cash flows from operations in 2021. The impact of the COVID-19 pandemic and actions taken to contain it on our liquidity for 2021 cannot be estimated as of the date of this filing.



However, we believe that our cash and cash equivalents will be sufficient to fund our operations for the next twelve months.



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



We have significant net operating loss (“NOL”) carryforwards as of March 31,  2021 for which a full valuation allowance has been provided due to our history of operating losses. Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”), as well as similar state provisions may restrict our ability to use our NOL credit carryforwards due to ownership change limitations occurring in the past or that could occur in the

future. These ownership changes may also limit the amount of NOL credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively.



Legislation commonly referred to as the Tax Cuts and Jobs Act (H.R. 1) was enacted on December 22, 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- 2018 federal NOLs will expire in varying amounts from 2021 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 2021 through 2037 if not utilized. The Company's ability to use its NOLs during this period will be dependent on the Company's ability to generate taxable income, and the NOLs could expire before the Company generates sufficient taxable income.  



The Company believes that Section 382 ownership changes occurred as a result of the Company's follow-on public offerings in 2011, 2013, and 2015. Any limitation may result in the expiration of a portion of the net operating loss and tax credit carryforwards before utilization and any net operating loss and tax credit carryforwards that expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the Company's valuation allowance. Due to the existence of a valuation allowance, it is not expected that such limitations, if any, will have an impact on the Company's results of operations or financial position. 



Off-Balance Sheet Arrangements



As of March 31,  2021, we had no off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our condensed consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.





Per Item 305(e) of Regulation S-K, the information called for by this Item 3 is not required.



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 March 31,  2021. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31,  2021, our disclosure controls and procedures were effective.



Changes in internal controls over financial reporting.

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.