UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-K

FORM 10-K

(Mark One)

Annual report pursuant to Section 13 or 15(d) of the SecuritiesExchange ACT OF 1934

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20172022

or

Transition report pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ForFor the transition period fromto

Commission FileNo. 001-16537

ORASURE TECHNOLOGIES, INC.INC.

(Exact Namename of Registrantregistrant as Specifiedspecified in Its Charter)its charter)

Delaware

36-4370966

(State or Other Jurisdictionother jurisdiction of

Incorporationincorporation or Organization)organization)

(I.R.S. Employer

Identification No.)

220 East First Street

Bethlehem, Pennsylvania

18015

(Address of Principal Executive Offices)principal executive offices)

(Zip Code)

(610)882-1820
(Registrant’s Telephone Number, Including Area Code):

(Registrant’s telephone number, including area code): (610) 882-1820

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, $0.000001 par value per share

OSUR

The NASDAQNasdaq Stock Market LLC

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

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

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

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T232.405)232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of RegulationS-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form10-K.  ☒

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 Rule12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No

State the aggregate market value of the voting andnon-voting common equity held by nonaffiliates,non-affiliates, computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the Registrant’s most recently completed second fiscal quarter (June 30, 2017)2022):$1,010,050,592197,743,692

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as ofFebruary 23, 2018: 60,966,86624, 2023: 73,244,807 shares.

Documents Incorporated by Reference:

Portions of the Registrant’s Definitive Proxy Statement for the 2018 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report.Report on Form 10-K will be incorporated by reference from certain portions of the Registrant's Definitive Proxy Statement for its 2023 Annual Meeting of Shareholders, or will be included in an amendment hereto, to be filed not later than 120 days after the close of the fiscal year ended December 31, 2022. Except with respect to information specifically incorporated by reference in the Annual Report on Form 10-K, the Definitive Proxy Statement is not deemed to be filed as part hereof.



Table of Contents

PART I
Page

ITEM 1.

Business3

ITEM 1A.

Risk Factors29

ITEM 1B.

Unresolved Staff Comments58

ITEM 2.

Properties58

ITEM 3.

Legal Proceedings58

ITEM 4.

Mine Safety Disclosures58

PART II

I

ITEM 5.

Page

ITEM 1.

Business

1

ITEM 1A.

Risk Factors

20

ITEM 1B.

Unresolved Staff Comments

50

ITEM 2.

Properties

50

ITEM 3.

Legal Proceedings

51

ITEM 4.

Mine Safety Disclosures

51

PART II

ITEM 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

59

52

ITEM 6.

Selected Financial Data61

ITEM 7.6.

Reserved

53

ITEM 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

62

54

ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk

78

63

ITEM 8.

Financial Statements and Supplementary Data

78

63

ITEM 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

79

ITEM 9A.

Controls and Procedures79

ITEM 9B.

Other Information80

PART III

63

ITEM 9A.

Controls and Procedures

63

ITEM 9B.

Other Information

65

ITEM 9C.

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

65

PART III

ITEM 10.

Directors, Executive Officers and Corporate Governance

81

66

ITEM 11.

Executive Compensation81

ITEM 12.11.

Executive Compensation

66

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

81

66

ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

81

66

ITEM 14.

Principal Accountant Fees and Services

81

PART IV

66

PART IV

ITEM 15.

Exhibits and Consolidated Financial Statement Schedules

82

67

ITEM 16.

Form10-K Summary

69

Signatures

82

70


Use of Names

References in this Annual Report on Form 10-K for the fiscal year ended December 31, 2022, (the "Annual Report") to "OraSure" mean OraSure Technologies, Inc. References in this Annual Report to “DNAG” mean DNA Genotek, Inc., references to “Diversigen” mean Diversigen, Inc., and references to “Novosanis” mean Novosanis NV. References in this Annual Report to "we", "us", "our", or the "Company" mean OraSure and its consolidated subsidiaries, DNAG, Diversigen, and Novosanis, unless otherwise indicated.

Disclosure Regarding Forward Looking Statements

This Annual Report contains certain “forward-looking statements,” within the meaning of the Federal securities laws. These may include statements about our expected revenues, earnings, earnings/losses per share, net income (loss), expenses, cash flow or other financial performance, future product performanceor developments, clinical trial or development activities, expected regulatory filings and approvals, planned business transactions, expected manufacturing performance, views of future industry, competitive or market conditions, and other factors that could affect our future operations, results of operations or financial position. These statements often include words, such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “may,” “will,” “should,” “could,” or similar expressions.


Forward-looking statements are not guarantees of future performance or results. Known and unknown factors that could cause actual performance or results to be materially different from those expressed or implied in these statements include, but are not limited to:

Our ability to market and sell products, whether through our internal, direct sales force or third parties;
Our ability to fulfill our commitments under our contracts with the U.S. government for InteliSwab® COVID-19 Rapid Tests;
Failure of distributors or other customers to meet purchase forecasts, historic purchase levels or minimum purchase requirements for our products;
Significant customer concentrations that exist or may develop in the future:
Our ability to manufacture products in accordance with applicable specifications, performance standards and quality requirements;
Our ability to obtain, and timing and cost of obtaining, necessary regulatory approvals for new products or new indications or applications for existing products; ability to comply with applicable regulatory requirements;
Our ability to effectively resolve warning letters, audit observations and other findings or comments from the U.S. Food and Drug Administration (“FDA”(or the "FDA”), or other regulators; changes
The impact of the COVID-19 pandemic on our business, supply chain and workforce;
The impact of the U.S. government ending the COVID-19 related Public Health Emergency;
Changes in relationships, including disputes or disagreements, with strategic partners or other parties and reliance on strategic partners for the performance of critical activities under collaborative arrangements;
Our ability to meet increased demand for the Company’s products; impact of significant customer concentration in the genomics business; impact of increased reliance on U.S. government contracts; failure of distributors or other customers to meet purchase forecasts, historic purchase levels or minimum purchase requirements for our products;
The impact of replacing distributors; inventorydistributors on our business;
Inventory levels at distributors and other customers;
Our ability of the Company to achieve itsour financial and strategic objectives and continue to increase itsour revenues, including the ability to expand international sales; ability to identify, complete, integrate and realize the full benefits of future acquisitions;
The impact of competitors, competing products and technology changes; impact of negative economic conditions; reductionchanges on our business;
Reduction or deferral of public funding available to customers; competition
Competition from new or better technology or lower cost products;
Our ability to develop, commercialize and market new products; market
Market acceptance of oral fluid or urine testing, collection or other products; changes
Market acceptance and uptake of microbiome informatics, microbial genetics technology and related analytics services;
Changes in market acceptance of products based on product performance or other factors, including changes in testing guidelines, algorithms or other recommendations by the Centers for Disease Control and Prevention, (“CDC”(the “CDC”) or other agencies; ability to fund research and development and other products and operations;
Our ability to obtain and maintain new or existing product distribution channels; reliance
Reliance on sole supply sources for critical products and components; availability
Availability of related products produced by third parties or products required for use of our products;
The impact of contracting with the U.S. government on our business;
The impact of negative economic conditions on our business;
Our ability to maintain sustained profitability;
Our ability to increase our gross margins;
The ability to utilize net operating loss carry forwards or other deferred tax assets; volatility
Volatility of the Company’sour stock price; uncertainty
Uncertainty relating to patent protection and potential patent infringement claims; uncertainty


Uncertainty and costs of litigation relating to patents and other intellectual property; availability
Availability of licenses to patents or other technology; ability
Ability to enter into international manufacturing agreements; obstacles
Obstacles to international marketing and manufacturing of products;
Our ability to sell products internationally, including the impact of changes in international funding sources and testing algorithms; adverse
Adverse movements in foreign currency exchange rates; loss
Loss or impairment of sources of capital; ability to meet financial covenants in credit agreements;
Our ability to attract and retain qualified personnel;
Our exposure to product liability and other types of litigation; changes
Changes in international, federal or state laws and regulations; customer
Customer consolidations and inventory practices; equipment
Equipment failures and ability to obtain needed raw materials and components; the
The impact of terrorist attacks and civil unrest; and general
General political, business and economic conditions. conditions, including inflationary pressures.

These and other factors that could affect our results are discussed more fully under Item 1A, entitled “Risk Factors,” and elsewhere in this Annual Report. Although forward-looking statements help to provide information about future prospects, readers should keep in mind that forward-looking statements may not be reliable. Readers are cautioned not to place undue reliance on the forward-looking statements. The forward-looking statements and Risk Factors are made as of the date of this Annual Report and we undertake no duty to update these statements.statements, unless we are required to do so by law. If we do update one or more forward-looking statements, no inference should be drawn that we will make updates with respect to other forward-looking statements or that we will make any further updates to those forward-looking statements at any future time.

Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose any materialnon-public information or other confidential commercial information.

Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of OraSure.

ReferencesTrademarks, Trade Names and Service Marks

This Annual Report contains certain trademarks, which are protected under applicable intellectual property laws and are the Company's property. Solely for convenience, the Company's trademarks and trade names referred to in this Annual Report may appear without the ® or TM symbol, but such references are not intended to “OraSure” meanindicate, in any way, that the Company will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We own rights to trademarks and service marks that we believe are necessary to conduct our business as currently operated. In the United States, we own a number of trademarks, including the OraSure Technologies, Inc. References®, Intercept®, Intercept i2®he, OraQuick®, OraQuick ADVANCE®, OraSure Quick Flu®, Q.E.D.®, InteliSwab®, Oragene®, DNA Genotek®, OMNImetTM, ORAcollect®, OMNIgene®, goDNATM, Diversigen®, CoreBiome®, Boostershot®, MetaGeneTM, BenchmarkTM, Novosanis®, Colli-Pee®, UCM®, UASTM, AUTO-LYTE®, prepIT®, and Hemagene® trademarks. We also own many of these marks and others in this Annual Report to “we,” “us,” “our,” or the “Company” mean OraSureseveral foreign countries and its consolidated subsidiaries, unless otherwise indicated.

we are pursuing registration of several other trademarks.


PART I

ITEM 1.Business.

ITEM 1.Business.

Our primary goal is to empower the global community to improve health and wellness by providing access to accurate essential information through effortless tests, collection kits and services. Our business is made uppreviously consisted of two principal segments. The firstsegments: our “Diagnostics” segment, and our “Molecular Solutions” segment.

In February 2023, we announced a corporate restructuring to combine the commercial and innovation teams across the two segments into one business unit with sales, marketing, product development and research teams covering multiple product lines. This change is our “OSUR”intended to accelerate innovation, enhance customer experience and result in operational synergies.

Diagnostics

Our Diagnostics business whichprimarily consists of the development, manufacture, marketing and sale of oral fluidsimple, easy to use diagnostic products and specimen collection devices using our proprietary technologies, as well as other diagnostic products including immunoassays and otherin vitro diagnostic tests that are used on other specimen types. Our diagnostic products includeThe Diagnostics business includes tests for diseases including COVID-19, HIV and Hepatitis C that are performed on a rapid basis at the point of care, and tests for drugs of abuse that are processed in a laboratory. These products are sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, and other public health organizations, distributors, government agencies, physicians’ offices, and commercial and industrial entities. Our COVID-19 and HIV products are also sold in a consumer-friendly format in the over-the-counter (“OTC”) market in the U.S. and, in the case of the HIV product, as a self-test to individuals in a number of other countries. In 2022, after obtaining a CE mark, we launched our OraQuick® HIV Self-Test, an oral swab in-home test for HIV-1 and HIV-2, in Europe, making it available in several European countries. Through our Diagnostics business we are also developing and commercializing products that measure adherence to HIV medications including pre-exposure prophylaxis ("PrEP").

In September 2022, we entered into an agreement with the Biomedical Advanced Research Development Authority (“BARDA”), pursuant to which BARDA will provide $8.6 million in funding to us to develop a 2nd generation Ebola test on the OraQuick® testing platform, with the objective of developing increased sensitivity and shelf life, with new chemistry and higher degrees of automation in the test’s manufacturing process.

Molecular Solutions

Our Molecular Solutions business is operated by our wholly-owned subsidiaries, DNA Genotek, Diversigen, and Novosanis. Our Molecular Solutions business sells its products and services directly to its customers, primarily through its internal sales force in the U.S. domestic market, and in many international markets, and also through distributors. Our products primarily consist of collection kits and services used by clinical laboratories, direct-to-consumer laboratories, researchers, pharmaceutical companies, and animal health service and product providers. Most of our Molecular Solutions revenues are derived from product sales to commercial customers and sales into the academic and research markets. A significant portion of our total sales is from repeat customers in both markets. Molecular Solutions customers span the disease risk management, diagnostics, pharmaceutical, biotech, nutrition, companion animal and environmental markets.

In 2020, we expanded the market focus of our Molecular Solutions business by selling existing collection products for use with COVID-19 tests. In 2022, demand for COVID-19 PCR testing declined, which was primarily driven by the availability of antigen tests, the reduction in the numer of COVID-19 cases, and the wider availability of vaccines that negatively impacted the sales of the collection products. We have also manufacture and sell medicaldeveloped additional collection devices used for the removal of benign skin lesions by cryosurgery or freezing. These cryosurgical products are sold in both professionalemerging microbiome market, which focuses on studying microbiomes andover-the-counter (“OTC”) markets in North America, Europe, Central and South America, and Australia.

The second segment is our “DNAG” or molecular collection systems business and is operated primarily through our subsidiary, DNA Genotek Inc. (“DNAG”), a company based in Ottawa, Canada. In the DNAG business, we manufacture and sell kits that are used to collect, stabilize, transport and store samples of genetic material for molecular testing in the consumer genetic, clinical genetic, academic research, pharmacogenomics, personalized medicine, microbiome their effect on human and animal genetics markets. Our Oragenehealth. In 2022, we launched the OMNIgene® DNA sample • GUT Dx collection kit provides anall-in-one systemdevice (OMD-200), which was granted De Novo authorization from the FDA for collection of human fecal samples and the collection, stabilization transportation and storage of DNA from human saliva. We also sell research use only products intothe bacterial community for subsequent assessment of the microbiome profile by an assay validated for use with OMNIgene®·GUT Dx device. Additionally, our OMNIgene® • GUT DNA and tuberculosis marketsRNA collection device (OMR-205), became available to gut microbiome researchers, allowing for self-collection, stabilization, storage and transportation of microbial DNA and RNA at ambient temperature for gut microbiome profiling. We leverage our existing sales force and global research connections to engage microbiome customers worldwide to establish ourselves among the leaders in ease-of-collection, stabilization, and transport of this challenging sample type. Through our partnership with Grifols, we offerreceived FDA clearance for our customersORAcollect®•Dx saliva collection device for OTC use, which allowsour commercial partners to use and market the device with their therapeutics or devices.

Our Molecular Solutions products include the Colli-Pee® device, developed and sold by our Novosanis subsidiary, for the volumetric collection of first void urine. This product is in its early stages, and initial sales are occurring primarily through distributors and

1


collaborations in the liquid biopsy and sexually transmitted disease markets. In 2022, Novosanis obtained a suite ofCE mark for its Colli-Pee® device containing a prefilled tube with UAS® chemistry, which is designed to stabilize urinary analytes. Our Diversigen subsidiary also offers laboratory and analytical services for both genomics and microbiome customers to more fully meet their needs. These services called “GenoFINDTM”,are primarily provided to pharmaceutical, biotech companies, and research institutions.

In 2022, Diversigen launched its metatranscriptomics sequencing and analysis services for gut microbiome samples, which rangegenerate a microbial community’s gene expression profile to provide information about the interactions between an individual and their microbiome, creating a holistic picture of a sample’s microbial functions and expression levels.

Business Update Related to InteliSwab® Covid-19 Rapid Tests

In June 2021, we received three Emergency Use Authorizations ("EUA") from package customizationthe FDA for our InteliSwab® COVID-19 Rapid Tests (“InteliSwab®”) for non-prescription OTC, professional point-of-care use and study design optimizationprescription home use. We began recording revenues on the sales of our InteliSwab® tests during the third quarter of 2021. In January 2022, InteliSwab® received FDA authorization for pediatric use in children ages 2 to extraction, analysis and reporting services. We serve customers in many countries worldwide, including many leading research universities and hospitals.

OraSure was formed in May 2000 under Delaware law solely14. In September 2021, the Defense Logistics Agency (“DLA”) awarded the Company a procurement contract for the purposesInteliSwab® tests for OTC use, which the DLA estimated to have a value of combining two companies, STC Technologies, Inc. (“STC Technologies”$205 million and which will provide InteliSwab® tests to up to 20,000 sites throughout the United States. In 2022, the Company began to deliver tests to sites throughout the United States under this contract, and DLA has provided delivery orders against which it can continue to issue shipping instructions into 2023. On November 22, 2022, the DLA awarded us a second procurement contract for the InteliSwab® tests for OTC use. Under the terms of the award, the contract estimate is 18 million tests, with a maximum award of 36 million tests and a guaranteed minimum award of 3.6 million tests. The contract will run from November 2022 through November 2023. In December 2022, the U.S. Department of Health and Human Services ("HHS") awarded the Company a fully funded firm fixed price contract for a total of 3.2 million InteliSwab® tests which were delivered in February 2023. In September 2021, we entered into an agreement with BARDA, which is part of the office of the Assistant Secretary for Preparedness and Response at HHS, pursuant to which BARDA would provide the Company with up to $13.6 million in funding to obtain clearance of a premarket notification ("510(k)") and Epitope, Inc.Clinical Laboratory Improvement Amendments of 1988 (“Epitope”CLIA”), and changing waiver of the state of incorporation of Epitope from OregonInteliSwab® tests. In May, 2022, InteliSwab® was selected by HHS to Delaware. STC Technologies and Epitope were merged into OraSure on September 29, 2000. Our principal offices are located at 220 East First Street, Bethlehem, Pennsylvania 18015, andbe distributed across the United States for nationwide school testing.

Through 2022, we have scaled up our telephone number is (610)882-1820.

Additional information about us can be found onoperations to meet the increased demand for the InteliSwab® tests. We significantly expanded our website,www.orasure.com. We make available free of charge through a link provided at such websiteUnited States production capacity for InteliSwab® tests to achieve capacity targets, set out in our Annual Reports on Form10-K, our Quarterly Reports on Form10-Q, our Current Reports on Form8-K and our other filings2021 contract with the SecuritiesU.S. Department of Defense ("DOD") (in coordination with the HHS), of more than 100 million tests annually.

Conclusion of Exploration of Strategic Alternatives

In 2021, our Board of Directors announced that it would explore and Exchange Commission (“SEC”), as well as any amendments to those Reports and filings. These Reports and filings are made available as soon as reasonably practicable after they are filed or furnished toevaluate a broad range of strategic alternatives with the SEC. Our Internet website and the information contained in or connected to that website are not intended to be incorporated by reference into this Annual Report.

goal of maximizing value for stockholders. In May, 2022, our Board of Directors concluded its review of strategic alternatives without a transaction.

Products

Diagnostics Products

The following is a summary of our principal Diagnostics products for the infectious disease and servicesrisk management markets:

InteliSwab® COVID-19 Rapid Test

InteliSwab® is our rapid immunoassay product designed to test nasal samples for the presence of antigen from SARS-CoV-2. The device uses an integrated swab to collect a specimen from the lower nostril. After collection, the integrated swab is inserted into a vial containing a pre-measured amount of developer solution to facilitate flow of the sample into the device. The specimen and their regulatorydeveloper solution flow through the test device and commercial status:

Product/Service

Description

Regulatory Status

Commercial
Status

OraQuick

ADVANCE® HIV-1/2

A rapid,point-of-care

qualitative test for antibodies to the Human Immunodeficiency Virus Type 1(“HIV-1”) and Type 2(“HIV-2” and together withHIV-1,“HIV-1/2”) that can be visually read in approximately 20 minutes.

Premarket approval (“PMA”) by the FDA for use with oral fluid, finger-stick and venous whole blood, and plasma.

CLIA (Clinical Laboratory Improvement Amendments of 1988) waived for use with oral fluid, finger-stick and venous whole blood.

Marketed

Marketed

CE mark (European Union) approved for use with oral fluid, finger-stick and venous whole blood, serum and plasma.

Marketed

Registered in various other countries.

Marketed

OraQuick®

HIV – 1/2

(Export Only)

World Health Organization (“WHO”)pre-qualification.

Marketed

Registered in various foreign countries.

Marketed

OraQuick®In-Home HIV Test

A rapid,point-of-care qualitative oral fluidHIV-1/2 test for OTC use that can be visually read in approximately 20 minutes.

PMA approved for OTC use.

CE Mark (European Union) approved for OTC use.

Marketed

Not Marketed

OraQuick® HIV Self-Test

Rapidpoint-of-care qualitative and oral fluidHIV-1/2 Self-Test that can be visually read in approximately 20 minutes.

Registered in various countries.

WHOpre-qualification.

Marketed
OraQuick® HCV

A rapid,point-of-care qualitative test for antibodies to the hepatitis C virus (“HCV”) that can be visually read in approximately 20 minutes.

PMA approved and CLIA waived for use with venous whole blood and finger-stick whole blood specimens.Marketed

CE mark (European Union) approved for use with oral fluid, finger-stick and venous whole blood, serum and plasma. Also registered in various other countries.

Marketed

Registered in various other countries.

Marketed

WHOpre-qualification.

Marketed

Product/Service

Description

Regulatory Status

Commercial
Status

OraQuick®EbolaA rapidpoint-of-care qualitative test for Ebola antigen that can be visually read in approximately 30 minutes.

Emergency Use Authorization (“EUA”) for use with finger stick and venous whole blood specimenstest results are observable in 30 minutes. The InteliSwab® test has received EUA from live patients.

Marketed

EUA for use with oral fluid specimens from cadavers.

Marketed

Emergency Use Assessment and Listing by WHO for whole blood samples and oral fluid samples from cadavers.

Marketed
OraQuick® Zika

A rapidpoint-of-care qualitative test for Zika antibodies that can be read in approximately 20 minutes.

Under development.Not Marketed

OraSure QuickFlu® Rapid Flu

A&B Test

A rapid,point-of-care qualitative test for antibodies to influenza (flu) Types A and B, including H1N1 infections, with results available in 10 minutes.

FDA 510(k) cleared for use with nasal swab, nasopharyngeal swab and nasal aspirate/wash.

CLIA waived for use with nasal and nasopharyngeal swabs.

Marketed

Marketed

OraSure®Oral fluid collection device for detection ofHIV-1 antibodies, cocaine and cotinine in a laboratory setting.

PMA approved for detection ofHIV-1 antibodies with approved laboratory enzyme immunoassay test and registered as a Class I Medical device in the U.S. for detection of cocaine and cotinine.

Marketed
Oragene®• DX

Non-invasiveall-in-one system for the collection, stabilization, transportation and storage of human DNA from saliva.

FDA 510(k) cleared for use withFDA-cleared or exempt molecular tests, including OTC use.Marketed
Oragene®• DNA

Non-invasiveall-in-one system for the collection, stabilization, transportation, and storage of human DNA from saliva.

CE marked and registered as Class 1 Medical Device in Canada.

Registered in various other countries.

Marketed
Oragene®• RNA

Non-invasiveall-in-one system for the collection, stabilization and transportation of RNA from human saliva.

Research use only product.Marketed
ORAcollect® • DX

All-in-one system for the collection, stabilization, transportation, and storage of human DNA from saliva.

FDA 510(k) cleared.Marketed
ORAcollect® • DNA

All-in-one system for the collection, stabilization, transportation, and storage of human DNA from saliva.

CE marked and registered as Class 1 Medical Device.

Marketed

Registered in various foreign countries.

Marketed

OMNIgene®

DISCOVER

Non-invasiveall-in-one system for the collection, stabilization, transportation, and storage of microbial DNA from saliva.

Research use only product.Marketed

Product/Service

Description

Regulatory Status

Commercial
Status

Performagene

All-in-one non-invasive swab kit for the collection, stablization and transportation of animal DNA samples.

Animal research use only.Marketed
OMNIgene®GUTAll-in-one system for the collection, stabilization, transportation and storage of microbial DNA in stool samples.

Research use only product.

CE marked and registered in certain countries.

Marketed

Marketed

OMNIgene®SPUTUM

Reagent for liquefying, decontaminating, transporting and preserving tuberculosis bacteria in sputum samples.

Research use only product.

CE marked and registered in certain countries.

Marketed
OMNIgene®•VAGINAL

Device for self-collection and stabilization of DNA and RNA from the vagina.

Research use only.Marketed
OMNIgene®• ORAL

Device for self-collection and stabilization of DNA and RNA from the mouth.

Research use only.Marketed
Hemagene®

Reagent to stabilize high molecular weight DNA in buffy coat samples at ambient temperature

Research use only.Marketed
PrepIT®

Reagents for extraction and preparation of DNA from saliva.

CE marked and registered in the U.S., Canada and various other countries.

Marketed
GenoFINDTMEnd-to-end services for genomics and microbiome analysis

Provided by CLIA and College of American Pathologists (“CAP”) certified lab.

Marketed
Intercept®

Oral fluid collection device for oral fluiddrugs-of-abuse (“DOA”) testing in a laboratory setting.

FDA 510(k) cleared for use with nine MICRO-PLATE DOA assays.Marketed

CE marked and registered in certain countries.

Marketed
MICRO-PLATE DOA Assays

Used to detect the following drugs in an oral fluid sample collected with Intercept® device: tetrahydrocannabinol (“THC” or marijuana), cocaine, opiates, amphetamines, methamphetamines, phencyclidine (“PCP”), benzodiazepines, barbiturates and methadone.

Nine drug assays – FDA 510(k) cleared.

Assays CE marked and registered in certain countries.

Marketed

Marketed

Intercept i2®

Oral fluid collection device for oral fluid DOA testing in a laboratory setting using fully-automated, high-throughput oral fluid DOA assays.

Forensic use only product.

Generic device CE marked and registered as Class I Medical Device in the U.S.

Marketed

Marketed

Homogeneous DOA AssaysFully-automated high-throughput oral fluid DOA assays jointly developed with Thermo Fisher for use on oral fluid samples collectedForensic use only.Marketed

Product/Service

Description

Regulatory Status

Commercial
Status

with an Intercept i2® device to detect PCP, opiates, cocaine, methamphetamines amphetamines, and THC.

Cryosurgical Systems - Professional

Cryosurgical (freezing) system for the removal of warts and other benign skin lesions, marketed under the Histofreezer® tradename primarily to the physicians’ office market.

FDA 510(k) cleared for nine types
of skin lesions.

CE marked and registered in certain countries.

Marketed

Marketed

Cryosurgical Systems – OTC

Cryosurgical system for the removal of common and plantar warts and skin tags, sold in various OTC markets under certain brand names and on a private label basis.

FDA 510(k) cleared for common and plantar warts.

Registered in Canada for warts and skin tags.

Marketed

Marketed

CE marked and registered for warts in certain countries under Scholl Freeze Spray® and POINTTS® names and for skin tags under CryoTag name.

Marketed

CE marked for skin tags.

Marketed

In addition to the above products, we sell certain immunoassayFDA for non-prescription, OTC home use in individuals aged two years or older, with symptoms within the first seven (7) days of onset when tested at least twice over a three-day period with at least 48 hours between tests and reagentswithout symptoms or epidemiological reasons to suspect COVID-19 when tested at least three times over a five-day period with at least 48 hours between tests.

In 2022, the InteliSwab® test became available for insurance risk assessment, substance abuse testingpurchase on Amazon’s online store to customers in the United States. The tests are sold and forensic toxicology applications; an oral fluid Western blotHIV-1 confirmatoryorders fulfilled by Amazon.

InteliSwab® COVID-19 Rapid Test Pro

The InteliSwab® COVID-19 Rapid Test Pro is a version of InteliSwab® intended for use by healthcare providers at the point of care. The test for confirming positiveHIV-1is performed in the same manner as the OTC version, except that the test results obtainedis run and interpreted by a healthcare provider. This test

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has received EUA from the FDA for use by laboratories located in the United States certified under CLIA. We have also received a CLIA waiver for use of our OraSurethe test, which enables the test to be used by numerous additional sites in the United States, which are not certified under CLIA, to perform high and moderately complex tests. These additional sites include outreach clinics, community-based organizations and physicians’ offices. This test is also indicated for individuals aged 2 years and older, with and without symptoms of COVID-19.

InteliSwab® collection device; andCOVID-19 Rapid Test Rx

The InteliSwab® COVID-19 Rapid Test Rx is the version of InteliSwab® that has received EUA from the FDA 510(k) cleared Q.E.D.® rapidpoint-of-care saliva alcohol test.for prescription home use with individuals aged 2 years or older who are suspected of COVID-19 infection by their healthcare provider within the first seven days of symptom onset.

OraQuick®Rapid HIV Test

The OraQuick®Rapid HIV Test is our rapidpoint-of-care test platformproduct designed to test oral fluid, whole blood (i.e., both finger-stick and venous), plasma and serum samples for the presence of various antibodies or analytes.antibodies. The device uses a porous flat pad to collect an oral fluid specimen. After collection, the pad is inserted into a vial containing apre-measured amount of developer solution and allowed to develop. When blood, plasma or serum is to be tested, a loop collection device is used to collect a drop of the specimen and mix it in the developer solution, after which the collection pad is inserted into the solution and allowed to develop. In all cases, the specimen and developer solution then flow through the testing device where test results are observable in approximately 20 minutes. The OraQuick® device is a screening test and generally requires a confirmation test where an initial positive result is obtained.

This product is sold under the OraQuickADVANCE®name in North America, Europe and certain other countries and under the OraQuick®name in other developing countries. The test has received PMA approval of a premarket approval (“PMA”) application from the FDA for the detection of antibodies to bothHIV-1 andHIV-2 in oral fluid, finger-stick whole blood, venous whole blood and plasma. This test is available for use by laboratories located in the United States certified under the Clinical Laboratory Improvements Amendment of 1988, or CLIA, to perform moderately complex tests. We have also received a CLIA waiver for use of the test with oral fluid and finger-stick and venous whole blood. As a result, the test can be used by numerous additional sites in the United States not certified under CLIA to perform moderately complex tests, such as outreach clinics, community-based organizations and physicians’ offices.

On the international front, we have obtained a CE mark for our OraQuickADVANCE®test so that we can sell this product in Europe and other countries accepting the CE mark for commercialization and this product is

registered for sale in other countries. We have distributors in place for several countries and are seeking to increase awareness and expand our distribution network for this product throughout the world. We have also received WHOWorld Health Organization (“WHO”) pre-qualification for our export onlyexport-only version of this product.

OraQuick®In-Home HIV Test

The OraQuick®In-Home HIV test is anover-the-counter OTC oral-fluid only version of our OraQuickADVANCE®HIV 1/2 Antibody Test. We received PMA approval to sell this test in the U.S. OTC market. We have also received a CE mark for the OraQuick®The In-Home HIV test, although this product is not currently sold in the European Union. TheIn-Home test is performed in the same manner as the OraQuickADVANCE® test, except that it has product labeling and instructions designed for consumers. In addition, we have established a toll free,toll-free, 24/7,365-day per year customer call centertelephone support to provide additional information and referral supportservices for consumers.consumers that use this product.

OraQuick®HIV Self-Test

The OraQuick® HIV Self-Test has the same diagnostic capabilities as our U.S. approved OraQuick®In-Home HIV test but is sold intofor use by individuals in certain foreign countries, at a lower costincluding under the CE mark in certain European countries, to meet the needs of those markets. We are working with Population Services International (“PSI”), a leading global health organization, along with UNITAID, the WHO and health officials from several African countries to deploy our self-test through theUNITAID-PSI HIV Self-Testing in Africa (“STAR”) project. The OraQuick® Self-Test has labeling and instructions specifically tailored for the African marketplace. The purpose of the STAR project is to generate crucial information about how best to deliver HIV self-testing, how to generate demand for HIV testing in this manner and what the potential public health impact of self-testing will be. Our OraQuick® Self-Test was chosen by PSI because of its quality,ease-of-use and oral fluid option. This product has received WHOpre-qualification and is eligible for procurement by purchasing entities entitled to access funding and other resources from the Global Fund, UNITAID and other agencies.

OraQuick®HCV Rapid Antibody Test

Another test available on the OraQuick®platform is the OraQuick® HCV rapid antibody test. Like the OraQuick® HIV test, thisThis product is a qualitative test that can detect antibodies to the hepatitis C virus or HCV,(“HCV”), in a variety of sample types. The OraQuick®HCV test operates in substantially the same manner as the OraQuick ADVANCE®HIV test.

We have received FDA PMA approval and CLIA waiver for use of the test in detecting HCV antibodies in venous whole blood and finger-stick whole blood specimens, making it the first and only rapid HCV test approved by the FDA for use in the United States. The OraQuick® HCV test has received a CE mark for use with oral fluid, venous whole blood, finger-stick whole blood, plasma and serum and is sold in Europe. This CE-marked product is also registered and sold in other foreign countries and has received WHOpre-qualification.

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OraQuick®Ebola Rapid Antigen Test

In 2015, we completed development of

We have received 510(k) clearance from the FDA for our new rapid Ebola test.test, making it the first and only rapid Ebola test cleared for sale in the U.S. This product utilizes the OraQuick® technology platform for the detection of Ebola antigen. This test has received EUAs from the FDA for emergency use by laboratoriesantigen and facilities adequately equipped, trained and capable of testing for Ebola infection (including treatment centers and public health clinics) oncan be used with finger-stick and venous whole blood samples collected from live patients as well asand oral fluid specimens collectedsamples from cadavers.recently deceased individuals. The WHO has also issued an Emergency Use Assessment and Listinguses for this producttest are limited to individuals that meet certain criteria indicating they may be infected with respect to the same specimen types.

OraSure QuickFlu® Rapid Flu A&B Test

The OraSure QuickFlu® Rapid Flu A&B test is an FDA 510(k) cleared rapid qualitative test for the detection of influenza (flu) Types A and B, including H1N1 viral infections. The test utilizes specimen collected with a nasal

swab, nasopharyngeal swab or nasal aspirate/wash. A reagent is first inserted into a test cartridge, the specimen is added andEbola virus, so the test is allowed to flow. Results arenot available in as little as ten minutes. This product is manufactured for us undergeneral screening of individuals that do not meet this criteria.

In September 2022, we entered into an agreement with Princeton BioMeditech Corporation (“PBM”) and is currently soldBARDA, pursuant to which BARDA will provide up to $8.6 million in certain U.S. markets. PBM has also obtainedfunding to us to develop a CLIA waiver for this2nd generation Ebola test for use with nasal and nasopharyngeal swabs.on the OraQuick® testing platform.

OraSure®Collection Device

Our OraSure®oral fluid collection device is used in conjunction with screening and confirmatory tests forHIV-1 antibodies. The generic version of this product can be used for other analytes. This device consists of a small, treated cotton-fiber pad on a handle that is placed in a person’s mouth for two to five minutes. The device collects oral mucosal transudate, (“OMT”), a serum-derived fluid that contains higher concentrations of certain antibodies and analytes than saliva. As a result, OMToral mucosal transudate testing is a highly accurate method for detectingHIV-1 infection and other analytes.

The OraSure® collection device is FDA approved for use in the detection ofHIV-1 antibodies. The generic version is a Class I medical device for the detection of cocaine and cotinine in oral fluid specimens.specimens for risk assessment testing. HIV-1 antibody detection using the OraSure®collection device involves three steps:

Collection of an oral fluid specimen using the OraSure® device;

Screening of the specimen forHIV-1 antibodies at a laboratory with an enzyme immunoassay (“EIA”) screening test approved by the FDA for use with the OraSure® device; and

Collection of an oral fluid specimen using the OraSure® device;
Screening of the specimen for HIV-1 antibodies at a laboratory with an enzyme immunoassay (“EIA”) screening test approved by the FDA for use with the OraSure® device; and
Laboratory confirmation of any positive screening test results with either our oral fluid Western blotHIV-1 confirmatory test (described below) or a blood basedblood-based nucleic acid test.

A trained health care professional then conveys test results and provides appropriate counseling to the individual who was tested.

Tuberculosis (“TB”) Products

OMNIgeneIntercept® • SPUTUM is anon-toxic and highly stable reagent that liquefies and decontaminates sputum samples at thepoint-of-collection or in the lab while preserving the viability of TB bacteria for at least eight (8) days at ambient temperatures. Optimized samples are compatible with all routine TB tests, enable cost-effective sample transport and simplify laboratory workflows while eliminating the need for lab reagents that require daily mixing and quality control. We believe OMNIGENE® • SPUTUM can improve laboratory and operational workflows compared to current approaches, and improve overall test results. This product is being offered to TB laboratories for evaluation.

The OMNIgene® • SPUTUM product is CE marked and is gaining greater interest for tuberculosis testing. Healthcare providers from more than 60 countries have expressed interest in evaluating this product and business entities, ranging from Ministries of Health,non-government organizations, donor agencies and diagnostic test developers, have begun their product evaluations. Our tuberculosis products are well positioned to support the U.S. government’s National Action Plan for combatting multi-drug resistant tuberculosis, by providing much needed solutions to developing countries that are at the highest risk for multi-drug resistant tuberculosis.

Molecular Collection Systems

We sell a number of genomic products that provideall-in-one systems for the collection, stabilization, transportation, and storage of DNA and/or RNA from human and animal biologic samples. Our lead product is sold under the Oragene® brand and is used to collect DNA from human saliva. These products are currently sold to thousands of academic, research and commercial customers in many countries worldwide.

Our molecular collection products are available in several different configurations and contain proprietary chemical solutions that are optimized for the specific application for which each product is designed. Product physical design is focused onease-of-use and reliability for self or assisted collection of samples. For example, several of the Oragene® products require users to simply hold the product close to their mouth and spit into the collection device. When the container is closed, the reagents stored in the lid of the container are mixed with the captured saliva and immediately protect the nucleic acids in the sample. Thisnon-invasive collection method yields nucleic acid that remains stable at ambient temperature for extended periods. The stabilizing technology results in high quality and high quantity nucleic acids that are required for most genetic testing and analysis methods.

We also market several microbiome collection products designed to collect, stabilize and transport the microbial profile from multiple sample types. Unlike genomic DNA, the microbiome of a sample can change over time, especially when exposed to temperature and environment fluctuations. In order to optimize and standardize sample results, a reliable method that captures and preserves (“snapshots”) the microbiome after collection, until analysis is required. We believe our products provide such a reliable method.

Our OMNIgene® • GUT product is anall-in-one system designed to enable an individual to easily self-collect high quality microbial DNA from feces or stool samples for gut microbiome profiling for use in clinical laboratory and research use settings. The product ensures that the fecal sample is fully stabilized immediately upon collection and maintains an accurate and reliable bacterial profile for weeks at room temperature. Current methodologies for gut microbiome profiling have distinct shortcomings due to the introduction of bias, leading to a lack of reproducibility in the field. We have also begun marketing other microbiome collection kits for DNA or RNA collected from the vagina and oral cavity.

We believe these products provide significant advantages over competing DNA and RNA collection methods such as blood collection or buccal swabs, particularly in human genetic applications. Benefits include the reliable collection of high quality and stable genetic samples, use of simplenon-invasive collection methods, the ability to store and transport collected samples for extended periods at ambient temperatures and compatibility with fully-automated laboratory testing systems.

Our molecular business also offers customers our GenoFINDTM services, a suite of genomic and microbiome services that range from package customization and study design optimization to extraction, analysis and reporting services. We believe our GenoFINDTM offering will become an increasingly valuable tool for meeting the needs of our molecular customers.

Our molecular collection products historically have been sold primarily as Class I medical devices for use by research and academic institutions. We have received FDA 510(k) clearance of the Oragene®•DX product for use with the eSensor® Warfarin sensitivity saliva test. A separate 510(k) clearance permits self-collection by consumers when the sample is to be tested with either an exempt or 510(k) cleared molecular test. Our ORAcollect® product similarly received 510(k) clearance from the FDA. We have also received CE mark approval for the Oragene®•DNA, ORAcollect® and OMNIgene®•GUT collection kits.

Intercept®Drug Testing System

A collection device that is substantially similar to the OraSure® collection device is sold under the name Intercept®, and is used to collect oral mucosal transudate or OMT for oral fluid drug testing. We have received FDA 510(k) clearance to use the Intercept®collection device with laboratory-based EIAs to test fordrugs-of-abuse commonly identified by the National Institute for Drug Abuse (“NIDA”) as theNIDA-5 (i.e., tetrahydrocannabinol (“THC” or marijuana), cocaine, opiates, amphetamines/methamphetamines and phencyclidine (“PCP”)), and for barbiturates, methadone and benzodiazepines. Each of these EIAs is also FDA 510(k) cleared for use with the Intercept® device. Our Intercept® device and oral fluid assays are sold in the U.S. primarily through laboratory distributors.

We believe that the Intercept®device has several advantages over competing urine and otherdrugs-of-abuse testing products, including its lower total testing cost, itsnon-invasive nature, mobility and accuracy, the ease of maintaining achain-of-custody, the treatment of test subjects with greater dignity, no requirement for specially-prepared collection facilities and difficulty of sample adulteration. The availability of an oral fluid test is intended to allow our customers to test for drug impairment and eliminate scheduling costs and inconvenience, thereby streamlining the testing process.

During 2014, we completed development of

We have also developed a next generationnext-generation collection device, which we are marketing under the tradenametrade name “Intercept i2®he”. This device offers several important advantages over our original Intercept®device, including a sample adequacy indicator that provides a visual prompt when the appropriate volume of oral fluid has been collected, the ability to collect a larger sample required by current laboratory testing protocols and a more optimized chemistry that results in improved recovery of the targeted drug analytes. The Intercept i2®hedevice is currently being sold as a forensic use only device within the criminal justice and drug treatment markets along with aNIDA-5 panel of fully-automated high-throughput oral fluid drug assays that we distribute under an agreement with Thermo Fisher Scientific (“Thermo Fisher”).Scientific.

Cryosurgical Systems (Skin Lesion Removal Products)

The Histofreezer® cryosurgical removal system is alow-cost alternative to liquid nitrogen and other methods for removal of warts and other benign skin lesions by physicians. The Histofreezer® product mixes three cryogenic gases in a small aerosol canister. When released, these gases are delivered to a specially designed foam bud, cooling the bud to a maximum of –50°C to –55°C. The frozen bud is then applied to the wart or lesion for 15 to 40 seconds (depending on the type of lesion) creating localized destruction of the target area by freezing. We have received 510(k) clearance for use of the Histofreezer® product to remove common warts and eight other types of benign skin lesions, and this product has been CE marked and registered for distribution in Canada, throughout Europe and in certain other foreign countries. We also supply this product on a private label basis for resale by one of our physician office distributors.

Internationally, we sell an OTC cryosurgical product through our distributor Genomma Labs (“Genomma”), under the POINTTS tradename, in Mexico and a number of South and Central American countries. We sell a CE marked cryosurgical wart removal product into the OTC foot care market in Europe, Australia and New Zealand through our distributor, Reckitt Benckiser (“Reckitt”), under the Scholl and Dr. Scholl trademarks. Reckitt is the owner of the Scholl and Dr. Scholl trademarks in countries outside North and South America. We also sell OTC cryosurgical products to retailers on a private label basis for the treatment of warts in the U.S., for the treatment of both warts and skin tags in Canada and for the treatment of skin tags in the U.K.

Immunoassay Tests and Reagents

We develop and sell immunoassay tests in formats, known as MICRO-PLATE and AUTO-LYTE®, to meet the specific needs of our customers. We also sell fully-automated high-throughput oral fluid drug assays developed under our agreement with Thermo Fisher.

In a MICRO-PLATE kit, the sample to be tested is placed into a small plastic receptacle, called a microwell, along with the reagents. The result of the test is determined by the color of the microwell upon completion of the reaction. Controlling the reaction involves the use of reagents by laboratory personnel. Test results are analyzed by any of a variety of commercially available laboratory instruments, which we may also provide to our laboratory customers.4


Our MICRO-PLATE tests can be performed on commonly used instruments and can detect drugs in urine, serum and sweat specimens. MICRO-PLATE tests are also used as part of the Intercept® product line to detectdrugs-of-abuse in oral fluid specimens.

specimens and we are selling a NIDA-5 panel of microplate assays supplied by Thermo Fisher to the U.S. forensic market under the agreement described above. AUTO-LYTE®tests are sold in the form of bottles of liquid reagents. These reagents, are run on commercially available laboratory-based automated analytical instruments, whichand are manufactured by a variety of third

parties. AUTO-LYTE® is typically used in high volume, automated, commercial reference insurance laboratories to detect certain drugs or chemicals in urine. Test results are produced quickly, allowing for high-throughput. Our AUTO-LYTE® tests continue to face strong competition from cheaper “home-brew” tests developed internally by our laboratory customers. As a result, we may eventually stop selling our AUTO-LYTE® tests.

We previously entered into an agreement with Thermo Fisher under which Thermo Fisher would develop and supply up to 12 fully-automated high-throughput oral fluid drug assays for use with our Intercept i2® device. Under this agreement, we are currently selling aNIDA-5 panel of assays supplied by Thermo Fisher in the U.S. forensic market. The parties are discussing certain changes to this agreement and assessing their ability to complete development of several additional assays and pursue FDA 510(k) clearance, CE marking and other regulatory approvals of the Intercept i2® device for use with a12-assay panel. Subject to these further discussions with Thermo Fisher, we believe the offering of an Intercept i2® device with a full menu of fully-automated high-throughput oral fluid assays will better meet the needs of our laboratory drug testing customers and allow us to compete more effectively against fully automated urine drug assays that dominate the drug testing market.

Western blotHIV-1 Confirmatory Test

We sell an oral fluid Western blotHIV-1 confirmatory test that received premarket approval from the FDA in 1996. This test uses the original specimen collected with the OraSureQ.E.D.® oral fluid collection device to confirm positive results of initial oral fluidHIV-1 EIA screening tests. Afterre-evaluating the market demand for this product, we decided to stop manufacturing our western blotHIV-1 confirmatory test in the summer of 2017. We believe existing inventory levels of this product will be exhausted in the first quarter of 2018, after which we will no longer sell this product. We are providing support to assist customers in seeking appropriate confirmatory testing services for positive results from the use of our OraQuick® collection device.

Q.E.D.®Saliva Alcohol Test

Our Q.E.D.®saliva alcohol test is apoint-of-care test device that is a cost-effective alternative to breath or blood alcohol testing. The test is a quantitative, saliva-based method for the detection of ethanol, has been cleared for sale by the FDA and has received a CLIA waiver. The U.S. Department of Transportation (“DOT”) has also approved the test.

Each Q.E.D.® test kit contains a collection stick that is used to collect a sample of saliva and a disposable detection device that displays results in a format similar to a thermometer. The Q.E.D.® device is easy to operate and instrumentation is not required to read the result. The product has a testing range of 0 to 0.145% blood alcohol and produces results in approximately two minutes.

Products Under Development

Infectious DiseaseMolecular Solutions Products

One recent area

Genomic Products

We sell many genomic products that provide all-in-one systems for the collection, stabilization, transportation, and storage of focus for product development has been our OraQuickDNA, RNA, as well as both DNA and RNA together from human and animal biological samples. Our lead products are sold under the Oragene® Ebola rapid antigen test. and ORAcollect® brands and are used to collect genetic material from human saliva. These products are currently sold to thousands of academic research and commercial customers in many countries worldwide. In July 2015, 2022, we received an Emergency Use Authorization or EUAFDA clearance for our Ebola testORAcollect®•Dx saliva collection device for OTC use through our partnership with Grifols, which allowsour commercial partners to use and legally market the device with their assays when used in conjunction with their intended uses.

Our genomic products are available in several configurations and contain proprietary chemical solutions optimized for the specific application for which each product is designed. Product physical design is focused on ease-of-use and reliability for self or assisted collection of samples. For example, several of the Oragene® products require users to hold the product close to their mouth and spit into the collection device. When the container is closed, the reagents stored in the container’s lid are mixed with the captured saliva and stabilize and preserve the nucleic acids in the sample. This non-invasive collection method yields nucleic acid that remains stable at ambient temperature for extended periods. The stabilizing technology ensures the preservation of high quality and high quantity nucleic acids required for many genetic testing and analysis methods.

We believe these products provide significant advantages over competing DNA and RNA collection methods such as blood collection or buccal swabs, particularly in human genetic applications.

Benefits include:

Reliable high-quality and stable genetic samples.
Simple, non-invasive collection methods.
The ability to store and transport collected samples for extended periods at ambient temperatures.
Compatibility with fully automated laboratory testing systems.

We also sell the Colli-Pee® collection device for the volumetric collection of first void urine samples. This product is used in liquid biopsy applications for the prostate and bladder cancer markets and in the sexually transmitted infection screening market.

COVID Collection Products

Since 2020, we have actively engaged with several laboratories and researchers to demonstrate the effectiveness of our existing collection products for use with COVID-19 molecular testing. We believe that oral samples collected using devices from our product lines for liquid saliva or oral swab samples are a suitable alternative to more commonly used samples collected with a nasopharyngeal or oropharyngeal swab. As a result, since 2020, we have sold our ORAcollect® • RNA and OMNIgene® • ORAL collection devices for use in connection with COVID-19 molecular testing. Due in part to the FDA. This authorization allows reduction in the number of COVID-19 cases and the shift toward

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the use of antigen testing, the demand for COVID-19 PCR testing declined in 2022, which negatively impacted the sales of our collection products.

Microbiome Products

We also market several microbiome collection products designed to collect, stabilize, and transport the microbial profile from multiple sample types. When unstabilized, a microbiome sample can change when exposed to environmental fluctuations, such as temperature changes. Our microbiome collection products support collecting and stabilizing metabolites found in fecal samples by capturing and preserving the microbiome after collection until the desired analysis can be performed.

Our OMNIgene® • GUT product is an all-in-one system designed to enable an individual to easily self-collect high-quality microbial DNA from feces or stool samples for gut microbiome profiling for use in the durationclinical laboratory and research settings. In 2022, our OMNIgene® • GUT DNA and RNA collection device (OMR-205), became available to gut microbiome researchers, allowing for self-collection, stabilization, storage and transportation of microbial DNA and RNA at ambient temperature for gut microbiome profiling. Most current methodologies for gut microbiome profiling have distinct shortcomings due to the introduction of bias, leading to a lack of reproducibility in the field. We believe our product ensures that the microbial DNA and RNA in the fecal sample are fully stabilized immediately upon collection and maintains an accurate and reliable bacterial profile for weeks at room temperature. Recently, we have applied these principles of sample stabilization to other sample types, including oral, skin, and vaginal samples.

We also launched the OMNIgene®•GUT Dx collection device (OMD-200), which was granted De Novo authorization from the FDA for collection of human fecal samples and the stabilization of DNA from the bacterial community for subsequent assessment of the U.S. Secretarymicrobiome profile by an assay validated for use with OMNIgene®·GUT Dx device.

Laboratory and Data Analytical Services

Our Molecular Solutions business also offers our customers microbiome laboratory testing and analytical services. Our services focus on accelerating microbiome discovery for customers in the pharmaceutical, agriculture, and research communities. Our goal is to help customers unleash the translational potential of the Departmentmicrobiome by providing fast and information-rich characterizations of Healthmicrobial diversity and Human Servicesfunction paired with expert analytics. We also offer comprehensive microbiome and metagenomics services to improve human, animal, and environmental health and, in 2022, we launched our metatranscriptomics sequencing and analysis services for gut microbiome samples. These services generate a microbial community’s gene expression profile to provide information about the interactions between an individual and their microbiome, creating a holistic picture of a sample’s microbial functions and expression levels. Diversigen has extensive experience with highly diverse microbiome sample types and provides complete project life cycle consulting services, including pre-project consulting, study design, extraction, and sequencing to complete bioinformatics analysis. Diversigen is at the forefront of setting quality standards for this industry and has obtained the College of American Pathologists (“HHS”CAP”) August 5, 2014 declaration regarding the emergency use of in vitro diagnosticaccreditation at its laboratory facilities.

Products Under Development

Diagnostic Products

Our research and development efforts include programs targeted at expanding and enhancing our diagnostics business. These programs typically focus on products related to drug adherence and rapid tests for the detection of the Ebola virus. Under this authorization, the test can be used on finger-stick and venous whole blood samples collected from live patients.various diseases.

In June 2015, we entered into

We are working to develop a contract with the Biomedical Advanced Research Development Authority (“BARDA”) within the HHS for up to $10.4 million of funding for our OraQuick® Ebola test. The three-year, multi-phased contract included an initial commitment of $1.8 million and options for up to an additional $8.6 million to fund certain clinical and regulatory activities. In September 2015 and July 2017, BARDA exercised an option to provide $7.2 million and $1.3 million, respectively, in additional funding for our OraQuick® Ebola test.

In March 2016, we received an EUA for use of the2nd generation Ebola test on oral fluid samples collected from cadavers. The WHO has issued an Emergency Use Assessment and Listing, or EUAL, for use of the productOraQuick® testing platform with whole blood samples collected from live patients and with oral fluid samples collected from cadavers. These approvals will allow expanded use of the product, particularly in Africa. We also intend to seek 510(k) clearance offunds obtained under our Ebola test from the FDA in the future.

Our recent product development efforts have also been focused on addressing global concerns regarding the Zika virus. As a result, we have been developing a rapid Zika antibody test on our OraQuick®platform. This virus is believed to be spread primarily through infected mosquitoes and has been linked as a possible cause of microcephaly in newborn babies whose mothers are infected. There has also been some potential correlation reported with Guillain-Barre syndrome in certain other infected patients.

In August 2016, we entered into a contract with BARDA for up to $16.6 million of funding for our OraQuick® Zika test. Thesix-year, multi-phased contract included an initial commitment of $7.0 million and options for up to an additional $9.6 million to fund the evaluation of additional product enhancements, and certain clinical and regulatory activities. In May 2017, BARDA exercised an option to provide $2.6 million in additional funding for our rapid Zika test.BARDA.

Molecular CollectionsSolutions

In order to intersect evolving customer needs within the academic and commercial markets, our molecular business product development pipeline is focused on extending offerings across different sample types and analytes within both the genomics and microbiome areas. Genomic customers are demonstrating an increasing demand for RNA collection and stabilization.stabilization of cell-free nucleic acids, exosomes, DNA and RNA. On the microbiome front, we continue to focus research and development work on collecting and stabilizing microbial DNA, RNA and RNAmetabolites from multiple sample types including gut, skin, vagina and saliva.

The field of microbiome services is fast paced with evolving biological understanding and development of new methodologies. Our development efforts are focused on remaining at the forefront of laboratory and informatics technologies, as well as providing new and relevant services to our customers. These include a focus on laboratory and informatics methods to integrate DNA, RNA and metabolites from microbial communities across different sample types.

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Sales and Marketing

We are also evolving the physical design and features ofmarket our products to further enable high throughput processing through improved interoperability with automated platforms.

Research and Development

In 2017, our research and development activities focused primarily on development of our new rapid Ebola and Zika tests, an improvement to our rapid HIV test, expanded molecular collection product offerings for the microbiome and genomics markets, our next generation Intercept i2® collection device, and clinical and technical support for our existing products, with significant focus in tuberculosis market support. From time to time, we have contracted with third parties to conduct research and development activities and we may do so in the future.

ResearchUnited States and development expenses were $13.4 million in 2017, $9.8 million in 2016, and $11.7 million in 2015. These expenses include our costs associated with research and development, regulatory affairs, clinical trials and product support.

Sales and Marketing

internationally. We attempt to reach our major target markets through a combination of direct sales, strategic arrangements and independent distributors. Our marketing strategy is to create or raise awareness through a full array of marketing activities, which include trade shows, print advertising, special programs, distributor promotions, telemarketing and the use of digital and social media in order to stimulate sales in each target market. Our revenues by geographic area are described in Note 2 of the Notes to the consolidated financial statements included in Item 15 of this Annual Report.

We market our

Diagnostics - Professional

Our InteliSwab® COVID-19 Rapid Test Pro and Rx products in the United Statesare primarily sold through distributors to U.S. hospitals, physician offices and internationally. Consolidated net revenues attributableclinics. These products are also marketed directly to customers in the United States were $121.5 million, $99.8 million,public health market including clinics and $96.5 million in 2017, 2016laboratories of state, county and 2015 respectively. Consolidated net revenues attributable to international customers amounted to $45.6 million, $28.4 million, and $23.2 million, or 27%, 22% and 19% of our total revenues, in 2017, 2016 and 2015, respectively. For more information about our revenues and long-lived assets attributable to U.S. and international customers, please see Note 10 to our consolidated financial statements included elsewhere in this Annual Report.

other governmental agencies.

Infectious Disease Testing - Professional

We market the OraQuickADVANCE® rapidHIV-1/2 antibody test directly to customers in the public health market for HIV testing. This market consists of a broad range of clinics and laboratories and includes states, counties, and other governmental agencies, family planning clinics, colleges and universities, correctional facilities and the military. There are also a number of organizations in the public health market, such as AIDS service organizations and various community-based organizations, that are set up primarily for the purpose of encouraging and enabling HIV testing. We also sell our OraQuickADVANCE® test directly to hospitals and physician offices in the U.S. andprimarily through distributors into the U.S. physician office market and to retail clinics operated by pharmacies.distributors. In addition, we distribute our OraQuick® HIV test in certain other foreign countries.countries through distributors.

Our OraQuick®HCV test is sold primarily to the same markets where our OraQuickADVANCE® ADVANCE HIV test is sold, including public health organizations, hospitals, physicians and retail clinics. We also sell this test in other countries through distributors.

A major focus for our HCV business has been,

Diagnostics - OTC and will continue to be, to market our test to foreign countries that intend to implement broad scale testing or country-wide HCV elimination programs.Self-Test

We currently sell our OraQuickInteliSwab® Ebola test under an EUA and our only customer to date has been the CDC, which has purchased the COVID-19 Rapid Test product for field testing in Africa. There were minimal Ebola sales in 2017. Our ability to expand sales of this test to other customers will likely depend on the timing and extent of future outbreaks of the disease, the availability of government or other funding and whether we are able to obtain FDA 510(k) clearance andpre-qualification with the WHO for our product.

We market the OraSure® oral fluid collection device forHIV-1 testing, on its own and as a kit in combination with laboratory testing services. To better serve our public health customers, we have contracted a commercial laboratory to provide prepackaged OraSure® test kits, with prepaid laboratory testing and specimen shipping costs included. We also sell the OraSure® device in the international public health market.U.S. retail and consumer markets, including for purchase by US customers on Walmart and Amazon’s online stores. The OTC InteliSwab® test is also sold directly and through distributors into a broad range of business-to-business (B2B) markets including employer testing, colleges and universities, local, state and federal governmental agencies and the US military.

We have distribution rights to an FDA 510(k) cleared and CLIA waived rapid flu A&B test, which we market under our proprietary OraSure QuickFlu®tradename. Under our agreement with the supplier of this product, we are permitted to sell this product into the U.S. hospital and public health markets.

We have also been working to commercialize the OMNIgene®SPUTUM and PrepIT® • MAX products. TB is a major global health issue, with long established relationships among public health agencies, NGO’s, and suppliers. We have a focused sales and market development team working with these key players to have our products evaluated and adopted where possible.

Infectious Disease Testing - OTC

We sell our OraQuick®In-Home HIV test in the U.S. retail or consumer market. Retailers carrying the product include CVS, Walgreens, Rite Aid andWal-Mart.The product is also available for purchaseon-line through certain retailers and from our website,www.oraquick.com. www.oraquick.com. The primary target population for ourHIV-OTC test is comprised ofcomprises young, sexually active adults, with greater purchase intent found in high-risksub-groups, such as men who have sex with men, African Americans and Latino Americans.

To support individuals that purchase and use our test, we offer toll-free customer support on a 24/7,365-day per year basis. This service provides consumers with access to trained representatives who can answer questions about HIV/AIDS and the use of our test, and refer consumers to appropriate resources forfollow-up confirmatory testing, counseling and medical treatment.

In 2016, we began selling We also sell our OraQuick®HIV Self-Test to PSI (Population Services International) for use in a self-testing pilot program called the HIV Self-Testing in Africa, or STAR, project. Under Phase I of the project,

certain international markets.

750,000 OraQuick® HIV self-tests were sold to PSI for use in three African countries, Malawi, Zambia and Zimbabwe. More recently, we were selected to participate in Phase II of the project under which approximately 4 million HIV self-tests are expected to be deployed over atwo-year period. We believe that we will supply the vast majority of tests under this phase of the project.

In June 2017, we entered into a charitable support agreement with the Bill & Melinda Gates Foundation (“Gates Foundation”) that will enable us to offer ourOur OraQuick®HIV Self-Test at an affordable price in 50 developing countries in Africa and Asia with funding fromis the Gates Foundation. The funding will consist of support payments tied to the volume of product we sell and reimbursement of certain related costs. The agreement has a four-year term and will enablenon-governmental organizations in the eligible countries that receive funding from government or public sector agencies and donors to access ouronly oral fluid HIV self-test at reduced pricing. The funding from the Gates Foundation will be in an aggregate amount not to exceed $20.0 million over the four-year term or $6.0 million each year of the agreement.

In July 2017, our OraQuick® HIV Self-Test wastest prequalified by the WHO. WHO prequalification aims tohelps ensure that diagnostic tests for high burden diseases meet global standards of quality, safety, and efficacy in order to optimize use of health resources and improve health outcomes. WHO prequalification enables governmental organizations implementing HIV self-testSelf-Test pilots and programs to access international funding to purchase our test.

Molecular Collection Systems

DNAG sells its products directly to its customers, primarily through its own internal sales force. In some countries distributors are used. Over half of DNAG’s employees work in the areas of sales, marketing, business development or product management. The significant majority of employees who deal directly with customers have molecular science backgrounds, which we believe is useful in selling and marketing molecular collection products, and more importantly, in identifying and evaluating new market and business opportunities.

Most of DNAG’s revenues are derived from product sales to commercial customers and into the academic and research markets. Sales to commercial customers providing consumer genetics and clinical diagnostic services have been increasing and account for a majority of DNAG’s revenues. A significant portion of DNAG’s sales are derived from repeat customers, in both markets. DNAG also has a number of established global customers in the livestock market, including breed associations and research institutions.

DNAG has expanded its market focus by developing new collection devices for the emerging microbiome market, which is focused on the study of microbes and their effect on human health. DNAG’s primary product offering, OMNIgene®GUT, is focused on the human gut microbiome (microbes living in human stool). DNAG is leveraging its existing sales force and global research connections to engage microbiome customers around the world to establish itself as the leader inease-of-collection, stabilization and transport of this challenging sample type.

Substance Abuse Testing

Our substance abuse testing products are marketed to laboratories serving the workplace testing, forensic toxicology, criminal justice and drug rehabilitation markets in the U.S. and in certain international markets.

We have entered into agreements for the distribution of our Intercept®collection device and associated MICRO-PLATE assays fordrugs-of-abuse testing in the workplace testing market in the United States and Canada through several laboratory distributors and internationally for workplace, criminal justice and forensic toxicology testing through other distributors. We also market the Intercept®collection device on its own and as a kit in combination with laboratory testing services. To better serve our workplace customers, we have contracted with commercial laboratories to provide prepackaged Intercept®test kits, with prepaid laboratory testing and specimen shipping costs included.

The criminal justice market in the United States for our substance abuse testing products consists of a wide variety of entities in the criminal justice system that require drug screening, such aspre-trial services, parole and probation offices, police forces, drug courts, prisons, drug treatment programs and community/family service programs. The forensic toxicology market consists of several hundred laboratories including federal, state and county crime laboratories, medical examiner laboratories and reference laboratories.

As discussed above, we have

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We also launchedsell our next generation Intercept i2®he collection device with aNIDA-5 panel of fully-automated high-throughput oral fluid assays developed with Thermo Fisher for the detection of PCP, THC, opiates, cocaine, methamphetamines and amphetamines. These products are currently sold into the criminal justice and drug treatment markets. Subject to our further discussions with Thermo Fisher, we plan to obtain FDA 510(k) clearance of our Intercept i2® device for use with theNIDA-5 assay panel, along with an additional six fully-automated high-throughput assays in order to expand sales of this product line into the workplace testing market and other markets that require 510(k) cleared drug tests. We expect that the 510(k) cleared Intercept i2® device and related fully-automated high-throughput assays will eventually replace our original Intercept®collector and MICRO-PLATE assays in the drug testing market.

We distribute our Q.E.D.®saliva alcohol test primarily through various distributors in the United States and internationally. The markets for alcohol testing are relatively small and fragmented with a broad range of legal and procedural barriers to entry. Markets range from law enforcement testing to workplace testing of employees in safety sensitive occupations. Typical usage situations includepre-employment, random, post-accident, reasonable-cause andreturn-to-duty testing.

Cryosurgical Systems

Molecular Solutions

Our Molecular Solutions business sells its products directly to its customers, primarily through its own internal sales force in U.S. domestic markets. However, in many international markets, distributors are used.

Most of our Histofreezer®Molecular Solutions revenues are derived from product sales occurto commercial customers and sales into the academic and research markets. Our commercial customers provide consumer genetics and clinical diagnostic services and account for a majority of these revenues. A significant portion of total sales are derived from repeat customers in both markets. Molecular Solutions also has customers in the United States to distributors that, in turn, resell the product to primary care physicianslivestock, companion animal and podiatrists in the United States. Our major U.S. distributors include Cardinal Healthcare, McKesson Medical-Surgical, AmerisourceBergen Corporation, and Henry Schein. pharmaceutical markets.

We have engaged a manufacturers’ representative organization to help our U.S. distributors promote and sell Histofreezer®. We also provide a private label versionexpanded the market focus of our professional Histofreezer® product to one of our U.S. distributors. Internationally, we sell the Histofreezer® product through a network of distributors in more than 20 countries worldwide.

We distribute cryosurgical wart removalMolecular Solutions business by selling certain existing collection products in the OTC foot care market in Europe, Australia and New Zealand through our distributor, Reckitt Benckiser, under its Scholl and Dr. Scholl tradenames, and in the OTC markets in Mexico and several Central and South American countries under the POINTTS tradename through our distributor, Genomma. We sell our product in the U.K. through another distributor, Appia, under the CryoTag tradename, for the removal of skin tags. We also sell OTC private label cryosurgical products for the removal of warts and skin tags in Canada and for the removal of warts in the U.S.

Insurance Risk Assessment

We currently market the OraSure® oral fluid collection device for use in screening life insurance applicantsinfectious disease testing, including COVID-19 tests, and by developing new collection devices for the emerging microbiome market, which is focused on the study of microbial communities and their effect on human health. Our primary product offering in the United Statesmicrobiome market, OMNIgene®•GUT, is focused on the human gut microbiome (microbes living in human stool). We are leveraging our existing sales force and internationallyglobal research connections to testengage microbiome customers around the world and establish ourselves as among the leaders in ease-of-collection, stabilization and transport of microbiome communities in a variety of challenging sample types such as stool, skin, vaginal and oral.

Our Molecular Solutions products include the Colli-Pee® device, a product developed and sold by our Novosanis subsidiary, for threethe volumetric collection of the most important underwriting risk factors:HIV-1, cocainefirst void urine. This product is in its early stages and cotinine (a metabolite of nicotine). Devicesinitial sales are sold to insurance testing laboratories, which in turn sell the devices to insurance companies, usually in combination with testing services.

We also promote use of the OraSure® device directly to insurance companies for life insurance risk assessment. Insurance companies then make their own decision regarding which laboratory to use to supply their collection devicesoccurring primarily through distributors and testing services. We sell our OraSure®Western blot confirmatory test directly to insurance testing laboratoriescollaborations for use in confirming oral fluid specimens collected with our OraSure® device that initially test positive forHIV-1.

the liquid biopsy and sexually transmitted disease markets.

There exists a wide range of policy limits where our OraSure® product is being used. In general, many (but not all) of our insurance company customers use the OraSure® device in connection with life insurance policies having face amounts of up to $250,000, with some customers using the device for policies of up to $500,000 in amount. Some insurance companies have chosen to extend their testing to lower policy limits where they did not test at all before, while others have used OraSure® to replace some of their blood and urine-based testing. In recent years, some insurance customers have adopted a “Simplified Issues” policy, where lab testing is no longer required and instead the applicant completes a questionnaire about personal behaviors.

We also selloffer laboratory and analytical services for both genomics and microbiome customers in order to more fully meet the needs of its customers. These services are primarily provided to pharmaceutical and biotech companies and research institutions. During 2019, we substantially expanded our AUTO-LYTE® assaysability to offer microbiome laboratory and reagents inbioinformatics services with the insurance testing market directly to certain laboratories.acquisition of CoreBiome and Diversigen. The laboratory operations of CoreBiome and Diversigen were combined during 2020 under the Diversigen brand.

Significant Products and Customers

Several different productsproduct lines have contributed significantly to our financial performance, accounting for 10% or more of our total revenues during the past three years. The table below shows a breakdown of those product revenueslines (dollars in thousands).

 

 

For the years ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

InteliSwab®

 

$

233,666

 

 

$

22,405

 

 

$

 

Genomics

 

 

54,335

 

 

 

63,350

 

 

 

36,878

 

OraQuick® HIV

 

 

38,812

 

 

 

42,144

 

 

 

44,224

 

COVID-19 collection kits

 

 

9,659

 

 

 

54,167

 

 

 

50,927

 

   For the years ended December 31, 
   2017   2016   2015 

Oragene® collection systems

  $71,610   $31,078   $29,385 

OraQuick®HIV

   35,149    33,068    34,358 

OraQuick® HCV

   25,409    14,066    11,386 

Cryosurgical systems

   12,279    13,234    11,920 

One of our customers accounted for approximately 25%58% of our net consolidated revenues in 2017. Another customer2022. We had no customers that accounted for approximately 15% and 12%more than 10% of our net consolidated revenues in 2016for the years ended December 31, 2021 and 2015, respectively.2020.

Financial Information by Segment

We operate our business within two reportable segments. The first is our “OSUR” business, which consists of the development, manufacture and sale of diagnostic products, specimen collection devices, and medical devices. The second is our “DNAG” or molecular collection systems business, which consists primarily of the development, manufacture and sale of oral fluid collection devices that are used to collect, stabilize, and store samples of genetic material for molecular testing.

OSUR revenues consist primarily of product sold into the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, public health organizations, distributors, government agencies, physicians’ offices, and commercial and industrial entities. OSUR also derives revenues from the sale of OTC products to retail pharmacies and mass merchandisers, and to consumers over the internet and from licensing and product development activities. DNAG revenues consist of product sold into the academic research, consumer genetics, clinical genetic testing, pharmacogenomics, personalized medicine, microbiome and animal genetics markets. For more information about our revenues from external customers, income and total assets, please see the sections entitled “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 10 to the consolidated financial statements, included elsewhere in this Annual Report on Form10-K.

Supply and Manufacturing

Our

We manufacture all of our OraQuickADVANCE®Rapid HIV test, OraQuick®In-Home HIV test, OraQuick® HCV test, OraQuick® Ebola test, OraSure®, Intercept® and Intercept i2®he collection devices, AUTOLYTEAUTO-LYTE® and MICRO-PLATE assays and QEDQ.E.D.®saliva alcohol test are all manufactured in our Bethlehem, Pennsylvania facilities. We expect to continue to manufacture these products at this location for the foreseeable future.

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We have contracted with a third party in Thailand for the assembly of the OraQuick® Rapid HIV devicetest and the OraQuick® HIV Self-TestIn-Home Test in order to supply certain international markets. This supply agreement had an initial term of one year, and automatically renews for additional annual periods unless either party provides a timely notice of termination prior to the end of an annual period. We believe that other firms would be able to manufactureassemble these OraQuick® tests on terms no less favorable than those set forth in the agreement if the Thailand contractor would be unable or unwilling to continue manufacturingassembling this product. We have long-term agreements in place for the contract manufacturing in Thailand and one of our suppliers has been manufacturing for us for the past 20 years.

We can purchase the HIV antigens, the nitrocellulose and certain other critical components, used in the OraQuick® HIV product lines and the HCV and Ebola antigens used in theour OraQuick® HCV testproduct lines only from a limited number of sources. If for any reason these suppliers are unwilling or no longer able to supply our antigen or nitrocellulose needs, we believe that alternative supplies could be obtained at a competitive cost. However, a change in any of the antigens, the nitrocellulose or other critical components used in our products would require FDA approval and some additional development work. This in turn could require significant time to complete, increase our costs and disrupt our ability to manufacture and sell the affected products.

We manufacture all of the proprietary chemistry and assay cards for our InteliSwab® COVID-19 Rapid Tests in our Bethlehem, Pennsylvania facilities. We significantly scaled up manufacturing capacity in the United States for our InteliSwab® COVID-19 Rapid Tests and have achieved manufacturing capacity targets under our 2021 contract with the US DOD, in coordination with HHS. Funding under the contract has been, and will be, paid to us based on achievement of milestones through March 2024 for the design, acquisition, installation, qualification and acceptance of the manufacturing equipment. An existing Company location in Bethlehem, PA has been retrofitted to accommodate increased manufacturing capacity.

Our MICROPLATEMICRO-PLATE and AUTO-LYTE® assays require the production of highly specific and sensitive antibodies corresponding to the antigen of interest. Substantially all our antibody requirements are provided by contract suppliers. We believe that we have adequate reserves of antibody supplies and that we have access to sufficient raw materials for these products.

Our OraSure QuickFlu® test is manufactured and supplied by a third party, Princeton BioMeditech. There is no other supply source for this product.

The fully-automated high-throughput oral fluid drug assays sold with our new Intercept i2®he collection device are manufactured and supplied under a long-term agreement with Thermo Fisher. There is no other supply source for these products.

The Histofreezer® product and our OTC cryosurgical products are assembled by a U.S. vendor with certain components sourced from international suppliers. We believe that additional suppliers for our cryosurgical products are available on terms no less favorable than the terms of our existing supply agreements in the event that our current suppliers would be unable or unwilling to continue supplying components and manufacturing finished products.

DNAG has twothree long-term contract manufacturing relationships to supply virtually all of its products, including the Oragene®product line. Many of the raw materials and components used in these products are also purchased from third parties, including one critical component that issome of which are purchased from a solesingle source supplier. We believe there are actively seeking to qualify other suppliers that can manufacture and supply the raw materials and components for the DNAG products. All DNAG products in our Molecular Solutions business are produced in Canada.

Employees

Our Colli-Pee® device is currently manufactured at our Belgian assembly facility with components supplied by third party vendors.

Our genomic, microbiome and metatranscriptomics laboratory testing and analytical services are provided by our subsidiary, Diversigen.

Human Capital Resources

In order to achieve the goals and expectations of our Company, it is crucial that we continue to attract and retain top talent. To facilitate talent attraction and retention, we strive to make OraSure a safe and rewarding workplace with opportunities for our employees to grow and develop in their careers.

As of December 31, 2017,2022, we had 377840 full-time employees, (including 133 employees at our subsidiary, DNAG). Of this total, there were 131 in sales, marketing and client services; 43 in research and development; 140 in operations, manufacturing, quality control, information systems, purchasing and shipping; 33 in quality assurance and regulatory affairs; and 30 in administration and finance. Thiswhich compares to 325785 employees as of December 31, 2016.2021. The increase in employees during 2022 was primarily the result of the need to add manufacturing capacity for our InteliSwab® COVID-19 Rapid Test. In February 2023, we announced an 11% reduction in our non-production workforce. Our employees are not currently represented by a U.S. collective bargaining agreement.

Competition

We believe our employees are among our most important resources and are critical to our continued success. We focus significant attention to attracting and retaining talented and experienced individuals to manage and support our operations, and our management team routinely reviews employee turnover rates at various levels of the organization. Management also reviews employee engagement and satisfaction surveys to monitor employee morale and receive feedback on a variety of issues.

The health and safety of our workforce is fundamental to the success of our business. We safeguard our people, projects and reputation by striving for zero employee injuries and illnesses, while operating and delivering our work responsibly and sustainably. We provide our employees upfront and ongoing safety training to ensure that safety policies and procedures are effectively communicated and implemented. Personal protective equipment is provided to those employees where needed for the employee to safely perform their job function.

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As part of our compensation philosophy, we believe that we must offer and maintain market competitive compensation and benefits programs for our employees in order to attract and retain superior talent. In addition to healthy base wages, additional programs include annual bonus opportunities, a Company matched 401(k) Plan or other savings plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, flexible work schedules, and employee assistance programs.

The OraSure family of companies is committed to creating and fostering a diverse, equitable, and inclusive workplace that reflects and contributes to the global communities in which we do business and the customers and partners we serve. This includes all communities impacted by our corporate presence. Our management teams and all of our employees are expected to exhibit and promote honest, ethical and respectful conduct in the workplace. All of our employees must adhere to a Code of Conduct that sets standards for appropriate behavior and includes required annual training on preventing, identifying, reporting and stopping any type of unlawful discrimination. We strive to recruit the best people for the job regardless of gender, ethnicity or other protected trait and it is our policy to fully comply with all laws (domestic and foreign) applicable to discrimination in the workplace. We have an active Diversity, Equity and Inclusion Council that strives to drive diversity, equity and inclusion within the workplace. At OraSure, we believe a variety of perspectives are critical to achieving success, and that diversity, equity and inclusion are key drivers to growth-based innovation and profitability. We aim to create a culture where all people feel valued, supported, and inspired to be themselves fearlessly, without judgment. We believe that when all voices are heard, we honor and exemplify our core values and best serve our communities.

2022 Developments

On March 31, 2022, the termination of Dr. Tang as President and Chief Executive Officer (the "CEO") of the Company became effective. Dr. Nancy Gagliano served as interim CEO for a period commencing on April 1, 2022 and ending on June 4, 2022, at which time Carrie Eglinton Manner was appointed as President and CEO.

On June 9, 2022, we announced the termination of Agnieszka Gallagher's employment with the Company as Executive Vice President, General Counsel and Chief Compliance Officer.

On August 8, 2022 our Board of Directors appointed Ken McGrath as the Company’s Chief Financial Officer. Mr. McGrath replaced Interim Chief Financial Officer, Scott Gleason.

On November 7, 2022 our Board of Directors promoted Kathleen Weber from President, Molecular Solutions to Chief Product Officer.

Competition

Diagnostics

The diagnostic industry is a multi-billion dollar international industry and is intensely competitive. Many of our competitors are substantially larger than we are, and have greater financial, research, manufacturing and marketing resources than we do.

We have many rapid tests with proprietary features enabling them to compete effectively in select market segments. Broadly, we differentiate based on our tests’ ease of use, which has enabled us to expand our self-testing offering.

ImportantThe primary competitive factors for our products include price, quality, performance, ease of use, customer service and reputation. Industry competition is based on these and the following additional factors:

Scientific and technological capability;

Proprietaryknow-how;

The ability to develop and market products and processes;

The ability to obtain FDA or other regulatory approvals;

The ability to manufacture products that meet applicable FDA or other applicable regulatory requirements;

Commercial execution and strength of distribution;

Access to adequate capital;

The ability to attract and retain qualified personnel; and

The availability of patent protection.

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A few large corporations produce a wide variety of diagnostic tests and other medical devices and equipment. A larger number ofmid-size companies generally compete only in the diagnostic industry and a significant number of small companies produce only a few diagnostic products. As a result, the diagnostic test industry is highly fragmented and segmented. This enables us to serve specific segments where the products provide a unique benefit.

The future market for diagnostic products is expected to be characterized by greater cost consciousness, the development of new technologies, tighter reimbursement policies and consolidation. The purchasers of diagnostic products are expected to place increased emphasis on lowering costs, reducing inventory levels, obtaining better performing products, automation, service and volume discounts. The increased complexity of the market is expected to force many competitors to enter into joint ventures or license certain products or technologies.

We expect competition to intensify as technological advances are made and become more widely known, and as new products reach the market. Furthermore, new testing methodologies could be developed in the future that render our products impractical, uneconomical or obsolete. There can be no assurance that our competitors will not succeed in developing or marketing technologies and products that are more effective than those we develop or that would render our technologies and products obsolete or otherwise commercially unattractive. In addition, there can be no assurance that our competitors will not succeed in obtaining regulatory approval for these products, or introduce or commercialize them, before we can do so. These developments could have a material adverse effect on our business, financial condition and results of operations.

Several companies market or have announced plans to market oral specimen collection devices and tests both within and outside the United States. We expect the number of devices competing with our OraQuick®, OraSure®, Intercept®and Intercept i2® devices to increase as the benefits of oral fluid-based testing become more widely accepted.

Competition in the U.S. market for infectious disease testing in medical settings is intense and is expected to increase. Our principal competition for HIV testing in the professional market comes from existing and new professional point-of-care rapid blood tests and automated laboratory-based blood tests, or other oral fluid-based tests. One of our competitors has received FDA approval and a CLIA waiver for aOur OraQuick ADVANCE® rapid HIV test is the only OTC oral fluid test for HIV testin the United States, and another sells a rapid HIV antigen/antibody test that is both FDA approved and CLIA waived.as such, enables outreach testing outside of clinics. Our OraQuick® rapid HCV test competes against laboratory-based blood tests in the U.S., as there currently are no other rapid HCV testing products approved by the FDA.

Our competitors in the domestic infectious disease testing market include medical diagnostic companies and specialized biotechnology firms, as well as pharmaceutical companies with biotechnology divisions. Competing tests are often sold at a lower price than we charge for our products. This competition can result in lost sales and degradation of the price (and therefore the applicable profit margins) we can charge for our HIV and HCV tests.

Outside the U.S., our rapid HIV and HCV tests compete against other rapid and laboratory-based tests. Significant sales of these products in Europe have not materialized principally because of differences in European healthcare systems compared to U.S. systems. Unlike the U.S., adoption of rapidpoint-of-care diagnostics is not widespread in Europe because laboratory testing is entrenched and healthcare systems are structured around centralized testing models. In addition, many competing tests in international markets are sold at very low prices. We intend to continue to build awareness and develop strategies to expand sales of our OraQuick® HIV and HCV tests in European and other international markets.

Our OraQuick®In-Home HIV oral fluid test is the only rapid HIV test approved by the FDA for sale in the U.S.US OTC market. We compete against one othernon-rapid HIV blood test available in

Outside the OTC market, which requires consumers to self-collect a blood sample and then send it to a laboratory for testing. The OraQuick® HIV Self-Test that we sell in certain international markets is expected to face competition from other blood-basedU.S., our rapid HIV self-tests.

Competition for our OraQuick® Ebola test includes government and commercially-developed laboratory andpoint-of-care molecularHCV tests along with a small number of rapid antigen tests sold under FDA Emergency Use Authorization (EUA). Our Ebola test is the only product with regulatory authorization for use on both whole blood samples from living patients and oral fluid samples from cadavers.

The OraSure QuickFlu®test competes primarilycompete against other rapid fluand laboratory-based tests, sold by various third partieswhich require blood as a sample. The majority of these blood-based tests are priced at or below our HIV and HCV rapid oral fluid tests. There are no other oral fluid tests for HCV outside the US with WHO Prequalification status and the CE mark. The majority of our sales outside the US are in Africa due to the greater incidence of HIV in that region. Our OraQuick® HIV Self-Test is CE marked, which enables us to participate in the U.S. hospitalEuropean OTC market for HIV.

The United States COVID-19 rapid testing market consists of tests used by medical professionals at the point-of-care as well as OTC tests purchased and public health markets.used by consumers. There are numerous professional point-of-care tests, OTC Antigen rapid tests and OTC rapid molecular tests authorized under EUA by the FDA. Our InteliSwab® test competes in both the professional point-of-care and OTC segments with these products.

Our Oragene® collection system competes against other types of collection devices used for molecular testing, such as blood collection devices and buccal swabs, which often are sold for prices lower than the prices charged for the Oragene® products. Although we believe the Oragene® device offers a number of advantages over these other products, the availability of lower price competitive devices can result in lost sales and degradation in pricing and profit margin. Our Oragene® product is also facing increasing competition from similarly designed collection systems which are beginning to enter the market.

OMNIgene®GUT is being sold in the emerging microbiome market and competes with a variety ofnon-standardin-house solutions developed by various researchers, including simply freezing the sample after collection. The microbiome market is expected to require standardization in the methods used for collection and stabilization in order to derive more accurate and repeatable results. To date, DNAG is one of the few vendors to offer a solution that fully meets these requirements.

The OMNIgene®• SPUTUM product is unique and has no direct competition in terms of a comparable product. The primary competition for this product is the incumbent methodologies that are widely adopted for collecting sputum samples and have been used in labs globally for many years.

In the substance abuse testing market, our Intercept® drug testing systemssystem competes with laboratory-based drug testing products using sample matrices such as urine, hair, sweat and oral fluid. We expect competition for our products to intensify, particularly from other domestic and international companies that have developed, or may develop, competing oral fluid drug testing products.

There are at least two competitors that sell fully-automated high-throughput oral fluid drug testing products in unregulated settings in the United States. These competitors sell these assays for use with either their own oral fluid collector or a collector manufactured by another party. These offerings compete against our Intercept® and Intercept i2® collection devices and related oral fluid assays.

Our MICRO-PLATE oral fluid drug assays, which are sold for use with the original Intercept®collector and our OraSure® collection device, also continue to come under increasing competitive pressure from “home-brew” assays developed internally by our laboratory customers. Our oral fluid MICRO-PLATE assays also compete with urine-based homogeneous assays that are run on fully-automated, random access analyzers. These tests provide strong competitive pressure because they provide the benefits of automation, including lower costs and short turn-around times.

Our MICRO-PLATEdrugs-of-abuse reagents sold in the forensic toxicology market are targeted to forensic testing laboratories where sensitivity, automation and “system solutions” are important. In the past, these laboratories have typically had to rely on radioimmunoassay test methods to provide an adequate level of sensitivity. Radioimmunoassays require radioactive materials, which have a short shelf-life and disposal problems. Our MICRO-PLATE tests meet the laboratories’ sensitivity needs, run on automated equipment, are not radioimmunoassays, and are offered to the laboratory as a complete system solution of reagents, instrumentation and software to meet the specific needs of each customer. We compete with both homogeneous and heterogeneous tests manufactured by many companies.

Sales of our AUTO-LYTE® urine assays have declined substantially over a number of years, primarily due to competition from “home-brew” assays developed internally by our laboratory customers, which can be produced at a cost lower than the price typically paid for our products. Many of our customers no longer purchase our AUTO-LYTE® assays, and we may eventually stop selling this product line.

Q.E.D.®competes against other semi-quantitative saliva-based alcohol tests that have received U.S. Department of Transportation approval as well as breath alcohol tests. Although there are lower priced tests on the market that use oral fluid or breath as a test medium, we believe that these tests are qualitative tests that we believe are believed to be substantially lower in quality and provide fewer benefits than our Q.E.D.®test.

Molecular Solutions

Our professional cryosurgical product is sold primarily to physicians, including family practitioners, pediatriciansOragene® and podiatrists. This product primarily competes against other portable cryosurgicalORAcollect® collection systems used for the removal of benign skin lesions in both the U.S. and Europe. In addition, certain of our distributors sell private label cryosurgical products that compete with our Histofreezer® product. Our OTC cryosurgical products compete against other cryosurgicaltypes of collection devices used for molecular testing, such as blood collection devices and buccal swabs, which often are sold for prices lower than the prices charged for the Oragene® and ORAcollect® products. Although we believe the Oragene® and ORAcollect® devices offer a number of advantages over these other products, offeredthe availability of lower price competitive devices can result in lost sales and degradation in pricing and profit margin. Our

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Oragene® and ORAcollect® products are also facing increasing competition from similarly designed collection systems which are beginning to enter the market. With the receipt of authorizations for use in connection with COVID-19 molecular tests, our Oragene® and ORAcollect® products now compete against COVID-19 testing systems and the collection methods used in those systems.

OMNIgene®GUT is being sold in the U.S. OTCemerging microbiome market and certain international OTC markets.competes with a variety of non-standard in-house solutions developed by various researchers, including simply freezing the sample after collection. The microbiome market is expected to require standardization in the methods used for collection and stabilization in order to derive more accurate and repeatable results. To date, we are one of the few vendors to offer a solution that fully meets these requirements.

Our genomic, microbiome and metatranscriptomics laboratory service offerings primarily compete against a number of commercial reference laboratories, specialty laboratories and hospital laboratories in the U.S.

Patents and Proprietary Information

We seek patents and other intellectual property rights to protect and preserve our proprietary technology and our right to capitalize on the results of our research and development activities. We also rely on trade secrets,know-how, continuing technological innovations and licensing opportunities to provide competitive advantages for our products in our markets and to accelerate new product introductions. We regularly search for third-party patents in fields related to our business to shape our own patent and product commercialization strategies as effectively as possible and to identify licensing opportunities. United States patents generally have a maximum term of 20 years from the date an application is filed.

We have five United States patents throughout our product and service lines. Our patent portfolio includes pending applications and issued patents in diagnostics and testing, sampling tools, and services and analysis. Our portfolio protects our innovative sampling tools, services and diagnostics that provide access to accurate, essential information that advances global health and well-being.

Diagnostics and testing products include the OraSure® and Intercept® collection devices that are covered by one utility and one design patent in each of the U.S., Canada, Japan, and throughout Europe. We have numerous foreign patents for the OraSure® and Intercept®its collection devices and technology relating to oral fluid collection, containers for oral fluids, methods to test oral fluid, formulations for the manufacture of synthetic oral fluid,fluids, and methods to control the volume of oral fluidfluids collected and dispersed. The utility patents will expire in January 2028, and the design patents will expire in 2025.

Sampling tools are the subject of several other patents and pending applications, including U.S. patentsand international utility patent applications directed to a new oral fluid collection device. The international applications will enter their national phase in countries throughout the world beginning in October 2023. Patents issuing from these applications will expire fromin March 2018 to December 2026. 2041.

We have also applieda U.S. and international PCT patent applications that are directed to a new developer solution vial for use with sampling and assay devices. The international application and will enter its national phase in countries throughout the world, beginning in May 2023 and patents issuing from these applications will expire in December 2041. Related design patent applications are pending in the U.S., Canada, and Europe.

We have additional pending applications directed to new direct sample collection pads for our InteliSwab® COVID-19 Rapid Test. These applications will enter their national phase in countries throughout the world, beginning in October 2023, and patents issuing from these applications will expire in bothDecember 2042. A related design patent issued in 2022 in the U.S. and corresponding design applications were registered in Canada, China, India, and Europe. These design patents will expire 2035.

We have registered design patents for a collection funnel and corresponding plunger device in Europe, China, and India and a corresponding U.S. design patent application is pending.

We have pending patent applications throughout our product and service lines directed to assays, methods, devices, and reagents for monitoring adherence to HIV medications, such as nucleoside reverse transcriptase inhibitors used in PrEP regimens.

We have two international families of patent applications filed in the United States and certain foreignin numerous countries on such productsworldwide. These applications are directed to novel nucleoside reverse transcriptase inhibitor-specific antibodies for use in assays to detect the presence of nucleoside reverse transcriptase inhibitor drug derivatives, including tenofovir, in fluid samples. Patents issuing from these applications will expire in October 2038 and technology.December 2040.

We have five United States patents for our OraQuick® platform, as well as corresponding related international patents. We also have patent applications pending internationally. Four of the U.S. patents expire from March to July 2019 and the fifth in July 2028.

We hold, through our subsidiary, DNAG, eighteenthirty granted United States patents and numerous foreign patents issued for compositions, methods and apparatuses for the collection, stabilization, transportation, and storage of nucleic acids (DNA and RNA) from oral fluid and other bodily fluids and tissues. These patents expire from July 2019June 2023 through March 2034.October 2037.

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We have threehold through our subsidiary, Novosanis, one granted United States patentspatent and numerous foreign patents issuedcovering a medical device for apparatuses and methodscapturing a predetermined volume of first void urine. This patent expires in September 2033. We have also applied for the topical removal of skin lesions relating to our cryosurgical wart removal products, and we have pending patent applications related to these productsadditional patents, in both the United States and in certain foreign countries.countries, in novel urine collection devices.

Our subsidiary, Diversigen, has licensed one United States patent and several foreign patent applications from the University of Minnesota for analytical standards to detect and/or measure sampling, processing, and/or amplification errors in a biological sample containing polynucleotide molecules. These patents will expire in May 2036. This license also covers certain software and know-how related to laboratory and bioinformatics procedures and processes. Diversigen has also licensed certain know-how and database assets from September 2025the Baylor College of Medicine related to February 2032.laboratory processes for microbiome and metagenomics services.

We require our employees, consultants, outside collaborators and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information developed by or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees and certain consultants, the agreements also provide that all inventions conceived by the individual during his or her tenure with us or the performance by the consultant of services for us will be our exclusive property.

We own rights to trademarks and service marks that we believe are necessary to conduct our business as currently operated. In the United States, we own a number of trademarks, including the OraSure®, Intercept®, Intercept i2®he, OraQuick®, OraQuickADVANCE?, Histofreezer®, OraSure QuickFlu®, Q.E.D.®, InteliSwab®, Oragene®, DNA Genotek®, OMNImetTM, ORAcollect®, OMNIgene®,goDNATM, Diversigen®, CoreBiome®, Boostershot®, MetaGeneTM, BenchmarkTM, Novosanis®, Colli-Pee®, UCM®, UASTM, AUTO-LYTE®, prepIT®, and AUTO-LYTEHemagene® trademarks. We also own many of these marks and others in several foreign countries. With respect to our international OTC cryosurgical products, the Schollcountries and Dr. Scholl tradenameswe are owned by Reckitt Benckiser in Europe, Australia, New Zealand andpursuing registration of several other countries outside North and South America, and the POINTTS tradename is owned by Genomma.trademarks.

Although important, the issuance of a patent or existence of trademark or trade secret protection does not in itself ensure the success of our business. Competitors may be able to produce products competing with our patented products without infringing our patent rights. Issuance of a patent in one country generally does not prevent manufacture or sale of the patented product in other countries. The issuance of a patent is not conclusive as to validity or as to the enforceable scope of the patent. The validity or enforceability of a patent or trademark can be challenged by litigation after its issuance or registration. If the outcome of such litigation is adverse to the owner of the patent, the owner’s rights could be diminished or withdrawn. Trade secret protection does not prevent independent discovery and exploitation of the secret product or technique.

Government Regulation

General

General

Most of our products are regulated by the U.S. Food and Drug Administration, or the FDA, along with other federal, state and local agencies and comparable regulatory bodies in other countries. This regulated environment governs almost all aspects of development, production and marketing, including product design and testing, authorizations to market, labeling, advertising and promotion, manufacturing, distribution, post-market surveillance and reporting, and recordkeeping. We believe that our products and procedures are in material compliance with all applicable FDA regulations, but the regulations regarding the manufacture and sale of our products may be unclear and are subject to change. We cannot predict the effect, if any, that these changes might have on our business, financial condition or results of operations.

Many of ourFDA-regulated products require some form of review and action by the FDA before they can be marketed in the United States. After approval or clearance by the FDA, we must continue to comply with other FDA requirements applicable to marketed products and are subject to periodic inspections by the FDA and other regulatory bodies. Both before and after approval or clearance, failure to comply with the FDA’s requirements

can lead to significant penalties or could disrupt our ability to manufacture and sell these products. In addition, the FDA could refuse permission to obtain certificates needed to export our products if the agency determines that we are not in compliance.

Domestic Regulation

Most of our products are regulated in the United States asin vitro diagnostic and medical devices. In the United States, devices are classified into three groups based on risk: class I (lowest risk), class II (moderate risk), and class III (highest risk). The classification of a device determines the level of regulation applicable to the device: class I devices are subject only to the general controls that are applicable to all regulated devices; class II devices are subject to both general controls and special controls, which are specific to the type of device; and class III devices are subject to general controls and any other controls that are needed to provide reasonable assurance of the safety and effectiveness of the specific device.

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The classification of the device also influences the type of premarket submission that is required before the device can be marketed. Some low risk devices (including many class I and some class II devices) may be placed on the market without any premarket submission. Such devices often are referred to as “exempt” or “510(k)-exempt.” Most devices, however, require some form of premarket submission prior to marketing. There are several mechanisms by which regulatedsuch devices can be placed on the market in the United States. Some productsStates, including 510(k)-clearance, de novo classification, premarket approval, or EUA.

Many class II devices and some class I devices may qualify for clearance under Section 510(k) of the Federal Food, Drug and Cosmetic Act.Act (the "FDCA"). To obtain this clearance from the FDA, the manufacturer must submit to the FDA a premarket notification that it intends to begin marketing the product, and show that the product is substantially equivalent to another legally marketed predicate device (i.e., a device that has been cleared through the 510(k) process; a device that was legally marketed prior to May 28, 1976; a device that has been downclassifiedreclassified by the FDA; or a device that the FDA previously has previously determined to be exempt from the 510(k) process). To be substantially equivalent, an applicant must show that when compared to a predicate, the new device has the same intended use and same technology, or if different technology, that the new device is as safe and effective as the predicate and does not raise different questions of safety and effectiveness. In all cases, data from some form of performance testing is required and in some cases, the submission must include data from human clinical studies. An applicant must submit a 510(k) notification at least 90 days before commercial distribution of the product commences. Marketing may only commence when the FDA issues a clearance letter finding that the new device is substantially equivalent to the predicate device. An applicant must submit a 510(k) application at least 90 days before commercial distribution of the affected product commences. The standards and data requirements necessary for the clearance of a new device may be unclear or may be subject to change. Although FDA clearance usually takes from four to twelve months, in some cases more than a year may be required before clearance is obtained, if at all.

If the device does not qualify for the 510(k) procedure, either because there is no existing predicate device, it is not substantially equivalent to a legally marketed predicate device or because it is classified by the FDA as a high riskclass III device, the FDA must approve either a request fordenovo classification or a premarket approvalPMA application or PMA,for devices that are low to moderate risk, grant a request for de novo classification before marketing can begin. Ade novoclassification is an alternate pathway to classify novel devices of low to moderate risk for which no substantially equivalent predicate device exists. Clearance ofexists into class I or class II. The FDA’s goal is to decide ade novorequest generally takes six months to one yearin 150 days from the time of submission of thede novo request is received, although it can take longer.

PMAs generally are generally required for class III devices, that are determined to bei.e., high risk devices, and must demonstrate, among other matters, that the medical device provides a reasonable assurance of safety and effectiveness for the intended use(s) of the device. A PMA is typically a complex submission, supported by valid scientific evidence, including the results of preclinical and clinical studies, usability data, detailed information about the manufacturing process for the device, and other data and information. Preparing a PMA is a resource-intensive and time-consuming process. Once a PMA has been submitted, the FDA is required to review the submission within 180 days. However, the FDA’s review may be, and often is, much longer, in many cases requiring one to three years or more, and may include requests for additional data, review by an independent panel of experts, and facility inspections before approval is granted, if at all.

If the FDA approves the PMA, it may place restrictions on the device. If the FDA’s evaluation of the PMA or the manufacturing facility is not favorable, the FDA may deny approval of the PMA application or issue a “not approvable” letter. The FDA may also require additional clinical trials, which can delay the PMA approval process by several years or prevent a PMA approval from being obtained.

If the FDA discovers that an applicant has submitted false or misleading information in any application or notification, the FDA may take action against the applicant and its employees or refuse to review submissions until certain requirements are met pursuant to its Application Integrity Policy (AIP).Policy. Delays in receipt of or failure to receive such clearances or approvals, the loss of previously received clearances or approvals, or the failure to comply with existing or future regulatory requirements could have a material adverse effect on our business, financial condition and results of operations.

Another option for marketing a product in the U.S. is through an EUA. FDA may grant an EUA for a product if the Secretary of Health and Human Services declares that circumstances exist justifying the authorization of emergency use of certain products. Such declaration may be made following a determination by the Secretary of Health and Human Services that there is a public health emergency, by the Secretary of Homeland Security that there is a domestic emergency, or by the Secretary of Defense that there is a military emergency, or the declaration may be made if a material threat is identified under a particular provision of the Public Health Service Act. Typically, a diagnostic device may receive EUA-authorization on the basis of analytical and clinical studies that do not satisfy the requirements for full clearance or approval. Devices also may be exempt from design controls and other quality requirements. An EUA for a device remains in effect until the Secretary of Health and Human Services, in consultation with the Secretary of Defense, determines that the circumstances justifying emergency use of the device no longer exist, or until the authorized device is approved or cleared.

If there are any modifications made to our marketed devices, a new premarket notification, or PMA supplement, or request to change an EUA may be required to be submitted to, and cleared, approved, or approvedauthorized by, the FDA, before the modified device may be marketed.

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A new PMA or a PMA supplement is required for modifications that affect the safety or effectiveness of the device, including, for example, certain types of modifications to the device’s intended use(s), manufacturing process, manufacturing facility, critical components, labeling and design. Likewise, a new 510(k) clearance is required for any modification that could significantly affect the safety or effectiveness of the device, e.g. a significant change or modification in design, material, chemical composition, energy source, or manufacturing process or a major change or modification in the intended use(s) of the device.

A clinical trial may be required in support of a 510(k) submission and generally is required for ade novo request or PMA application. These trials generally require an approved application for an Investigational Device Exemption or(“IDE”) and compliance with other IDE application approved in advance by the FDA for a specified number of patients,requirements, unless the proposed study is deemed to be exempt from the IDE requirements. In addition, if a study meets the requirements for anon-significant risk study, it may be eligible for compliance with “abbreviated” IDE requirements, which include a subset of the requirements applicable to significant risk medical device studies. If a full IDE is required, anAn IDE application must be supported by appropriate data, such as laboratory testing results, protocols for the proposed investigation, and other information demonstrating that the device is appropriate for use with humans in a clinical study. Clinical trials may begin if the IDE application is approved by the FDA and the appropriate institutional review boards or IRBs, at the clinical trial sites. Submission of an IDE application does not give assurance that the FDA will issue the IDE. If the IDE application is approved, there can be no assurance the FDA will determine that the data derived from the trial(s) support the ultimate approval or clearance of the device or warrant the continuation of clinical trials. An IDE supplement must be submitted to and approved by the FDA before a sponsor or investigator may make a change to the investigational plan in such a way that may affect its scientific soundness, study indication or the rights, safety or welfare of human subjects. The trial must also comply with the FDA’s regulations, including the requirement that informed consent be obtained from each subject, and with clinical trial reporting regulations that require submission of information on certain clinical trials to a database maintained by the National Institutes of Health. Even if a trial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtain FDA clearance to market the product in the United States. If a study meets the requirements for a non-significant risk study, however, it may be eligible for compliance with “abbreviated” IDE requirements, which include a subset of the requirements applicable to significant risk medical device studies. A non-significant risk study also will be considered to have an approved IDE application without such application actually being submitted to FDA.

Some of our products are used for research only or for other nonclinical ornon-diagnostic purposes. Our molecular collection products are sold to many academic and research institutions for research purposes and ourdrugs-of-abuse products are sold to laboratories and clinics for forensic or othernon-medical uses. The FDA does not currently regulate products used for these purposes, although other state and federal regulatory requirements may apply.

Another option for marketing a product in the U.S. is through Emergency Use Authorization, or EUA, that is granted by the FDA as a result of the Secretary of Health and Human Services declaring an emergency justifying the authorization of emergency use of certain in vitro diagnostic devices to aid in addressing the emergency. Typically, analytical and clinical studies are completed as required by the FDA. Products are exempt from design controls and other quality requirements in order to expedite development of diagnostic tools to aid in the diagnosis of viral pathogens that have the potential to affect public health.

Most devices distributed in the United States must comply with the FDA’s Quality System Regulations (“QSRs”), including current good manufacturing practices. These regulations govern the entire lifecyclelife cycle of a medical device, including design, manufacture, testing, release, packaging, distribution, documentation and purchasing as well as complaint handling, corrective and preventative actions, and internal auditing. In complying with the QSRs, manufacturers must continue to expend time, money and effort in the area of production, quality, and postmarketpost-market surveillance to ensure full compliance.

Companies that market devices are also subject to other post-market and general requirements, including product listing and establishment regulations, which help facilitate FDA inspections and other regulatory action, post-market

surveillance requests, restrictions imposed on marketed products, promotional standards and requirements for recordkeeping and reporting of certain adverse reactions and device malfunctions. Device reporting regulations require that manufacturers report if their device may have caused or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction of the device or a similar device were to recur.

The FDA regularly inspects companies to determine compliance with the QSRs and other post-market requirements. Failure to comply with statutory requirements and the FDA’s regulations can result in an FDA Form 483 (which is issued by the FDA at the conclusion of an inspection when an investigator has observed any conditions that may constitute violations), public warning letters, monetary penalties against a company or its officers and employees, suspension or withdrawal of regulatory approvals, operating restrictions, total or partial suspension of production, injunctions, product recalls, product detentions, refusal to provide export certificates, seizure of products and criminal prosecution. We believe that our facilities and procedures are in material compliance with the FDA’s OSR regulations and other postmarketpost-market requirements, but the regulations are subject to change or may be unclear, and we cannot be sure that FDA investigators will agree with our compliance with the FDA’s postmarketpost-market requirements.

On December 23, 2013, our molecular collection systems subsidiary, DNAG, received a warning letter from the FDA. The warning letter primarily focused on DNAG’s response to two Form 483 observations issued by the FDA as a result of an inspection of DNAG’s Ottawa, Canada facilities in September 2013. Specifically, the warning letter indicated the need for additional documentation regarding design and development activities for DNAG’s products and focused in particular on the design planning and design history file for DNAG’s 510(k)-cleared Oragene®• DX collection device. In addition, the warning letter requested additional documentation related to finished product acceptance testing activities for DNAG’s ORAcollect® collection device. The letter further noted that DNAG does not currently have in place an approved PMA or 510(k) clearance for its ORAcollect® device.

DNAG submitted a formal response to the FDA to address the issues referenced in the warning letter and the warning letter was cleared in August 2017. In addition, DNAG received 510(k) clearance of its ORAcollect® device on April 18, 2016.

The Clinical Laboratory Improvement Amendments of 1988, or CLIA prohibitprohibits any facility that conducts laboratory testing on specimens derived from humans from providing information for the diagnosis, prevention or treatment of any disease or impairment of, or the assessment of, the health of human beings, unless there is in effect for such facility a certificate issued by the U.S. Department of Health and Human Services or an accredited organization, and such certificate is applicable to the category of examination or procedure performed. Tests may be waived from this regulatorycategorized as “waived,” enabling them to be used by laboratories with the lowest level of CLIA oversight if theythe tests meet certain requirements established under CLIA. We consider the applicability of CLIA requirements in the design and development of our products. We have obtained a waiver of the CLIA requirements for our OraQuickADVANCE® rapidHIV-1/2 antibody test, our OraQuick®HCV rapid antibody test and our Q.E.D.®alcohol saliva test and may seek similar waivers for certain other products. In addition, the supplier of the OraSureQuick-Flu® Quick-Flu® test has

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obtained a CLIA waiver for that product. AThe InteliSwab® COVID-19 Rapid Test Pro is authorized for use in patient care settings operating under CLIA waiver allows certain customersCertificate, Certificate of Compliance and Certificate of Accreditation.

The laboratory services provided by our subsidiary, Diversigen, consist of microbiome, metatranscriptomics and metagenomics sequencing, bioinformatics and analysis. Diversigen has elected to useobtain a license from CLIA and has received a certificate of accreditation from the waived products that may not have been able to use them without complying with applicable quality control and other requirements.College of American Pathologists (CAP).

Certain of our products may also be affected by state regulations in the United States, which can restrict the use and sale of certain diagnostic products. We are presently working with legislators or regulators in certain of these states in an effort to modify or remove any restrictions affecting our ability to sell products.

Advertising and Promotion

Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the Federal Trade Commission (“FTC”) and by other federal and state regulatory and enforcement authorities,

including the Department of Justice, (“DOJ”), the Office of Inspector General of the Department of Health and Human Services, and various state attorneys general. Although physicians are permitted to exercise medical judgment to use medical devices for indications other than those cleared or approved by the FDA, we may not promote our products for such“off-label” “off-label” uses and can only market our products for cleared or approved uses. Promotional activities forFDA-regulated products of other companies have also been the subject of enforcement actions brought under healthcare reimbursement laws and consumer protection statutes. In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims. If the FDA determines that our promotional materials or training constitute promotion of an uncleared or unapproved use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a notice of violation, a warning letter, injunction, seizure, civil fine or criminal penalties. FTCFederal Trade Commission enforcement actions often result in consent decrees that constrain future actions. DOJDepartment of Justice prosecutions can result in significant criminal and civil penalties, including exclusion from the Medicare and Medicaid programs. If an enforcement action is brought by the FDA or FTC,Federal Trade Commission, our reputation could be damaged and sales of our products could be impaired.

Import and Export Requirements

Products for export from the United States are subject to foreign countries’ import requirements and the exporting requirements of the FDA, as applicable. In particular, international sales of medical devices manufactured in the United States that are not approved or cleared by the FDA for use in the United States, or are banned or deviate from lawful performance standards, are subject to FDA export requirements.

Foreign countries often require, among other things, an FDA certificate for products for export, also called a Certificate for Foreign Government (“CFG”). To obtain this certificate from the FDA, the device manufacturer must apply to the FDA. The FDA certifies that the product has been granted clearance or approval in the United States and that the manufacturing facilities were in compliance with QSR regulations at the time of the last FDA inspection. If the FDA determines that our facilities or procedures do not comply with the QSR regulations, it may refuse to provide such certificates until we resolve the issues to the FDA’s satisfaction. Failure to obtain a CFG could inhibit our ability to export our products to countries that require such certificates.

International

International

We are also subject to regulations in foreign countries governing products, human clinical trials and marketing, and may need to obtain approval (orpre-qualification or endorsement) from local regulators in such countries or international public health agencies, such as the World Health Organization, in order to sell products in certain countries. Approval processes vary from country to country, and the length of time required for approval or to obtain other clearances may in some cases be longer than that required for U.S. governmental approvals. We generally pursue approval only in those countries that we believe have a significant market opportunity.

The International Organization for Standardization (“ISO”) is a worldwide federation of national standards bodies from some 130 countries, established in 1947. The mission of thebodies. ISO is to promote the development of standardization and related activities in the world with a view to facilitating the international exchange of goods and services. ISO13485 certification indicates that our quality system complies with standards applicable to activities ranging from initial product design and development through production and distribution.

In the

The European Union (“EU”) adopted the EU Medical Devices Regulation (the “EU MDR”) and the In Vitro Diagnostic Medical Devices Regulation (the “EU IVDR”), products that fall under the scope ofwhich repealed and replaced the Medical Devices Directive (“MDD”) and the In Vitro Diagnostic Medical Devices Directive (“IVDD”), respectively. The EU MDR and EU IVDR impose stricter pre-market and post-market requirements for the marketing and sale of medical devices and in vitro diagnostic medical devices, including in the area of clinical evaluation requirements, quality systems and post-market surveillance. The EU IVDR became applicable on May 26, 2022. There is a transitional period during which products that have a declaration of conformity issued under the IVDD prior to May 26, 2022 may continue to be

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placed on the EU market for a certain period before requiring certification under the IVDR; however, class A non-sterile products do not benefit from such transitional provisions and have been required to be IVDR compliant since May 26, 2022.

In the EU, products that fall under the scope of the MDR and the IVDR are not subject to the prior approval of a regulatory authority, but, depending on the class of product, may require prior review by a notified body. Notified bodies are accredited and supervised by national regulatory authorities to conduct conformity assessment procedures of medical devices or other products. Such products must comply with certain essential requirements listed in those directives. ISO certification creates a rebuttable presumption that the product satisfies the applicable

requirements. Compliance with these requirements allows us to complete the applicable conformity assessment procedure, involving a notified body where necessary, and to affix the CE mark to our products, without which they may not be placed on the market in the EU. We also note that from January 1, 2021, the United Kingdom (“UK”) has introduced a UK-specific route to market for medical devices. Compliance with these requirements may add further complexities to our international strategy.

We have completed the applicable conformity assessment procedures and obtained the right to use the CE mark for the OraQuickADVANCE®HIV-1/2 test, the OraQuick® HCV test, our Histofreezer® product line, our OTC cryosurgical removal product and certain of the Oragene® collection kits and OMNIgene® products sold by DNAG.

We must also comply with certain registration and licensing requirements as dictated by Health Canada, prior to commencing sales in Canada. We have completed this process for several of our current products and may do so with respect to other products in the future. In addition, Canadian law requires manufacturers of medical devices to have a quality management system that meets various ISO requirements in order to obtain a license to sell their devices in Canada. Health Canada also requires all companies that market Class II, Class III and Class IV products in Canada to be certified as part of the Medical Device Single Audit Program ("MDSAP"). We received this certification for our Diagnostics segment (previously named "OSUR") in January 2019 as well as for our Molecular Business Unit in February 2020.

We have obtained WHOpre-qualification for our OraQuick® HIV-1/Antibody Test, OraQuick® HIV Self TestSelf-Test and OraQuick® HCV test and we will likely seek WHOpre-qualification or endorsement for certain other products sold into international markets. HCV.

Anti-Kickback and Other Fraud and Abuse Laws

The Federal Anti-Kickback Statute prohibits the knowing and willful offer, payment, solicitation, or receipt of any form of remuneration in return for, or to induce:

The referral of an individual to a person for the furnishing or arranging for the furnishing of items or services reimbursable under Medicare, Medicaid or other governmental healthcare programs; or

The purchase, lease, or order of, or the arrangement or recommendation of the purchasing, leasing, or ordering of any item or service reimbursable under Medicare, Medicaid, or other governmental healthcare programs.

Our products are or may be purchased by customers that will seek or receive reimbursement under Medicare, Medicaid or other governmental healthcare programs. Noncompliance with the federal anti-kickback statuteFederal Anti-Kickback Statute can result in exclusion from Medicare, Medicaid or other governmental healthcare programs, and/or restrictions on our ability to operate in certain jurisdictions, as well as civil and criminal penalties, any of which could have an adverse effect on our business and results of operations.

The False Claims Act (“FCA”) imposes liability on any person or entity who, among other things, knowingly and willfully presents, or causes to be presented, a false or fraudulent claim for payment by a federal health care program, including Medicaid and Medicare. A violation of the Federal Anti-Kickback Statute is considered a violation of the FCA. Some suits filed under the FCA, known as “qui tam” actions, can be brought by a “whistleblower” or “relator” on behalf of the government, and such individuals may share in any amounts paid by the entity to the government in fines or settlement. Manufacturers can be held liable under false claims laws, even if they do not submit.

The Beneficiary Inducement provisions of the Federal Civil Monetary Penalties Law prohibits the offering or transferring of remuneration to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services. Noncompliance can result in civil monetary penalties for each wrongful act, assessment of three times the amount claimed for each item or service and exclusion from the Federal healthcare programs.

Many states have also adopted some form of anti-kickback laws and false claims laws. A determination of liability under such laws could result in fines and penalties, restrictions on our ability to operate in these jurisdictions and significant damage to our reputation.

We are also subject to other federal and state laws targeting fraud and abuse in the healthcare industry, including false claims laws, marketing conduct laws, transparency laws, and laws constrainingthat require us to adopt a compliance program. Taken together, these fraud and abuse laws constrain the sales, marketing and other promotional activities of manufacturers of medical devices by limiting the kinds of financial arrangements, including sales programs, such manufacturers can enter into with physicians, hospitals, laboratories and other potential purchasers of medical devices. Violations of these laws may be punishable by criminal or civil sanctions, including substantial fines, imprisonment and exclusion from participation in government healthcare programs such as Medicare and Medicaid. These laws and regulations are

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wide ranging and subject to changing interpretation and application. In recent years, there has been greater scrutiny of marketing practices in the medical device industry which has resulted in several government investigations by various government

authorities and the introduction and/or passage of federal and state legislation regulating interactions between medical device manufacturers and healthcare professionals and providers and requiring the disclosure by medical device manufacturers of payments to certain healthcare professionals and providers. For example, under the Physician Payments Sunshine Act provisions of the Affordable Care Act, device manufacturers are subject to new federal reporting and disclosure requirements with regard to payments or other transfers of value made to U.S. physicians, certain other licensed health care practitioners, and teaching hospitals. Reports submitted under the Sunshine Act are placed in a public database. Device manufacturers are required to submit annual reports by March 31 which cover the prior calendar year. To be in compliance with such disclosure laws, we have implemented necessary systems to accurately track gifts and other payments.

We have implemented a written Policy on Interactions with Health Care Professionals, which is based on the Code of ConductEthics for Interactions with Health Care Professionals promulgated by the Advanced Medical Technology Association, or AdvaMed,(the "AdvaMed"), a leading trade association representing medical device manufacturers. The Policy applies to all employees and is intended to comply with applicable state and federal laws, regulations and government guidance. The Policy addresses interactions related to sales and marketing practices, research and development, product training and education, grants and charitable contributions, support of third-party educational conferences, and consulting arrangements. While we believe that our practices are in compliance with the Anti-Kickback and other fraud and abuse laws, the standards for compliance with such statutes can be unclear and subject to change.

Foreign Corrupt Practices Act and Other Anti-Corruption Laws

The U.S. Foreign Corrupt Practices Act (“FCPA”), to which we are subject, prohibits corporations and individuals from engaging in certain activities to obtain or retain business or to influence a person working in an official capacity.bribery and corruption when dealing with foreign government officials and foreign political parties. It is illegal to use any means of interstate commerce corruptly inoffer, pay, promise, or authorize the furtherance of any offer, payment, promise to pay or authorization of paymentgiving of anything of value to any officer or employee of a foreign government official, government staff member,or public international organization, political party, political party official, or political candidate, in an attempt to obtain or retain business or to otherwise improperly influence a person working in an official capacity.capacity on behalf of a foreign government or public international organization. Our present and future business has and will continue to be subject to the FCPA and various other laws, rules and/or regulations applicable to us as a result of our international sales. ThoseWe also are subject to the FCPA’s accounting provisions, which require us to keep accurate books and records and to maintain a system of internal accounting controls sufficient to assure management’s control, authority, and responsibility over the company's assets. The failure to comply with the FCPA and similar laws could result in civil or criminal sanctions or other adverse consequences.

The laws to which we are subject as a result of our international sales also include the U.K. Bribery Act (the “Bribery Act”), which proscribes giving and receiving bribes in the public and private sectors, bribing a foreign public official, and failing to have adequate procedures to prevent employees and other agents from giving bribes. U.S. companies that conduct business in the United Kingdom generally will be subject to the Bribery Act. Penalties under the Bribery Act include potentially unlimited fines for companies and criminal sanctions for corporate officers under certain circumstances.

Environmental Regulation

Because of the nature of our current and proposed research, development, and manufacturing processes, we are subject to stringent federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, air emission, effluent discharge and handling and disposal of solid wastes, hazardous materials and hazardous wastes. Products that we sell in Europe are subject to regulation in European Union, or EU markets under the Directive on the Restriction of the Use of Certain Hazardous Substances Directive, or RoHS.(“RoHS”). RoHS prohibits companies from selling products whichelectrical and electronic equipment, such as electronic medical devices, that contain certain hazardous materials, including lead, mercury, cadmium, chromium, polybrominated biphenyls and polybrominated diphenyl ethers, in the EU member states.Member States. In addition, the EU’s Regulation on the Registration, Evaluation, Authorization, and Restriction of Chemicals Directive also restricts(“REACH”) imposes severe restrictions and requirements on companies marketing devices in the EU. Among other things, REACH requires companies to obtain prior authorization to use substances of very high concern that are listed for authorization, and imposes bans on the marketing of products that contain specifically listed hazardous substances. Companies marketing medical devices in products.the EU may also be subject to expensive waste take back obligations under the EU Directive on Waste Electrical and Electronic Directive, the Packaging and Packaging Waste Directive, and the Batteries Directive.

Future environmental laws, rules, regulations or policies may require us to alter our manufacturing processes, thereby increasing our manufacturing costs.costs, or may impose other additional obligations on us or our products. We believe that our products and manufacturing processes at our facilities comply in all material respects with applicable environmental laws and worker health and safety laws; however, the risk of environmental liabilities cannot be completely eliminated.

The foregoing discussion of our business should be read in conjunction with the consolidated financial statements and accompanying notes included in Item 15 of this Annual Report.

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Information Available on the Internet

Our filings with the Securities and Exchange Commission, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, including exhibits, proxy and information statements and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act are available on our website (www.orasure.com) free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC at its website (https://www.sec.gov). The information contained on our website is not a part of this Annual Report.

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ITEM 1A.Risk Factors

Summary of Risk Factors

Investing in our securities involves risk. Below is a summary of the principal factors that could adversely affect our business, operations and financial results. You should carefully consider the following risks and uncertainties, together with all other information in this Annual Report, including our consolidated financial statements and related notes and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section, before investing in our Company. This summary does not address all of the risks that we face. Additional discussion of the summarized risks can be found below following this summary.

Risks Relating to Products, Marketing and Sales

ITEM 1A.Risk Factors
Changes in the genomics market may adversely affect our business.
Our future success depends upon market acceptance of our existing and future products and service offerings.
We may not realize anticipated revenue from our InteliSwab® COVID-19 rapid test.
The COVID-19 pandemic continues to cast uncertainty over our consolidated results of operations, financial position and cash flows, while the consequences of COVID-19 and the governmental response to the pandemic and pandemic-related macroeconomic impacts could negatively affect our operations and share price;
Marketing of our COVID-19 tests and collection kits under EUAs from the FDA is subject to certain limitations and we are required to maintain compliance with the terms of the EUA, among other things, and the continuance of the EUAs is subject to government discretion.
If acceptance and adoption of oral fluid testing and collection products does not continue, our further results may suffer.
We expect to face increasing competition from other providers of diagnostic tests, sample collection products and molecular laboratory services.
Our inability to expand international sales could adversely affect our business and results of operations.
Our international presence may increase our risks and expose our business to regulatory, cultural or other restraints.
Our U.S. government contracts require compliance with numerous laws and increases our risk and liability.
Our inability to manufacture products in accordance with applicable specifications, performance standards or quality requirements could adversely affect our business.
Our business will suffer if we do not effectively manage challenges to our manufacturing processes and we may be unable to successfully scale-up manufacturing of our products in sufficient quality and quantity to meet demand, which would negatively impact revenue expectations.
Our business results depend on our ability to manage disruptions in our domestic and global supply chains and distribution channels.
Certain of our products depend on components from a sole-source supplier, the loss of which would cause us to be unable to deliver such products.
Our U.S. government contracts may affect our intellectual property rights.
We may not be able to fulfill our obligations under government contracts, which could result in reduced sales and profits, contract penalties or terminations and damages to customer relationships.

Risks Relating to Our Industry, Business and Strategy

Consolidation in the healthcare industry could adversely affect our future revenues and operating results.
Our research, development and commercialization efforts may not succeed and our competitors may develop and commercialize more effective or successful offerings.
Customer concentration creates risk for our business.
Acquisitions or investments may not generate the expected benefits and could disrupt our ongoing business, distract our management, increase our expenses and adversely affect our business.
There are risks relating to our recent acquisitions.

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Our revenues could be affected by third-party reimbursement policies and potential cost constraints.
���
Changes in healthcare regulation could affect our revenues, costs and financial condition.
Reductions in government funding and research budgets could adversely affect our business and financial results.

Risks Relating to Our Reliance on Third Parties

The use of third party supply sources for critical components of our products could adversely affect our business.
Our failure to maintain existing distribution channels, or develop new distribution channels, may result in lower revenues.

Risks Relating to Intellectual Property

Our success depends on our ability to protect our proprietary technology.
We may become involved in intellectual property disputes, which could increase our costs and limit or eliminate our ability to sell products, provide services or use certain technologies.

Regulatory Risks

The need to obtain regulatory approvals, clearances, authorizations or certifications could increase our costs and adversely affect our financial performance.
Failure to comply with FDA or other regulatory requirements may require us to suspend production or sale of our products or institute a recall which could result in higher costs and loss of revenues.
Our inability to respond to changes in regulatory requirements could adversely affect our business.
We are subject to numerous government regulations in addition to FDA requirements, which could increase our costs and affect our operations.
FDA regulation of laboratory-developed tests and genetic testing could affect demand for our products.

Risks Relating to the Economy, Our Financial Results, Investments, Credit Facilities and Need for Financing

We have experienced losses in the past and may not be able to again achieve and maintain profitable operations.
Economic volatility and disruption, including those related to the COVID-19 pandemic could adversely affect our business, financial performance, results of operations, cash flow and financial condition or those of our customers and suppliers.
An impairment of goodwill and intangible assets could reduce our earnings.
Changes to foreign currency exchange rates could negatively affect our operating results.

Risks Relating to Our Common Stock

Our stock price could continue to be volatile.
Future sales of our Common Stock by existing stockholders, executive officers or directors could depress the market price of our Common Stock and make it more difficult for us to sell stock in the future.
Certain provisions in our Certificate of Incorporation and Bylaws and under Delaware law could make a third-party acquisition of us difficult.

Risk Factors

You should carefully consider the risks and uncertainties described below, together with all of the other information included in this Annual Report and our other SEC filings, in considering our business and prospects.below. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not disclosed or not presently known to us or that we currently deem immaterial also may impair our business operations. The occurrence of any of the following risks could harm our business, financial condition or results of operations.

Regulatory Risks

The NeedRisks Relating to Obtain Regulatory Approvals Could Increase Our CostsProducts, Marketing and Sales

Changes in the Genomics Market May Adversely Affect Our Financial Performance.our Business.

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The genomics market has been the largest component of our proposedoverall molecular business segment for some time and the major drivers of this market have been the consumer genomics segment, which offers products and services to consumers to provide them with personalized health and genealogical information, and the disease risk management segment which offers genetic testing through physicians for a variety of applications including prenatal testing, risk screening and pharmacogenomics. The ancestry portion of the consumer genomics market may be maturing and our sales to customers with offerings in this market have been volatile. Our genomics revenues have also been volatile due to changes in promotional strategies and purchasing patterns by one of our largest customers which serves the consumer ancestry and genetic testing market and cost cutting and de-stocking efforts at some of our larger disease risk management customers. These trends in the ancestry testing market may continue and revenues in this segment may continue to be volatile.

In an effort to increase our molecular revenues, we have devoted increasing time and attention to expanding sales of our genomics products both domestically and internationally, with both new and existing accounts, including co-clearances and co-promotions with strategic partners. While we believe these new markets represent large growth opportunities, there is no assurance that we will be successful in capitalizing on these opportunities or that we will be able to increase our product sales consistent with our expectations. Factors include, but are not limited to, the market acceptance of our products, available funding, cost containment strategies implemented by customers, increasing competition and regulatory constraints could limit sales of our genomics products. To the extent that we are subjectunsuccessful or limited in expanding our business into new markets, our revenues and results of operations could be negatively affected.

Despite these challenges, we believe there is significant growth opportunity for our genomics products in the area of disease risk management (“DRM”), which includes genetic risk testing, prenatal testing, carrier screening, pharmacogenomics testing and population heath studies.

Our Future Success Depends Upon Market Acceptance of Our Existing and Future Products and Service Offerings.

Our future success will depend, in part, on the market acceptance, and the timing of such acceptance, of new products such as InteliSwab®, OraQuick® HIV Self-Test, OraQuick® Ebola test and OMNIgene® • GUT product offerings, and other new products or technologies that may be developed or acquired. In addition, our future revenues will depend on market acceptance of new uses for our saliva collection products, including for COVID-19 testing, and our new service offerings, such as the microbiome laboratory testing and analytical services we provide through Diversigen. To commercially market new uses of our products and to regulationachieve market acceptance, we will likely be required to undertake clinical studies to validate the new uses for our products and spend significant funds to complete product development and clinical studies and then undertake substantial marketing efforts to inform potential customers and the public of the existence and perceived benefits of these products and services. In addition, governmental funding may be needed to help complete development, obtain required regulatory approvals, clearances or EUAs and create market acceptance and expand the use of these products and services.

There may be limited evidence on which to evaluate the market reaction to products and services that may be developed and our marketing efforts for new products and services or products with new uses may not be successful. The market for microbiome products and services is in its early stages and its future development and acceptance by our customers is uncertain. Also, we continue to develop and seek 510(k) regulatory clearance for the InteliSwab® tests, and it is uncertain whether we will be successful in our development and validation efforts or whether these products will prove effective, receive applicable regulatory approvals and gain widespread acceptance in the marketplace. As such, there can be no assurance that any products or services will obtain significant market acceptance and fill the market need that is perceived to exist on a timely basis, or at all. It is possible that our expenses to develop and market any such products, including, without limitation our InteliSwab® tests, will exceed any benefit in revenues, which may be short-lived. In addition, other products that compete with ours may achieve 510(k) clearance earlier than we do, providing market advantages.

We May Not Realize Anticipated Revenue From Our InteliSwab® COVID-19 Rapid Test.

While we expect to continue to see significant demand for our InteliSwab® COVID-19 Rapid Test, other companies are working to produce or have produced rapid tests for COVID-19 which may lead to the diversion of customers, including governmental and quasi-governmental entities, away from us and toward other companies. Moreover, the dangers posed by COVID-19 may subside over time. A number of preventative vaccines have been approved for use in human populations by regulatory agencies in the U.S. and around the world. The uptake of these vaccines will likely limit the spread of COVID-19 and potentially reduce the market size for COVID-19 testing.

We expect that, if and when the current COVID-19 pandemic subsides, there could be significantly reduced demand for testing, and thus, for our InteliSwab® COVID-19 Rapid Tests. We have seen a reduction in the prevalence of COVID-19 since the height of the pandemic, and we expect that revenues relating to our COVID-19 testing products will decline in the future if the prevalence of COVID-19 remains low. Further, if the COVID-19 pandemic becomes a seasonal virus or experiences fluctuations in prevalence, we could

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experience fluctuations in our revenues associated with our InteliSwab® COVID-19 Rapid Tests. While there is still demand for COVID-19 testing products, there is no guarantee that current or anticipated demand will continue, or if demand does continue, that we will be able to produce our InteliSwab® COVID-19 Rapid Test in quantities to meet the demand. A significant decline in demand for our InteliSwab® COVID-19 Rapid Test without a corresponding increase in our other businesses could have a material, adverse effect on our results of operations, cash flow and financial position.

The COVID-19 Pandemic Continues to Cast Uncertainty Over Our Consolidated Results of Operations, Financial Position and Cash Flows, While the Consequences of COVID-19 and the Governmental Response to Contain the Pandemic and Pandemic-Related Macroeconomic Impacts Could Negatively Affect Our Operations and Share Price.

Although we have experienced heavy demand for our InteliSwab® tests and certain specimen collection devices for use in COVID-19 molecular testing as a result of the COVID-19 pandemic, which has had a positive impact on our performance, the duration and level of the demand for COVID-19 testing is highly uncertain. In addition, the COVID-19 pandemic has continued to negatively impact our ability to provide our HIV self-tests in Southern and Eastern African countries due to logistics challenges and, in our Molecular Solutions segment, COVID-related disruptions in clinical and research work, particularly in the academic market, had reduced demand for our products. We believe the COVID-19 pandemic's continued impact on our consolidated results of operations, financial position and cash flows will be primarily driven by; (i) the severity and duration of the COVID-19 pandemic; (ii) the COVID-19 pandemic's impact on the U.S. healthcare system and the U.S. economy; (iii) the timing, scope and effectiveness of federal, state and local governmental responses to the COVID-19 pandemic, including the development and deployment of vaccine, and (iv) the COVID-19 pandemic's impact on global clinics, research markets and global logistics. Each of these factors are difficult to predict and the nature, length and severity of any adverse consequences as a result of any given factor are uncertain.

Management has closely monitored the impact of the COVID-19 pandemic, with a focus on the health and safety of our employees and business continuity.

In response to, or as a result of, the current COVID-19 pandemic and emergence of variants, we may experience, among other things, voluntary or mandated temporary closures of one or more of our facilities; temporary or long-term labor shortages; temporary or long-term adverse impacts on our supply ‎chain and distribution channels; the potential of increased network vulnerability and risk of data loss resulting from ‎increased use of remote access and removal of data from our facilities; and required reallocation or adjustment of resources, which may ‎impact our business plans and product offerings. In addition, the direct or indirect impacts of ‎COVID-19 may extend to disrupt our suppliers, partners, manufacturers, customers and other ‎stakeholders, which in turn could materially adversely affect our business, results of operations or financial condition. Any change or disruption in operations could impact and have a material adverse effect on our operations and/or results from operations. In addition, the re-introduction of voluntary or mandated efforts ‎to slow the spread of COVID-19 could impact our operations and sales. If portions or all of our, our partners’, or our customer’s operations are disrupted or suspended as a result of preventative or reactionary ‎measures in response to the ongoing spread of COVID-19, it could have a material adverse impact on our ‎profitability, results of operations, financial condition and share price. Further, there continue to be significant economic and social impacts of the COVID-19 pandemic, including rising inflation rates, continued levels of higher unemployment, and market volatility, among other impacts; any of which may have an impact on consumer behavior, including use of our products.‎

Given the uncertainties associated with the ongoing COVID-19 pandemic, including ‎the uncertainty surrounding the remaining duration and outcome, COVID-19 variants and vaccine efficacy, we are unable to estimate the full impact of the COVID-19 pandemic on its business, financial condition, results of operations, and/or cash flows; however, the impact could be material.

Marketing of Our COVID-19 Tests and Collection Kits Under EUAs From The FDA Is Subject To Certain Limitations and We Are Required To Maintain Compliance With The Terms of The EUA, Among Other Things, And The Continuance of The EUAs Is Subject To Government Discretion.

On February 4, 2020, the HHS issued a declaration that the threat to public health posed by COVID-19 justifies the emergency use of unapproved in vitro diagnostics for the detection or diagnosis of SARS-CoV-2. Under Section 564 of the FDCA, because HHS has issued this declaration, the FDA Commissioner is authorized to issue EUAs to permit certain developers of SARS-CoV-2 diagnostics to begin offering the tests for detection and diagnosis of COVID-19 without having completed the normally applicable FDA review and clearance or approval process for marketing authorization (with the related standards that would apply to demonstrate safety and effectiveness). The issuance of an EUA reflects an FDA conclusion that based on the totality of scientific evidence available to the FDA, it is reasonable to believe that the product may be effective in diagnosing COVID-19, the known potential benefits of the product outweigh the known and potential risks, and there is no adequate, approved, and available alternative to the emergency use of the product.

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During 2020, our ORAcollect®·RNA and OMNIgene®·ORAL collection devices were included in EUAs granted by the FDA to certain third parties for use in the detection of SARS-CoV-2, and we have separately obtained EUAs for these products. In addition, we obtained three EUAs for our new our InteliSwab® COVID-19 Rapid Test. Although there are certain regulatory requirements the FDA has waived for the duration of the EUAs, we remain subject to specific conditions of the authorization, including ensuring appropriate labeling as approved by FDA specifically for purposes of the EUA, maintaining records of distribution to authorized laboratories, collecting data on occurrences of any false positives or false negatives, and tracking any adverse events. As part of the conditions of authorization, OraSure was required to conduct a clinical study in a pediatric population ages 2-14 and an asymptomatic population in addition to launching an app for consumers to report their test results to public health jurisdictions. OraSure has completed the required conditions of authorization with respect to the pediatric claim and launched the InteliSwab ® Connect application for reporting test results to public health jurisdictions. As a result of the National Institutes of Health study (Performance of Screening for SARS-CoV-2 using Rapid Antigen Tests to Detect Incidence of Symptomatic and Asymptomatic SARS-CoV-2 Infection: findings from the Test Us at Home prospective cohort study), FDA has requested modifications to labeling to include serial testing and has removed the required for the Company to conduct a study in an asymptomatic population. Labeling has been modified as required for inclusion of serial testing and authorized by FDA.

As with other FDA-regulated products, issues could emerge during the course of the marketing and use of our products under an EUA that could impact our ability to continue the sale and distribution of these products (for example, compliance or product performance issues). The applicable EUAs remain effective only until the HHS declaration is terminated or revoked, and the FDA may also revoke an EUA if it determines the criteria for issuance are no longer met or other circumstances make such revocation appropriate to protect the public health or safety. If that were to occur then in order market our diagnostic products or collection kits for the purpose of detecting COVID-19, we would be required to obtain the necessary regulatory clearances or approvals and be subject to the full and usual regulatory obligations for device manufacturers, including the QSR under 21 CFR Part 820. It is possible that we may not be able to obtain those clearances or approvals in a timely manner, or at all, and that one or more of our competitors may obtain the necessary clearances or approvals for their products before we do.

If Acceptance and Adoption of Oral Fluid Testing and Collection Products Does Not Continue, Our Future Results May Suffer.

We have made significant progress in gaining acceptance of oral fluid testing products, particularly for (i) HIV testing in the public health, hospital, insurance and other markets, and (ii) drugs-of-abuse testing in the workplace and criminal justice markets. Our subsidiary, DNAG, has also made significant progress in gaining acceptance of oral fluid collection products that are used with molecular testing applications including testing for SARS-CoV-2. However, the degree of acceptance for these products is uncertain, and one or more markets may resist the adoption of oral fluid products as a replacement for other testing or collection methods in use today. As a result, there can be no assurance that we will be able to expand the use of our oral fluid testing products in these or other markets.

However, clinical reference laboratories and hospital-based laboratories currently provide the majority of diagnostic tests used by physicians and other healthcare providers in the U.S. In certain international markets such as Europe, diagnostic testing is performed primarily by centralized laboratories. Our future sales will depend, in part, on our ability to expand market acceptance of rapid point-of-care testing by physicians, other healthcare providers and consumers and successfully compete against laboratory testing methods and products. Even if we can demonstrate that our products are more cost effective, save time, or have better performance or other benefits, physicians, other healthcare providers and consumers may resist changing to rapid point-of-care tests and instead may choose to obtain diagnostic results through laboratory tests. In addition, demand for our new rapid tests for SARS-CoV-2 or PrEP adherence may not develop consistent with our expectations. Our failure to achieve and expand market acceptance of our rapid point-of-care diagnostic tests with customers would have a negative effect on our future sales growth.

We Expect to Face Increasing Competition From Other Providers of Diagnostic Tests, Sample Collection Products and Molecular Laboratory Services.

Our rapid point-of-care tests compete with other point-of-care products made by our competitors. This competition is particularly evident with respect to our OraQuick ADVANCE® HIV-1/2 test and our HIV Self-Test outside of the US. The Oragene® product line sold by our subsidiary, DNAG, competes against other molecular collection products, such as blood collection kits and buccal swabs and will likely face additional competition from collection devices similar in design and operation to our Oragene® and ORAcollect® products. There are a number of products currently in or expected to enter the market for the detection of antigen to SARS-CoV-2 that currently or will compete with our InteliSwab® COVID -19 diagnostic test.

Our genetic and microbiome laboratory services business is expected to face increasing competition, primarily from large commercial reference laboratories, hospital-based laboratories and specialty laboratories. We believe there is significant opportunity in the markets for these services, particularly the microbiome market which is still in the early stages. As these markets evolve and expand, we expect competition for genomic and microbiome laboratory services to intensify.

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There is significant competition, including from other companies and governmental organizations, who make and distribute rapid tests for COVID-19. Many of these entities have substantially greater resources (including capital and personnel) than we do. Even if we are successful in marketing our InteliSwab® tests, there is no guarantee that competitors will not take market share from our offerings through more effective marketing or competitive pricing, higher quality or technological superiority.

A number of our competitors are making investments in competing technologies, products and services, and several may have a competitive advantage because of their greater financial, technical, research and other resources. Some competitors offer broader product lines and service offerings, aggressively discount prices for their products and services and may have greater name recognition than we have. We also face competition from certain of our distributors or former customers that have created, or may decide to create, their own products to compete with ours. If our competitors take market share from our offerings through more effective marketing or competitive pricing, higher quality or technological superiority, our revenues, margins and operating results could be adversely affected. In addition, our revenues and operating results could be negatively impacted if some of our customers use internally developed or acquired sample collection devices or services in order to reduce costs.

Our Product Sales Cycles Can be Lengthy, and May Depend on Public Funding, Which Can Cause Variability and Unpredictability in Our Operating Results.

The sales cycles for certain of our products can be lengthy and unpredictable, which makes it more difficult to accurately forecast revenues in a given period and may cause revenues and operating results to vary from period to period. Sales of our products often involve purchasing decisions by large public and private institutions, may require many levels of approval and may be dependent on economic or political conditions and the availability of grants or funding from governmental or public health agencies which can vary from period to period in both amount and timing. For example, in past years our OraQuick ADVANCE® HIV-1/2 test has been purchased through bulk procurement or other funding provided by governmental agencies. In particular,Our OraQuick® HCV test has been purchased by customers who receive government funding, and we believe increased funding from the CDC and other agencies will be required to substantially increase the volume of HCV testing, especially in the public health market. There can be no assurance that purchases or funding from these agencies will occur or continue. As a result, we may expend considerable resources on unsuccessful sales efforts or we may not be able to complete transactions at all or on a schedule and in an amount consistent with our objectives.

Our Inability To Expand International Sales Could Adversely Affect Our Business and Results of Operations.

One of our strategic priorities is to substantially expand our product sales internationally. An opportunity to accomplish this objective is with the sale of our OraQuick® HIV Self-Test in support of large self-testing programs in certain African countries and elsewhere. Our OraQuick® HIV Self-Test is also currently available in six European countries: United Kingdom, Germany, France, Italy, Spain and Portugal. We are also working to expand international sales of our professional HIV and HCV products and our molecular collection kits. We also believe there is a significant opportunity for international sales of our InteliSwab® COVID-19 Rapid Test once the necessary studies and registrations are complete.

While we believe international sales of these and other products represent attractive long-term opportunities with significant growth potential, there is no guarantee that these opportunities will materialize, continue or increase. Among other factors, competition from competitive lower priced products and the uncertainties of available funding could negatively impact the success of these opportunities. If international sales of these products do not occur or increase or if we are subjectotherwise unable to strict governmental controlsexpand international sales of our products, our revenues and results of operations could be negatively impacted.

In addition, market conditions in many countries often require that we sell our products at a price below our typical U.S. or European pricing in order to participate in these markets. As a result, sales in certain countries may contribute lower profit margins to our business. To the extent these international sales comprise a large or increasing part of our business, our gross margins will be negatively affected. In addition, we may have difficulty selling our products at a sufficiently low price to maintain or increase this business over the long term without funding support from public health entities, government agencies or other sources. If we are unable to obtain or continue this funding support at sufficient levels, or at all, our revenues and results of operations could be negatively affected.

Our International Presence May Increase Our Risks and Expose Our Business to Regulatory, Cultural or Other Restraints.

We seek to increase revenue derived from international sales of our products. Our international sales accounted for $37.3 million, or 10% of consolidated net revenues in 2022, $45.3 million, or 24%, of consolidated net revenues in 2021, and $40.9 million, or 24%, of consolidated net revenues in 2020. In addition, our subsidiary DNAG, which accounted for $75.0 million or 19% of consolidated net revenues in 2022, is operated in Canada. We have previously acquired foreign companies and we may acquire other foreign companies as part of our business development efforts.

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A number of factors could adversely affect the performance of our business and/or cause us to incur substantially increased costs because of our international presence and sales, including, but not limited to those set forth below:

Uncertainty in the application of foreign laws and the interpretation of contracts with foreign parties;
The potential for inconsistent imposition of legal and regulatory requirements;
Cultural and political differences that favor local competitors or make it difficult to effectively market, sell and gain acceptance of our products;
Cultural and language differences that make international operations and business management more difficult;
Inexperience in international markets and territories and difficulties in staffing and managing foreign operations;
Exchange rates, currency fluctuations, tariffs and other barriers, extended payment terms and dependence on international distributors or representatives;
Regulatory requirements, including compliance with applicable customs regulations and the need to obtain or maintain regulatory approvals, registrations or reimbursement approvals for our products;
Trade protection measures, additional trade sanctions and import/export licensing requirements;
The inability to obtain or maintain ISO certification for our or our suppliers’ manufacturing facilities;
Our inability to identify international distributors and negotiate acceptable terms for distribution agreements;
Diversion to the U.S. of our products that are sold at lower prices into international markets;
The loss of one or more distributors and difficulties or delays in obtaining new or transferred product registrations or approvals for use by a replacement distributor;
Differing tax laws across jurisdictions, as well as changes in those laws;
An increase of withholding and other taxes on remittances and other payments by a foreign subsidiary;
The creditworthiness of foreign distributors and customers and difficulty in collecting foreign accounts receivable;
Difficulty of enforcing contractual obligations or recovering damages under foreign legal systems;
Difficulty collecting amounts owed by foreign governments or other customers;
Economic conditions, inflation, political instability, the absence of available funding sources, terrorism, civil unrest, war and natural disasters in foreign countries;
Exposure to infectious disease and epidemics, including the effects of the COVID-19 outbreak on our business operations in geographic locations impacted by the outbreak and on the development, manufacture, labeling, distribution and marketingbusiness operations of our products.

customers and suppliers;

Long sales cycles in international markets, especially for sales to foreign governments, quasi-governmental agencies and international public health agencies;
The processsale of obtaining required approvals, clearancescompeting products by foreign competitors at prices at or premarket authorizations can involve lengthybelow the prices we offer for our products;
Restrictions on our ability to repatriate investments and detailed laboratory testing, human clinical trials, sampling activitiesearnings from foreign operations;
Changes in shipping costs;
The unavailability of licenses to certain patents in force in a foreign country which cover our products; and
Reduced protection for, or enforcement of, our patents and other costly, time-consuming procedures. These approvals, clearances and other premarket authorizations can requireintellectual property rights in foreign countries.

In addition, we have contracted with a third party in Thailand for the submissionmanufacture of a large amountportion of clinical data which can be expensiveour OraQuick® HIV tests and a portion of the assembly of our InteliSwab® COVID-19 Rapid Tests, and all of DNAG’s products are produced in Canada. We may requireenter into agreements to manufacture these or other products in additional foreign countries as well. However, economic, cultural and political conditions and foreign regulatory requirements may slow or prevent the manufacture of our products in countries other than the United States. Interruption of the supply of our products could reduce revenues or cause us to incur significant time to obtain. It isadditional expenses in finding an alternative source of supply. Foreign currency fluctuations and economic conditions in foreign countries could also possible that a product will not perform at a level needed to generateincrease the clinical data required to obtain such premarket authorizations. The submissioncosts of an applicationmanufacturing our products in foreign countries. In addition, the ongoing COVID-19 pandemic has resulted in increased government-imposed travel restrictions and extended shutdowns of certain businesses in the affected locations as well as logistics delays due to the FDAglobal logistical crisis from the pandemic. These or other regulatory authority does not guarantee that an authorizationany further political or governmental responses to market or import the product will be received. A regulatory authority may impose requirements as a condition to granting an approval, clearance, or other premarket authorization that may include significant restrictions or limitations. The regulatory authority may delay or refuse to grant premarket authorization, even though a product has been approved or registered without restrictions or limitations pandemic diseases could result

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in another country or by another agency. Delays in receipt or failure to receive such approvals, clearances or other premarket authorizationsocial, economic and labor instability of foreign countries, which could have a material adverse effect on our business, results of operations and financial conditioncondition.

OurU.S. Government Contracts Require Compliance With Numerous Laws and Increases Our Risk and Liability.

From time to time, we receive funding from the U.S. government and we sell some of our products to the federal government. Historically, we have sold a number of our products to the government under contracts with the General Services Administration and the Veterans Administration.

In September 2022 we entered into an $8.6 million contract with BARDA to develop a second generation Ebola test on the OraQuick® testing platform and we were selected to provide our OraQuick® In-Home HIV tests in support of the CDC "Together Take me Home," HIV self-test program. Under the program, the CDC is expected to provide $41.5 million over a five-year period to support community testing. During the third quarter of 2022, we entered into a contract with the DLA for the second procurement of our InteliSwab® COVID-19 Rapid Test for OTC use. During the same quarter, we entered into a contract with the BARDA to provide us with up to $13.6 million in funding to obtain FDA 510(k) clearance and CLIA waiver for our InteliSwab® test. In September 2021, we entered into a contract with the U.S. Department of Defense, in coordination with the HHS for $109 million in funding to build additional manufacturing capacity in the United States for our InteliSwab® test.

As a result of our U.S. government funding and product sales to the U.S. government, we must comply with laws and regulations relating to the award, administration and performance of U.S. government contracts. U.S. government contracts typically contain a number of extraordinary provisions that would not typically be found in commercial contracts and which may create a disadvantage and additional risks to us as compared to competitors that do not rely on government contracts. For example, the government has the right to terminate one or more of these contracts at its convenience even if we have not defaulted in any of our obligations.

As a U.S. government contractor, we are subject to increased risks of investigation, criminal prosecution and other legal actions and liabilities to which purely private sector companies are not. The results of any such actions could adversely impact our business and have an adverse effect on our consolidated financial performance.

A violation of specific laws and regulations could result in the imposition of fines and penalties or the termination of our contracts, as well as suspension or debarment. The suspension or debarment in any particular case may be limited to the facility, contract or subsidiary involved in the violation or could be applied to our entire enterprise in certain severe circumstances. Even a narrow scope suspension or debarment could result in negative publicity that could adversely affect our ability to renew contracts and to secure new contracts, both with the U.S. government and private customers, which could materially and adversely affect our business and results of operations.

Regulated devices must also meet ongoing FDA requirements after an initialpre-market authorization is received. These requirements include manufacturing quality control Fines and quality assurance registrationpenalties could be imposed for failing to follow procurement integrity and listing, adverse event andbidding rules, employing improper billing practices or otherwise failing to follow rules relating to billing on cost-plus contracts, receiving or paying kickbacks, or filing false claims, among other reporting and labeling, promotion and advertising requirements.

Allin vitro diagnostic products that are to be sold in the EU must bear the CE mark indicating conformance with the essential requirements of the IVDD. We have obtained the CE mark for several of our existing products. We also intend to apply for CE marks for certain of our future products and are not aware of any material reason why we would be unable to obtain those marks. However, there can be no assurance that compliance with all provisions of the IVDD will be demonstrated and the CE mark will be obtained or maintained for all products that we desire to sell in the EU. The failure to obtain or maintain the CE mark for one or more of our products could lead to the termination of strategic alliances and agreements for sales of those products in the EU.

potential violations. In addition, we or our distributors are often required to obtain premarket authorization or product registration with foreign governments or regulatory bodies before we can importcould suffer serious reputational harm and sell our products in foreign countries. We may also be required to obtain WHOpre-qualification or endorsement in order to sell certain products in international markets or enable our customers to access interested funding sources for our products. We may have difficulty obtaining such authorizations, registrations,pre-qualifications or endorsements and, if obtained, such authorizations, registrations,pre-qualifications or endorsements may contain restrictions that limit our ability to market and sell our products in the relevant country. In addition, any change in our arrangement with a foreign distributor could result in the loss of or delay in transfer of any applicable product registrations, thereby interrupting our ability to sell those products in the affected markets.

Failure to Comply With FDA or Other Regulatory Requirements May Require Us to Suspend Production or Sale of Our Products or Institute a Recall Which Could Result in Higher Costs and a Loss of Revenues.

Regulation by the FDA and other federal, state and foreign regulatory agencies impacts many aspectsvalue of our operations, and the operations of our suppliers and distributors, including manufacturing, labeling, packaging, adverse event reporting, recalls, distribution, storage, advertising, promotion and record keeping. We are subject to routine inspection by the FDA and other agencies to determine compliance with QSR and FDA regulatory requirements in the United States and other applicable regulations worldwide, including but not limited to ISO standards. We believe that our facilities and procedures are in material compliance with the FDA requirements and ISO standards, but the regulations maycommon stock could be unclear and are subject to change, and we cannot be sure that the FDA or other regulators will agree with our compliance with these requirements. The FDA and foreign regulatory agencies may require post-marketing testing and surveillance to monitor the performance of approved or cleared products or impose conditions on any product clearances or approvals that could restrict the distribution or commercial applications of those products. Regulatory agencies may impose restrictions on our or our distributors’ advertising and promotional activities or preclude these activities altogether if a noncompliance is believed to exist. In addition, the subsequent discovery of previously unknown problems with a product may result in restrictions on the product or additional regulatory actions, including withdrawal of the product from the market.

Failure to comply with the applicable requirements of the FDA can result in, among other things, 483 notices, warning letters, administrative or judicially imposed sanctions such as injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, refusal to grant premarket clearance or PMA approval for devices, withdrawal of product registrations, marketing clearances or approvals, or criminal prosecution. The ability of our suppliers to supply critical components or materials and of our distributors to sell our products could also be adverselynegatively affected if their operationsallegations of impropriety related to such contracts are determined to be out of compliance. Such actions by the FDA and other regulatory bodies could adversely affect our revenues, costs and results of operations.made against us.

Some of our products, particularly those sold by DNAG, are sold for research purposes in the U.S. We do not promote these products for clinical diagnostic use and they are labeled “For Research Use Only”, or RUO. If the FDA were to disagree with our RUO designation of a product, we could be forced to stop selling the product until appropriate regulatory clearance or approval has been obtained.

In the ordinary course of business, we must frequently make subjective judgments with respect to compliance with applicable laws and regulations. If regulators subsequently disagree with the manner in which we have sought to comply with these regulations, we could be subjected to substantial civil and criminal penalties, as well as product recall, seizure or injunction with respect to the sale of our products. The assessment of any civil and criminal penalties against us could severely impair our reputation within the industry and any limitation on our ability to manufacture and market our products could have a material adverse effect on our business.

Our Inability to Respond to Changes in Regulatory Requirements Could Adversely Affect Our Business.

We believe that our products and procedures are in material compliance with all applicable FDA regulations, ISO requirements, and other applicable regulatory requirements, but the regulations regarding the manufacture and sale of our products, the Quality System Regulation (“QSR”) and ISO requirements, and other requirements may be unclear and are subject to change. Newly promulgated regulations could require changes to our products, necessitate additional clinical trials or procedures, or make it impractical or impossible for us to market our products for certain uses, in certain markets, or at all. The FDA and other regulatory authorities also have the ability to change the requirements for obtaining product approval and/or impose new or additional requirements as part of the approval process. These changes or new or additional requirements may occur after the completion of substantial clinical work and other costly development activities. The implementation of such changes or new or additional requirements may result in additional clinical trials and substantial additional costs and could delay

or make it more difficult or complicated to obtain approvals and sell our products. In addition, the FDA may revoke an Emergency Use Authorization under which our products are sold, where it is determined that the underlying health emergency no longer exists or warrants such authorization. Such revocation would preclude the sale of our affected products unless and until a further regulatory approval or authorization is obtained. We cannot predict the effect, if any, that these changes might have on our business, financial condition or results of operations.

Our Inability to Manufacture Products in Accordance Withwith Applicable Specifications, Performance Standards or Quality Requirements Could Adversely Affect Our Business.

The materials and processes used to manufacture our products must meet detailed specifications, performance standards and quality requirements to ensure our products will perform in accordance with their label claims, our customers’ expectations and applicable regulatory requirements. As a result, our products and the materials used in their manufacture or assembly undergo regular inspections and quality testing. Factors such as defective materials or processes, mechanical failures, human errors, environmental conditions, changes in materials or production methods, and other events or conditions could cause our products or the materials used to produce or assemble our products to fail inspections and quality testing or otherwise not perform in accordance with our label claims or the expectations of our customers.

Any failure or delay in our ability to meet the applicable specifications, performance standards, quality requirements or customer expectations could adversely affect our ability to manufacture and sell our products or comply with regulatory requirements. These events could, in turn, adversely affect our revenues and results of operations.

Our Business Will Suffer if We Are SubjectDo Not Effectively Manage Challenges to Numerous Government RegulationsOur Manufacturing Processes and We May be Unable to Successfully Scale-Up Manufacturing of Our Products in AdditionSufficient Quality and Quantity to FDA Requirements,Meet Demand, Which Could Increase Our CostsWould Negatively Impact Revenue Expectations.

Challenges in the manufacture of our products in the face of significant demand for our InteliSwab® COVID-19 Rapid Tests have adversely affected, and Affect Our Operations.could in the future adversely affect, our operating efficiency and results of operations. We have contracted with

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the U.S. Department of Defense to add additional manufacturing capacity of our InteliSwab® COVID-19 Rapid Tests. However, we face risks, including with respect to expanding our overall production capacity, that could increase costs, divert management attention and reduce our operating results, with no guarantee of success. The expansion of our manufacturing and scale-up of additional commercial production and capacity involves significant risks and challenges, including, but not limited to, design and construction delays, implementation of new systems and expertise and cost overruns. There can be no assurance that our scale-up and manufacturing expansion will be operational, on time, or contribute the production capacity that we anticipate, and we cannot guarantee that any such scale-up will operate at costs acceptable to us or that demand for our products will remain at levels high enough to meet the return on investment necessary to justify our investment in these projects.

As we increase our manufacturing capacity to meet market demand or begin to manufacture new products at scale, we may face unanticipated manufacturing challenges as production volumes increase, new processes are implemented and new supplies of raw materials used in these products are secured. In addition, we could experience delays in production as we increase our manufacturing capacity or begin to manufacture new products that may result in our inability to meet product demand as the FDAproducts ordered by our customers being on back-order as initial production issues are addressed. If we experience production delays or inefficiencies, a deterioration in the quality of our products or other complications in managing changes to our manufacturing processes, including those that are designed to increase capacity, enhance efficiencies and other regulations described previously, lawsreduce costs or that relate to new products or technologies, we may not achieve the benefits that we anticipate from these actions when expected, or at all, and regulations in some states may restrict our ability to sell products in those states. While we intend to work with state legislatorsoperations could experience disruptions, our manufacturing efficiency could suffer and regulators to remove or modify any applicable restrictions, there is no guarantee we will be successful in these efforts.

We must also comply with numerous laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control, disposal of hazardous substances, labor or employment practices and the configuration and operation of the websites through which we advertise our products. Compliance with these laws or any new or changed laws regulating our business, could result in substantial costs. Because of the number and extent of the laws and regulations affecting our industry, and the number of governmental agencies whose actions could affect our operations, it is impossible to reliably predict the full nature and impact of these requirements. To the extent the costs and procedures associated with complying with these laws and requirements are substantial or it is determined that we do not comply, our businessfinancial condition and results of operations could be materially and adversely affected.

Failure To Comply With Privacy, Security Any such delays could allow our competitors to seize market advantage. In addition, global supply chain and Breach Notification Regulations May Increase Our Costs.

The Company believes it is neither a covered entity nor a business associate of a covered entity and is not responsible for complying with the Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”). However, the Company has in place certain administrative, technical and physical safeguards to protect the privacy and security of consumers’ personal information and endeavors to comply with all applicable state and federal laws with respectworkforce challenges related to the protection of consumers’ personal information. The Company is required to comply with varying state privacy, securityCOVID-19 pandemic increase the risks in scaling-up manufacturing as global supply challenges may increase the difficulty in obtaining necessary materials and breach reporting laws.a dynamic and unpredictable labor market may make the necessary labor and staffing challenges more difficult. If we do not complyare unable to successfully meet our manufacturing challenges, we may be unable to meet the demand for our InteliSwab® COVID-19 Rapid Tests, which could have a material, adverse effect on our reputation, revenues, results of operations, cash flow and financial position.

Our Business Results Depend on our Ability to Manage Disruptions in our Domestic and Global Supply Chains and Distribution Channels.

Our ability to meet our customers needs and achieve our financial objectives depends on our ability to maintain key manufacturing, supply and distribution arrangements. The loss or disruption of such manufacturing and supply arrangements could, in the future, interrupt our ability to obtain necessary raw materials and manufacture our products. Such disruptions could result from labor disputes, financial liquidity, natural disasters, extreme weather conditions, public health emergencies and pandemics, supply constraints and general economic and political conditions that could limit the ability of our suppliers to timely provide us with existingraw materials and components and distribute our products in a timely manner in accordance with applicable quality requirements. Disruptions in the global supply chain could also delay or preclude the ability of our distributors to sell and deliver our products to customers.

The availability and price of these materials, parts, products and services are affected by a variety of factors beyond our control, including the willingness of suppliers to sell into the medical device industry, changes in supply and demand, general economic conditions, labor costs, fuel-related transportation costs, liability concerns, climate change (including new and existing laws and regulations related to properly transferring data containing consumers’ personal information,address climate change), competition, import duties, tariffs, currency exchange rates, inflationary pressures and political uncertainty around the world. Our suppliers often pass some of their cost increases on to us, and if such increased costs are sustained or increase further, our suppliers may pass further cost increases on to us. In addition, transportation costs have generally increased and may further increase if crude oil prices increase. Our transportation and service providers are typically able to pass any significant increases in oil prices on to us. Our costs may also be impacted by laws to increase minimum wages, including the potential increase to the federal minimum wage in the United States that has been recently proposed by the current administration.

Our ability to recover such increased costs may depend upon our ability to raise prices on our products. Due to the highly competitive nature of the healthcare industry and the cost-containment efforts of our customers and third-party payers, we may be unable to pass along cost increases through higher prices. If we are unable to fully recover these costs through price increases or offset these increases through cost reductions, or we experience terminations or interruption of our relationships with our suppliers, we could experience lower margins and profitability, and our results of operations, financial condition and cash flows could be subject to monetary fines, civil penalties or criminal sanctions. In addition to other federal and state laws that protectmaterially harmed.

Recently, the privacy and security of consumers’ personal information, we may be

subject to enforcement and interpretationsglobal supply chain has experienced significant disruptions caused by various governmental authorities and courtsthe COVID-19 pandemic, resulting in complex compliance issues. For example, weshortages of labor and equipment. These conditions, if not mitigated or remedied in a timely manner, could incur damages under state laws pursuantdelay or preclude delivery of raw materials needed to an action brought by a private party for the wrongful usemanufacture our products or disclosuredelivery of consumers’ personal information.

Compliance With Regulations Governing Public Company Corporate Governance and Reporting is Complex and Expensive.

Many laws and regulations impose obligations on public companies, and these obligations have increased the scope, complexity and cost of corporate governance, reporting and disclosure practices. Examples include the Sarbanes-Oxley Act of 2002, the requirements of The NASDAQ Global Market, The Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC’s requirements for public companiesour products to provide financial statementscustomers, particularly in interactive data format using the eXtensible Business Reporting Language (“XBRL”), and the International Financial Reporting Standards conversion requirements. Our implementation of certain aspects of these laws and regulations has required and will continue to require substantial management time and oversight and may require us to incur significant additional accounting and legal costs. We continually evaluate and monitor developments with respect to new and proposed rules and cannot predict or estimate the ultimate amount of additional costs we may incur or the timing of such costs. These laws and regulations are also subject to varying interpretations, in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Although we are committed to maintaining high standards of corporate governance and public disclosure, if we fail to comply with any of these requirements, legal proceedings may be initiated against us, which may adversely affect our business.

FDA Regulation of Laboratory-Developed Tests and Genetic Testing Could Affect Demand For Our Products.

The FDA has regulatory responsibility over instruments, test kits, reagents and other devices used to perform diagnostic testing by clinical laboratories. In the past, the FDA has taken the position that it has regulatory authority over laboratory-developed tests, or LDTs, but has exercised enforcement discretion in not regulating most LDTs performed by high complexity CLIA-certified laboratories. LDTs are tests designed, developed, and performedin-house by a laboratory. Such laboratories are subject to regulation under CLIA but have not been subject to regulation by FDA under the agency’s medical device requirements. A significant portion of the total volume of genetic or molecular testing is performed with LDTs.

Inmid-2010, the FDA announced that it would begin regulating LDTs, including laboratory developed molecular tests, and in October 2014 issued proposed guidance on the regulation of LDTs for public comment. On January 13, 2017, the FDA released a discussion paper synthesizing public comments on the 2014 draft guidance documents and outlining a possible approach to regulation of LDTs. The discussion paper has no legal status and does not represent a final version of the LDT draft guidance documents. We cannot predict what policies will be adopted with respect to regulating LDTs.

Our subsidiary, DNAG, sells its DNA collection systems to certain laboratories and other customers for use with LDTs. The FDA’s increased regulation of LDTs could make it more difficult for laboratories and other customers to continue offering LDTs that involve genetic or molecular testing.international markets. This in turn could increase costs, delayhave an adverse impact on our business, financial condition, results of operations or cash flows.

Certain of Our Products Depend on Components From a Sole-Source Supplier, the introductionLoss of new LDT’sWhich Would Cause Us to be Unable to Deliver Such Products.

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Our Intercept i2®he collection device is manufactured and reduce demandsupplied under a long-term agreement with Thermo Fisher, the sole-source supplier for DNAG’s productsthese products. If Thermo Fisher were unable or unwilling to supply the necessary components for the manufacture of the Intercept i2®he collection devices, we would be unable to produce this product or offer it to our customers. Any interruption in, or change in the cost or quality of, the supply of the necessary raw materials, manufacturing services, product and process development, or other materials necessary to manufacture the product could adversely impact the efficacy of the product and negatively affect our revenues.reputation with our customers. In addition, many of the raw materials used in our DNAG products, including our Oragene® product line, and components used in these products are also purchased from third parties, some of which are purchased from a sole source supplier. If our sole source suppliers were to be acquired by a competitor, they may elect not to provide us with the product, raw materials or other components, as applicable. If our sole source suppliers were to otherwise cease supplying us, go out of business, or were unable to meet their obligations in a timely fashion or at an acceptable price, or at all, we may be forced to incur higher costs to obtain the necessary raw materials elsewhere, if we could even source such materials at all.

Evolving Legislative, Judicial and Ethical Standards on the Use of Technology and Biotechnology Could

Our U.S. Government Contracts May Affect Our Molecular Collection Systems Business.our Intellectual Property Rights.

The adoption of genetic testing is occurring within the broader context of a myriad of decisions related to genetic patenting and genotyping. Issues associated with regulatory requirements, health insurance, data access and

privacy,Provisions in our U.S. government contracts may affect our intellectual property protection, national and international legislative initiatives and other variables impact the widespread adoption of genetic testing or specific segments or tests within the genetic testing market. These developments could impact salesrights. Certain of our molecular collection systems products.

Federalactivities have been funded, and State Laws Pertainingmay in the future be funded, by the U.S. government, including our contracts with BARDA. When new technologies are developed with U.S. government funding, the government obtains certain rights in any resulting patents, including the right to Healthcare Frauda nonexclusive license authorizing the government to use the invention. These rights may permit the government to disclose our confidential information to third parties and Abuse Could Adversely Affect Our Business, Financial Conditionto exercise “march-in” rights to use and Resultsallow third parties to use our patented technology. The government can exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of Operations.

We arethe U.S. government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, government-funded inventions must be reported to the government, government funding must be disclosed in any resulting patent applications, and our rights in such inventions may be subject to various federal and state laws targeting fraud and abusecertain requirements to manufacture products in the healthcare industry, including anti-kickback laws, false claims laws, laws constrainingUnited States.

Our U.S. Government Contracts and Related Administrative Processes Are Subject to Audits and Cost Adjustments by the sales, marketingFederal Government.

Federal government agencies can audit and promotioninvestigate government contracts and the administrative processes and systems of medical devices by limiting the kinds of financial arrangements that manufacturers of these products may enter into with physicians, hospitals, laboratoriesgovernment contractors. These agencies can review our performance on government contracts, pricing practices, cost structure, and other potential purchasers of medical devices, and laws requiring the reporting of certain transactions between manufacturers and healthcare professionals. Violations of these laws are punishable by criminal or civil sanctions, including substantial fines, imprisonment and exclusion from participation in government healthcare programs such as Medicare and Medicaid. Many of the existing requirements have not been definitively interpreted by state authorities or courts, and available guidance is limited. Unless and until we are in full compliance with these laws, we could face enforcement action and fines and other penalties, and could receive adverse publicity, all of which could materially harm our business. In addition, changes in or evolving interpretations of theseapplicable laws, regulations and standards. They can also review our compliance with government regulations and policies and the adequacy of our internal control systems and policies, including our purchasing, accounting, estimating, compensation and management information processes and systems. Any costs found to be improperly allocated to a specific government contract, unallowable or administrative or judicial interpretations,unreasonable will not be reimbursed, and any such costs already reimbursed may require usbe required to change our business practices or subject our business practices to legal challenges, whichbe refunded and certain penalties may be imposed. Adjustments arising from government audits and reviews could have a material adverse effect on our business, financial condition, and results of operations.

Our International Sales Create Potential Exposure Under Anti-Corruption Laws.

In 2017, approximately $45.6 million of our consolidated net revenues were generated from sales in a variety of foreign countries. These international activities subject us to the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by business entities for the purpose of obtaining or retaining business. We have operations, agreements with third parties and make sales in countries known to experience corruption. Further international expansion may create increased exposure to such practices. Our activities in these countries create the risk of unauthorized payments or offers of payments by one of our employees, consultants, sales agents or distributors that could be in violation of various laws, including the FCPA, even though these parties are not always subject to our control. It is our policy to implement safeguards to discourage these practices by our employees and distributors, including employee training, contracts requiring compliance with the FCPA and similar rules, and standard reviews of our distributors. However, our existing safeguards and any future improvements may not prove to be effective, and our employees, consultants, sales agents or distributors may engage in conduct for which we might be held responsible. Violations of the FCPA and other laws may result in criminal or civil sanctions, which could be severe and we may be subject to other liabilities, which could negatively affect our reputation, business, results of operations and financial condition.prospects.

Moreover, if any administrative process or system related to such contracts is found not to comply with governmental requirements, we may be subjected to government scrutiny that could delay or otherwise adversely affect our ability to compete for or perform government contracts or collect our revenue in a timely manner. An unfavorable outcome of an audit of our government contracts could adversely affect our results of operations.

We May Not be Able to Fulfill Our Obligations Under Government Contracts, Which Could Result in Reduced Sales and Profits, Contract Penalties or Terminations, and Damages to Customer Relationships.

If we are unable to successfully scale-up our manufacturing of our InteliSwab® COVID-19 Rapid Tests, we may be unable to meet our obligations under our government contracts. In addition, certain of our government contracts require us to meet production and manufacturing milestones. Failure to meet these milestones would result in not receiving payments under the contract. Our inability to fulfill our obligations under government contracts could result in reduced sales and profits, contract penalties or terminations, and damage to customer relationships, leading the government to turn to other companies to fulfill the contract.

Risks Relating to Our Industry, Business and Strategy

Our Ability to Sell Products Could be Adversely Affected by Competition From New and Existing Products.

The markets we serve are highly competitive and rapidly changing and we expect competition to intensify as technological advances are made and become more widely known, and as new products reach the market. Many of our principal competitors have considerably greater financial, technical and marketing resources than we do. As new products enter the market, our products may become obsolete or a competitor’s products may be more effective or more effectively marketed and sold than ours. In addition, there can be no assurance that our competitors will not succeed in obtaining regulatory approval for new products that would render our

technologies and products obsolete or otherwise commercially unattractive, or introduce or commercialize such products, before we can do so. If we fail to convince our customers of the advantages and economic value of our products or otherwise maintain and enhance our competitive position, our customers may decide to use products developed by competitors which could result in a loss of revenues. These developments could have a material adverse effect on our business, financial condition and results of operations.

We also face competition from products that are sold at a lower price. Where this occurs, customers may choose to buy lower cost products from third parties or we may be forced to sell our products at a lower price, both of which could result in a loss of revenues or a lower gross margin contribution from the sale of our products. We may also be required to increase our marketing efforts in order to compete effectively, which would increase our costs.

Consolidation in the Healthcare Industry Could Adversely Affect Our Future Revenues and Operating Results.

The healthcare industry has experienced a significant amount of consolidation. As a result of this consolidation, competition to provide goods and services to customers has increased. In addition, group purchasing organizations and integrated health delivery networks have served to concentrate purchasing decisions for some customers, which has also placed pricing pressure on medical device suppliers. We

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may not be able to compete successfully in such a consolidated industry. We believe industry consolidation may continue as companies attempt to strengthen or hold their market positions and as more companies are acquired or cease operating. Further consolidation in the industry could exert additional pressure on the prices of our products.

Our Research, Development and Commercialization Efforts May Not Succeed and Our Competitors May Develop and Commercialize More Effective or Successful Products.Offerings.

In order to remain competitive, we must regularly commit substantial resources to research and development and the commercialization of new or enhanced products.products and services. The research and development process generally takes a significant amount of time from product inception to commercial launch. This process is conducted in various stages. During each stage there is a substantial risk that we will not achieve our goals on a timely basis, or at all, and we may have to abandon a new or enhanced product or service in which we have invested substantial time and money.

During 2017, 2016 and 2015 we incurred $13.4 million, $9.8 million and $11.7 million, respectively, in research and development expenses. We expect to continue to incur significant costs related to our research and development activities.

Successful products and services can require significant development and investment, including testing to demonstrate their performance capabilities, cost-effectiveness or other benefits prior to commercialization. Regulatory approval or clearance must be obtained before most products may be sold and additional development efforts on these products may be required before any regulatory authority will review them. Similarly, regulatory clearances or registrations, such as a CLIA certification, and compliance with industry guidelines, may be required in order to provide competitive laboratory services. As noted above, regulatory authorities may not approve these products for commercial saleissue such approvals, clearances or certifications or may substantially delay or condition approval.such action. Even if a product or service is developed and all applicable regulatory approvals, clearance or certifications are obtained, there may be little or no market for the product or service and entry into or development of new markets for our products and services may require an investment of substantial resources, such as new employees, offices and manufacturing facilities. Moreover, we may spend a significant amount of money on manufacturing facilities, advertising or other activities and fail to develop a market for the product.product or service. Other factors that could affect the success of our efforts include our ability to manufacture products or provide laboratory services in a cost-effective manner and whether we can obtain necessary intellectual property rights and protection and our ability to obtain reimbursement authorizations in the markets where the product will beor service is sold.

Accordingly, if

If we fail to develop and gain commercial acceptance for our products and services, or if competitors develop more effective products and services or a greater number of successful new products and services, customers may decide not to purchase our products and services or may purchase and use products and services developed by our competitors. This would result in a loss of revenues and adversely affect our results of operations, cash flow and business.

Failure to Successfully Commercialize RapidPoint–of-Care Ebola and Zika Tests Could Adversely AffectCustomer Concentration Creates Risk for Our ResultsBusiness.

One of Operations and Business Prospects.

our customers accounted for approximately 58% of our net consolidated revenues for the year ended December 31, 2022. We have completed development of a rapid Ebola antigen test using our OraQuick®technology platform. In 2015 and 2016, under an EUA (Emergency Use Authorization) received from the FDA, we sold $2.5 million of productexpect that sales to the CDC for field testing. There were minimal saleslarge non-commercial customer will continue to be a significant contributor to our net consolidated revenue. Certain parts of this product during 2017. It is uncertain whether,our business may continue to have a high customer concentration and depend disproportionately on a few large customers. To the extent that such a large customers fail to what extent, we will be successful in obtaining additional or sustainablemeet their purchase commitments, change their ordering patterns or business strategies, or otherwise reduce their purchases or stop purchasing our products, or if we experience difficulty in meeting the high demand by these larger customers for our Ebola test. Significant efforts are under way to develop a vaccine for the Ebola virus. If a vaccine is developed and widely deployed in the countries at risk for Ebola, the need for testing could be reduced as could the demand for our product.

There is also no assurance that our Ebola test will perform at a level necessary to receive all of the regulatory approvals required for its use. In addition, it is possible that the FDA may revoke our EUA if it is determined that Ebola is no longer an emergency warranting that authorization. Failure to successfully obtain the required regulatory approvals or receive sustainable and significant purchase commitments for our Ebola test could adversely affectproducts, our revenues and results of operations.

During 2016 and 2017, we have worked to complete development of a rapid Zika antibody test, also using our OraQuick® technology platform. Once development is complete and a prototype test is finalized, we intend to seek EUA for this product. There is no assurance that we will be able to successfully complete development of our Zika test or that we will be able to obtain EUA or other necessary regulatory approvals required to commercialize this product. In addition, even if our development efforts are successful and such approvals are received, there is no assurance that we will be able to obtain significant or sustainable purchase commitments for our Zika test. Our failure to successfully complete development, obtain the required regulatory approvals or receive substantial purchase commitments for our Zika testoperations could adversely affect our revenues and results of operations.

Failure to Achieve Our Financial and Strategic Objectives Could Have a Material Adverse Impact on Our Business Prospects.

As a result of any number of risk factors identified in this Annual Report, no assurance can be given that we will be successful in implementing our financial and strategic objectives, including our efforts to increase sales of our products or continue growing our business. In addition, the funds for research, clinical development and other projects have in the past come primarily from our business operations. If our business slows and we have less money available to fund research and development and clinical programs, we will have to decide at that time which programs to cut, and by how much. Similarly, if adequate financial, personnel, equipment or other resources are not available, we may be required to delay or scale back our business. Our operations will be adversely affected if our total revenue and gross profits do not correspondingly increase or if our technology, product, clinical and market development efforts are unsuccessful or delayed. Furthermore, our failure to successfully introduce new or enhanced products and develop new markets could have a material adverse effect on our business and prospects.affected.

If We Lose Our Key Personnel or Are Unable to Attract and Retain Qualified Personnel as Necessary, Our Business Could be Harmed.

Our success depends to a large extent upon the contributions of our executive officers, management and sales, marketing, operations and scientific staff. Our business may be harmed by the loss of a significant number of our executive officers or senior managers. We may not be able to attract or retain a sufficient number of qualified employees in the future due to the intense competition for qualified personnel among medical products and other life science businesses. Our ability to recruit such employees will depend on a number of factors, including compensation, benefits, work location, the prospects of our Company, and the possibility for advancement within our organization. We generally do not enter into employment agreements requiring our employees to work for us for any specified period.

If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that will adversely affect our ability to effectively manufacture, sell and market our products, to meet the demands of our strategic partners in a timely fashion, or to support research, development and clinical programs. Although we believe we will be successful in attracting and retaining qualified personnel, competition for experienced scientists and other qualified personnel from numerous companies and academic and other research institutions may limit our ability to do so on acceptable terms.

If We Do Not Successfully Manage the Transition Associated with the Appointment of a New Chief Executive Officer and Chief Financial Officer, Our Business May Be Harmed

In January 2018, we announced the retirement of our President and Chief Executive Officer, which will become effective as of April 1, 2018, and the retirement of our Chief Financial Officer and Chief Operating Officer, which will become effective on or before June 30, 2018, with the exact date to be determined based on the timing for our appointment of a new Chief Financial Officer. Any changes that may result from hiring a new Chief Executive Officer or Chief Financial Officer can create uncertainty and may negatively impact our ability to execute our business strategy quickly and effectively. Management transition periods can be difficult as the new management gains detailed knowledge of our operations, and friction or further management changes or disruptions could result from changes in strategy and management style. Until we fully integrate our new Chief Executive Officer and Chief Financial Officer, we may be unable to successfully manage and grow our business, and our results of operations and financial condition could suffer as a result. Any changes in our organization as a result of this management transition may have a disruptive impact and could have a material adverse effect on our business, financial condition and results of operations.

Acquisitions or Investments May Not Generate the Expected Benefits and Could Disrupt Our Ongoing Business, Distract Our Management, Increase Our Expenses and Adversely Affect Our Business.

Since the beginning of 2019, we have acquired several companies through which we have gained access to new technologies, products and services which are complementary to our existing business and aligned with our long-term business strategy. We maywill likely continue to pursue strategic acquisitions or investments as a way to expand our business. These activities, and their impact on our business, are subject to many risks, including the following:

Suitable acquisitions or investments may not be found or consummated on terms or schedules that are satisfactory to us or consistent with our objectives;

We may be unsuccessful in competing for acquisitions with other entities, some of which have greater financial resources or may be better able to realize synergies with a potential target;

The benefits expected to be derived from an acquisition or investment may not materialize and could be affected by numerous factors, such as regulatory developments, insurance reimbursement, our inexperience with new businesses or markets, general economic conditions and increased competition;

We may be unable to successfully integrate an acquired company’s personnel, assets, management, information technology systems, accounting policies and practices, products, services and/or technology into our business;

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Worse than expected performance of an acquired business may result in the impairment of intangible assets;

Acquisitions may require substantial expense and management time and could disrupt our business;

We may not be able to accurately forecast the performance or ultimate impact of an acquired business;

We may have difficulties in coordinating geographically separate organizations;

We may fail to successfully manage relationships with customers, distributors and suppliers of an acquired business;

An acquisition may result in a diversion of resources from our existing products, business and technologies;

An acquisition and subsequent integration activities may require greater capital and other resources than originally anticipated at the time of acquisition;

To the extent we agree to pay contingent consideration for an acquisition, if and how much of such consideration we are required to pay may be subject to dispute, resulting in the distraction of our management team and the incurrence of legal costs;
An acquisition may result in employee anxiety, morale and/or engagement issues;
An acquisition may result in disparate information technology, internal control, financial reporting and record-keeping systems;
An acquisition may result in new partners or customers who may operate on terms and programs different than ours;
An acquisition may result in employees not familiar with our operations;
An acquisition may result in new products and services, including the risk that any underlying intellectual property associated with such products and services may not have been adequately protected or that such products and services may infringe on the proprietary rights of others;
An acquisition may result in the incurrence of unexpected expenses, stockholder lawsuits, the dilution of our earnings or our existing stockholders’ percentage ownership, or potential losses from undiscovered liabilities not covered by an indemnification from the seller(s) of the acquired business;

An acquisition may result in the loss of our or the acquired company’s key personnel, customers, distributors or suppliers; and

An acquisition of a foreign business may involve additional risks, including, but not limited to, foreign currency exposure, liability or restrictions under foreign laws or regulations, and our inability to successfully assimilate differences in foreign business practices or overcome language or cultural barriers and other inherent risks of operating in unfamiliar legal and regulatory environments.

The occurrence of one or more of the above or other factors may prevent us from achieving all or a significant part of the benefits expected from an acquisition or investment. This may adversely affect our financial condition, results of operations and ability to grow our business or otherwise achieve our financial and strategic objectives.

There Are Risks Relating To Our Recent Acquisitions.

The success of the acquisitions will depend, in part, on our ability to successfully combine and integrate our legacy business with those businesses acquired. The integration of the businesses with our existing business can be complex, costly and time-consuming processes. It is possible that a number of factors, including, without limitation, the loss of key employees, higher than expected costs, diversion of management attention and resources, the disruptions of ongoing businesses or inconsistencies in standards, controls, procedures and policies, could adversely affect our ability to maintain relationships with customers, vendors and employees or to achieve the anticipated benefits and cost savings of the acquisitions. If we experience difficulties with the integration process, the anticipated benefits of the acquisitions may not be realized fully or at all, or may take longer to realize than expected. These integration matters could have an adverse effect on us for an undetermined period following the acquisitions.

As a general matter, the market for microbiome laboratory testing and analytical services provided by Diversigen is at an early stage and is still developing. In addition, the Colli-Pee® urine collection devices manufactured and sold by Novosanis are relatively new products that are not yet widely accepted by customers. There is no assurance that we will be successful in creating or expanding demand for these services and products. To the extent that the markets for these services and products fail to develop or increase, our revenues and results of operations could be adversely affected and we may not meet our growth objectives.

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Our Revenues Could be Affected by Third-Party Reimbursement Policies and Potential Cost Constraints.

Theend-users of certain of our products include hospitals, physicians and other healthcare providers. Use of our products could be adversely impacted if theseend-users do not receive adequate reimbursement for the cost of our products from their patients’ healthcare insurers or payors. Our net sales could also be adversely affected by changes in reimbursement policies of governmental or private healthcare payors, including in particular the level of reimbursement for our products.

In the United States, hospitals, physicians and other healthcare providers who purchase diagnostic products generally rely on third-party payors, such as private health insurance plans, Medicare and Medicaid, to reimburse all or part of the cost of the product and procedure. The overall escalating cost of medical products and services has led to, and will continue to lead to, increased pressures on the healthcare industry, both foreign and domestic, to reduce the cost of products and services. Given the efforts to control and reduce healthcare costs in the United States in recent years, currently available levels of reimbursement may not continue to be available in the future for our existing products or products under development. Third-party reimbursement and coverage may not be available or adequate in either the United States or international markets, current reimbursement amounts may be decreased in the future and future legislation, and regulation or reimbursement policies of third-party payors, may reduce the demand for our products or our ability to sell our products on a profitable basis. In addition, the reimbursement approval process may delay the market introduction of our products.

Changes in Healthcare Regulation Could Affect Our Revenues, Costs and Financial Condition.

In recent years, there have been numerous initiatives at the federal and state level for comprehensive reforms affecting the payment for, the availability of and reimbursement for healthcare services in the United States. These initiatives have ranged from proposals to fundamentally change federal and state healthcare reimbursement programs, including providing comprehensive healthcare coverage to the public under government-funded programs, to minor modifications to existing programs. One example is the Patient Protection and Affordable Care Act, the Federal healthcare reform law enacted in 2010 (the “Affordable Care Act”). Similar reforms may occur internationally.

Legislative and regulatory bodies are likely to continue to pursue healthcare reform initiatives in many forms and may continue to reduce funding in an effort to lower overall federal healthcare spending. The U.S. government recently enacted legislation that eliminated what is known as the “individual mandate” under the Affordable Care Act and may enact other changes in the future. The ultimate content and timing of any of these types of changes

in other to healthcare reform legislation and the resulting impact on us are impossible to predict. If significant reforms arecontinue to be made to the healthcare system in the United States, or in other jurisdictions, those reforms may increase our costs or otherwise have an adverse effect on our financial condition and results of operations.

The Affordable Care Act imposes a 2.3% excise tax on certain transactions, including U.S. sales of many medical devices, which includes domestic sales of certain of our products. This new tax became effective in January 2013. However, the Consolidated Appropriations Act of 2016, which was enacted late 2015, suspended the tax beginning January 1, 2016, and this suspension was recently extended through December 31, 2019. It is unclear whether and to what extent this tax will impact our business, if and when the suspension is lifted.

New or Changed Testing Guidelines Could Affect Sales of Our Diagnostic Products.

From time to time, governmental agencies such as the Centers for Disease Control and Prevention, or CDC issue diagnostic testing guidelines or recommendations, which can affect the usage of our HIV and HCV testingtests or other diagnostic products. For example, past sales of domestic professional OraQuick® HIV salestests have decreased in recent years in part due to customer migration to automated fourth generation HIV immunoassays performed in a laboratory, as recommended under testing guidelines issued by the CDC. In addition, some states have promulgated, or may in the future promulgate, laws and regulations that affect HIV or HCV testing. The issuance of new laws or guidelines, or changes in existing laws or guidelines, and the manner in which these new or changed laws and guidelines are interpreted and applied by healthcare practitioners, could impact the degree to which our OraQuick® rapid HIV and HCV testing products or other products are used. New or changed laws or guidelines could affect the number of people tested, the frequency of testing and whether testing products such as our OraQuick® HIV and HCV tests are used broadly for screening large populations or in a more limited capacity as a confirmatory test or otherwise. These factors could in turn affect the level of sales of our products and our results of operations.

Reductions in Government Funding and Research Budgets Could Adversely Affect Our Business and Financial Results.

We sell our OraQuickADVANCE®HIV-1/2 and OraQuick®HCV tests into the US public health market which consists of state, county and other governmental public health agencies, community based organizations, service organizations and similar entities. We also sell these products into the hospital market. Many of these customers depend to a significant degree on grants or funding provided by governmental agencies to run their operations including programs that use our products. In international markets, we often sell products such as our productsOraQuick® HIV Self-Test to or through foreign governmental agencies or parties funded by such agencies.

Many of our molecular collection products are sold to researchers at academic institutions, pharmaceutical and biotechnology companies, government laboratories and private foundations. Many research customers are dependent for their funding on grants from U.S. governmental agencies such as the U.S. National Institutes of Health and agencies in other countries.countries to pay for the products and services they purchase. These research customers also purchase our genomic and microbiome laboratory tests and analytical services.

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The level of available government grants or funding in the U.S. and elsewhere is unpredictable and may be affected by various factors including economic conditions, legislative and regulatory developments, political changes, civil unrest and changing priorities for research and development activities. Further, government proposals to reduce or eliminate budgetary deficits have sometimes included reduced allocations to government agencies in the U.S. and other countries that fund life sciences research and development activities. Any reduction or delay in government or other funding as a result of legislative or regulatory changes or other factors, could cause our customers to delay, reduce or forego purchases of our products.products and services.

Certain Changes by the Current Administration Could Affect our Business.

The current Administration has promised to repeal and replace the Affordable Care Act, has expressed concerns with respect to existing trade agreements such as the North American Free Trade Agreement, or NAFTA, and has indicated a desire to make other regulatory changes. Changes in regulatory or economic conditions or in the laws and policies governing foreign trade, taxes, manufacturing, and development in the United States could impact

our business. For example, changes in the level of reimbursement or the availability of funding for health care could create uncertainty for our business and negatively impact our revenues and results of operations. Similarly a substantial part of DNAG’s revenues represent sales of product from Canada into the United States. The imposition of tariffs or other changes in the trade relationship between Canada and the United States could negatively impact DNAG’s performance. Economic and regulatory changes could also affect foreign currency exchange rates which, in turn, could affect our reported financial results and our competitiveness on a worldwide basis.

Developments Related To The U.K.’s Referendum On Membership in The E.U. Could Adversely Affect Us.

On June 23, 2016, the United Kingdom (“U.K.”) held a referendum and voted in favor of exiting the European Union, or E.U. This “Brexit” referendum has created political and economic uncertainty, particularly in the U.K. and E.U. and this uncertainty may last for years. Until the precise terms and timing of the U.K.’s exit from the E.U. are determined, it will be difficult to predict the impact of the Brexit referendum. Our business in the U.K., the E.U. and world-wide could be affected during this period of uncertainty, and perhaps longer, by the impact of the Brexit referendum. The U.K.’s decision to exit the E.U. could cause volatility in global financial markets, including in global currency exchange rates, resulting in a slow-down in economic activity in the U.K., Europe or globally, negatively impact new trade agreements between the U.K and other countries, including the United States, and result in significant regulatory changes and uncertainty. One or more of these events could make it more difficult or costly to sell our products, particularly in the U.K. and Europe, and negatively affect our revenues and results of operations. The Brexit referendum may also influence other countries and result in additional countries deciding to leave the E.U. This in turn could result in additional changes and uncertainty, any or all of which could negatively impact our business.

Increases in Demand for Our Products Could Require Us to Expend Considerable Resources or Harm Our Customer Relationships if We are Unable to Meet That Demand.

If we experience significant or unexpected increases in the demand for our products, we and our suppliers may not be able to meet that demand without expending additional capital resources. These capital resources could involve the cost of new machinery or new manufacturing facilities. This would increase our capital costs, which could adversely affect our earnings. Our suppliers may be unable or unwilling to expend the necessary capital resources or otherwise expand their capacity. In addition, new manufacturing equipment or facilities may require FDA approval before they can be used to manufacture our products. To the extent we are unable to obtain or are delayed in obtaining such approvals, our ability to meet the demand for our products could be adversely affected.

If we or our suppliers are unable to develop necessary manufacturing capabilities in a timely manner, our sales could be adversely affected. If we fail to increase production volumes in a cost effective manner or if we experience lower than anticipated yields or production problems as a result of changes that we or our suppliers make in our manufacturing processes to meet increased demand, we could experience shipment delays or interruptions and increased manufacturing costs, which could also have a material adverse effect on our revenues and profitability.

Unexpected increases in demand for our products may require us to obtain additional raw materials in order to manufacture products to meet the demand. Some raw materials require significant ordering lead time and some are currently obtained from a sole supplier or a limited group of suppliers. We have long-term supply agreements with certain of these suppliers, but these long-term agreements involve risks for us, such as our potential inability to obtain an adequate supply of raw materials and components and our reduced control over pricing, quality and timely delivery. It is also possible that one or more of these suppliers may become unwilling or unable to deliver materials to us. Any shortfall in our supply of raw materials and components, or our inability to quickly and cost-effectively obtain alternative sources for this supply, could have a material adverse effect on our ability to meet increased demand for our products. This could negatively affect our total revenues or cost of sales and related profits.

Our inability to meet customer demand for our products could also harm our customer relationships and impair our reputation within the industry. This, in turn, could have a material adverse effect on our business and prospects.

We Rely on Information Technology in Our Operations and Any Material Failure, Inadequacy, Interruption or Security Breach of that Technology Could Harm Our Ability to Efficiently Operate Our Business.

We rely heavily on enterprise resource planning and other complex information technology systems across our operations and on the internet, including for management of inventory, purchase orders, invoices, shipping, interactions with our third-party logistics provider, revenue and expense accounting, online business, consumer call support, and various other processes and transactions. Our ability to effectively manage our business, coordinate the production, distribution and sale of our products, respond to customer inquiries, and ensure the timely and accurate recording and disclosure of financial information depends significantly on the reliability and capacity of these systems and the internet.

The failure of any of the foregoing systems to operate effectively, problems with transitioning to upgraded or replacement systems, or disruptions in the operation of the internet, could cause delays in product sales and reduced efficiency of our operations. Significant expenditures could be required to remediate any such problem.

Security Breaches and Other Disruptions Could Compromise Our Information, Expose Us To Liability and Harm Our Reputation and Business.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, personal information, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our employees in our data centers and on our networks. Secure maintenance and transmission of this information is critical to our operations business strategy. We generally rely on commercially available systems, software, tools and domestically available monitoring to provide security for processing, transmitting and storing this sensitive date.

Cyber-attacks could result in unauthorized access to our computer systems or our third party IT service provider’s systems and, if successful, misappropriate personal or confidential information. In addition, a contractor or other third party with whom we do business may attempt to circumvent our security measures or obtain such information, and may purposefully or inadvertently cause a breach involving sensitive information. While we will continue to evaluate and implement additional protective measures to reduce the risk and detect cyber incidents, cyberattacks are becoming more sophisticated and frequent and the techniques used in such attacks change rapidly. Despite our cybersecurity measures (including employee and third party training, monitoring of networks and systems and maintenance of back up of protective systems) which are continuously reviewed and upgraded, our information technology networks and infrastructure may still be vulnerable to damage, disruptions or shut downs due to attack by hackers or breaches, voyeur or malfeasance. Even the most well protected IT networks, systems and facilities remain potentially vulnerable because the techniques used in attempted security breaches are continually evolving and generally are not recognized until launched against a target or, in some cases, are designed not to be detected and, in fact, may not be detected. Any such compromise of our or our third party’s IT service providers’ data security and access, public disclosure, or loss of personal or confidential business information, could result in legal claims and proceedings, liability under laws to protect privacy of personal information, and regulatory penalties, and could disrupt our operations, require significant management attention and resources to remedy any damages that result, and damage our reputation and customers willingness to transact business with us, any of which could adversely affect our business.

Risks Relating to CollaboratorsOur Reliance on Third Parties

The Use of SoleThird Party Supply Sources or Third-Party Suppliers For Critical Components of Our Products Could Adversely Affect Our Business.

We currently purchase certain critical components of our products from sole supply sources or other third-party suppliers. For example, the biological antigens and antibodies, nitrocellulose and certain other components required to make our OraQuick® HIV, HCV and Ebola products are currently purchased from sole source suppliers. Our OraSure QuickFlu® test and the fully automated high-throughput drug assays sold with our Intercept i2® device are manufactured and supplied by sole source suppliers and the conjugates used in our MICROPLATE oral fluiddrugs-of-abuse assays are obtained from third partythird-party suppliers.

We have contracted with a third partyparties in Thailand for parts of the assembly of OraQuick®HIV device and the OraQuick® HIV Self-Test in order to supply certain international markets. In addition, our subsidiary, DNAG, uses twothree third-party manufacturers to supply virtually all of its products, including its Oragene® line and ORAcollect® lines of collection kits. Many of the raw materials and components used in its products are also purchased from third parties, a critical one of which is obtained from a sole source supplier.

The COVID-19 pandemic and the measures taken to contain the spread of the virus, have disrupted, and could continue to disrupt, the normal operations of our third-party suppliers. Our third-party suppliers may not have the personnel, raw materials, capacity or capability to manufacture our products according to our schedule and specifications. To the extent any such production and distribution interruption or closures occur and continue for an extended period of time, the impact on our supply chain could have a material adverse effect on our results of operations. If our third-party suppliers are unable or unwilling to supply or manufacture a required component or product or if they make changes to a component, product or manufacturing process or do not supply materials meeting our specifications, we may need to find another source and/or manufacturer. This could require that we perform additional development work and it may be difficult to find such an alternate supply source in a reasonable time period or on commercially reasonable terms, if at all. We may also need to obtain FDA or other regulatory approvals for the use of an alternative component or for changes to our products or manufacturing process. Completing that development and obtaining such approvals could require significant time and expense and such approvals may not occur at all. The availability of critical components and products from sole supply sources or other third parties could also reduce our control over pricing, quality and timely delivery. These events could either disrupt our ability to manufacture and sell certain of our products into one or more markets or completely prevent us from doing so, and could increase our costs. Any such event could have a material adverse effect on our results of operations, cash flow and business.

Our Failure to Maintain Existing Distribution Channels, or Develop New Distribution Channels, May Result in Lower Revenues.

We have marketed many of our products by collaborating with laboratories, diagnostic companies and distributors. Our sales depend to a substantial degree on our ability to sell products to these customers and on the marketing and distribution abilities of the companies with which we collaborate.

Relying on distributors or others to market and sell our products could harm our business for various reasons, including:

We may not be able to find suitable distributors to distribute our products on satisfactory terms, or at all;

Our distributors or other customers may not fulfill their contractual obligations to us or otherwise market and distribute our products in the manner or at the levels we expect;

We do not control the incentives provided by our distributors to their sales personnel and the effectiveness of these incentives could affect sales of our products;

Agreements with distributors may terminate prematurely due to disagreements or may result in litigation between the parties;

We may not be able to renew existing distribution agreements on acceptable terms, or at all;

Our distributors may not devote sufficient resources or priority to the sale of our products;

Our distributors may prioritize their own private label products that compete with our products;

Our existing distributor relationships or contracts may preclude or limit us from entering into arrangements with other distributors; and

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We may not be able to negotiate future distribution agreements on acceptable terms, or at all.

Although we will try to maintain and expand our business with distributors and customers and require that they fulfill their contractual obligations, there can be no assurance that such companies will do so or that new distribution channels will be available on satisfactory terms. As a result, our revenues and business could be adversely affected.

We May Need Strategic Partners to Assist in Developing and Commercializing Some of Our Products.

Although we may elect to pursue some product opportunities independently, opportunities that require a technology controlled by a third party, a significant level of investment for development and commercialization or a distribution network beyond our existing sales force may necessitate involving one or more strategic partners. Further, our ability to enter into agreements with additional strategic partners depends in part on convincing them that our products can help achieve and accelerate their goals and efforts. Our strategy for development and commercialization of products may entail entering into arrangements with distributors or other corporate parties, universities, research laboratories, government agencies, licensees and others. Relying on collaborative relationships could be risky to our business for a number of reasons, including:

We may be required to transfer material rights to such strategic collaborators, government agencies, licensees and others;

Our collaborators may not devote sufficient resources or attach a sufficiently high priority to the success of our collaboration;

Our collaborators may not obtain regulatory approvals necessary to continue the collaborations in a timely manner;

We have limited access to our collaborator’s confidential corporate information and sudden unexpected changes in ownership or strategy or other material events affecting a collaborator of which we are not made aware of in a timely manner, or at all, could adversely impact our relationship;
Our collaborators may be acquired by another company, sell the part of their business related to our collaboration, decide to terminate our collaborative arrangement or become insolvent;

Our collaborators may develop technologies or components competitive with our products;

Our collaborators may fail to deliver technologies or components that satisfy market requirements or such products may fail to perform properly;

Disagreements with collaborators could result in the termination of the relationship or litigation;

Collaborators may not have sufficient capital resources; and

We may not be able to negotiate future collaborative arrangements, or renewals of existing collaborative agreements, on acceptable terms or at all.

While we generally expect that our collaborative partners will have an economic motivation to succeed in performing their contractual responsibilities, there is no assurance that they will do so, either at the level required or at all, and the amount and timing of resources to be devoted to these activities will be controlled by others. Reliance on strategic agreements can also make it difficult to accurately forecast our future revenues or operating results. There can be no assurance that the expected revenues or profits will be fully derived from such arrangements.

Actions of Third-Party Inventory Management and Logistics Providers Could Adversely Affect Our Ability to Supply Products to Our Customers.

We use third-party logistics providers to store and manage certain of our finished goods inventory and ship finished product to our customers. We have selected highly reputable providers with extensive experience in the

logistics field for these services. However, in the event any of our providers lose or damage our products, experience a casualty or catastrophic event at a warehouse or otherwise fail to provide safe storage and timely handling and delivery of our products, we could incur additional costs, experience difficulty in supplying our products to our customers or suffer damage to our reputation in the industry. These events could, in turn, reduce our revenues and adversely affect our results of operations.

Risks Relating to Intellectual Property

Our Success Depends on Our Ability to Protect Our Proprietary Technology.

Our industry places considerable importance on obtaining patent, trademark and trade secret protection, as well as other intellectual property rights, for new technologies, products and processes. Our success depends, in part, on our ability to develop and maintain a strong intellectual property portfolio or obtain licenses to patents and technologies, both in the United States and in other countries. If we cannot continue to develop, obtain and protect intellectual property rights, our revenues and gross profits could be adversely affected. Moreover, our current and future licenses or other rights to patents and other technologies may not be adequate for the operation of our business.

As appropriate, we intend to file patent applications and obtain patent protection for our proprietary technology. These patent applications and patents will cover, as applicable, compositions of matter for our products, methods of making those products, methods of using those products and apparatuses relating to the use or manufacture of those products. However, there have been changes to the patent laws and proposed changes to the rules of the U.S. Patent and Trademark Office, which may impact our ability to protect our technology and enforce our intellectual property rights. For example, in 2011, the U.S. enacted sweeping changes to the U.S. patent system under the Leahy-Smith America Invents Act (the “AIA”), including changes that would transition the U.S. from a“first-to-invent” system to a“first-to-file” system and alter the processes for challenging issued patents. These changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

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We also rely on trade secrets,know-how and continuing technological advancements to protect our proprietary technology. We have entered, and will continue to enter, into confidentiality agreements with our employees, consultants, advisors and collaborators. Our employees and third-party consultants also sign agreements requiring that they assign to us interests in inventions and original expressions and any patents or copyrights arising from their work. However, these parties may not honor these agreements.

We cannot guarantee that the process of filing patents, the laws governing trade secrets and proprietary information, or any agreements we enter into with employees, consultants, advisors or collaborators will provide adequate protection of our intellectual property rights. For example, employees,our competitors may develop similar products without infringing on any of our intellectual property rights or design around our proprietary technologies. Employees, consultants and others who participate in the development of our products may breach their agreements with us regarding our intellectual property, and we may not have adequate remedies for the breach. We also may not be able to effectively protect our intellectual property rights in some foreign countries, as many countries do not offer the same level of legal protection for intellectual property as the United States. Furthermore, for

For a variety of reasons, we may decide not to file for patent, copyright or trademark protection outside of the U.S. Our trade secrets could become known through other unforeseen means. NotwithstandingAlthough we have licensed certain technology for use in our effortsmicrobiome laboratory services offerings and we have developed proprietary know-how that we use in this business, we do not currently hold any patents covering the laboratory processes and analytical methods offered to our customers. The absence of patent protection in this or other parts of our business may make it more difficult to protect our intellectual property,property. In addition, our competitors may independently develop similar or alternative technologies or products that are equal or superior to our technology. Our competitors may also develop similar products without infringing on any of our intellectual property rights or design around our proprietary technologies.

Moreover, issued patents remain in effect for a fixed period and after expiration will not provide protection of the inventions they cover. Once our patents expire, we may be faced with increased competition, which could reduce our revenues. We may also not be able to successfully protect our rights to unpatented trade secrets andknow-how.

Some of our employees, including scientific and management personnel, were previously employed by competing companies. Although we encourage and expect all of our employees to abide by any confidentiality agreement with a prior employer, competing companies may allege trade secret violations and similar claims against us. In addition, some of these agreements may conflict with, or be subject to, the rights of third parties with whom our employees, consultants or advisers have prior employment or consulting relationships. An adverse determination may limit or restrict the type of work that certain employees involved with such products may perform.

We may collaborate with universities and governmental research organizations which, asor receive funding for our products from government agencies. As a result, one or more of these entities may acquire part of the rights to any inventions or technical information derived from our collaboration or funding relationship with them.

To facilitate development and commercialization of a proprietary technology base, we may need to obtain licenses to patents or other proprietary rights from other parties. Obtaining and maintaining such licenses may require the payment of substantial amounts. In addition, if we are unable to obtain these types of licenses, our product development and commercialization efforts may be delayed or precluded. Moreover, some licenses may be nonexclusive, and therefore our competitors may have access to the same technology licensed to us.

We May Become Involved in Intellectual Property Disputes, Which Could Increase our Costs and Limit or Eliminate Our Ability to Sell Products, Provide Services or Use Certain Technologies.

From time to time, we may seek to enforce our patents or other intellectual property rights through litigation. In addition, there are a large number of patents and patent applications in our product and service areas, and additional patents may be issued to third parties relating to our product and service areas. We, our customers or our suppliers may be sued for infringement of patents or misappropriation of other intellectual property rights with respect to one or more of our products.products or services. Litigation in our industry regarding patent and other intellectual property rights is prevalent and is expected to continue. We may also have disputes with parties that license patents to us if we believe the license is no longer needed for our products or services or the licensed patents are no longer valid or enforceable.

Our industry is characterized by a large number of patents, and the claims of these patents appear to overlap in many cases. As a result, there is a significant amount of uncertainty regarding the extent of patent protection and infringement. Companies may have pending patent applications, which are typically confidential for the first eighteen months following filing, that cover technologies we incorporate in our products.products or services. Accordingly, we may be subjected to substantial damages for past infringement or be required to modify our products or services or stop selling them if it is ultimately determined that our products or services infringe a third party’s proprietary rights. In addition, governmental agencies could commence investigations or criminal proceedings against our employees or us relating to claims of misuse or misappropriation of another party’s proprietary rights.

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Intellectual property litigation is costly. As such, our involvement in litigation or other legal proceedings with respect to patents or other intellectual property and proprietary technology, either as a plaintiff or defendant, could adversely affect our revenues, market share, results of operations and business because:

As is common with major litigation, it
It could consume a substantial portion of managerial and financial resources;

Its outcome would be uncertain and a court may find that our patents are invalid or unenforceable in response to claims by another party or that the third-party patent claims are valid and infringed by our products;products or services;

An adverse outcome could subject us to the loss of the protection of our patents or to liability in the form of past royalty payments, penalties, reimbursement of litigation costs and legal fees, special and punitive damages, or future royalty payments, any of which could significantly affect our future earnings;

Governmental agencies may commence investigations or criminal proceedings against our employees, former employees and us relating to claims of misappropriation or misuse of another party’s proprietary rights;

Failure to obtain a necessary license upon an adverse outcome could prevent us from selling our current products or services or other products or services we may develop or acquire;

We may be required to alter our product or services, given the proprietary rights of others;

The pendency of any litigation may in and of itself cause our distributors and customers to reduce or terminate purchases of our products;products or services; and

A court could award a preliminary and/or permanent injunction, which would prevent us from selling our current or future products.products or services.

We may indemnify some customers and strategic partners under our agreements with such parties if our products, services or activities have actually or allegedly infringed upon, misappropriated or misused another party’s proprietary rights. Further, our products or services may contain technology provided to us by other parties, such as universities, contractors, suppliers, customers or customers,collaborators, and we may have little or no ability to determine in advance whether such technology infringes the intellectual property rights of a third party. These other parties may also not be required or financially able to indemnify us in the event that an infringement or misappropriation claim is asserted against us.

We may also become involved in other types of disputes regarding intellectual property rights, including state, federal or foreign court litigation, and patent interference, patent reexamination, patent reissue, or trademark opposition proceedings in the United States Patent and Trademark Office. Opposition or revocation proceedings could be instituted in a foreign patent office as well. Under the AIA,Federal law, various forms of post issuance patent review proceedings have been authorized, including an inter-parties review process. These proceedings permit certain persons to challenge the validity of a patent on the grounds that it was known from the prior art. The filing of such proceedings, or the issuance of an adverse decision in such proceedings, could result in the loss of valuable patent rights that could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Regulatory Risks Relating

The Need to Products, MarketingObtain Regulatory Approvals, Clearances, Authorizations or Certifications Could Increase Our Costs and SalesAdversely Affect Our Financial Performance.

Our Future Success Depends Upon Market Acceptance

Many of Our Existingour proposed and Future Products.

We believe successful new product introductions provide a significant competitive advantage because customers make an investment of time in selectingexisting products and learningservices are subject to use a new productregulation by the FDA and other governmental or public health agencies. In particular, we are reluctantsubject to switch thereafter. Our future success will depend, in part,strict governmental controls on the market acceptance,development, manufacture, labeling, distribution and the timing of such acceptance, of new products such as our OraQuick® HIV Self-Test , OraQuick® Ebola test, OraQuick® Zika test, OMNIgene®GUT and OMNIgene®SPUTUM product offerings, and other new products or technologies that may be developed or acquired. To achieve market acceptance, we and/or our distributors will likely be required to undertake substantial marketing efforts and spend significant funds to inform potential customers and the public of the existence and perceived benefits of these products. In addition, governmental funding for the purchase of our products and the processes and procedure for our laboratory services. Our practice is to train our employees on the legal requirements applicable to our business, including the requirements of the FDA and other relevant agencies.

The process of obtaining required approvals, clearances, other premarket authorizations or certifications can involve lengthy and detailed laboratory testing, human clinical trials, sampling activities and other costly, time-consuming procedures. These approvals, clearances, other premarket authorizations or certifications can require the submission of a large amount of clinical data which can be expensive and may be neededrequire significant time to help create market acceptance and expand the use of our products.

There may be limited evidence on which to evaluate the market reaction to products that may be developed and our marketing efforts for new products may not be successful.obtain. It is also possible that governmental fundinga product will not perform at a level needed to generate the clinical data required to obtain such premarket authorizations or certifications. The submission of an application to the FDA or other regulatory authority does not guarantee that an authorization to market or import the product or a laboratory certification will be received. A regulatory authority may impose requirements as a condition to granting an approval, clearance, premarket authorization or certification that may include significant restrictions or limitations. The regulatory authority may delay or refuse to grant premarket authorization or certification, even though a product has been approved or registered without restrictions or limitations in another country or by another

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agency. Delays in receipt or failure to receive such approvals, clearances, premarket authorization or certification could have a material adverse effect on our business, financial condition and results of operations.

All in vitro diagnostic products that are to be limitedsold in the EU must bear the CE mark indicating conformance with the requirements of the relevant EU in vitro diagnostic medical devices legislation. The new EU Regulation 2017/746 on in vitro diagnostic medical devices ("IVDR"), became applicable on May 26, 2022 and repealed the previous Directive 98/79/EC, ("IVDD"). There is a transitional period during which products that have a declaration of conformity issued under the IVDD prior to May 26, 2022 may continue to be placed on the EU market for newa certain period before requiring certification under the IVDR; however, class A non-sterile products do not benefit from such astransitional provisions and have been required to be IVDR compliant since May 26, 2022. We have obtained the CE mark for several of our OraQuick® Ebolaexisting products [under the IVDD]. We also intend to apply for CE marks for certain of our future products and Zika tests or the new sample collection and stabilization products being commercialized by DNAG. As such,are not aware of any material reason why we would be unable to obtain those marks. However, there can be no assurance that compliance with all provisions of the IVDR will be demonstrated and the CE mark will be obtained or maintained for all products that we desire to sell in the EU. The failure to obtain or maintain the CE mark for one or more of our products could lead to the termination of strategic alliances and agreements for sales of those products in the EU and mean that we are unable to sell such products in the EU.

In addition, we or our distributors are often required to obtain premarket authorization or product registration with foreign governments or regulatory bodies before we can import and sell our products in foreign countries. We may also be required to obtain WHO pre-qualification or endorsement in order to sell certain products in international markets or enable our customers to access interested funding sources for our products. We may have difficulty obtaining such authorizations, registrations, pre-qualifications or endorsements and, if obtained, such authorizations, registrations, pre-qualifications or endorsements may contain restrictions that limit our ability to market and sell our products in the relevant country. In addition, any change in our arrangement with a foreign distributor could result in the loss of or delay in transfer of any applicable product registrations, thereby interrupting our ability to sell those products in the affected markets.

Failure to Comply With FDA or Other Regulatory Requirements May Require Us to Suspend Production or Sale of Our Products or Institute a Recall Which Could Result in Higher Costs and a Loss of Revenues.

Regulation by the FDA and other federal, state and foreign regulatory agencies impacts many aspects of our operations, and the operations of our suppliers and distributors, including manufacturing, labeling, packaging, adverse event reporting, recalls, distribution, storage, advertising, promotion and recordkeeping. We are subject to routine inspection by the FDA and other agencies to determine compliance with QSR and FDA regulatory requirements in the United States and other applicable regulations worldwide, including but not limited to ISO standards. We believe that our facilities and procedures are in material compliance with the FDA requirements and ISO standards, but the regulations may be unclear and are subject to change, and we cannot be sure that the FDA or other regulators will agree with our compliance with these requirements. The FDA and foreign regulatory agencies may require post-marketing testing and surveillance to monitor the performance of approved or cleared products or impose conditions on any product clearances or approvals that could restrict the distribution or commercial applications of those products. Regulatory agencies may impose restrictions on our or our distributors’ advertising and promotional activities or preclude these activities altogether if a noncompliance is believed to exist. In addition, the subsequent discovery of previously unknown problems with a product may result in restrictions on the product or additional regulatory actions, including withdrawal of the product from the market.

Failure to comply with the applicable requirements of the FDA can result in, among other things, 483 notices, warning letters, administrative or judicially imposed sanctions such as injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, refusal to grant PMA approval for devices, withdrawal of product registrations, marketing clearances or approvals, or criminal prosecution. The ability of our suppliers to supply critical components or materials and of our distributors to sell our products could also be adversely affected if their operations are determined to be out of compliance. Such actions by the FDA and other regulatory bodies could adversely affect our revenues, costs and results of operations.

Some of our products, particularly those sold by DNAG, are sold for research purposes in the U.S. We do not promote these products for clinical diagnostic use and they are labeled “For Research Use Only” ("RUO"). If the FDA were to disagree with our RUO designation of a product, we could be forced to recall and/or stop selling the product until appropriate regulatory clearance or approval has been obtained.

In the ordinary course of business, we must frequently make subjective judgments with respect to compliance with applicable laws and regulations. If regulators subsequently disagree with the manner in which we have sought to comply with these regulations, we could be subjected to substantial civil and criminal penalties, as well as product recall, seizure or injunction with respect to the sale of our products. The assessment of any civil and criminal penalties against us could severely impair our reputation within the industry and any limitation on our ability to manufacture and market our products could have a material adverse effect on our business.

Our Inability to Respond to Changes in Regulatory Requirements Could Adversely Affect Our Business.

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We believe that our products and procedures are in material compliance with all applicable FDA regulations, ISO requirements, and other applicable regulatory requirements, but the regulations regarding the manufacture and sale of our products, the QSR and ISO requirements, and other requirements may be unclear and are subject to change. Newly promulgated regulations could require changes to our products, necessitate additional clinical trials or procedures, or make it impractical or impossible for us to market our products for certain uses, in certain markets, or at all. The FDA and other regulatory authorities also have the ability to change the requirements for obtaining product approval or clearance and/or impose new or additional requirements as part of the approval or clearance process. These changes or new or additional requirements may occur after the completion of substantial clinical work and other costly development activities. The implementation of such changes or new or additional requirements may result in additional clinical trials and substantial additional costs and could delay or make it more difficult or complicated to obtain approvals and sell our products. We cannot predict the effect, if any, that these changes might have on our business, financial condition or results of operations.

We Are Subject to Numerous Government Regulations in Addition to FDA Requirements, Which Could Increase Our Costs and Affect Our Operations.

In addition to the FDA and other regulations described previously, laws and regulations in some states may restrict our ability to sell products in those states. While we intend to work with state legislators and regulators to remove or modify any applicable restrictions, there is no guarantee we will be successful in these efforts.

We must also comply with numerous laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control, disposal of hazardous substances, labor or employment practices and the configuration and operation of the websites through which we advertise our products. As a device manufacturer, we are required to report annually to the Centers for Medicare & Medicaid Services (“CMS”) any payments or transfers of value we have made to physicians and teaching hospitals and any physician ownership or investment interest in our business. In the U.S., before we can market a new medical device, or a new use of, or claim for, or significant market acceptancemodification to, an existing product, we generally must first receive either 510(k) clearance or de novo authorization or approval of a PMA from the FDA. Similarly, most major markets for medical devices outside the U.S. also require clearance, approval, authorization or compliance with certain standards before a product can be commercially marketed. Compliance with these laws or any new or changed laws regulating our business could result in substantial costs. Because of the number and fillextent of the marketlaws and regulations affecting our industry, and the number of governmental agencies whose actions could affect our operations, it is impossible to reliably predict the full nature and impact of these requirements. To the extent the costs and procedures associated with complying with these laws and requirements are substantial or it is determined that we do not comply, our business and results of operations could be adversely affected.

Failure to Comply With Privacy, Security and Breach Notification Regulations May Increase Our Costs.

In the past, the Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”) has generally affected us indirectly, as we are generally neither a Covered Entity nor a Business Associate, as further defined under HIPAA, to Covered Entities. We have in place certain administrative, technical and physical safeguards to protect the privacy and security of consumers’ personal information and endeavors to comply with all applicable state and federal laws with respect to the protection of consumers’ personal information. We are required to comply with varying state privacy, security and breach reporting laws. If we do not comply with existing or new laws and regulations related to properly transferring data containing consumers’ personal information, we could be subject to monetary fines, civil penalties or criminal sanctions. In addition to other federal and state laws that protect the privacy and security of consumers’ personal information, we may be subject to enforcement and interpretations by various governmental authorities and courts resulting in complex compliance issues. Moreover, the potential for enforcement action against us is now greater, as the U.S. Department of Health and Human Services (HHS) can take action directly against Business Associates. Thus, while we believe we are and will be in compliance with all required HIPAA standards, there is no guarantee that the government will agree. Enforcement actions can be costly and interrupt regular operations of our business. For example, we could incur damages under state laws pursuant to an action brought by a private party for the wrongful use or disclosure of consumers’ personal information.

Failure to Comply With Data Protection Requirements or Privacy Laws Could Increase Our Costs.

The EU has adopted a comprehensive overhaul of its data protection regime from the prior national legislative approach to a single European Economic Area Privacy Regulation called the General Data Protection Regulation (“GDPR”), which came into effect on May 25, 2018. The new EU data protection regime extends the scope of the EU data protection law to all foreign companies processing data of EU residents. It provides for a harmonization of the data protection regulations throughout the EU, thereby making it easier for non-European companies to comply with these regulations. It imposes a strict data protection compliance regime with severe penalties of up to the greater of 4% of worldwide turnover and €20 million and includes new rights such as the “portability” of personal data. Although the GDPR will apply across the EU without a need that is perceivedfor local implementing legislation, as had been the case under the prior data protection regime, local data protection authorities will still have the ability to existinterpret the GDPR, which has the potential to create

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inconsistencies on a timely basis,country-by-country basis. We are implementing a plan to ensure compliance with these new requirements. Complying with the enhanced obligations imposed by the GDPR may result in significant costs to our business and require us to amend certain of our business practices. Further, we have no assurances that violations will not occur, particularly given the complexity of the GDPR, as well as the uncertainties that accompany new, comprehensive legislation.

We are also subject to the California Consumer Privacy Act of 2018 (“CCPA”), which took effect on January 1, 2020. The CCPA imposes extensive new requirements and protections on the processing of personal data, aimed at giving California consumers more visibility and control over their personal information. Failure to comply with the CCPA or other data processing or security laws, or any changes in these laws, could adversely impact our business and our business plans. In 2020, the California residents voted the California Privacy Rights Act (the "CPRA") into law. The CPRA will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. The CPRA also created a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. The majority of the CPRA provisions became effective on January 1, 2023, and additional compliance investment and potential business process changes may be required. Similar laws have been proposed, and likely will be proposed, in other states and at all.the federal level, and if passed, such laws may have potentially conflicting requirements that would make compliance challenging.

If Acceptance

FDA Regulation of Laboratory-Developed Tests and AdoptionGenetic Testing Could Affect Demand For Our Products.

The FDA has regulatory responsibility over instruments, test kits, reagents and other devices used to perform diagnostic testing by clinical laboratories. In the past, the FDA has taken the position that it has regulatory authority over laboratory-developed tests ("LDTs"), but has exercised enforcement discretion in not regulating most LDTs performed by high complexity CLIA-certified laboratories. LDTs are tests designed, developed, and performed in-house by a laboratory. Such laboratories are subject to regulation under CLIA but have not been subject to regulation by the FDA under the agency’s medical device requirements. A significant portion of Oral Fluid Testingthe total volume of genetic or molecular testing is performed with LDTs.

In mid-2010, the FDA announced that it would begin regulating LDTs, including laboratory developed molecular tests, and Collection Products Does Not Continue, Our Future Results May Suffer.

in October 2014 issued proposed guidance on the regulation of LDTs for public comment. On January 13, 2017, the FDA released a discussion paper synthesizing public comments on the 2014 draft guidance documents and outlining a possible approach to regulation of LDTs. The discussion paper has no legal status and does not represent a final version of the LDT draft guidance documents. We have made significant progresscannot predict what policies will be adopted with respect to regulating LDTs. FDA has been working with regulatory advocacy groups to bring forward legislative approaches specifically for in gaining acceptancevitro diagnostic tests including LDTs. For example, in 2021, the Verifying Accurate, Leading-edge, IVCT Development ("VALID") Act was introduced to Congress and provided a framework to change IVDs and LDTs to in vitro clinical tests ("IVCTs"). The proposed regulation would give FDA oversight of oral fluid testing products, particularly for (i) HIV testingLDTs once it becomes law. In 2022, the VALID Act was incorporated into the Senate user fee bill but was not included in the public health, hospital, insurance and other markets, and(ii) drugs-of-abuse testing inyear-end Consolidated Appropriations Act of 2022. Absent congressional legislation to clarify FDA's authorities, the

FDA may consider administrative action, such as rule making, to clarify requirements for LDT's.

workplace and criminal justice markets. Our subsidiary, DNAG, has also made significant progresssells its DNA collection systems to certain laboratories and other customers for use with LDTs. The FDA’s increased regulation of LDTs could make it more difficult for laboratories and other customers to continue offering LDTs that involve genetic or molecular testing. This, in gaining acceptanceturn, could increase costs, delay the introduction of oral fluid collectionnew LDTs and reduce demand for DNAG’s products that are used with molecularand adversely impact our revenues.

In 2019, the Department of Justice indicted a number of telemedicine companies and cancer genetic testing applications. However, the degreelaboratories for allegedly submitting fraudulent insurance claims to Medicare. A number of acceptance for these products is uncertain, and one or more markets may resist the adoptioncompanies were customers of oral fluid products as a replacement for other testing or collection methods in use today.DNAG. As a result of these activities, the FDA has issued letters to genetic testing laboratories indicating that it plans to increase oversight of this market which has caused some of these companies to stop providing testing options or to change how they are reporting the information provided by the testing. The activities have negatively affected this market and there is a risk that these enforcement actions will continue to negatively affect this market by forcing laboratories to either stop offering such services or restricting the use of such services. Such a reduction in testing could result in decreased sales of our DNA collection devices.

Our International Sales Create Potential Exposure Under Anti-Corruption Laws.

We have a policy in place prohibiting our employees, distributors and agents from engaging in corrupt business practices, including activities prohibited by the FCPA and similar foreign laws. In 2022, approximately $37.3 million of our consolidated net revenues were generated from sales in a variety of foreign countries. These international activities subject us to the FCPA, the U.K. Bribery Act and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by business entities for the purpose of obtaining or retaining business. We have operations, enter into agreements with third parties, and make sales in countries known to experience corruption. Further international expansion, including the acquisition of foreign entities,

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may create increased exposure to such practices. Our activities in these countries create the risk of unauthorized payments or offers of payments by one of our employees, consultants, sales agents or distributors that could be in violation of various laws, including the FCPA, even though these parties are not always subject to our control. It is our policy to implement safeguards to discourage these practices by our employees and distributors, including employee training, contracts requiring compliance with the FCPA and similar rules, and standard reviews of our distributors. However, our existing safeguards and any future improvements may not prove to be effective, and our employees, consultants, sales agents or distributors may engage in conduct for which we might be held responsible. Violations of the FCPA and other laws may result in criminal or civil sanctions, which could be severe and we may be subject to other liabilities, which could negatively affect our reputation, business, results of operations and financial condition.

Risks Relating to the Economy, Our Financial Results, Investments, Credit Facilities and Need for Financing

We Have Experienced Losses in the Past and May Not Be Able To Again Achieve and Maintain Profitable Operations.

We experienced annual net losses during the five years prior to 2015 and again in 2020, 2021 and 2022. In addition, as of December 31, 2022, we had an accumulated deficit of $138.4 million. Even though we achieved profitability in 2015 through 2019, there can be no assurance that we will be able to expandachieve or sustain profitability in the usefuture.

Our ability to achieve and continue profitable operations in the future will be dependent upon a number of factors including, without limitation, the following:

Our ability to continue growing sales of our oral fluid testingmolecular collection products and related genomic and microbiome laboratory services;
Our ability to produce and successfully commercialize our InteliSwab® COVID-19 Rapid Tests and compete with comparable products;
Our ability to grow our OraQuick ADVANCE® HIV 1/2 test in these or other markets.

Our Customers May Resist Adoption of RapidPoint-of-Care Diagnostic Testing.

Salesthe United States and expand sales of our rapidpoint-of-care diagnostic products, such as our OraQuickADVANCE®HIV-1/2, OraQuick® HCV and OraQuick®In-HomeOraQuick® HIV tests, are an important part of our business. Rapidpoint-of-care tests are beneficial because, among other things, they can be administered by healthcare providers in their own facilities or used by consumers at home without sending samples to central laboratories and can help ensure that test results are delivered to the individuals being tested.

However, clinical reference laboratories and hospital-based laboratories currently provide the majority of diagnostic tests used by physicians and other healthcare providersSelf-Test internationally;

Changes in the U.S. In certainmarkets in which we operate, including changes in the prevalence of COVID-19;
Changes in customer buying patterns or a buildup of significant quantities in our distributors’ inventories or distribution channels;
The level of expenditures we are required to make in order to develop, obtain regulatory approvals for and successfully commercialize our new products;
Our ability to expand our business through the acquisition of other companies or technologies or through internal development of new or improved products;
Our ability to improve manufacturing efficiencies and reduce cost of goods sold;
Our ability to successfully launch new products after receipt of required regulatory approvals or the acquisition of rights to those products;
The degree to which our major distributors and customers comply with their contractual obligations, including minimum purchase commitments;
Whether we are successful in obtaining and maintaining required regulatory approvals and registrations for our new products;
The level of competition, including the degree to which competitors sell lower priced products or more attractive offerings to compete with our products;
Changes in economic conditions in domestic or international markets, such as Europe, diagnostic testing is performed primarilyeconomic downturns, reduced demand, inflation and currency fluctuations;
Failure to achieve our revenue growth targets; and
The costs and results of patent infringement, product liability and other litigation or claims asserted by centralized laboratories.or against us.

We began a strategic restructuring of our business in early 2023 by combining our Molecular Solutions and Diagnostics business units into a single commercial organization, and eliminated approximately 11% of our non-production workforce. While we believe this strategic restructuring will result in new efficiencies and a decrease in expenses, there can be no assurance that we will achieve such operational efficiencies, and our consolidated financial results may be adversely impacted as a result.

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Recent Volatility In Capital Markets And Lower Market Prices For Our Securities May Affect Our Ability To Access New Capital Through Sales Of Shares Of Our Common Stock Or Issuance Of Indebtedness, Which May Materially Harm Our Liquidity, Limit Our Ability To Grow Our Business, Pursue Acquisitions Or Improve Our Operating Infrastructure And Restrict Our Ability To Compete In Our Markets.

Our operations consume substantial amounts of cash, and we intend to continue to make significant investments to support our business growth, respond to business challenges or opportunities, develop new solutions, retain or expand our current levels of personnel, improve our existing solutions, enhance our operating infrastructure, and potentially acquire complementary businesses and technologies. Our future salescapital requirements may be significantly different from our current estimates and will depend on many factors, including the need to:

finance unanticipated working capital requirements;
develop or enhance our technological infrastructure and our existing solutions;
pursue acquisitions or other strategic relationships; and
respond to competitive pressures.

Accordingly, we may need to pursue equity or debt financing to meet our capital needs. With uncertainty in part,the capital markets and other factors, such financing may not be available on terms favorable to us or at all. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve additional restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms satisfactory to us, we could face significant limitations on our ability to expand market acceptanceinvest in our operations and otherwise suffer harm to our business.

Economic Volatility and Disruption, Including Those Related To The COVID-19 Pandemic, Could Adversely Affect Our Business, Financial Performance, Results of rapidpoint-of-care testing by physicians, other healthcare providersOperations, Cash Flow and consumersFinancial Condition or Those of Our Customers and successfully compete against laboratory testing methodsSuppliers.

Global and products. We expectU.S. markets and economies have experienced extreme volatility and disruption following the global outbreak of COVID-19 that clinical referencehas continued throughout 2022. Many economists and major investment banks have expressed concern that the continued spread of the virus globally has led to a world-wide economic downturn. Volatile economic conditions may occur again or continue in the future.

Although the severity and duration of the COVID-19 pandemic cannot be reasonably estimated at this time, impacts that we may experience include, but are not limited to:

a slowdown or stoppage in the supply chain of the raw materials and components used to manufacture our products;
interruptions or delays in domestic and/or international shipment of our products to our distributors and customers;
interruptions in normal operations of certain end-use customers that could result in reductions in demand for our products;
disruptions to our operations, including a shutdown of our facilities or product lines; restrictions on our operations and sales, marketing and distribution efforts; and interruptions to our research and development, manufacturing, clinical/regulatory and other hospital-based laboratories willimportant business activities;
shutdown or interruption of our manufacturing facilities due to contamination and costs incurred to clean and disinfect a facility following contamination;
inefficiencies and increased costs in our production and shipping processes due to premium pay for manufacturing and certain other employees as well as social distancing and personal protective equipment requirements;
limitations on employee resources and availability, including due to sickness, government restrictions, the desire of employees to avoid contact with large groups of people or mass transit disruptions;
a fluctuation in foreign currency exchange rates or interest rates could result from market uncertainties;
an increase in exposure to credit losses for customers adversely affected by the COVID-19 pandemic; and

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an increase in regulatory restrictions or continued market volatility could hinder our ability to execute strategic business activities, including acquisitions.

These conditions could adversely affect our financial performance and condition or those of our customers and suppliers. These circumstances could also adversely affect our access to liquidity needed to conduct or expand our business or conduct future acquisitions or make other discretionary investments. Many of our customers rely on public funding provided by federal, state and local governments, and this funding has been and may continue to compete vigorously againstbe reduced or deferred as a result of economic conditions or other factors. These circumstances may adversely impact our rapidpoint-of-care products. Even if we can demonstrate thatcustomers and suppliers, which, in turn, could adversely affect their ability to purchase and/or distribute our products are more cost effective, save time, or have better performancesupply us with necessary equipment, raw materials or other benefits, physicians, other healthcare providers and consumers may resist changing to rapidpoint-of-care tests and instead may choose to obtain diagnostic results through laboratory tests. Our failure to achieve and expand market acceptancecomponents. Any or all of our rapidpoint-of-care diagnostic tests with customersthese effects would have a negativean adverse effect on our operations, business, financial condition and results of operations.

Although there are positive signs that COVID-19 has begun to subside as compared to the height of the pandemic, the duration of the COVID-19 pandemic is still unknown, and it is difficult to predict the full extent of potential impacts the pandemic will have in the future sales growth.on our business, operations, and financial results, or on our customers, suppliers or logistics providers, or on the global economy as a whole. It is uncertain how materially the COVID-19 pandemic will affect our global operations, particularly if the effects continue or get worse over an extended period of time. Even with the improvement of economic conditions, it may take time for our customers and suppliers to establish new budgets and return to normal purchasing and shipping patterns. We cannot predict the re-occurrence of any economic slowdown or the strength or sustainability of an economic recovery.

Rising Inflation Rates Could Negatively Impact Our Revenues And Profitability If Increases In The Prices Of Our Products Or A Decrease In Consumer Spending Results In Lower Sales. In Addition, If Our Costs Increase And We ExpectAre Not Able To Pass Along These Price Increases To Our Customers, Our Net Income Would Be Adversely Affected, And The Adverse Impact May Be Material.

Inflation rates, particularly in the United States, have increased recently to Face Intense Competition From Other Providers of Diagnostic Testslevels not seen in years. Increased inflation may result in decreased demand for our products and Sample Collection Products.

Our rapidpoint-of-care tests compete with similarpoint-of-care products made byservices, increased operating costs (including our competitors. This competition is particularly evident with respectlabor costs), reduced liquidity, and limitations on our ability to our OraQuickADVANCE®HIV-1/2 test.access credit or otherwise raise debt and equity capital. In addition, the Oragene® product line sold byUnited States Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation. Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks. In an inflationary environment, we may be unable to raise the sales prices of our subsidiary, DNAG, competes against other molecular collection products at or above the rate at which our costs increase, which could/would reduce our profit margins and have a material adverse effect on our financial results and net income. We also may experience lower than expected sales and potential adverse impacts on our competitive position if there is a decrease in consumer spending or a negative reaction to our pricing. A reduction in our revenue would be detrimental to our profitability and financial condition and could also have an adverse impact on our future growth.

An Impairment of Goodwill and Intangible Assets Could Reduce our Earnings.

At December 31, 2022, our consolidated balance sheet reflected approximately $35.1 million of goodwill and approximately $11.7 million of intangible assets. Goodwill is recorded when the purchase price of a business exceeds the fair value of the tangible and separately measurable intangible net assets. U.S. generally accepted accounting principles (“U.S. GAAP”) require us to test goodwill for impairment on an annual basis or when events or circumstances occur indicating that goodwill might be impaired. Long-lived assets, such as blood collection kitsintangible assets with finite useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The impairment review often cannot be done at the level of the individual asset and buccal swabs. There areit must instead be applied to a numbergroup of competitors making investments in competing technologies and products, and a numberassets. For the purpose of our competitors may haveannual goodwill impairment testing based on the current circumstances of how we manage or business, this group of assets is the Company as a competitive advantage because of their greater financial, technical, research and other resources. Some competitors offer broader product lines, aggressively discount prices for their products and may have greater name recognition thanwhole. If we have. We also face competition from certaindetermine that any of our distributorsgoodwill or former customers that have created or may decideintangible assets were impaired, we will be required to create, their own productstake an immediate charge to compete with ours. Ifearnings and our competitors’ products take market share from our products through more effective marketing or competitive pricing, our revenues, margins and operating results of operations could be adversely affected. In addition,We recognized a pre-tax impairment charge of $3.6 million during the year ended December 31, 2022, which is reported in loss on impairments in our revenuesconsolidated statement of operations.

Changes in Foreign Currency Exchange Rates Could Negatively Affect Our Operating Results.

Our financial statements are stated in U.S. Dollars and, operating results could be negatively impacted if somehistorically, most of our customers internally develop or acquire their own sample collection devices and use those devicesinternational sales have also been denominated in placeU.S. Dollars. As a result, in the past our exposure to foreign currency exchange rate risk has not been material. Nonetheless, these sales are subject to currency risks since changes in the values of foreign currencies relative to the value of the U.S. dollar can render our products comparatively more expensive. These exchange rate fluctuations could negatively impact international sales of our products, as could changes in order to reduce costs.the general economic conditions in those markets.

Customer Concentration

In addition, the revenues and Purchase Seasonality Creates Risk for Our Business.

We have experienced strong revenue growth during the past several years, primarily due to increasing salesexpenses of our OraQuick®rapid HCV testsubsidiary, DNAG, are recorded in Canadian Dollars and our Oragene® saliva DNA collection kit. The higher sales of these products have been driven by increased demand by an increasing number of large customers.

Our molecular collections sales grew from $32.2 million in 2016 to $75.1 million in 2017, largely as a result of increased ordersthe revenues and expenses of our Oragene® collection systems bysubsidiary Novosanis are recorded in Euros. Revenues and expenses denominated in foreign currencies are translated into U.S.

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dollars for purposes of reporting our largest customer servingconsolidated financial results. Our expectation is that the consumer genomics market. In November 2017, we announced the execution of a multi-year purchase agreement for the sale of $144 millionbusinesses of our Oragene® product to a large consumer genomics customer.

In our infectious disease business, sales of our HCV test rose from $14.1 million in 2016 to $25.4 million in 2017. This growth was primarily attributable to sales under a previously announced $18.0 million contract with a foreign government in support of a country-wide HCV elimination program. This agreement was largely completed in 2017 and this customer unexpectedly decided not to renew the agreement for an additional 12 months.

We expect that sales to the large consumer genetics customersubsidiaries will continue to grow and our exposure to foreign currency exchange rates may be amore significant growth driver for our molecular business. It is also possible that other countries implementing broad based HCV testing or elimination programs could have a significant impact on our business. As a result, certain partsthan in past years.

Exchange rate fluctuations may affect the revenues and expenses of our business will likely continue toforeign subsidiaries and the translation of those financial results into U.S. dollars. Favorable movement in exchange rates have a high customer concentration and depend disproportionately on a few large customers. In addition, demand from a large consumer genomics customer increased significantlybenefited us in 2016 and 2017 due to special promotions towards the end of these years. To the extent that such a large customer fails to meet its purchase commitments, does not continue such promotional programs or otherwise does not continue to purchaseprior periods. However, where there are unfavorable currency exchange rate fluctuations, our products, or if we experience difficulty in meeting the high demand by these customers forconsolidated financial statements including our products, ourbalance sheet, revenues and results of operations, could be adverselynegatively affected.

Our Inability In addition, fluctuations in exchange rates could affect year-to-year comparability of operating results. In the past, we have not generally entered into hedging instruments to Carry Out Certain of Our Marketing and Sales Plans May Make it Difficult for Usmanage our currency exchange rate risk, but we may need to Grow or Maintain Our Business.

We have implementeddo so in the past, and we intendfuture. However, our attempts to implement in the future, an aggressive sales and marketing plan to expand sales of our products.hedge against these risks may not be successful. If we are unable to successfully implement these programshedge against unfavorable foreign currency exchange rate movements, our consolidated financial results may be adversely impacted.

Risks Relating to Our Common Stock

Our Stock Price Could Continue to be Volatile.

Our stock price has been volatile, has fluctuated substantially in the past, may be volatile in the future and could experience substantial declines. The following factors, among others, could have a significant impact on the market for our Common Stock:

The performance of our business, including our efforts to increase sales of our OraQuick® HIV, HCV and Molecular Solutions products and our OraQuick® In-Home HIV test and HIV Self-Test;
Our efforts to expand sales of our genomic and microbiome laboratory service offerings;
Our efforts to produce and commercialize our InteliSwab Covid-19 Rapid Tests;
Future announcements concerning us and our products or modify these programsservices, including with respect to significant acquisitions, strategic collaborations and joint ventures;
Ability to achieve the expected benefits, enhanced revenue growth and synergies from strategic acquisitions;
Clinical results with respect to our products or services or those of our competitors;
The status of clinical studies and pending submissions for required regulatory approvals;
The announcement of regulatory or enforcement actions by the FDA or other agencies against us, our products or services, or one or more of our customers;
The gain or loss of significant contracts and availability of funding for the purchase of our products and services;
Delays in responsethe development, regulatory approval or commercialization of new or enhanced products or services;
Legislative developments and industry or competitive trends;
Biological or medical discoveries;
Disputes or developments with key customers, distributors or suppliers;
Developments in patent or other proprietary rights;
Litigation or threatened litigation;
Complaints or concerns about the performance or safety of our products and publicity about those issues, including publicity expressed through social media or otherwise over the internet;
Failure to evolvingachieve, or changes in, financial estimates by securities analysts and comments or opinions about us by securities analysts or major stockholders;
Governmental regulation;
Changes in the level of competition;
Loss of or declines in sales to major distributors or customers or changes in the mix of products sold;
Period-to-period fluctuations in our operating results;
Additions or departures of key personnel;
General market and economic conditions,conditions; and

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Terrorist attacks, civil unrest, war and national disasters, including pandemics.

In addition, the stock market in general has experienced extreme price and volume fluctuations that have affected the market price of our Common Stock, as well as the stock of many companies in the diagnostics and life sciences industries. Often, price fluctuations are unrelated to the operating performance of the specific companies whose stock is affected.

In the past, following periods of volatility in the market price of a company’s stock, securities class action litigation has occurred against the issuing company. If we were subject to this type of litigation in the future, we could incur substantial costs and experience a subsequent diversion of our management’s attention and resources, each of which could have a material adverse effect on our revenue and earnings. Any adverse determination in this type of litigation could also subject us to significant liabilities.

Future Sales of Our Common Stock by Existing Stockholders, Executive Officers or Directors Could Depress the Market Price of Our Common Stock and Make It More Difficult For Us to Sell Stock in the Future.

Sales of our Common Stock in the public market, or the perception that such sales may beoccur, could negatively impact the market price of our Common Stock. We are unable to growestimate the number of shares of our Common Stock that may actually be resold in the public market since this will depend on the market price for our Common Stock, the individual circumstances of the sellers and other factors.

We have a number of institutional stockholders that own significant blocks of our Common Stock. If one or more of these stockholders sell large portions of their holdings in a relatively short time, for liquidity or other reasons, the prevailing market price of our Common Stock could be negatively affected. In addition, it is possible that one or more of our executive officers or non-employee members of our Board of Directors could sell shares of our Common Stock during an open trading window or pursuant to a 10b5-1 sales plan under our Insider Trading Policy. These transactions and the perceived reasons for these transactions could have a negative effect on the prevailing market price of our Common Stock.

Because We Do Not Intend to Pay Cash Dividends on Our Common Stock, an Investor in Our Common Stock Will Benefit Only if Our Common Stock Appreciates in Value.

We currently intend to retain our current earnings and future earnings, if any, to finance the expansion of our business could suffer.and do not expect to pay any cash dividends on our Common Stock in the foreseeable future. As a result, the success of an investment in our Common Stock will depend entirely upon any future appreciation. There is no guarantee that our Common Stock will appreciate in value or even maintain the price at which investors purchased their shares.

Our Sales Cycles Can be Lengthy, and May Depend on Public Funding, Which Can Cause Variability and Unpredictability

Certain Provisions in Our Operating Results.Certificate of Incorporation and Bylaws and Under Delaware Law Could Make a Third-Party Acquisition of Us Difficult.

The sales cycles for certain

Our Certificate of our products can be lengthyIncorporation and unpredictable, which makesBylaws contain provisions that could make it more difficult for a third party to accurately forecast revenuesacquire us, even if doing so would be beneficial to our stockholders. We are also subject to certain provisions of Delaware law that could delay, deter or prevent a change in a given period and may cause revenues and operating resultscontrol of us. These provisions could limit the price investors might be willing to vary from period to period. Salespay in the future for shares of our products often involve purchasing decisions by large public and private institutions, may require many levels of approval and may be dependent on economic or political conditions and the availability of grants or funding from governmental or public health agencies which can vary from period to period in both amount and timing. For example, in past years our OraQuickADVANCE®HIV-1/2 test has been purchased through bulk procurement or other funding provided by governmental agencies. Our OraQuick® HCV test has been purchased by customers who receive government funding, and we believe increased funding from the CDC and other agencies will be required to substantially increase the volume of HCV testing, especially in the public health market. More recently, we have sold large quantities of our OraQuick® HCV test to foreign governments and agencies for use in broad-based or country-wide HCV elimination programs. There can be no assurance that purchases or funding from these agencies will occur or continue. As a result, we may expend considerable resources on unsuccessful sales efforts or we may not be able to complete transactions at all or on a schedule and in an amount consistent with our objectives.Common Stock.

General Risk Factors

We May Face Product Liability Claims for Injuries Resulting From the Use of Our Products.

We may be held liable if any of our products, or any product which is made with the use or incorporation of any of our technologies, causes injury of any type or is found otherwise unsuitable during product testing, manufacturing, marketing, sale or usage. There is no assurance that we would be successful in defending any product liability lawsuits brought against us. Moreover, there is no assurance that our products will not be included in unethical, illegal or inappropriate research or applications, which may in turn put us at risk of litigation. Regardless of merit or eventual outcome, product liability claims could result in:

Decreased demand for our products;

Lost revenues;

Damage to our image or reputation;

Costs related to litigation;

Increased product liability insurance costs;

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Diversion of management time and attention; and

Incurrence of damages payable to plaintiffs.

We are selling cryosurgical products in the consumer or OTC market in the United StatesInteliSwab® COVID-19 Rapid Test and certain countries and we may expand OTC sales of these products into other countries. We also sell the OraQuick®In-Home HIV test in the United States OTC market, and we offer HIV self-testsSelf-Tests to consumers internationally. We believe the sale of products in the OTC marketfor use by consumers increases our potential exposure to product liability and other claims.

The Insurance We Purchase to Cover Our Potential Business Risks May be Inadequate.

Although we believe that our present product liability and other insurance coverage is sufficient to cover our current estimated exposures, we cannot be sure that we will not incur liabilities in excess of our policy limits. In addition, although we believe that we will be able to continue to obtain adequate coverage in the future, there is no assurance that we will be able to do so at acceptable costs.

We Could Suffer Monetary Damages, Incur Substantial Costs or be Prevented From Using Technologies Important to Our Products as a Result of Legal Proceedings.

We have been, and in the future may become, involved in various legal proceedings arising out of our businesses. These may include commercial disputes, negligence claims or various other lawsuits arising in the ordinary course of our business, including employment matters. Such lawsuits can seek damages, sometimes in substantial amounts, for commercial or personal injuries allegedly suffered and can include claims for punitive or other special damages. An adverse ruling or rulings in one or more such lawsuits could, individually or in the aggregate, result in the termination or modification of a material contract or otherwise have a material adverse effect on our sales, operations or financial performance.

Performance of Our Products May Affect Our Revenues, Stock Price and Reputation.

Our products are generally sold with labeling that contains performance claims approved or cleared by the FDA or other regulators. However, our products may not perform as expected. For example, a defect in one of our diagnostic or specimen collection products or a failure by a customer to follow proper testing procedures, may cause the product to report inaccurate information such as a false positive result or a false negative result. A false positive or negative result can also occur even when there is no apparent product defect and the customer has apparently used our product properly. Identifying the root cause of a product performance or quality issue can be difficult and time consuming.

If our products fail to perform in accordance with the applicable label claims or otherwise in accordance with the expectations or needs of our customers, customers may switch to a competing product or otherwise stop using our products, and our revenues could be adversely affected. Under such circumstances, we may be required to implement shipment holds or product recalls and incur warranty obligations, which would increase our costs. In addition, poor performance by one or more of our products and publicity surrounding such performance could have an adverse effect on our reputation, our continuing ability to sell products and the prevailing market price of our Common Stock.

Our Ability To Expand International Salesto Sell Products Could be Adversely Affect Our BusinessAffected by Competition From New and Results of Operations.Existing Products and Services.

One

The markets we serve are highly competitive and rapidly changing and we expect competition to intensify as technological advances are made and become more widely known, and as new products and services reach the market. Many of our strategic priorities is to substantially expand our product sales internationally. An opportunity to accomplish this objective is with the sale of our OraQuick®HIV Self-Test in support of large self-testing

programs in certain African countriesprincipal competitors have considerably greater financial, technical and elsewhere. Whilemarketing resources than we believe international sales of our HIV self-test and other products represent attractive long-term opportunities with significant growth potential, there is no guarantee that these opportunities will continue or increase. Among other factors, competition from other cheaperdo. As new products and services enter the uncertainties of available funding could negatively impact the success of these opportunities. If international sales of thesemarket, our products do not continueand services may become obsolete or increasea competitor’s products and services may be more effective or if we are otherwise unable to expand international sales of our other products, our revenuesattractive or more effectively marketed and results of operations could be negatively impacted.

sold than ours. In addition, market conditionsthere can be no assurance that our competitors will not succeed in many countries often requireobtaining regulatory approval for new products and services that would render our technologies, products and services obsolete or otherwise commercially unattractive, or introduce or commercialize such products and services before we sell our products at a price below our typical U.S. or European pricing in order to participate in these markets. As a result, sales in certain countries may contribute lower profit margins to our business. To the extent these international sales comprise a large or increasing part of our business, our gross margins will be negatively affected. In addition, we may have difficulty selling our products at a sufficiently low price to maintain or increase this business over the long term without funding support from public health entities, government agencies or other sources.can do so. If we are unablefail to obtain or continue this funding support at sufficient levels, or at all,convince our revenuescustomers of the advantages and results of operations could be negatively affected.

Our International Presence May Increase Our Risks and Expose Our Business to Regulatory, Cultural or Other Restraints.

We seek to increase revenue derived from international sales of our products. Our international sales accounted for $45.6 million or 27% of consolidated net revenues in 2017, $28.4 million or 22% of consolidated net revenues in 2016 and $23.2 million or 19% of consolidated net revenues in 2015. In addition, our molecular collection systems business, which accounted for $75.1 million or 45% of consolidated net revenues in 2017, is operated in Canada.

A number of factors could adversely affect the performance of our business and/or cause us to incur substantially increased costs because of our international presence and sales, including those set forth below:

Uncertainty in the application of foreign laws and the interpretation of contracts with foreign parties;

The potential for inconsistent imposition of legal and regulatory requirements;

Cultural and political differences that favor local competitors or make it difficult to effectively market, sell and gain acceptance of our products;

Inexperience in international markets and territories and difficulties in staffing and managing foreign operations;

Exchange rates, currency fluctuations, tariffs and other barriers, extended payment terms and dependence on international distributors or representatives;

Regulatory requirements (including compliance with applicable customs regulations) and the need for reimbursement approvals;

Trade protection measures, trade sanctions and import/export licensing requirements;

The inability to obtain or maintain ISO certification for our or our suppliers’ manufacturing facilities;

Our inability to obtain or maintain regulatory approvals or registrations for our products;

Our inability to identify international distributors and negotiate acceptable terms for distribution agreements;

Diversion to the U.S.economic value of our products that are sold at lower prices into international markets;

The loss of oneand services or more distributorsotherwise maintain and difficulties or delays in obtaining new or transferred product registrations or approvals forenhance our competitive position, our customers may decide to use products and services developed by a replacement distributor;

Multiple jurisdictions and differing tax laws, as well as changes in those laws;

An increase of withholding and other taxes on remittances and other payments by a foreign subsidiary;

The creditworthiness of foreign distributors and customers and difficulty in collecting foreign accounts receivable;

Difficulty of enforcing contractual obligations or recovering damages under foreign legal systems;

Difficulty collecting amounts owed by foreign governments or other customers;

Economic conditions, political instability, the absence of available funding sources, terrorism, civil unrest, war and natural disasters in foreign countries;

Long sales cycles in international markets, especially for sales to foreign governments, quasi-governmental agencies and international public health agencies;

The sale of competing products by foreign competitors at prices at or below the prices we offer for our products;

Restrictions on our ability to repatriate investments and earnings from foreign operations;

Changes in shipping costs;

The unavailability of licenses to certain patents in force in a foreign country which cover our products; and

Reduced protection for, or enforcement of, our patents and other intellectual property rights in foreign countries.

In addition, we have contracted with a third party in Thailand for the manufacture of a portion of our OraQuick®HIV-1/2 tests, and all of DNAG’s products are produced in Canada. We may enter into agreements to manufacture these or other products in additional foreign countries as well. However, economic, cultural and political conditions and foreign regulatory requirements may slow or prevent the manufacture of our products in countries other than the United States. Interruption of the supply of our products could reduce revenues or cause us to incur significant additional expenses in finding an alternative source of supply. Foreign currency fluctuations and economic conditions in foreign countries could also increase the costs of manufacturing our products in foreign countries.

Our U.S. Government Contracts Require Compliance With Numerous Laws and Increases Our Risk and Liability.

We are currently receiving funding from the U.S. government related to our OraQuick® Ebola rapid antigen test and our OraQuick® Zika rapid antibody test and we sell some of our products to the federal government. As a result of our U.S. government funding and product sales to the U.S. government, we must comply with laws and regulations relating to the award, administration and performance of U.S. government contracts. U.S. government contracts typically contain a number of extraordinary provisions that would not typically be found in commercial contracts and which may create a disadvantage and additional risks to us as compared to competitors that do not rely on government contracts. As a U.S. government contractor, we are subject to increased risks of investigation, criminal prosecution and other legal actions and liabilities to which purely private sector companies are not. The results of any such actions could adversely impact our business and have an adverse effect on our consolidated financial performance.

A violation of specific laws and regulations could result in the impositiona loss of fines and penalties or the termination of our contracts, as well as suspension or debarment. The suspension or debarment in any particular case may be limited to the facility, contract or subsidiary involved in the violation or could be applied to our entire enterprise in certain severe circumstances. Even a narrow scope suspension or debarment could result in negative publicity that could adversely affect our ability to renew contracts and to secure new contracts, both with the U.S. government and private customers, which could materially and adversely affect our business and

results of operations. Fines and penalties could be imposed for failing to follow procurement integrity and bidding rules, employing improper billing practices or otherwise failing to follow rules relating to billing on cost-plus contracts, receiving or paying kickbacks, or filing false claims, among other potential violations. In addition, we could suffer serious reputational harm and the value of our common stock could be negatively affected if allegations of impropriety related to such contracts are made against us.

Our U.S. Government Contracts May Affect our Intellectual Property Rights.

Provisions in our U.S. government contracts may affect our intellectual property rights. Certain of our activities have been funded, and may in the future be funded, by the U.S. government, including our contracts with BARDA. When new technologies are developed with U.S. government funding, the government obtains certain rights in any resulting patents, including the right to a nonexclusive license authorizing the government to use the invention.revenues. These rights may permit the government to disclose our confidential information to third parties and to exercise“march-in” rights to use and allow third parties to use our patented technology. The government can exercise itsmarch-in rights if it determines that action is necessary because we fail to achieve practical application of the U.S. government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, government-funded inventions must be reported to the government, government funding must be disclosed in any resulting patent applications, and our rights in such inventions may be subject to certain requirements to manufacture products in the United States.

Our U.S. Government Contracts Are Subject to Future Funding and the Government’s Choice to Exercise Options, and May be Terminated for the Government’s Convenience.

Our contracts with the U.S. government are subject to future funding and are subject to the right of the government to terminate the contracts in whole or in part for its convenience. There is pressure for the U.S. government to reduce spending. Thenon-appropriation of funds or the termination for the government’s convenience of our contracts could negatively affect our financial results.

For U.S. government contracts that include options, such as our BARDA contracts, the U.S. government generally has the unilateral right not to exercise such options and may not exercise an option if the agency is not satisfied with our performance under the contract or does not receive funding to continue the program, among other reasons. If levels of U.S. government expenditures and authorizations for emerging diseases decrease or shift to programs in areas where we do not offer products or are not developing product candidates, or if the U.S. government otherwise declines to exercise its options under its contracts with us, our business, revenue and operating results would suffer.

Our U.S. Government Contracts Are Subject To Numerous Requirements in Order to be Reimbursed by the Federal Government.

Our current contracts with BARDA are cost plus fixed fee contracts and potential future contracts with the U.S. government may also be structured this way. Under our cost plus fixed fee contracts, we are allowed to recover our approved costs plus a fixed fee. The total price on a cost plus fixed fee contract is based primarily on allowable costs incurred, but generally is subject to contract funding limitations. U.S. government regulations require us to notify our customer of any cost overruns or underruns on a cost plus contract. If we incur costs in excess of the funding limitation specified in the contract we may not be able to recover those cost overruns.

Our U.S. Government Contracts and Related Administrative Processes Are Subject to Audits and Cost Adjustments by the Federal Government.

Federal government agencies can audit and investigate government contracts and the administrative processes and systems of government contractors. These agencies can review our performance on government contracts,

pricing practices, cost structure, and compliance with applicable laws, regulations and standards. They can also review our compliance with government regulations and policies and the adequacy of our internal control systems and policies, including our purchasing, accounting, estimating, compensation and management information processes and systems. Any costs found to be improperly allocated to a specific government contract, unallowable or unreasonable will not be reimbursed, and any such costs already reimbursed may be required to be refunded and certain penalties may be imposed. Adjustments arising from government audits and reviewsdevelopments could have a material adverse effect on our business, financial condition and results of operations.

We also face competition from products that are sold at a lower price. Where this occurs, customers may choose to buy lower cost products from third parties or we may be forced to sell our products at a lower price, both of which could result in a loss of revenues or a lower gross margin contribution from the sale of our products. We may also be required to increase our marketing efforts in order to compete effectively, which would increase our costs.

Failure to Achieve Our Financial and Strategic Objectives Could Have a Material Adverse Impact on Our Business Prospects.

As a result of any number of risk factors identified in this Annual Report, no assurance can be given that we will be successful in implementing our financial and strategic objectives, including our efforts to increase sales of our products and services or continue growing our business. In addition, the funds for research, clinical development and other projects have in the past come primarily from our business operations. If our business slows and we have less money available to fund research and development and clinical programs, we will have to decide at that time which programs to cut, and by how much. Similarly, if adequate financial, personnel, equipment or other resources are not available, we may be required to delay or scale back our business. Our operations will be adversely affected if our total revenue and gross profits do not correspondingly increase or if our technology, product, service, clinical and market development efforts are unsuccessful or delayed. Furthermore, our failure to successfully introduce new or enhanced products and services and develop new markets could have a material adverse effect on our business and prospects.

Moreover, if any administrative

If We Fail To Establish and Maintain Proper And Effective Internal Control Over Financial Reporting, Our Operating Results and Our Ability to Operate Our Business Could Be Harmed.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. We are required to

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comply with the requirements of The Sarbanes-Oxley Act of 2002, or SOX, which requires that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation, document our controls and perform testing of our key control over financial reporting to allow management and our independent public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of SOX. Our testing, or systemthe subsequent testing by our independent public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. For instance, during the quarter ended December 31, 2022, management identified and remediated a material weakness in internal control over financial reporting related to such contracts is founduser access controls to adequately restrict user and privileged access over certain information technology systems that support our financial reporting processes and to ensure appropriate segregation of duties. While no misstatement arose as a result of this deficiency, if we are not able to comply with governmentalthe requirements of Section 404 in a timely manner, or if we or our accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock would likely decline and we could be subject to lawsuits, sanctions or investigations by regulatory authorities, which would require additional financial and management resources. Additionally, any failure to maintain the adequacy of our internal controls could prevent us from accurately reporting our financial results, which could result in investors losing confidence in the accuracy of our financial statements and reporting systems and our stock price could decline.

If We Lose Our Key Personnel or Are Unable to Attract and Retain Qualified Personnel as Necessary, Our Business Could be Harmed.

Our success depends to a large extent upon the contributions of our executive officers, management and sales, marketing, operations and scientific staff. Our business may be harmed by the loss of a significant number of our executive officers or senior managers. We may not be able to attract or retain a sufficient number of qualified employees in the future due to the intense competition for qualified personnel among medical products, laboratory services and other life science businesses. Our ability to recruit such employees will depend on a number of factors, including compensation, benefits, work location, the prospects of our Company, and the possibility for advancement within our organization. We generally do not enter into employment agreements requiring our employees to work for us for any specified period.

If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may be subjected to government scrutinyexperience constraints that could delay or otherwisewill adversely affect our ability to compete for or perform government contracts or collecteffectively produce, market and sell our revenueproducts and services, to meet the demands of our strategic partners in a timely manner. An unfavorable outcomefashion, or to support research, development and clinical programs. Although we believe we will be successful in attracting and retaining qualified personnel, competition for experienced scientists and other qualified personnel from numerous companies and academic and other research institutions may limit our ability to do so on acceptable terms.

We have recently experienced significant changes in our senior leadership, including the appointment of an audit ofa new Chief Financial Officer and Chief Product Officer, as well as a new Interim Chief Executive Officer, who was followed by a new President and Chief Executive Officer. Although we have endeavored to implement any management and director transition in a non-disruptive manner, such transitions might impact our government contracts couldbusiness, and give rise to uncertainty among our customers, investors, vendors, employees and others concerning our future direction and performance, which may materially and adversely affect our business, financial condition, results of operations.operations and cash flows, and our ability to execute our business model.

Risks Relating

In addition, because certain members of our management and board of directors have served in their respective capacities for only limited durations, we face the additional risks that these persons have limited familiarity with our past practices, our business and our industry and lack established track records in managing our business strategy.

In addition, we have recently experienced turnover in other key leadership roles. Any future changes to the Economy, Our Financial Results, Investments, Credit Facilitiesexecutive management team, including hires or departures, could cause further disruption to the business and Need for Financing

Economic Volatility and Disruption Could Adversely Affect Our Results of Operations, Cash Flow and Financial Condition or Those of Our Customers and Suppliers.

Volatile economic conditions may occur again or continuehave a negative impact on operating performance, while these operational areas are in the future. These conditions could adversely affect our financial performance and condition or those of our customers and suppliers. These circumstances could also adversely affect our access to liquidity needed to conduct or expand our business or conduct future acquisitions or make other discretionary investments. Many of our customers rely on public funding provided by federal, state and local governments, and this funding has been and may continue to be reduced or deferred as a result of economic conditions or other factors. These circumstances may adversely impact our customers and suppliers, which, in turn, could adversely affect their ability to purchase our products or supply us with necessary equipment, raw materials or components. Even with the improvement of economic conditions, it may take time for our customers and suppliers to establish new budgets and return to normal purchasing and shipping patterns.transition. We cannot predict the reoccurrence of any economic slowdown or the strength or sustainability of an economic recovery.

We Have Experienced Losses in the Recent Past and May Not Be Able to Maintain Profitable Operations.

We experienced annual net losses during the five years prior to 2015. In addition, as of December 31, 2017, the Company had an accumulated deficit of $119.5 million. Even though we achieved profitability since 2015, there can beprovide no assurance that we will find suitable successors to key roles as transitions occur or that any identified successor will be successfully integrated into our management team.

If Our Essential Employees Who Are Unable To Telework Become Ill or Otherwise Incapacitated, Our Operations May Be Adversely Impacted.

As a medical device manufacturer, we fall within a “critical essential infrastructure” sector, specifically the “Healthcare/Public Health” sector, and are considered exempt under various stay at home/shelter in place orders. Accordingly, our employees may continue to work because of the importance of our operations to the health and well-being of citizens in the states in which we operate. Consistent with these Stay at Home Orders, we have implemented telework policies wherever possible for appropriate categories of “nonessential” employees. “Essential” employees that are unable to telework continue to work at our facilities, and we have implemented appropriate safety measures, including social distancing, face covering and increased sanitation standards. We are following guidance from the Center for Disease Control and the Occupational Safety and Health Administration regarding suspension of nonessential travel, self-isolation recommendations for employees returning from certain geographic areas, confirmed reports of any COVID-19 diagnosis

46


among our employees, and the return of such employees to our workplace. Pursuant to updated guidance from the Equal Employment Opportunity Commission, we are engaging in limited and appropriate inquiries of employees regarding potential COVID-19 exposure, based on the direct threat that such exposure may present to our workforce. We continue to address other unique situations that arise among our workforce due to the COVID-19 pandemic on a case-by-case basis. While we believe that we have taken appropriate measures to ensure the health and well-being of our “essential” employees, there can be no assurances that our measures will be sufficient to protect our employees in our workplace or that they may otherwise be exposed to COVID-19 outside of our workplace. If a number of our essential employees become ill, incapacitated or are otherwise unable to continue working during the current or any future epidemic, our operations may be adversely impacted.

Increases in Demand for Our Products and Services Could Require Us to Expend Considerable Resources or Harm Our Customer Relationships if We Are Unable to Meet That Demand.

If we experience significant or unexpected increases in the demand for our products and services, we and our suppliers may not be able to sustainmeet that demand without expending additional capital resources. These capital resources could involve the cost of new products, machinery or new manufacturing or laboratory facilities. This would increase our capital costs, which could adversely affect our earnings. Our suppliers may be unable or unwilling to expend the necessary capital resources or otherwise expand their capacity. In addition, new manufacturing or laboratory equipment and facilities may require FDA approval or government or industry certification before they can be used to manufacture our products or provide laboratory services. To the extent we are unable to obtain or are delayed in obtaining such approvals, our ability to meet the demand for our products and services could be adversely affected.

If we are unable to develop necessary manufacturing or laboratory capabilities in a timely manner, our sales could be adversely affected. If we fail to increase these capabilities in a cost effective manner or if we experience lower than anticipated yields or production or performance problems as a result of changes that we make in our manufacturing or laboratory processes to meet increased demand, we could experience delays or interruptions and increased costs, which could also have a material adverse effect on our revenues and profitability.

Unexpected increases in demand for our products may require us to obtain additional raw materials in order to manufacture products to meet the demand. Some raw materials require significant ordering lead time and some are currently obtained from a sole supplier or a limited group of suppliers. We have long-term supply agreements with certain of these suppliers, but these long-term agreements involve risks for us, such as our potential inability to obtain an adequate supply of raw materials and components and our reduced control over pricing, quality and timely delivery. It is also possible that one or more of these suppliers may become unwilling or unable to deliver materials to us. Any shortfall in our supply of raw materials and components, or our inability to quickly and cost-effectively obtain alternative sources for this profitabilitysupply, could have a material adverse effect on our ability to meet increased demand for our products. This could negatively affect our total revenues or cost of sales and related profits.

Our inability to meet customer demand for our products and services could also harm our customer relationships and impair our reputation within the industry. This, in turn, could have a material adverse effect on our business and prospects.

We Rely on Information Technology in Our Operations and Any Material Failure, Inadequacy, Interruption or Security Breach of that Technology Could Harm Our Ability to Efficiently Operate Our Business.

We rely heavily on enterprise resource planning and other complex information technology systems across our operations and on the future.

internet, including for management of inventory, processing and analyzing laboratory specimens, purchase orders, invoices, shipping, revenue and expense accounting, online business, consumer call support, and various other processes and transactions. Our ability to continue profitable operationseffectively manage our business, coordinate the production, distribution and sale of our products, process and analyze specimens in our laboratories, respond to customer inquiries, and ensure the timely and accurate recording and disclosure of financial information depends significantly on the reliability and capacity of these systems and the internet.

The failure of any of the foregoing systems to operate effectively, problems with transitioning to upgraded or replacement systems, or disruptions in the operation of the internet, could cause delays in product sales or the provision of laboratory services and reduced efficiency of our operations. Significant expenditures could be required to remediate any such problem.

Security Breaches and Other Disruptions Could Compromise Our Information, Expose Us To Liability and Harm Our Reputation and Business.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, personal information, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our employees in our data centers and on our networks. Secure maintenance and transmission of this information is critical to our operations business strategy. We generally rely on commercially available systems, software, tools and domestically available monitoring to provide security for processing, transmitting and storing this sensitive date.

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Cyber-attacks could result in unauthorized access to our computer systems or our third party IT service provider’s systems and, if successful, misappropriate personal or confidential information. We have been victimized by a spear phishing attack, and such attacks are an ongoing threat. If successful, these activities could lead to the disclosure of intellectual property or personally identifiable information, which could lead to financial harm and cause reputational damage. We have taken additional steps designed to improve the security of our networks and computer systems.

In addition, a contractor or other third party with whom we do business may attempt to circumvent our security measures or obtain such information, and may purposefully or inadvertently cause a breach involving sensitive information. While we will continue to evaluate and implement additional protective measures to reduce the risk and detect cyber incidents, cyberattacks are becoming more sophisticated and frequent and the techniques used in such attacks change rapidly. Despite our cybersecurity measures (including employee and third party training, monitoring of networks and systems and maintenance of back up of protective systems) which are continuously reviewed and upgraded, our information technology networks and infrastructure may still be vulnerable to damage, disruptions or shutdowns due to attack by hackers or breaches, voyeur or malfeasance.

Even the most well protected IT networks, systems and facilities remain potentially vulnerable because the techniques used in attempted security breaches are continually evolving and generally are not recognized until launched against a target or, in some cases, are designed not to be detected and, in fact, may not be detected. Any such compromise of our or our third party’s IT service providers’ data security and access, public disclosure, or loss of personal or confidential business information, could result in legal claims and proceedings, liability under laws to protect privacy of personal information, and regulatory penalties, and could disrupt our operations, require significant management attention and resources to remedy any damages that result, and damage our reputation and customers willingness to transact business with us, any of which could adversely affect our business.

As our activities continue to evolve and expand, we may be subject to additional laws which impose further restrictions on the transfer, access, use, and disclosure of health and other personal information which may impact our business either directly or indirectly. Our failure to comply with applicable privacy or security laws or significant changes in these laws could significantly impact our business and future will be dependent upon a numberbusiness plans.

Federal and State Laws Pertaining to Healthcare Fraud and Abuse Could Adversely Affect Our Business, Financial Condition and Results of factorsOperations.

We are subject to various federal and state laws targeting fraud and abuse in the healthcare industry, including without limitation,anti-kickback laws, false claims laws, laws constraining the following:

Our ability to continue growing our molecular collection systems business;

Our ability to mitigate declining sales of our OraQuickADVANCE®HIV-1/2 test in the United States and expand sales of our OraQuick® HIV Self-Test internationally;

The levelsales, marketing and promotion of expendituresmedical devices by limiting the kinds of financial arrangements that manufacturers of these products may enter into with physicians, hospitals, laboratories and other potential purchasers of medical devices, and laws requiring the reporting of certain transactions between manufacturers and healthcare professionals. Violations of these laws are punishable by criminal or civil sanctions, including substantial fines, imprisonment and exclusion from participation in government healthcare programs such as Medicare and Medicaid. Many of the existing requirements have not been definitively interpreted by state authorities or courts, and available guidance is limited. Unless and until we are requiredin full compliance with these laws, we could face enforcement action and fines and other penalties, and could receive adverse publicity, all of which could materially harm our business. In addition, changes in or evolving interpretations of these laws, regulations, or administrative or judicial interpretations, may require us to make in orderchange our business practices or subject our business practices to develop, obtain regulatory approvals for and successfully commercializelegal challenges, which could have a material adverse effect on our new products;

Our ability to successfully commercialize our OraQuick® Ebola and Zika tests and other new products.

Our ability to improve manufacturing efficiencies;

Our ability to successfully launch new products after receipt of required regulatory approvals or the acquisition of rights to those products;

The degree to which our major distributors and customers comply with their contractual obligations, including minimum purchase commitments;

Whether we are successful in obtaining and maintaining required regulatory approvals and registrations for our new products;

The level of competition, including the degree to which competitors sell lower priced products or more attractive offerings to compete with our products;

Changes in economic conditions in domestic or international markets, such as economic downturns, reduced demand, inflation and currency fluctuations;

Failure to achieve our revenue growth targets;

Changes in distributor buying patterns or a buildup of significant quantities in our distributors’ inventories or distribution channels; and

The costsbusiness, financial condition and results of patent infringement, product liability and other litigation or claims asserted by or against us.
operations.

We May Experience Fluctuations in Our Financial Results or Fail to Meet Our Financial Projections.

Our operating results can fluctuate from quarter to quarter and year to year, which could cause our growth or financial performance to fall below the expectations of investors and securities analysts. Our financial projections for future periods are based on a number of assumptions, including estimated demand for our products. However, sales to our distributors and other customers may fall short of expectations because of lower than estimated demand or other factors, including continued volatility and disruption in economic conditions, increasing competition, seasonal fluctuations, changes in ordering patterns or business strategy, reduced governmental funding and other circumstances described elsewhere in this Annual Report. Infrequent, unusual or unexpected changes in revenues or costs could also contribute to the variability of our financial results.

Customers in certain of the markets we serve often submit a high percentage of purchase orders in the third month of a calendar quarter. Although this can vary from quarter to quarter, many customers make purchase decisions late in a quarter due to budgetary or financial requirements. In addition, certain governmental customers must fully spend budgeted funds by the end of their fiscal year or risk losing these funds, which can contribute to fluctuations in our sales fromyear-to-year. This can make it difficult to accurately forecast whether we will achieve our quarterly sales forecasts and can cause variability in our operating results.

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In addition, our products provide different contributions to our gross margin. Accordingly, our operating results could also fluctuate and be affected by the mix of products sold and the relative prices and gross margin contribution of those products. Failure to achieve operating results consistent with the expectations of investors and securities analysts could adversely affect our reputation and the price of our Common Stock.

Changes in Foreign Currency Exchange Rates Could Negatively Affect Our Operating Results.

Our financial statements are stated in U.S. Dollars and, historically, most of our international sales have also been denominated in U.S. Dollars. As a result, in the past our exposure to foreign currency exchange rate risk has not been material. Nonetheless, these sales are subject to currency risks, since changes in the values of foreign currencies relative to the value of the U.S. dollar can render our products comparatively more expensive. These exchange rate fluctuations could negatively impact international sales of our products, as could changes in the general economic conditions in those markets.

In addition, the revenues and expenses of our subsidiary, DNAG, are recorded in Canadian Dollars and certain of its international sales are denominated in local currencies, including the Euro, British Pound and Australian Dollar. Revenues and expenses denominated in foreign currencies are translated into U.S. dollars for purposes of

reporting our consolidated financial results. Our expectation is that the DNAG business will continue to grow and our exposure to foreign currency exchange rates may be more significant than in past years.

Exchange rate fluctuations may affect DNAG’s revenues and expenses and the translation of DNAG’s financial results into U.S. dollars. Favorable movement in exchange rates have benefited us in prior periods. However, where there are unfavorable currency exchange rate fluctuations, our consolidated financial statements including our balance sheet, revenues and results of operations, could be negatively affected. In addition, fluctuations in exchange rates could affectyear-to-year comparability of operating results. In the past, we have not generally entered into hedging instruments to manage our currency exchange rate risk, but we may need to do so in the future. However, our attempts to hedge against these risks may not be successful. If we are unable to successfully hedge against unfavorable foreign currency exchange rate movements, our consolidated financial results may be adversely impacted.

Tax Matters, Including the Changes in Corporate Tax Rates, Disagreements with Taxing Authorities and Imposition of New Taxes Could Impact our Results of Operations and Financial Condition.

We are subject to income and other taxes in the U.S. and our operations, plans and results are affected by tax and other initiatives. On December 22, 2017, the U.S. Government enacted comprehensive tax legislation known as the Tax Cuts and Jobs Act (the “Tax Act”). This legislation makes broad and complex changes to the U.S. tax code, including but not limited to reducing the corporate tax rate from 35% to 21%, requiring aone-time transition tax on certain unrepatriated earnings of foreign subsidiaries and accelerating first year expensing of certain capital expenditures. The Tax Act also introduces new tax laws that may impact our taxable income in 2018, which will include, but not be limited to, a new provision designed to tax global intangible low taxed income (GILTI), limitations on the deductibility of certain executive compensation, creating a base erosion anti-abuse tax (BEAT) and modifying or repealing many deductions and credits. The impact of many provisions of the Tax Act lack clarity and is subject to interpretation until additional Treasury Department guidance is issued. The ultimate impacts of the Tax Act may differ from the Company’s estimates due to changes in the interpretations and assumptions made, as well as any forthcoming regulatory guidance. The Tax Act could also impact changes to our valuation of deferred tax assets and liabilities. Any such change in valuation could have a material impact on our income tax expense and deferred tax balances.

We are also subject to regular reviews, examinations, and audits by the Internal Revenue Service and other taxing authorities with respect to our taxes. Although we believe our tax estimates are reasonable, if a taxing authority disagrees with the positions we have taken, we could face additional tax liability, including interest and penalties. There can be no assurance that payment of such additional amounts upon final adjudication of any disputes will not have a material impact on our results of operations and financial position.

We also need to comply with new, evolving or revised tax laws and regulations. The enactment of new or revised foreign or domestic tax regulations or increases in tariffs or changes in the application or interpretation of the Tax Act, could have an adverse effect on our business or on our results of operations.

Our Revolving Credit Facility Contains Certain Financial Covenants Which, if Not Satisfied, Could Limit Our Ability to Borrow in the Future or Result in the Acceleration of the Amounts Borrowed Under This Facility.

Our revolving credit facility with a commercial bank contains various financial and other covenants with which we must comply on an ongoing or periodic basis. If we enter into new or additional credit facilities or loan agreements, we would expect those arrangements would contain similar types of covenants. Although we do not expect to violate these covenants and obligations, if such a violation were to occur, our ability to borrow funds in the future may be adversely affected. To the extent we borrow funds and a subsequent violation occurs, the outstanding debt under our credit facility or other arrangement could become immediately due and payable and our lender(s) could proceed against any collateral securing such indebtedness.

We May Require Future Additional Capital.

Our future liquidity and ability to meet our future capital requirements will depend on numerous factors, including, but not limited to, the following:

The costs, scope and timing of strategic acquisitions;

The costs and timing of expansion of sales and marketing activities;

The timing and success of the commercial launch of new products;products or services;

The extent to which we gain or expand market acceptance for existing, new or enhanced products;products and services;

The costs and timing of the expansion of our manufacturing and laboratory capacity;

The success of our research and product development efforts;

The time, cost and degree of success of conducting clinical trials and obtaining regulatory approvals;

The magnitude of capital expenditures;

Changes in existing and potential relationships with distributors and other business partners;

The costs involved in obtaining and enforcing patents, proprietary rights and necessary licenses;

The costs and liability associated with patent infringement or other types of litigation; and

Competing technological and market developments;developments.

If additional financing is needed, we may seek to raise funds through the sale of equity or other securities or through bank borrowings. There can be no assurance that financing through the sale of securities, bank borrowings or otherwise will be available to us on satisfactory terms, or at all.

Terrorist Attacks, or Natural Disasters, Public Health Crises, Political Unrest or Other Catastrophic Events Outside of Our Control May Adversely Affect Our Business.

Terrorist attacks, or natural disasters, including disasters attributable to climate change impacts, public health crises, political unrest or other catastrophic events outside of our control, including pandemics, and subsequent governmental responses to these events, could cause economic instability. These actions could adversely affect economic conditions both within and outside the United States and reduce demand for our products. For example, the COVID-19 outbreak has led to, and for an unknown period of time will continue to lead to, disruptions in local, regional, national and global markets and economies affected thereby, including the United States. This outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things: (i) restrictions on travel, government mandated social distancing measures, and the temporary closure of many corporate offices, retail stores, and manufacturing facilities and factories; (ii) significant disruption to the business of many companies, including our customers and suppliers, as well as layoffs of employees; (iii) reduction or termination by public health and other customers of infectious disease testing programs, including for HIV and HCV, and a reallocation of personnel and monetary resources from these programs to programs intended to address COVID-19; (iv) reduction or termination of clinical and research studies by academic and other entities that use our molecular collection products and laboratory services; and (v) rapidly evolving proposals and actions by state and federal governments to address the problems being experienced by markets, businesses and the economy in general, which may have unintended consequences or may not adequately address such problems. These events couldhave disrupted, and threaten to continue to disrupt, our normal operation, the operations of our customers and suppliers and eliminate, reduce or delay our customers’ ability to purchase and use our products and our suppliers’ ability to provide raw materials and finished products. Despite our efforts to manage and mitigate the impact of these events on us, it is impossible to predict the precise nature and consequences of these events, or of any political or policy decisions and regulatory changes occasioned by emerging events or uncertainty under applicable laws or regulations that impact us. It is clear that these types of events are impacting and will, for at least some time, continue to impact our product development and operation and in many instances the impact may be adverse and may be material. Any potential impact to our results of operations will depend to a large extent on future developments and new information that could emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by authorities and other entities to contain the spread or treat its impact, all of which are beyond our control. These potential impacts, while uncertain, could adversely affect our business and results of operation. In addition, the impacts of political unrest,

49


including as a result geopolitical tension, such as a deterioration in the relationship between the United States and China or escalation in conflict between Russia and Ukraine, including any resulting sanctions, export controls or other restrictive actions that may be imposed by the US and/or other countries against governmental or other entities in, for example, Russia, also could lead to disruption, instability and volatility in the global markets, which may have an adverse impact on our business or ability to access the capital markets.

Various types of disasters, including earthquakes, fires, floods, riots, acts of terrorism and pandemics, may also affect our manufacturing facilities and computer systems, and increase our cybersecurity risks. Although we have business interruption insurance, our facilities, including some pieces of manufacturing equipment and our computer systems, may be difficult to replace and could require substantial replacement lead-time. Various types of disasters, including earthquakes, fires, floods and acts of terrorism, may affect our manufacturing facilities and computer systems. In the event our existing manufacturing facilities or computer systems are affected byman-made or natural disasters, including pandemics, we may have difficulty operating our business and may be unable to manufacture products for sale or meet customer demands or sales projections. If our manufacturing operations were curtailed or shut down entirely, it would seriously harm our business. Moreover, we may incur incremental costs following an unforeseen event which could adversely affect our results of operation.

Risks Relating to

The Ongoing Conflict Between Russia And Ukraine And The Related Implications Could Have A Material Adverse Effect On Our Common StockBusiness And Results Of Operations.

Our Stock Price Could Continue to be Volatile.

Our stock price has been volatile, has fluctuated substantially inAs a result of the past, may be volatile inongoing military conflict between Russia and Ukraine, the futureUnited States and other countries have imposed significant sanctions on Russia and could experience substantial declines. The following factors, among others,impose even wider sanctions. Such sanctions could have a significant impact ondamage or disrupt international commerce and the global economy. We cannot predict the broader or longer-term consequences of the conflict or of the sanctions imposed to date, which could include embargoes, regional instability, geopolitical shifts, exchange rate fluctuations, financial market for our Common Stock:

The performance of our business, including our efforts to increase sales of our OraQuick® HIV, HCV and molecular collection systems products and our OraQuick®In-Home HIV test and HIV self-test;

Future announcements concerning usdisruptions and our products, including with respecteconomic recession. Further, the conflict could exacerbate supply chain challenges, lead to significant acquisitions, strategic collaborations and joint ventures;

Clinical results with respect to our products or those of our competitors;

The status of clinical studies and pending submissions for required regulatory approvals;

The announcement of regulatory or enforcement actions byan increase in cyberattacks from Russia, affect the FDA or other agencies against us, our products or one or more of our customers;

The gain or loss of significant contractsglobal price and availability of funding for the purchase ofkey commodities, reduce our products;

Delays in the development, regulatory approval or commercialization of new or enhanced products;

Legislative developmentssales and industry or competitive trends;

Biological or medical discoveries;

Disputes or developments with key customers, distributors or suppliers;

Developments in patent or other proprietary rights;

Litigation or threatened litigation;

Complaints or concerns about the performance or safety of our products and publicity about those issues, including publicity expressed through social mediaearnings or otherwise over the internet;

Failure to achieve, or changes in, financial estimates by securities analysts and comments or opinions about us by securities analysts or major stockholders;

Governmental regulation;

Changes in the level of competition;

Loss of or declines in sales to major distributors or customers or changes in the mix of products sold;

Period-to-period fluctuations in our operating results;

Additions or departures of key personnel;

General market and economic conditions; and

Terrorist attacks, civil unrest, war and national disasters.

In addition, the stock market in general has experienced extreme price and volume fluctuations that have affected the market price of our Common Stock, as well as the stock of many companies in the diagnostics and life sciences industries. Often, price fluctuations are unrelated to the operating performance of the specific companies whose stock is affected.

In the past, following periods of volatility in the market price of a company’s stock, securities class action litigation has occurred against the issuing company. If we were subject to this type of litigation in the future, we could incur substantial costs and experience a subsequent diversion of our management’s attention and resources, each of which could have a materialan adverse effect on our revenuebusiness and earnings. Any adverse determination in this typeresults of litigation could also subject us to significant liabilities.operations.

Future Sales of Our Common Stock by Existing Stockholders, Executive Officers or Directors Could Depress the Market Price of Our Common Stock and Make It More Difficult For Us to Sell Stock in the Future.

Sales of our Common Stock in the public market, or the perception that such sales may occur, could negatively impact the market price of our Common Stock. We are unable to estimate the number of shares of our Common Stock that may actually be resold in the public market since this will depend on the market price for our Common Stock, the individual circumstances of the sellers and other factors.

We have a number of institutional stockholders that own significant blocks of our Common Stock. If one or more of these stockholders sell large portions of their holdings in a relatively short time, for liquidity or other reasons, the prevailing market price of our Common Stock could be negatively affected. In addition, it is possible that one or more of our executive officers ornon-employee members of our Board of Directors could sell shares of our Common Stock during an open trading window or pursuant to a10b5-1 sales plan under our Insider Trading Policy. These transactions and the perceived reasons for these transactions could have a negative effect on the prevailing market price of our Common Stock.

Investor Confidence and Share Value May be Adversely Impacted if We and/or Our Independent Registered Public Accounting Firm Conclude That Our Internal Control Over Financial Reporting is Not Effective.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring us, as a public company, to include a report in our Annual Reports on Form10-K that contains an assessment by management of the effectiveness of our internal control over financial reporting. In addition, our independent registered public accounting firm must report on the effectiveness of these internal controls.

We expect that our internal controls will continue to evolve as our business activities change. Although we seek to diligently and vigorously review our internal control over financial reporting in an effort to ensure compliance with the Section 404 requirements, any control system, regardless of how well designed, operated and evaluated, can provide only reasonable, not absolute, assurance that its objectives will be met. In addition, the overall qualityconflict between Russia and Ukraine may have the effect of our internal controls may be affected by the internal control over financial reporting implemented byheightening other risks disclosed in this Annual Report, any business we acquireof which could materially and our ability to assess and successfully integrate the internal controls of any such business.

If, during any year, our independent registered public accounting firm is not satisfied with our internal control over financial reporting or the level at which our controls are documented, designed, operated, tested or assessed, or if the independent registered public accounting firm interprets the requirements, rules or regulations differently than we do, then it may issue a report that is qualified. We also could conclude that our internal control over financial reporting is not effective. These events could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our financial statements and effectiveness of our internal controls, which ultimately could negatively impact the market price of our Common Stock.

Because We Do Not Intend to Pay Cash Dividends on Our Common Stock, an Investor in Our Common Stock Will Benefit Only if Our Stock Appreciates in Value.

We currently intend to retain our current earnings and future earnings, if any, to finance the expansion ofadversely affect our business and doresults of operations. Such risks include but are not expectlimited to pay any cash dividends on our Common Stockinterruptions in the foreseeable future. As a result,transportation channels for the successmanufacture and global distribution of an investment in our Common Stock will depend entirely upon any future appreciation. There is no guarantee that our Common Stock will appreciate in value or even maintain the price at which investors purchased their shares.

Certain Provisions in Our Certificateproducts, heightened inflation, depressed levels of Incorporationconsumer and Bylaws and Under Delaware Law Could Make a Third-Party Acquisition of Us Difficult.

Our Certificate of Incorporation and Bylaws contain provisions that could make it more difficult for a third party to acquire us, even if doing so would be beneficialcommercial spending, disruptions to our stockholders.global technology infrastructure, adverse changes in international trade policies and relations, and the inability to implement and execute our business strategy. We are also subjectcurrently unable to certain provisionspredict the extent, nature or duration of Delaware law that could delay, deter or prevent a change in controlany of us. These provisions could limit the price investors might be willing to pay in the future for shares of our Common Stock.

these occurrences.

Future Sales of Shares of Our Common Stock Could Adversely Affect the Trading Price of Our Common Stock and Our Ability to Raise Funds in New Equity Offerings.

Future sales of a substantial number of our shares of Common Stock or equity-related securities in the public market or privately, or the perception that such sales may occur, could adversely affect prevailing trading prices of our Common Stock, and could impair our ability to raise capital through future offerings of equity or equity-related securities. No prediction can be made as to the effect, if any, that future sales of shares of Common Stock or the availability of shares of Common Stock for future sale will have on the trading price of our Common Stock.

ITEM 1B.Unresolved Staff Comments.

Not Applicable.

ITEM 2.Properties.

ITEM 1B.Unresolved Staff Comments.

None

ITEM 2.Properties.

We own a 48,000 square foot facility which is OraSure’s primary corporate office and manufacturing facility, a 31,700 square foot facility that houses our primary corporate office, our sales and marketing, research and development, human resources, and regulatory and quality offices, a 48,000 square foot facility and a 33,500 square foot facility which isare used for manufacturing activities.activities, and we lease an additional 139,000 square foot manufacturing facility, which is primarily dedicated to the production of our InteliSwab®COVID-19 Rapid Tests. Each of these facilities is located in Bethlehem, Pennsylvania. We also rent additional warehouse and distribution space on anas-needed basis, including a 70,000 square foot warehouse in Bethlehem Township, Northampton County, Pennsylvania. In addition,November 2022, we terminated our lease for a facility in York, Pennsylvania, which was intended for use in manufacturing activities. Given the improvements in manufacturing efficiency we were able to realize at our other facilities, we determined that this additional space was not necessary. We were not required to pay termination fees. Our subsidiary, DNAG, also leases a 35,883 square foot facility in Ottawa, Canada, which is used as its primary corporate office and houses sales and

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marketing, manufacturing, distribution, research and development, and regulatory and quality operations. Our other subsidiaries, Diversigen and Novosanis, also lease facilities for their operations.

We believe that the facilities described above are adequate for our current requirements.

ITEM 3.Legal Proceedings.



From time to time, we are involved in certain legal actions arising in the ordinary course of business. In management’s opinion, the outcomes of such actions, either individually or in the aggregate, are not expected to have a material adverse effect on our future financial position or results of operations.

ITEM 4.Mine Safety Disclosures.

In March 2021, we filed a complaint against Spectrum Solutions, LLC ("Spectrum") in the United States District Court for the Southern District of California alleging that certain saliva collection devices manufactured and sold by Spectrum infringe a patent held by DNAG. Spectrum has filed an answer to the initial complaint, asserting that its device does not infringe our patent and that our patent is invalid. In August 2021, we amended our complaint to add a second patent to this litigation. Spectrum responded to our amended complaint and asserted counterclaims for inequitable conduct and antitrust violations with respect to one of the patents in the litigation and subsequently filed a request for review of the second patent at the Patent and Trademark Office. DNAG filed a motion to dismiss Spectrum’s counterclaims in October 2021, which was denied by the Court on March 30, 2022. Expert discovery is ongoing. On November 29, 2022, the district court issued a claim construction order. On January 30, 2023, Spectrum filed a motion for summary judgment of noninfringement. We opposed the motion. Briefing is complete and the motion remains pending. The final pretrial conference is set for September 7, 2023. The Patent and Trademark Office instituted review of the second patent on February 10, 2023, scheduling a hearing for November 14, 2023.

ITEM 4.Mine Safety Disclosures.

Not Applicable.

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PART II

ITEM 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

ITEM 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our Common Stock is listed for trading on the Global Select Market tier of The Nasdaq Stock Market LLC (“NASDAQ”Nasdaq”) under the symbol OSUR. High and low sales prices reported by NASDAQ during the periods indicated are shown below.

   Year ended December 31,   Year ended December 31,   
   2017   2016 
       High           Low           High           Low     

First Quarter

  $12.97   $8.39   $7.39   $5.09 

Second Quarter

  $17.96   $12.03   $7.99   $5.81 

Third Quarter

  $22.79   $17.06   $9.05   $5.57 

Fourth Quarter

  $23.01   $12.86   $9.53   $7.09 

“OSUR”. On February 20, 2018,17, 2023, there were 369290 holders of record and approximately 16,42622,603 holders in street name of our Common Stock, and the closing price of our Common Stock was $17.86$5.95 per share.

Dividends

We have never paid any cash dividends and our Board of Directors does not anticipate paying cash dividends in the foreseeable future. We intend to retain any future earnings to provide funds for the operation and expansion of our business.

Share Repurchases and Retirements

Period

  Total number
of shares
purchased
  Average price
paid per
Share
   Total number of
shares purchased
as part of publicly
announced plans
or programs
   Maximum number (or
approximate dollar
value) of shares that
may yet be repurchased
under  the plans or
programs(1, 2)
 

October 1, 2017 - October 31, 2017

   254(3)  $19.92    N/A    11,984,720 

November 1, 2017 - November 30, 2017

   —     —      —      11,984,720 

December 1, 2017 - December 31, 2017

   —     —      —      11,984,720 
  

 

 

    

 

 

   
   254     —     
  

 

 

    

 

 

   

Period

 

Total number of
shares purchased

 

 

 

Average price
paid per Share

 

 

Total number of
shares purchased
as part of publicly
announced plans
or programs

 

 

Maximum number (or
approximate dollar value)
of shares that may yet be
repurchased under the plans
or programs
(1, 2)

 

October 1, 2022 - October 31, 2022

 

 

1,110

 

(3)

 

$

3.97

 

 

 

 

 

 

11,984,720

 

November 1, 2022 - November 30, 2022

 

 

47,823

 

(3)

 

 

4.81

 

 

 

 

 

 

11,984,720

 

December 1, 2022 - December 31, 2022

 

 

1,707

 

(3)

 

 

4.96

 

 

 

 

 

 

11,984,720

 

 

 

 

50,640

 

 

 

 

 

 

 

 

 

 

 

(1)
(1)
On August 5, 2008, our Board of Directors approved a share repurchase program pursuant to which we are permitted to acquire up to $25.0 million of outstanding shares. This share repurchase program may be discontinued at any time.
(2)This column represents the amount that remains available under the $25.0 million repurchase plan, as of the period indicated. We have made no commitment to purchase any shares under this plan.
(3)Pursuant to the OraSure Technologies, Inc. Stock Award Plan, and in connection with the vesting of restricted shares, these shares were retired to satisfy minimum tax withholdings.

(2)
This column represents the amount that remains available under the $25.0 million repurchase plan, as of the period indicated. We have made no commitment to purchase any shares under this plan.
(3)
Pursuant to the OraSure Technologies, Inc. Stock Award Plan, and in connection with the vesting of restricted and performance shares, these shares were retired to satisfy minimum tax withholdings

Performance Graph

The performance graph set forth below shall not be deemed “soliciting material” or “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under that Section. This graph will not be deemed “incorporated by reference” into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether such filing occurs before or after the date hereof, regardless of any general incorporation language in such filing.

The following graph compares the cumulative total returns to investors in the Company’s Common Stock, the NASDAQNasdaq Composite Index, the Nasdaq Biotechnology Index, and the NASDAQ BiotechnologyNasdaq Health Care Index for the period from December 31, 20122017 through December 31, 2017.2022. The graph assumes that $100 was invested on December 31, 20122017 in the Company’s Common Stock and in each of the above-mentioned indices, and that all dividends, if any, were reinvested.

52


The NASDAQNasdaq Composite Index was chosen because it is a broad index of companies whose equity securities are traded on NASDAQ.Nasdaq. The NASDAQNasdaq Biotechnology Index (old peer group) was historically chosen because it includes a number of our competitors. We have chosen to replace the Nasdaq Biotechnology Index with the Nasdaq Health Care Index (new peer group) because we believe it better reflects companies relevant to our current business, and we utilize the Nasdaq Health Care Index as a benchmark for compensation decisions. Furthermore, many healthcare investors look to the Nasdaq Health Care Index as an appropriate benchmark for stock performance. We will discontinue using the Nasdaq Biotechnology Index after this Annual Report. Stockholders are cautioned that the graph shows the returns to investors only as of the dates noted and may not be representative of the returns for any other past or future period.

img36601609_0.jpg 

*$100 invested on 12/31/12 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.

 

 

Fiscal year ending December 31,

 

 

 

2017

 

 

2018

 

 

2019

 

 

2020

 

 

2021

 

 

2022

 

OraSure Technologies, Inc.

 

 

100.00

 

 

 

61.93

 

 

 

42.58

 

 

 

56.12

 

 

 

46.08

 

 

 

25.56

 

NASDAQ Composite

 

 

100.00

 

 

 

97.16

 

 

 

132.81

 

 

 

192.47

 

 

 

235.15

 

 

 

158.65

 

NASDAQ Biotechnology

 

 

100.00

 

 

 

91.14

 

 

 

114.02

 

 

 

144.15

 

 

 

144.18

 

 

 

129.59

 

NASDAQ Health Care

 

 

100.00

 

 

 

83.86

 

 

 

92.88

 

 

 

118.12

 

 

 

106.27

 

 

 

79.91

 

   12/12   12/13   12/14   12/15   12/16   12/17 

OraSure Technologies, Inc.

   100.00    87.60    141.23    89.69    122.28    262.67 

NASDAQ Composite

   100.00    141.63    162.09    173.33    187.19    242.29 

NASDAQ Biotechnology

   100.00    174.05    230.33    244.29    194.95    228.29 

Securities Authorized for Issuance Under Equity Compensation Plans

For certain information concerning securities authorized for issuance under our equity compensation plan, see Item 12, “Securities“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

ITEM 6.Selected Consolidated Financial Data.

The following table sets forth selected consolidated financial data of the Company. This information should be read in conjunction with the consolidated financial statements and notes thereto included in Item 15 and the information set forth in Item 7, “Management’s6. Reserved

Not Applicable

53


ITEM 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Selected Consolidated Financial Data

(In thousands, except per share data)

  Years ended December 31, 
  2017  2016  2015   2014  2013 

Operating Results:

      

Net revenues

 $167,064  $128,198(2)  $119,719   $106,464  $98,940(4) 

Costs and expenses

  126,826(1)   107,933   111,661    111,266(3)   111,102(5) 

Operating income (loss)

  40,238   20,265   8,058    (4,802  (12,162

Other income, net

  794   58   774    531   200 

Income tax expense (benefit)

  10,084   603   665    343   (772

Net income (loss)

  30,948   19,720   8,167    (4,614  (11,190

Earnings (loss) per share

      

Basic

 $0.52  $0.35  $0.14   $(0.08 $(0.20

Diluted

 $0.51  $0.35  $0.14   $(0.08 $(0.20

Shares used in computing earnings (loss) per share

      

Basic

  59,050   55,615   56,397    55,949   55,555 

Diluted

  61,024   56,513   56,846    55,949   55,555 

Cash Flow:

      

Cash flows provided by operating activities

 $28,156(1)  $24,598  $15,773   $7,526(3)  $8,385(5) 
  December 31, 
  2017  2016  2015   2014  2013 

Financial Position:

      

Cash, cash equivalents, and investments

 $176,587  $120,950  $101,319   $97,867  $93,191 

Working capital

  189,668   139,106   111,480    104,752   100,590 

Total assets

  296,201   207,935   189,321    189,633   184,245 

Accumulated deficit

  (119,510  (150,458  (170,178   (178,345  (173,731

Stockholders’ equity

  258,081   185,850   159,436    158,701   161,146 

(1)Includes a $12.5 million gain associated with the settlement of our litigation with Ancestry.com DNA LLC and its contract manufacturer, which was recorded as a reduction of operating expenses in the indicated period.
(2)Includes an additional $5.4 million of exclusivity payments recognized in other revenues as a result of the early termination of our HCVco-promotion agreement with AbbVie, bringing total exclusivity payments recognized in 2016 to $18.9 million.
(3)Includes a $5.5 million gain from the termination of the Company’s oral fluid assay agreement with Roche Diagnostics, which was recorded as a reduction of operating expenses in the indicated period.
(4)Includes anon-recurring net favorable $2.5 million adjustment to account for a change in the Company’s revenue recognition policy related to its OraQuick®In-Home HIV test.
(5)Includes an $8.3 million gain from the termination of the Company’s oral fluid assay agreement with Roche Diagnostics, which was recorded as a reduction of operating expenses in the indicated period.

ITEM 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Statements below regarding future events or performance are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Our actual results could be quite different from those expressed or implied by the forward-looking statements. Factors that could affect results are discussed more fully under the Item 1A, entitled “Risk Factors,” and elsewhere in this Annual Report. Although forward-looking statements help to provide complete information about us, readers should keep in mind that forward-looking statements may not be reliable. Readers are cautioned not to place undue reliance on the forward-looking statements. We undertake no duty to update any forward-looking statements made herein after the date of this Annual Report.

The following discussion should be read in conjunction with the consolidated financial statements contained herein and the notes thereto, along with the Section entitled “Critical Accounting Policies and Estimates,” set forth below. This section of this Annual Report on Form 10-K for the year ended December 31, 2022 (this "Annual Report") generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussion of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Business Overview

Our primary goal is to empower the global community to improve health and Business Segments

Ourwellness by providing access to accurate essential information through effortless tests, collection kits and services. Through December 31, 2022 our business is comprisedconsisted of two segments: our “Diagnostics” segment and our “Molecular Solutions" segment.

In February 2023, we announced a corporate restructuring to combine the commercial and innovation teams across the two segments into one business unit, with sales, marketing, product development and research teams covering multiple product lines. This change is intended to accelerate innovation, enhance customer experience and result in operational synergies. Beginning with the first quarter of 2023, we will report financial results on a non-segmented basis.

Our “OSUR”Diagnostics business primarily consists of the development, manufacture, marketing and sale of oral fluidsimple, easy to use diagnostic products and specimen collection devices using our proprietary technologies, as well as other diagnostic products including immunoassays and otherin vitro diagnostic tests that are used on other specimen types. Our molecular collections systems or “DNAG”The Diagnostics business consists of the manufactureincludes tests for diseases including COVID-19, HIV and sale of specimen collection kits that are used to collect, stabilize, transport and store samples of genetic material for molecular testing in the consumer genetic, clinical genetic, academic research, pharmacogenomics, personalized medicine, microbiome and animal genetics markets.

Our OSUR diagnostic products include testsHepatitis C that are performed on a rapid basis at the point of care, and tests for drugs of abuse that are processed in a laboratory. These products are sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, and other public health organizations, distributors, government agencies, physicians’ offices, and commercial and industrial entities. We also manufactureOur COVID-19 and sell medical devices used for the removal of benign skin lesions by cryosurgery or freezing. These cryosurgicalHIV products are also sold in both professional anda consumer-friendly format in the over-the-counter (“OTC”) marketsmarket in North America,the U.S. and, in the case of the HIV product, as a self-test to individuals in a number of other countries. In 2022, after obtaining a CE mark, we launched our OraQuick® HIV Self-Test, an oral swab in-home test for HIV-1 and HIV-2, in Europe, Centralmaking it available in several European countries. Through our Diagnostics business we are also developing and South America,commercializing diagnostic products that measure adherence to HIV medications including pre-exposure prophylaxis ("PrEP"). In September 2022, we entered into an agreement with the Biomedical Advanced Research Development Authority ("BARDA"), pursuant to which BARDA will provide up to $8.6 million in funding to us to develop a 2nd generation Ebola test on the OraQuick® testing platform, with the objective of developing increased sensitivity and Australia.shelf life, with new chemistry and higher degrees of automation in the test's manufacturing process.

Our DNAG or molecular collection systemsMolecular Solutions business is operated by our subsidiary,wholly-owned subsidiaries, DNA Genotek Inc. (“DNAG”("DNAG"), a company basedDiversigen, Inc. ("Diversigen"), and Novosanis NV ("Novosanis"). Our Molecular Solutions business sells its products and services directly to its customers, primarily through its internal sales force in Ottawa, Canada. DNAG’s Oragene® DNA samplethe U.S. domestic market, and in many international markets, also through distributors. Our products primarily consist of collection kit provides anall-in-one systemkits and services used by clinical laboratories, direct-to-consumer laboratories, researchers, pharmaceutical companies, and animal health service and product providers. Most of our Molecular Solutions revenues are derived from product sales to commercial customers and sales into the academic and research markets. A significant portion of our total sales is from repeat customers in both markets. Molecular Solutions customers span the disease risk management, diagnostics, pharmaceutical, biotech, nutrition, companion animal and environmental markets.



In 2020, we expanded the market focus of our Molecular Solutions business by selling existing collection products for use with COVID-19 tests. In 2022, demand for COVID-19 PCR testing declined, which was primarily driven by the availability of antigen tests, the reduction in the number of COVID-19 cases, and the wider availability of vaccines which negatively impacted the sales of the collection products. We have also developed additional collection devices
for the emerging microbiome market, which focuses on studying microbiomes and their effect on human and animal health. In 2022, we launched the OMNIgene
® • GUT Dx collection stabilization, transportationdevice (OMD-200), which was granted De Novo authorization from the FDA for collection of human fecal samples and storagethe stabilization of DNA from human saliva. We also sell research use only sample collection products intothe bacterial community for subsequent assessment of the microbiome profile by an assay validated for use with OMNIgene®·GUT Dx

54


device. Additionally, our OMNIgene® • GUT DNA and tuberculosis marketsRNA collection device (OMR-205), became available to gut microbiome researchers, allowing for self-collection, stabilization, storage and transportation of microbial DNA and RNA at ambient temperature for gut microbiome profiling. We leverage our existing sales force and global research connections to engage microbiome customers worldwide to establish ourselves among the leaders in ease-of-collection, stabilization, and transport of this challenging sample type. Through our partnership with Grifols, we offerreceived FDA clearance for our customersORAcollect®•Dx saliva collection device for OTC use, which allows our commercial partners to use and market the device with their therapeutics or devices.


Our Molecular Solutions products include the Colli-Pee® device, developed and sold by our Novosanis subsidiary, for the volumetric collection of first void urine. This product is in its early stages, and initial sales are occurring primarily through distributors and collaborations in the liquid biopsy and sexually transmitted disease markets. In 2022, Novosanis obtained a suite ofCE mark for its Colli-Pee® device containing a prefilled tube with UAS® chemistry, which is designed to stabilize urinary analytes. Our Diversigen subsidiary, also offers laboratory and analytical services for both genomics and microbiome customers to more fully meet their needs. These services called “GenoFINDTM”,are primarily provided to pharmaceutical, biotech companies, and research institutions.

In 2022, Diversigen launched its metatranscriptomics sequencing and analysis services for gut microbiome samples, which range from package customizationgenerate a microbial community's gene expression profile to provide information about the interactions between an individual and study design optimization to extraction, analysistheir microbiome, creating a holistic picture of a sample's microbial functions and reporting services. We serve customers worldwide, including many leading research universities and hospitals.expression levels.

Recent Developments

Litigation SettlementRestructuring

Effective

In February 6, 2017,2023, we settledannounced a corporate restructuring to combine the commercial and innovation teams across the Molecular and Diagnostics segments into one business unit with sales, marketing, product development and research teams covering multiple product lines. This change is intended to accelerate innovation, enhance customer experience and result in operation synergies.

Impact of COVID-19

As COVID-19 continues to impact the economy of the United States and other countries around the world, we are committed to being a part of the response to this unprecedented challenge. We have made substantial investments to expand our patent infringementoperations in order to manufacture product used for COVID-19 testing in the United States.



Due to COVID-19, we have experienced volatility, including periods of material decline compared to prior year periods in testing volume of our base business (which excludes COVID-19 testing)
and breachperiods of contract litigation against Ancestry.com DNA LLC (“Ancestry”)significant demand for our COVID-19 testing product, with demand generally fluctuating in line with changes in prevalence of the virus and its contract manufacturer. Underrelated variants. It is difficult for us to predict the duration or magnitude of the outbreak’s effects on our business or results of operations.

We expect that, if and when the current COVID-19 pandemic subsides, there could be significantly reduced demand for testing, and thus, for our InteliSwab® COVID-19 Rapid Tests. Further, if the COVID-19 pandemic becomes a Settlementseasonal virus or experiences fluctuations in prevalence, we could experience fluctuations in our revenues associated with our InteliSwab® COVID-19 Rapid Tests For additional information on COVID-19 related risks we face, see the “Risk Factors - Risks Relating to Products, Marketing and License Agreement executedSales - The COVID-19 pandemic continues to cast uncertainty over our consolidated results of operations, financial position and cash flows, while the consequences of COVID-19 and the governmental response to the pandemic and pandemic-related macroeconomic impacts could negatively affect our operations and share price.” section of this Annual Report

Appointment of New CEO

Carrie Eglinton Manner was appointed President and Chief Executive Officer ("CEO"), effective June 4, 2022. Ms. Eglinton Manner also joined the OraSure Board of Directors (the "Board"). She succeeded Dr. Nancy Gagliano, who was appointed Interim CEO in March 2022. Dr. Gagliano continues to serve on the OraSure Board.

Exploration of Strategic Alternatives

During 2022 our Board of Directors explored and evaluated a broad range of strategic alternatives with the goal of maximizing value for stockholders. Ms. Eglinton Manner’s appointment as CEO came in tandem with a decision by the parties, Ancestry agreedOraSure Board to payconclude its

55


review of the strategic alternatives and for the Company to move forward under her leadership. Market conditions and the Board of Directors' belief in our ability to further build upon recent operational successes with Ms. Eglinton Manner’s leadership were factors in the decision.

BARDA Funding for Ebola Product

In September 2022, we entered into an agreement with BARDA, which is part of the office of the Assistant Secretary for Preparedness and Response, pursuant to which BARDA will provide up to $8.6 million in funding to us to develop a settlement fee2nd generation Ebola test on the OraQuick® testing platform. Our current OraQuick® Ebola Rapid Antigen Test is de novo authorized for use with whole blood or cadaveric oral fluid. The test received de novo authorization from the FDA in 2019, making it the first and only rapid antigen test to receive authorization for the detection of $12.5Ebola virus.

New Contract for In-Home HIV Tests

In September 2022, we were selected to provide our OraQuick® In-Home HIV tests in support of the CDC's “Together Take Me Home,” HIV self-test program. Under the program, the CDC will provide $41.5 million over a five-year period to support community testing. Emory University will manage the program and closely collaborate with a number of partner organizations, including OraSure, to supply tests to communities not equitably reached by HIV testing services across the United States. Under the "Together Take Me Home" HIV self-test program, we will provide up to 1 million OraQuick® In-Home HIV tests over a five-year period. A free HIV self-test will be mailed in discreet packages to people who enroll through its website. The program will target populations that are disproportionately affected by HIV and less likely to have access to key prevention services.

U.S. Government Contract Awards

In September 2021, we entered into a contract with the DLA for the procurement of our InteliSwab® COVID-19 Rapid Test for OTC use, which the DLA estimated to have a value of $205 million. Under the terms of the contract, we receivedare providing our InteliSwab® COVID-19 Rapid Tests to up to 20,000 sites throughout the United States. The contract period was October 2021 through September 2022, however the DLA has provided delivery orders against which it can continue to issue shipping instructions into 2023.

In November 2022, the DLA awarded us a second procurement contract for our InteliSwab® COVID-19 Rapid Test for OTC use. Under the terms of this award, the contract estimate is 18 million InteliSwab® COVID-19 Rapid Tests; with a maximum award of 36 million tests and a guaranteed minimum award of 3.6 million tests. The contract will run from November 2022 through November 2023.

In December 2022, the HHS awarded a third procurement contract for our InteliSwab® COVID-19 Rapid Test for OTC use. Under the terms of this contract we were awarded a fully funded firm fixed price contract for a total of 3.2 million tests to be delivered in the first quarter of 20172023.

DOD Manufacturing Capacity Funding

In September 2021, we entered into an agreement for $109 million in funding from the DOD, in coordination with the Department of Health and recorded as a gain on litigation settlementHuman Services, to build additional manufacturing capacity in the United States for our consolidated statement of income. In addition, we granted Ancestry a royalty-bearing,non-exclusive, worldwide license to certain patents and patent applications related to the collection of DNA in human saliva. The license granted to Ancestry is limited to saliva DNA collection kits sold or usedInteliSwab® COVID-19 Rapid Test as part of Ancestry’s genetic testing service offerings and does not cover the sale or use of collection kits outside of Ancestry’s business. The Settlement and License Agreement also provides us with a royalty-free,non-exclusive license to patents related to Ancestry’s existing saliva DNA collection kit.

Gates Foundation

In June 2017, we entered into a charitable supportnation's pandemic preparedness plan. Under this agreement, with the Bill & Melinda Gates Foundation (“Gates Foundation”) that enables us to offer our OraQuick® HIV self-test at an affordable price in 50 developing countries in Africa and Asia with funding from the Gates Foundation. The funding will consistbe used to expand our production capacity by 100 million tests annually. Funding is received based on the achievement of support payments tied tomilestones for the volumedesign, acquisition, installation, housing, qualification and acceptance of product we sell and reimbursement of certain related costs. The agreement has a four-year term and will enablenon-governmental organizationsthe manufacturing equipment as set forth in the eligible countries that receive funding from government or public sector agenciesagreement. We continue to invest time and donorsmoney to access our HIV self-test at reduced pricing. The funding frombuild the Gates Foundation will be in an aggregate amount not to exceed $20.0 million over the four-year term or $6.0 million each year of theadditional manufacturing capacity as required under this agreement.

WHO Prequalification

In July 2017, our OraQuick® HIV self-test was prequalified by the World Health Organization (“WHO”). WHO prequalification indicates that diagnostic tests for high burden diseases meet global standards of quality, safety, and efficacy, in order to optimize use of health resources and improve health outcomes. WHO prequalification enables governmental organizations implementing HIV self-test pilots and programs to access international funding to purchase our test.

Self-Testing Project in Africa

In July 2017, our OraQuick® HIV self-test was selected by UNITAID and Population Services International (“PSI”) for use in Phase II of the HIV Self-Testing in Africa (“STAR”) project. Phase II of the project began late in 2017 and will continue over atwo-year period. Approximately 4.0 million HIV self-tests are expected to be deployed in Phase II. We believeanticipate that we will supplycomplete the vast majority of these tests. The OraQuick® HIV self-test has been used in Phase Irequirements of the STAR Project, which representedcontract by the largest evaluationend of HIV self-testing to date. Upon completion of Phase I2023. Since the inception of the project, 750,000 OraQuick® HIV self-tests will have been distributed.

New Genomics Contract

In November 2017, we entered into a new $144.0 million agreement for the supply of our Oragene®• Dx devices to a leading consumer genomics customer. The agreement provides for the supply of product over several years with minimum annual purchases by the customer.

HCV Foreign Supply Contract

In 2016, we entered into a contract, to supply a foreign government with $18.0 million of product, primarily to support a nationwide HCV testing and treatment program. Through December 31, 2017, we have supplied $14.1received $60.3 million of product to this customer under the contract. The contract includes a renewal option under which the government may purchase up to 100% of the original quantities of product on the same terms and conditions contained in the contract. During the second half of 2017, we engaged in renewal discussions with this customer, including with respect to specific quantities of product to be supplied. Subsequent to these discussions in late 2017, we were informed that the government decided to move to an all laboratory testing solution and that another party had been selected to provide that solution based on cost. In light of these developments, it is unclear whether this government will fulfill the remaining purchase obligations under our existing contract.funding.

Management Succession Plan

In January 2018, we announced the retirement of our President and Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”) and Chief Operating Officer. Stephen S. Tang, Ph.D., who currently serves as Chairman of the Board of Directors (the “Board”), was appointed as the Company’s new President and CEO, effective as of April 1, 2018. Dr. Tang will replace Douglas A. Michels, who will retire as President and CEO,

and as a member of the Board, on March 31, 2018. In addition, Ronald H. Spair, our CFO and Chief Operating Officer, will be retiring on or before June 30, 2018, with his exact retirement date to be determined based on the timing for the Company’s appointment of a new CFO.

Current Consolidated Financial Results

During the year ended December 31, 2017,2022, our consolidated net revenues were $167.1increased 66% to $387.5 million, compared to $128.2$233.7 million for the year ended December 31, 2016.2021. Net product and services revenues during the year ended December 31, 20172022 increased 51%67% when compared to 2016, primarilythe same period of 2021, largely due to $233.7 million of InteliSwab® COVID-19 Rapid Test revenue recorded in 2022, compared to $22.7 million in 2021. We first began selling this product in August of 2021. Also contributing to the increased revenues were higher sales of our hepatitis C ("HCV") and substance abuse testing products. Declines in sales of our molecular sample collection kits for COVID-19 testing, lower genomics product revenue, lower laboratory services revenues and OraQuick® HCV products and increaseda decline in international sales of our OraQuick®HIV self-test. Partially offsettingproducts offset these increases were lower domestic salespositive drivers of our professional OraQuick® HIV product and lower domestic and OTC sales of our cryosurgical products. revenue. Other revenues for 2017 were $5.1 million compared to $21.3 million in 2016. Other revenues in 2017 included $4.4 million recognized in connection with funding received from the U.S. Department of Health and Human Services Office of the Assistant Secretary for Preparedness and Response’s Biomedical Advanced Research and Development Authority (“BARDA”) related to our Ebola and Zika products and $689,000 of cost reimbursement under our charitable support agreement with the Gates Foundation. Other revenues in 2016 included $2.3 million of BARDA funding and $18.9 million of exclusivity revenues recognized under our HCVco-promotion agreement with AbbVie, which terminated on December 31, 2016.

Our consolidated net income for the year ended December 31, 20172022 were $9.4 million compared to $6.8 million in the same period of 2021. This increase was $31.0largely due to increased research and development funding associated with our InteliSwab® COVID-19 rapid test offset by a decrease in royalty income.

56


Our consolidated net loss for the year ended December 31, 2022 was $17.9 million, or $0.51$0.25 per share on a fully-dilutedfully diluted basis, compared to a consolidated net incomeloss of $19.7$23.0 million, or $0.35$0.32 per share on a fully-dilutedfully diluted basis, for the year ended December 31, 2016.2021. Results for the current year include apre-tax gainfull-year 2022 benefited from the increased revenues in 2022 compared to 2021. The benefit of $12.5the higher revenues was offset by the negative impact of $17.1 million associated with the settlement of our litigation against Ancestryimpairment charges taken for idle manufacturing lines and its contract manufacturergoodwill. There were no similar charges in the first quarter of 2017.2021. 2022 results also included higher spending in operating expenses across all categories.

Cash provided by operating activities for the year ended December 31, 2017 was $28.2 million and included the $12.5 million litigation settlement noted above. Cash provided byused in operating activities during the year ended December 31, 20162022 was $24.6 million.$47.2 million compared to $35.4 million used in the year ended December 31, 2021. The use of cash in 2022 reflected the significant investment in inventory purchases in anticipation of future demand of our COVID-19 testing products as well the increase in our accounts receivable balances resulting largely from COVID-19 shipments made toward the end of the fourth quarter of 2022. As of December 31, 2017,2022, we had $176.6$110.8 million in cash, (including restricted cash), cash equivalents, andavailable-for-sale securities, compared to $120.9$170.1 million at December 31, 2016.2021.

Results of Operations

YEAR ENDED DECEMBER 31, 20172022 COMPARED TO DECEMBER 31, 20162021

CONSOLIDATED NET REVENUES

The table below shows a breakdown of total net revenues (dollars in thousands)generated by each of our business segments.

   Year Ended December 31, 
   Dollars      Percentage of Total
Net Revenues
 
   2017   2016   %
Change
  2017  2016 

OSUR

  $86,889   $74,710    16  52  58

DNAG

   75,099    32,214    133   45   25 
  

 

 

   

 

 

    

 

 

  

 

 

 

Net product revenues

   161,988    106,924    51   97   83 

Other

   5,076    21,274    (76  3   17 
  

 

 

   

 

 

    

 

 

  

 

 

 

Net revenues

  $167,064   $128,198    30  100  100
  

 

 

   

 

 

    

 

 

  

 

 

 

 

 

For the Year Ended December 31,

 

 

 

 

Dollars

 

 

 

 

 

 

Percentage of Total Net Revenues

 

 

 

 

2022

 

 

2021

 

 

% Change

 

 

 

2022

 

 

 

2021

 

 

Diagnostics

 

$

296,663

 

 

$

87,030

 

 

 

241

 

%

 

 

77

 

%

 

 

37

 

%

Molecular Solutions

 

 

81,384

 

 

 

139,867

 

 

 

(42

)

 

 

 

21

 

 

 

 

60

 

 

Net product and services revenues

 

 

378,047

 

 

 

226,897

 

 

 

67

 

 

 

 

98

 

 

 

 

97

 

 

Other

 

 

9,432

 

 

 

6,777

 

 

 

39

 

 

 

 

2

 

 

 

 

3

 

 

Net revenues

 

$

387,479

 

 

$

233,674

 

 

 

66

 

%

 

 

100

 

%

 

 

100

 

%

Consolidated net product and services revenues increased 51%67% to $162.0$378.0 million in 2017for the year ended December 31, 2022 from $106.9$226.9 million in 2016. Higherfor 2021. This increase was largely driven by higher sales of our molecularInteliSwab® COVID-19 Rapid Tests, and OraQuick®our HCV products and higher international sales of our OraQuick® HIV self-

test weresubstance abuse testing products. The increase was partially offset by lower domestic salesdeclines in revenues of our professional OraQuick® HIVmolecular product use for COVID-19 testing, our molecular product used for genomic testing, and lower domestic and OTC sales of our cryosurgical products. In 2017, we recognized $4.4 million as other revenues in connection with funding from BARDA related to our Ebola and Zika products and $689,000 of cost reimbursement under the Gates Foundation agreement. laboratory services revenues. Other revenues in 2016 included $18.9for the year ended December 31, 2022 were $9.4 million compared to $6.8 million in exclusivity payments received under2021. This increase was largely due to increased research and development funding associated with our AbbVie HCVco-promotion agreement and $2.3 millionInteliSwab® COVID-19 rapid test offset by a decrease in BARDA funding. Ourco-promotion agreement with AbbVie was terminated on December 31, 2016 and no further revenues were recognized under this agreement after that date.royalty income.

Consolidated net revenues derived from products sold to customers outside of the United States were $45.6$37.3 million and $28.4$45.3 million, or 27%10% and 22%19% of total net revenues, during the years ended December 31, 20172022 and 2016,2021, respectively. Because the majority of our international sales are denominated in U.S. dollars, the impact of fluctuating foreign currency exchange rates was not material to our total consolidated net revenues.

Net Revenues by Segment

OSURDiagnostics Segment

The table below shows the amount of total net revenues (dollars in thousands) generated by our OSURDiagnostics segment.

  Year Ended December 31, 

 

For years ended December 31,

 

 

  Dollars     Percentage of Total
Net Revenues
 

 

Dollars

 

 

 

 

Percentage of Total Net Revenues

 

 

Market

  2017   2016   %
Change
 2017 2016 

 

2022

 

 

2021

 

 

% Change

 

 

 

2022

 

 

2021

 

 

Infectious disease testing

  $61,951   $48,408    28  67  50

Risk assessment testing

   12,659    13,068    (3  14   14 

Cryosurgical systems

   12,279    13,234    (7  13   14 
  

 

   

 

    

 

  

 

 

Infectious disease testing:

 

 

 

 

 

 

 

 

 

 

 

COVID-19

 

$

233,666

 

 

$

22,707

 

 

 

929

 

%

 

 

77

 

%

 

 

25

 

%

Other

 

 

52,728

 

 

 

54,645

 

 

 

(4

)

 

 

17

 

 

 

 

61

 

 

Total infectious disease testing

 

 

286,394

 

 

 

77,352

 

 

 

270

 

 

 

94

 

 

 

86

 

 

Substance abuse testing

 

 

10,269

 

 

 

9,678

 

 

 

6

 

 

 

4

 

 

 

 

11

 

 

Net product revenues

   86,889    74,710    16  94  78 

 

 

296,663

 

 

 

87,030

 

 

 

241

 

 

 

98

 

 

 

97

 

 

Other

   5,076    21,274    (76  6   22 

 

 

7,010

 

 

 

3,010

 

 

 

133

 

 

 

2

 

 

 

3

 

 

  

 

   

 

    

 

  

 

 

Net revenues

  $91,965   $95,984    (4) %  100 100

 

$

303,673

 

 

$

90,040

 

 

 

237

 

%

 

 

100

 

%

 

 

100

 

%

  

 

   

 

    

 

  

 

 

57


Infectious Disease Testing Market

COVID-19 revenues were $233.7 million and $22.7 million for the years ended December 31, 2022 and 2021, respectively. This growth was driven largely through fulfillment of our government procurement contracts for InteliSwab® tests. We first began selling this product in August 2021. We are anticipating higher COVID-19 revenues in the first half of 2023 followed by lower revenues in the second half of 2023, as we work down our government InteliSwab® COVID-19 rapid test contracts.

Sales to theother infectious disease testing market increased 28%markets decreased 4% to $61.9$52.7 million in 2017for the year ended December 31, 2022 from $48.4$54.6 million in 2016.for the year ended December 31, 2021. This increasedecline resulted from higherlower world-wide sales of our OraQuick® HCVOraQuick® HIV product and higher internationaloffset by increased world-wide sales of our OraQuick® HIV self-test, partially offset by a decline in domestic sales of our professional OraQuick® HIV product. HCV products.

The table below shows a breakdown of our total net OraQuick® HIV and HCV product revenues (dollars in thousands) during 20172022 and 2016.2021.

   Year Ended December 31, 

Market

  2017   2016   %
Change
 

Domestic HIV

  $17,015   $21,499    (21)% 

International HIV

   11,301    5,248    115 

Domestic OTC HIV

   6,832    6,320    8 
  

 

 

   

 

 

   

Net HIV revenues

   35,148    33,067    6 
  

 

 

   

 

 

   

Domestic HCV

   8,448    7,436    14 

International HCV

   16,961    6,630    156 
  

 

 

   

 

 

   

Net HCV revenues

   25,409    14,066    81 
  

 

 

   

 

 

   

Net OraQuick® revenues

  $60,557   $47,133    28
  

 

 

   

 

 

   

 

 

Years ended December 31,

 

 

Market

 

2022

 

 

2021

 

 

% Change

 

 

Domestic HIV

 

$

16,241

 

 

$

16,641

 

 

 

(2

)

%

International HIV

 

 

22,571

 

 

 

25,503

 

 

 

(11

)

 

Net HIV revenues

 

 

38,812

 

 

 

42,144

 

 

 

(8

)

 

Domestic HCV

 

 

8,353

 

 

 

6,881

 

 

 

21

 

 

International HCV

 

 

5,016

 

 

 

4,902

 

 

 

2

 

 

Net HCV revenues

 

 

13,369

 

 

 

11,783

 

 

 

13

 

 

Net OraQuick® revenues

 

$

52,181

 

 

$

53,927

 

 

 

(3

)

%

Domestic OraQuick® HIV sales decreased 21%2% to $17.0$16.2 million for the year ended December 31, 20172022 from $21.5$16.6 million for the year ended December 31, 2016. This reduction was2021. The decline is primarily thea result of competitive losses tied to pricing,a large order fulfilled in the lossfirst half of sales topoint-of-care2021 for our OraQuick® In-Home HIV tests perceivedshipped to be more sensitive, and the CDC’s testing guidelines recommending the use of competing fourth generation automated HIV immunoassays performed in a laboratory. We anticipate that future domestic sales of our professional HIV product will continue to be negatively affected by the CDC and use in an initiative to drive increased in-home HIV testing, guidelines, changeswhich was not repeated in government funding, and continued product and price competition.2022. This negative impact to sales was partially offset by improved distribution strategy with our distribution partners.

International sales of our OraQuick® HIV products during 2017 rose 115%2022 decreased 11% to $11.3$22.6 million from $5.2$25.5 million in 2016. 2021. This increasedecrease was largely due to the continued shipment of product in support of an HIV self-testing program in Africa, and higher sales of our professional product into certain areas of Africa, Asia, and Latin America,customer order timing. This was partially offset by a decline in sales in the Middle East andOur OraQuick® HIV Self-Test expansion into Europe. Funding under the charitable support agreement with the Gates Foundation began in the third quarter of 2017 and product revenues in 2017 included approximately $1.0 million of support payments under that agreement.

Sales of our OraQuick®In-Home HIV test in 2017 of $6.8 million increased 8% compared to $6.3 million in 2016, largely due to expansion of public health programs that use ourIn-Home test and additional shelf placement of the product in the home diagnostic section of certain retail pharmacies.

Domestic OraQuick® HCV sales increased 14%21% to $8.4 million in 20172022 from $7.4$6.9 million in 2016 primarily due to higher sales to2021, driven by new funding granted by certain state governments, increased legislation regarding drug testing and a rise in drug use requiring more testing. Furthermore this part of our U.S. public health customers in support of HCV testing program expansion, higher sales tonon-acute healthcare offices, and increased sales to hospitals. business also benefited from an improved distribution strategy with our distribution partners.

International OraQuick® HCV sales increased 156% to $17.0remained largely flat at $5.0 million in 2017 from $6.62022 compared to $4.9 million in 2016, largely due to continued product shipments to a foreign government to support a nationwide HCV testing and treatment program and increased sales in Asia and Africa, partially offset by the loss of a multi-national humanitarian organization customer who switched to a competitive product due to pricing.As discussed above, we were recently notified that our supply contract with the foreign government will not be renewed and it is unclear whether this government will fulfill the remaining purchase obligations under the existing contract. During 2017, we recorded $11.8 million in revenue from this contract. It is uncertain if we will record revenues of this magnitude in 2018, if at all.2021.

Risk AssessmentSubstance Abuse Testing Market

Sales to the risk assessment market decreased 3%substance abuse testing markets increased 6% to $12.6$10.3 million for the year ended December 31, 20172022 from $13.1$9.7 million for the year ended December 31, 2016, primarily as a result of a reduction of inventory maintained by one of our largest customers and lab closings2021 due to consolidations occurring in the laboratory service industry, partially offset by higher sales resulting from increased drug testing in the pain management and drug treatment markets.market share gains.

Cryosurgical Systems Market

Sales of our cryosurgical systems products (which includes both the physicians’ office and OTC markets) decreased 7% to $12.3 million in 2017 from $13.2 million in 2016.

The table below shows a breakdown of our total net cryosurgical systems revenues (dollars in thousands) generated in each market during 2017 and 2016.

   Year Ended December 31, 

Market

  2017   2016   %
Change
 

Domestic professional

  $5,400   $5,545    (3)% 

International professional

   797    771    3 

Domestic OTC

   1,230    1,350    (9

International OTC

   4,852    5,568    (13
  

 

 

   

 

 

   

Net cryosurgical systems revenues

  $12,279   $13,234    (7)% 
  

 

 

   

 

 

   

Sales of our Histofreezer® product to physicians’ offices in the United States decreased 3% to $5.4 million in the 2017 from $5.5 million 2016, primarily due to timing of orders placed by our distributors and loss of sales due to competing private label products. These declines in sales were partially offset by increased sales into new markets and additional business generated by our newmid-tier distributors. International sales of our Histofreezer® product increased 3% to $797,000 in 2017 from $771,000 in 2016.

Sales of our private-label wart removal product in the U.S. retail market decreased to $1.2 million in 2017 from $1.4 million in 2016. Sales volume in 2016 was higher as a result of initial stocking orders for a new large pharmacy customer during that period.

Sales of our international OTC cryosurgical products during 2017 decreased 13% to $4.9 million compared to $5.6 million in 2016, largely due to lower sales into Europe as a result of competitive pressures and lower sales in Latin America due to the economic instability of certain countries in that region.

Other revenues

Other revenues in 2017 decreased 76% to $5.1 million from $21.3 million in 2016. Other revenues in 2016 included AbbVie exclusivity revenues of $18.9 million. There are no similar revenues in 2017 due to the termination of our AbbVie HCVco-promotion agreement on December 31, 2016. Revenues related to funding from BARDA increased to $4.4 million in 2017 compared to $2.3 million in 2016. Revenues in 2017 also include $689,000 in reimbursement of certain costs under our charitable support agreement with the Gates Foundation. No such reimbursement occurred in 2016.

DNAG Segment

Molecular Collection Systems

Sales of our molecular collection systems products increased 133% to $75.1 million in 2017 from $32.2 million in 2016.

The table below shows a breakdown of our total net molecular collection systems revenues (dollars in thousands) generated in each market during 2017 and 2016.

   Year Ended December 31, 

Market

  2017   2016   %
Change
 

Commercial genomics

  $61,594   $20,767    197

Academic genomics

   10,017    10,312    (3

Microbiome

   3,488    1,135    207 
  

 

 

   

 

 

   

Net molecular collection systems revenues

  $75,099   $32,214    133
  

 

 

   

 

 

   

Sales of our Oragene® product in the commercial market rose 197% to $61.6 million in 2017 compared to $20.8 million in 2016, largely as a result of higher customer demand primarily from a large customer in the consumer genetics market. Sales of our Oragene® product in the academic market decreased 3% to $10.0 million in 2017 compared to $10.3 million in 2016 largely due to thenon-recurrence of a large order which occurred in 2016. Microbiome sales increased 207% to $3.5 million in 2017 compared to $1.1 million in 2016 as interest in our microbiome product offering continues to grow with both new and existing customers.

CONSOLIDATED OPERATING RESULTS

Consolidated gross margin was 59% for the year ended December 31, 2017 compared2022 increased 133% to 69% for the comparable period of 2016. Gross margin for 2017 decreased primarily due to the absence of AbbVie exclusivity revenues, an increase in lower margin international product sales, and higher scrap and spoilage costs.

Consolidated operating income in 2017 was $40.2 million, a $19.9 million improvement from $20.3 million of operating income reported in 2016. Operating income in 2017 benefited from increased product revenues, the Ancestry litigation settlement gain, and lower sales and marketing costs, partially offset by the loss of AbbVie exclusivity revenues recorded in the prior year and higher research and development and general and administrative expenses in the current year.

OPERATING INCOME (LOSS) BY SEGMENT

OSUR Segment

OSUR’s gross margin was 58% in 2017 compared to 69% in 2016. OSUR’s margin was negatively impacted in 2017 primarily by the absence of exclusivity revenues under our AbbVie agreement ($18.9 million was recorded in 2016 versus none in 2017), an increase in lower margin international product sales, and an increase in scrap and spoilage costs.

Research and development expenses increased 50% to $10.5 million in 2017 from $7.0 million in 2016, largely as a result of the inclusion in 2016 of a $1.4from $3.0 million payment received to settle a claim against one of our raw material suppliers. This settlement was recorded as a reduction in research and development expense in 2016. During 2017, research and development expenses also increased due to higher supply costs associated with the development of our Ebola and Zika products and increased staffing expenses.

Sales and marketing expenses decreased 11% to $18.9 million in 2017 from $21.3 million in 2016, primarily as a result of the termination of our AbbVie HCVco-promotion agreement on December 31, 2016. During 2016, we incurred $1.1 million of detailing andco-promotion expenses associated with the AbbVie agreement. No such costs were incurred for 2017. For the year ended December 31, 2017, we also experienced lower staffing costs, partially offset by higher external commissions payable to certain international distributors.

General and administrative expenses increased 16% to $26.1 million in 2016 from $22.6 million in 20162021 largely due to higher staffing costs and an increase in accrued bonuses as a result of Company’s strong performance.

All of the above contributed to OSUR’s operating loss of $2.7 million for 2017, which includednon-cash charges of $3.2 million for depreciation and amortization and $6.4 million for stock-based compensation.

DNAG Segment

DNAG’s gross margin was 61% in 2017 compared to 67% in 2016. The decline in gross margin was primarily due to an increase in lower margin sales in 2017 as compared to 2016.

Researchresearch and development expenses increased 4% to $2.8 million in 2017 from $2.7 million in 2016 due to higher staffing costs.

Salesfunding for 510(k) clearance and marketing expenses increased 15% to $9.6 million in 2017 compared to $8.3 million in 2016 due to higher staffing and commission expenses.

General and administrative expenses decreased 45% to $3.2 million in 2017 compared to $5.7 million in 2016, largely due to lower legal costs asCLIA waiver of our lawsuit with Ancestry and its contract manufacturerInteliSwab® COVID-19 rapid test. This was settled in the first quarter of 2017.

Operating expenses in 2017 were offset by lower royalty income from a licensing agreement related to our proprietary buffer solution used for the $12.5 millionpre-tax gain associated with the settlementpreservation and stabilization of the Ancestry litigation.oral fluid specimens.

All of the above contributed to DNAG’s operating income of $43.0 million for 2017, which includednon-cash charges of $3.2 million for depreciation and amortization and $543,000 for stock-based compensation.58


CONSOLIDATED INCOME TAXESMolecular Solutions Segment

We continue to believe the full valuation allowance established in 2008 against OSUR’s total U.S. deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed. For the year ended December 31, 2017, we recorded state income tax expense of $0 compared to $250,000 in the year ended December 31, 2016. Canadian income tax expense of $10.1 million and $353,000 was recorded in 2017 and 2016, respectively. Canadian taxes in 2017 included the additional taxes due as a result of the $12.5 million Ancestry litigation settlement gain and DNAG’s increasedpre-tax income. On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“Tax Act”) that instituted fundamental changes to the taxation on multinational corporations. The impact of the Tax Act on our current and future financial results is discussed in more detail in Note 8 of the Notes to the consolidated financial statements included herein.

YEAR ENDED DECEMBER 31, 2016 COMPARED TO DECEMBER 31, 2015

CONSOLIDATED NET REVENUES

The table below shows a breakdown of total net revenues (dollars in thousands)generated by eachour Molecular Solutions segment for the year ended December 31, 2022 and 2021.

 

 

Years ended December 31,

 

 

Market

2022

 

 

2021

 

 

% Change

 

 

Genomics

 

$

54,335

 

 

$

63,350

 

 

 

(14

)

%

Microbiome

 

 

7,503

 

 

 

7,944

 

 

 

(6

)

 

COVID-19

 

 

9,659

 

 

 

54,167

 

 

 

(82

)

 

Laboratory services

 

 

7,296

 

 

 

11,840

 

 

 

(38

)

 

Other product and service revenues

 

 

2,591

 

 

 

2,566

 

 

 

1

 

 

Net molecular product and services revenues

 

$

81,384

 

 

 

139,867

 

 

 

(42

)

 

Other

 

 

2,422

 

 

 

3,767

 

 

 

(36

)

 

Net molecular product and services revenues

 

$

83,806

 

 

$

143,634

 

 

 

(42

)

%

Sales of our business segments.

   Year Ended December 31, 
   Dollars      Percentage of Total
Net Revenues
 
   2016   2015   %
Change
  2016  2015 

OSUR

  $74,710   $74,534    0  58  62

DNAG

   32,214    29,924    8   25   25 
  

 

 

   

 

 

    

 

 

  

 

 

 

Net product revenues

   106,924    104,458    2   83   87 

Other

   21,274    15,261    39   17   13 
  

 

 

   

 

 

    

 

 

  

 

 

 

Net revenues

  $128,198   $119,719    7  100  100
  

 

 

   

 

 

    

 

 

  

 

 

 

Consolidated net product revenues increased 2%genomics products decreased 14% to $106.9$54.3 million in 2016 from $104.52022 compared to $63.4 million in 2015, primarily2021, largely as a result of higher internationala shift in market prioritization at our larger commercial customers and a reduction in demand in the animal genetics market.

Microbiome revenues decreased 6% to $7.5 million in 2022 compared to $7.9 million in 2021, due to decreased sales in the commercial microbiome market. This was partially offset by the onboarding of new customers in the academic market.

Sales of our OraQuick® HIVmolecular sample collection kits for COVID-19 testing decreased 82% to $9.7 million in 2022 compared to $54.2 million in 2021 due to lower COVID-19 PCR testing sales to our core customers, driven by the availability of antigen tests, the wider availability of vaccines, lower public funding for PCR testing, and HCV testshigh inventory levels held by some of those customers.

Laboratory services revenues decreased 38% to $7.3 million in 2022 compared to $11.8 million in 2021, as a result of a large customer ceasing its operations and the timing of clinical trials activity.

Other revenues decreased 36% to $2.4 million in 2022 compared to $3.8 million in 2021 due to lower royalty income received under a litigation settlement agreement.

CONSOLIDATED OPERATING RESULTS

Consolidated gross profit percentage was 38% for the year ended December 31, 2022 compared to 50% for 2021. The decrease in gross margins rates was caused by an unfavorable product mix of higher sales of lower margin products driven by the decline in molecular COVID-19 revenues offset by an increase in InteliSwab® revenues. In addition, 2021 margins benefited from lower payroll taxes as result of applying for an Employee Retention Credit under the Coronavirus Aid, Relief and Economic Security Act, which increased gross profit by $2.5 million.

Consolidated operating loss in 2022 was $23.0 million, which was a $12.8 million increase from the $10.2 million of operating loss reported in 2021. Results in 2022 were negatively impacted by the decline in gross margin described above coupled with impairment charges of $17.1 million and the increased operating expenses described below.

OPERATING INCOME BY SEGMENT

Diagnostic Segment

The gross profit percentage of the Diagnostics business was 36% in 2022 compared to 29% in 2021. This increase was driven by an improved product mix associated with the higher sales of InteliSwab® COVID-19 Rapid Tests. This was partially offset by lower payroll taxes in 2021 as result of applying for the Employee Retention Credit which increased gross profit by $2.5 million in that year.

Research and development expenses increased 8% to $26.0 million in 2022 from $24.1 million in 2021, due to higher staffing costs associated with increased head count, cost incurred under our molecular collection systemsDOD expansion contract which did not occur in 2021, and cryosurgical system products.increased clinical study activities related to obtaining CE mark for our InteliSwab® rapid test, partially offset by lower product development activities related to our InteliSwab® rapid test as we received EUA authorization in June 2021. Also contributing to the higher spend are consulting fees required under our DOD expansion contract. Similar fees did not occur in 2021.

59


Sales and marketing expenses increased 18% to $33.5 million in 2022 from $28.5 million in 2021, due to increased staffing costs associated with higher head count, increased severance costs, and the inclusion of the Employee Retention Credit in 2021 results, which did not repeat in 2022. Furthermore, travel and annual meeting expenses increased as travel and in person events have resumed as COVID-19 restrictions have been lifted. In addition, we also recorded an increase in our reserve for uncollectible accounts. These increaseshigher spend items were partially offset by lower domestic sales of our OraQuick® HIV testa decrease in consulting fees.

General and lower sales of our Ebola product. Other revenuesadministrative expenses increased 31% to $42.8 million in 2016

increased 39% to $21.32022 from $32.6 million compared to $15.3 million during 2015,in 2021 largely due to higher exclusivity revenue recognizedstock compensation expense associated with accelerated vesting of shares under our HCVco-promotion agreementformer CEO's and general counsel's employment agreements, higher staffing costs associated with AbbVie. AbbVie revenuesincreased head count and severance costs, increased legal costs, and increased consulting and accounting fees.

Operating expenses for the Diagnostic segment also include an impairment charge of $4.9 million associated with an idle manufacturing line for which it has no projected cash flows and minimal resale or salvage value. Diagnostic operating expenses also included a goodwill impairment charge of $3.6 million. The decline in 2016 included an additional $5.4 million recognized duethe Company's stock price was identified as a triggering event which required the Company to perform a quantitative goodwill impairment analysis. The results of this analysis indicated the Diagnostic segment's goodwill was impaired and was written down to $0.

All of the above contributed to the early terminationDiagnostics segment’s operating loss of the contract at the end of that year.

Consolidated net revenues derived from products sold to customers outside the U.S. were $28.4 million and $23.2 million, or 22% and 19% of total consolidated net revenues during the years ended December 31, 2016 and 2015, respectively. Because the majority of our international sales are denominated in U.S. dollars, the impact of fluctuating foreign currency exchange rates was not material to our total consolidated net revenues.

Net Revenues by Segment

OSUR Segment

The table below shows the amount of total net revenues (dollars in thousands) generated by our OSUR segment.

   Year Ended December 31, 
   Dollars      Percentage of Total
Net Revenues
 

Market

  2016   2015   %
Change
  2016  2015 

Infectious disease testing

  $48,408   $49,129    (1)%   50  55

Risk assessment testing

   13,068    13,485    (3  14   15 

Cryosurgical systems

   13,234    11,920    11   14   13 
  

 

 

   

 

 

    

 

 

  

 

 

 

Net product revenues

   74,710    74,534    0   78   83 

Other

   21,274    15,261    39   22   17 
  

 

 

   

 

 

    

 

 

  

 

 

 

Net revenues

  $95,984   $89,795    7  100  100
  

 

 

   

 

 

    

 

 

  

 

 

 

Infectious Disease Testing Market

Sales to the infectious disease testing market decreased 1% to $48.4 million in 2016 from $49.1 million in 2015, primarily due to lower domestic sales of our OraQuick® HIV product and lower sales of our OraQuick® Ebola andIn-Home HIV tests, partially offset by higher international sales of our OraQuick® HIV and HCV tests.

The table below shows a breakdown of our total net OraQuick® HIV and HCV product revenues (dollars in thousands) during 2016 and 2015.

   Year Ended December 31, 

Market

  2016   2015   %
Change
 

Domestic HIV

  $21,499   $24,956    (14)% 

International HIV

   5,248    2,410    118 

Domestic OTC HIV

   6,320    6,992    (10
  

 

 

   

 

 

   

Net HIV revenues

   33,067    34,358    (4
  

 

 

   

 

 

   

Domestic HCV

   7,436    7,502    (1

International HCV

   6,630    3,884    71 
  

 

 

   

 

 

   

Net HCV revenues

   14,066    11,386    24 
  

 

 

   

 

 

   

Net OraQuick® revenues

  $47,133   $45,744    3
  

 

 

   

 

 

   

Domestic OraQuick® HIV sales decreased 14% to $21.5$0.6 million for the year ended December 31, 2016 from $24.92022, which included non-cash charges of $8.1 million for depreciation and amortization, impairment charges of $8.5 million, and $9.3 million for stock-based compensation.

Molecular Solutions Segment

The gross profit percentage of the year ended December 31, 2015.Molecular Solutions segment was 46% in 2022 compared to 63% in 2021. This decrease was primarily the result of the continued loss

of sales to competing fourth generation automated HIV immunoassays performed in a laboratory, as recommended under testing guidelines issued by the Centers for Disease Control and Prevention (“CDC”), the loss of sales topoint-of-care HIV tests perceived to be more sensitive, reduced program funding, and the timing of orders placed by our customers. International sales of our OraQuick® HIV test in 2016 increased 118% to $5.2 million from $2.4 million in 2015. This increase was largely due to the shipment of product in support of a new HIV self-testing program in Africa, new shipments into the Middle East, sales to a new distributor in Russia, and increased sales in Asia due to a new military testing project.

Sales of our OraQuick®In-Home HIV test decreased 10% to $6.3 millionless favorable product mix and an increase in 2016 from $7.0 million in 2015. This decline was primarily thereserves for excess inventory as result of a reduction in promotions run in 2016 as compared to 2015 and a fourth quarter 2015 sales increase immediately following a celebrity’s announcement that he had tested positive for the HIV virus. A comparable event did not occur in 2016. Theforecasted decline in sales was partially offset by the positive impact of a price increase implemented in the third quarter of 2015.demand.

Domestic OraQuick® HCV sales decreased 1% to $7.4 million in 2016 from $7.5 million in 2015, largely due to the inclusion in 2015 of a $1.3 million order for a U.S. government HCV testing program that did not recur in 2016, partially offset by the expansion of existing HCV testing programs and the addition of new programs in the public health market. International OraQuick® HCV sales increased 71% to $6.6 million in 2016 from $3.9 million in 2015, largely due the first shipments of $1.4 million of product to a foreign government to support a nationwide HCV testing and treatment program, the expansion of our business in Asia, and increased sales in Africa.

Risk Assessment Market

Sales to the risk assessment market decreased 3% to $13.1 million for the year ended December 31, 2016 from $13.5 million for the year ended December 31, 2015, primarily as a result of lower sales of our OraSure® oral fluid collection device into the domestic life insurance market.

Cryosurgical Systems Market

Sales of our cryosurgical systems products (which includes both the physicians’ office and OTC markets) increased 11% to $13.2 million in 2016 from $11.9 million in 2015.

The table below shows a breakdown of our total net cryosurgical systems revenues (dollars in thousands) generated in each market during 2016 and 2015.

   Year Ended December 31, 

Market

  2016   2015   %
Change
 

Domestic professional

  $5,545   $4,311    29

International professional

   771    916    (16

Domestic OTC

   1,350    390    246 

International OTC

   5,568    6,303    (12
  

 

 

   

 

 

   

Net cryosurgical systems revenues

  $13,234   $11,920    11
  

 

 

   

 

 

   

Sales of our Histofreezer® product to physicians’ offices in the United States increased 29% to $5.5 million in 2016 from $4.3 million in 2015, primarily due to the recovery of business previously lost to competition from private label brands, the initiation of a distributor expansion strategy, and the timing of orders by certain customers. International sales of Histofreezer® decreased 16% to $771,000 in 2016 from $916,000 in the same period of the prior year, primarily due to lower sales in Asia.

Sales of our domestic private-label OTC wart removal products in the U.S. retail market increased to $1.4 million in 2016 from $390,000 in 2015, due to the launch of private-label products in two additional large pharmacy chains early in 2016.

Sales of our international OTC cryosurgical products during 2016 decreased 12% to $5.6 million compared to $6.3 million in 2015, largely due to lower sales into Europe, partially offset by higher sales in Latin America.

Other revenues

Other revenues in 2016 increased 39% to $21.3 million from $15.3 million in 2015. AbbVie exclusivity revenues increased to $18.9 million in 2016 from $13.5 million in 2015 due to the early termination of ourco-promotion agreement with AbbVie which we agreed to as of June 30, 2016. The agreement terminated on December 31, 2016, and as a result of the shortened term, an additional $5.4 million of associated deferred revenue which existed as of June 30, 2016 was recognized into revenue over the remaining six months of 2016. Following the termination of our HCVco-promotion agreement with AbbVie on December 31, 2016, AbbVie has no further financial obligations to us. Also included in other revenues for 2016 was $2.3 million in BARDA funding, a 30% increase from the $1.8 million in BARDA funding in 2015. This increase was due to new funding for our Zika product.

DNAG Segment

Molecular Collection Systems

Net molecular collection systems revenues increased 8% to $32.2 million in 2016 from $29.9 million in 2015.

The table below shows a breakdown of our total net molecular collection systems revenues (dollars in thousands) generated in each market during 2016 and 2015.

   Year Ended December 31, 

Market

  2016   2015   %
Change
 

Commercial genomics

  $20,767   $19,513    6

Academic genomics

   10,312    9,872    4 

Microbiome

   1,135    539    111 
  

 

 

   

 

 

   

Net molecular collection systems revenues

  $32,214   $29,924    8
  

 

 

   

 

 

   

Sales of our Oragene® product in the commercial market increased 6% to $20.8 million in 2016 compared to $19.5 million in 2015, primarily as a result of sales to new customers and ordering patterns of existing customers, partially offset by the loss of two U.S. customers that previously filed for bankruptcy protection in 2015. These customers contributed approximately $2.9 million in sales during 2015. The Company has no unreserved collection exposure related to these two customers. Sales of our Oragene® product in the academic market rose 4% to $10.3 million in 2016 compared to $9.8 million in 2015, due to the shipment of product to support a study on autism. Sales in 2016 also included $1.1 million in sales of our gut microbiome product compared to $539,000 in the same period of 2015 as interest in our microbiome product offering continued to grow with both new and existing customers.

CONSOLIDATED OPERATING RESULTS

Consolidated gross margin was 69% for the year ended December 31, 2016 compared to 67% for the comparable period of 2015. Gross margin for 2016 increased primarily due to the higher AbbVie exclusivity revenues.

Consolidated operating income in 2016 was $20.3 million, a $12.2 million increase from the $8.1 million of operating income reported in 2015. Operating income in 2016 benefited as compared to the prior year from higher revenues, improved gross margins and lower sales and marketing and research and development costs, partially offset by higher general and administrative expenses.

OPERATING INCOME BY SEGMENT

OSUR Segment

OSUR’s gross margin was 69% in 2016 compared to 66% in 2015. OSUR’s margin in 2016 was positively impacted by the increase in other revenues and lower scrap and spoilage costs.

Research and development expenses decreased 21% to $7.0remained relatively flat at $10.3 million in 2016 from $8.92022 compared to $10.1 million in 2015, largely as a result of a $1.4 million payment received to settle a claim against one of our raw material suppliers. This settlement was recorded as a reduction in research and development expense.2021.

Sales and marketing expenses decreased 20%4% to $21.3$15.7 million in 2016 from $26.62022 compared to $16.3 million in 2015, primarily as a result of2021 largely due to lower detailing and other expensesamortization expense associated with our OraQuick® HCVco-promotion agreementan intangible asset that was fully amortized at the end of 2021, lower commission expense associated with AbbVie, as well asthe decline in sales, lower consulting costs, and a decrease in expense related to the cancellation of a marketing loyalty program. These decreases in spend were partially offset by higher staffing costs.costs related to increased head count.

General and administrative expenses increased 12%44% to $22.6$25.4 million in 2015 from $20.12022 compared to $17.7 million in 20152021, due increased consulting, severance,primarily to higher legal fees.

Operating expenses for the Molecular Solutions segment also includes impairment charges of $8.6 million in 2022 associated with several idle manufacturing lines for which there are no projected cash flows and other staffing-related costs.minimal resale or salvage value.

All of the above contributed to OSUR’san operating incomeloss of $15.6$22.4 million for 2016,2022, which includednon-cash charges of $2.7$7.2 million for depreciation and amortization, the impairment charges of $8.6 million, and $5.6$2.3 million for stock-based compensation.

DNAG Segment

DNAG’s gross margin was 67% in 2016 compared to 70% in 2015. This decrease was attributable to a higher volume of lower margin sales experienced in 2016 when compared to 2015 coupled with the inclusion of severance costs in DNAG’s costs of goods sold in 2016.

Research and development expenses were $2.7 million in both 2016 and 2015.

Sales and marketing expenses decreased 1% to $8.3 million in 2016 compared to $8.4 million in 2015 due to lower bad debt expense.

General and administrative expenses increased 7% to $5.7 million in 2016 compared to $5.3 million in 2015, largely due to higher legal costs.

All of the above contributed to DNAG’s operating income of $4.6 million for 2016, which includednon-cash charges of $3.0 million for depreciation and amortization and $467,000 for stock-based compensation.

CONSOLIDATED INCOME TAXES

We continue to believe the full valuation allowance established in 2008 against our total U.S. deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed. For the year ended December 31, 2016, state2022 and 2021, we recorded income tax expense of $250,000 was recorded compared to $0 in 2015. Canadian$1.5 million and $13.7 million, respectively. 2022 income tax expense is comprised of $353,000$1.7 million of Canadian withholding taxes paid on the repatriation of Canadian earnings which occurred in the first quarter of 2022, $0.9 million of U.S. state income taxes, and $665,000 was recorded in 2016a foreign income tax benefit of $1.2 million associated with our Canadian subsidiary. Our 2021 expense is comprised of U.S. state income taxes of $0.2 million and 2015, respectively.

foreign tax expense associated with our Canadian subsidiary of $13.5 million.

Liquidity and Capital Resources

  December 31, 

 

December 31,

 

 

December 31,

 

  2017   2016 

 

2022

 

 

2021

 

  (In thousands) 

 

(In thousands)

 

Cash, cash equivalents and restricted cash

  $72,869   $109,790 

Cash and cash equivalents

 

$

83,980

 

 

$

116,762

 

Available for sale securities

   103,718    11,160 

 

 

26,867

 

 

 

53,288

 

Working capital

   189,668    139,106 

 

 

255,326

 

 

 

231,242

 

60


Our cash and cash equivalents restricted cash andavailable-for-sale securities increaseddecreased to $176.6$110.8 million at December 31, 20172022 from $120.9$170.0 million at December 31, 2016.2021. Our working capital increased to $189.7$255.3 million at December 31, 20172022 from $139.1$231.2 million at December 31, 2016.2021.

During 2017, we generated $28.2 millionthe year ended December 31, 2022, net cash used in cash from operating activities.activities was $47.2 million. Our net incomeloss of $31.0$17.9 million includednon-cash charges of $17.1 million associated with impairment charges taken for stock-based compensation expense of $6.9 millionidle manufacturing lines and goodwill, depreciation and amortization expense of $6.4$15.3 million, as well asnon-cash benefitsstock-based compensation expense of $518,000. Additional sources$11.6 million, deferred income tax benefit of cash include increases$1.7 million, a decrease in reserve for uncollectible accounts payable of $5.2$1.0 million, largely dueand a decrease in inventory reserves of $0.8 million. Cash used to inventory purchases that were invoiced at the end of the year, accrued expenses and other liabilities of $9.2 million largely due tofund our working capital accounts included an increase in Canadian income taxes payable and a higheryear-end accrual for management incentive bonuses. Usesinventory of cash in operating activities during the year included$43.0 million to meet anticipated demand to support COVID-19 testing programs, an increase in accounts receivable of $22.1$25.2 million largely resulting from an increase in productdue to orders placed duringin the fourth quarter, of 2017, an increase in inventory balances of $7.4 million related to higher raw material purchases for our HIV self-test and HCV products, and an increase in prepaid expenses and other assets of $384,000.$7.1 million associated with tax installments made to the Canadian Revenue Agency and a decrease in deferred revenue of $0.6 million due to the recognition of revenue from customer prepayments. Offsetting these uses of cash was a $4.0 million increase in accounts payable due to the timing of invoices received and payments made and a decrease in accrued expenses and other liabilities of $1.4 million.

We used $96.3 million inNet cash provided by investing activities in 2017 to purchase $161.3was $21.1 million of investments and $4.3 million to acquire property and equipment, partially offset byfor the year ended December 31, 2022, which reflects proceeds from the maturities and redemptions of investments of $69.3 million.$47.4 million, offset by $22.9 million used to purchase investments. Investing activities also included $6.8 million to acquire property and equipment and $57.1 million used to build additional manufacturing capacity as required by the $109 million agreement with the DOD. This is offset by $60.3 million received from the DOD as reimbursement under that contract.

Net cash provided byused in financing activities was $30.4$3.8 million in 2017,for the year ended December 31, 2022, which resulted from $31.7 million in proceeds received from the exercise of stock options partially offset by $1.2reflects $2.3 million used for the repurchase of common stock to satisfy withholding taxes related to the vesting of restricted shares.

In September 30, 2016, we entered into a credit agreement (the “Credit Agreement”) with a commercial bank, which was amended in December 2017. The Credit Agreement provides for revolving extensionsshares and performance stock units awarded to our employees, payments of credit in an initial aggregate amountlease liabilities of up to $10.0 million (inclusive of a letter of credit subfacility of $2.5 million), with an option to request, prior to the second anniversary of the closing date, that lenders, at their election, provide up to $5.0 million of additional revolving commitments. Obligations under the Credit Agreement are secured by a first priority security interest in certain eligible accounts receivable, 65% of the equity$1.4 and payment of our subsidiary, DNAG, and certain related assets. There were no borrowings outstanding under the Credit Agreement at December 31, 2017 or 2016.contingent consideration obligation of $0.2 million.

Borrowings under the Credit Agreement are subject to compliance with borrowing base limitations tied to eligibility of accounts receivable. Interest under the Credit Agreement is payable at the London Interbank Offered Rate for one, two, three orsix-month loans, as selected by the Company, plus 2.50% per year. The Credit Agreement will be subject to an unused line fee of 0.375% per annum on the unused portion of the commitment under the Credit Agreement during the revolving period. The maturity date of the Credit Agreement is September 30, 2019.

In connection with the Credit Agreement, under certain circumstances, we must comply with a minimum fixed charge coverage ratio of 1.10 to 1.00, measured as of the last day of each fiscal month and for the twelve-fiscal month period ending on such date. As of December 31, 2017 and 2016, we were in compliance with all applicable covenants under the Credit Agreement.

OurWe expect current balances of cash and cash equivalents andavailable-for-sale securities and our available borrowing capacity are expected to be sufficient to fund our current and foreseeable operating and capital needs for the foreseeable future.

needs. Our cash requirements, however, may vary materially from those now planned due to many factors, including, but not limited to, the timing of reimbursement under our $109 million DOD contract, the scope and timing of future strategic acquisitions, the progress of our research and development programs, the scope and results of clinical testing, the cost of any future litigation, the magnitude of capital expenditures, changes in existing and potential relationships with business partners, the timing and cost of obtaining regulatory approvals, the timing and cost of future stock purchases, the costs involved in obtaining and enforcing patents, proprietary rights and any necessary licenses, the cost and timing of expansion of sales and marketing activities, market acceptance of new products, competing technological and market developments, the impact of the current economic environment and other factors. In addition, $43.7$71.0 million, or 25%64%, of our $176.6$110.8 million in cash, cash equivalents restricted cash andavailable-for-sale securities belongs to our Canadian subsidiary. RepatriationIn 2022, we repatriated $65 million of such cash into the United States exceeding certain levelsand incurred approximately $1.7 million of Canadian withholding tax. Further repatriation of cash from Canada into the United States could have additional adverse tax consequences. It is still our intention going forward to continue to permanently reinvest the historical undistributed earnings of our foreign subsidiaries.

Contractual Obligations and Commercial Commitments

The following sets forth our approximate aggregate obligations as of December 31, 2017 (in thousands) for future payments under contracts and other contingent commitments, for the year 2018 and beyond:

       Payments due by December 31,         

Contractual

Obligations

  Total   2018   2019   2020   2021   2022   Thereafter 

Operating leases1

  $5,157   $617   $791   $828   $834   $845   $1,242 

Employment contracts2

   2,059    1,729    330    —      —      —      —   

Purchase obligations3

   15,028    14,262    383    383    —      —      —   

Minimum commitments under contracts4

   292    292    —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total contractual obligations

  $22,536   $16,900   $1,504   $1,211   $834   $845   $1,242 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1Represents payments required under our operating leases. See Note 11 of the Notes to the consolidated financial statements included herein.
2Represents salary payments payable under the terms of employment agreements executed by us with certain executives. See Note 11 of the Notes to the consolidated financial statements included herein.
3Represents payments required bynon-cancellable purchase orders or supply agreements related to inventory, supplies, capital expenditures and other goods or services. The supply agreements are cancellable within a specified number of days of written notice to the supplier. See Note 11 of the Notes to the consolidated financial statements included herein.
4Represents payments required pursuant to certain licensing agreements executed by the Company. These agreements are cancellable within a specified number of days after communication by the Company of its intent to terminate. See Note 11 of the Notes to the consolidated financial statements included herein.
5Does not include any obligations under our revolving credit facility, which was undrawn as of December 31, 2017. See Note 7 of the Notes to the consolidated financial statements included herein.

Off-Balance Sheet Arrangements. We do not have anyoff-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of RegulationS-K under the Securities Exchange Act of 1934, as amended.

Critical Accounting Policies and Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires that we make estimatesjudgments and assumptionsestimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. On anon-going basis, we evaluate our judgments and estimates, including those related to bad debts, customer sales returns, inventories, intangible assets, income taxes, revenue recognition,

performance-based compensation, contingencies and litigation. We base our judgments and estimates on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 2 of the Notes to the consolidated financial statements included in Item 15 of this Annual Report. We consider the following accounting policies, which have been discussed with our Audit Committee, to be most critical in understanding the more complex judgments that are involved in preparing our financial statements and the uncertainties that could impact our results of operations, financial condition, and cash flows.

61


Revenue Recognition. We recognize

Product sales. Revenue from product revenues when theresales is persuasive evidencerecognized upon transfer of control of a product to a customer based on an amount that an arrangement exists,reflects the price is fixed or determinable, title has passed and collection is reasonably assured. Product revenuesconsideration we are recordedentitled to, net of allowances for any discounts or rebates.

We generally do not grant price protection or product return rights to our customers, except for warranty returns and return rights on sales of our OraQuick®In-Home HIV test into the retail markettrade, and for warranty returns. InteliSwab®products to the retail trade and certain customers.

Historically, returns arising from warranty issues have been infrequent and immaterial. Accordingly, we expense warranty returns as incurred.

Our netService Revenues

Service revenues recordedrepresent microbiome laboratory testing and analytical services. We recognize revenues when we satisfy our performance obligation for services rendered.

Arrangements with multiple-performance obligations

In arrangements involving more than one performance obligation, which largely applies to our service revenue stream, each required performance obligation is evaluated to determine whether it qualifies as a distinct performance obligation based on sales ofwhether (i) the OraQuick®In-Home HIV test represent total gross revenues, less an allowance for expected returns,customer can benefit from the good or service either on its own or together with other resources that are readily available and customer allowances for cooperative advertising, discounts, rebates, and chargebacks. The allowance for expected returns(ii) the good or service is an estimate established by management, based upon currently available information, and is adjusted to reflect known changesseparately identifiable from other promises in the factors that impact this estimate. Other customer allowances are at contractual rates and are recordedcontract. The consideration under the arrangement is then allocated to each separate distinct performance obligation based on each respective relative stand-alone selling price. The estimated selling price of each deliverable is determined using an observable cost plus margin approach. The consideration allocated to each distinct performance obligation is recognized as a reduction of gross revenue when recognized in our consolidated statements of income.

We record shipping and handling charges billed to our customers as product revenue andcontrol is transferred for the related expense as cost of products sold. Taxes assessed by governmental authorities, such as salesgoods or value-added taxes, are excluded from product revenues.services or when the performance obligation has been satisfied.

On June 10, 2014, we entered into a Master Program Services andCo-Promotion Agreement with AbbVie toco-promote our OraQuick® HCV test in the United States. This agreement with AbbVie was terminated effective December 31, 2016. Accordingly, we did not record any revenue from thisco-promotion agreement during 2017. During 2016 and 2015, $18.9 million and $13.5 million, respectively, in exclusivity revenues were recognized and recorded as other revenue in our consolidated statements of income.Inventories

On June 12, 2015, we were awarded a grant for up to $10.4 million in total funding from the U.S. Department of Health and Human Services (“HHS”) Office of the Assistant Secretary for Preparedness and Response’s Biomedical Advanced Research and Development Authority (“BARDA”) related to our OraQuick® Ebola rapid antigen test. The three-year, multi-phased grant included an initial commitment of $1.8 million and options for up to an additional $8.6 million to fund certain clinical and regulatory activities. In September 2015 and July 2017, BARDA exercised options to provide $7.2 million and $1.3 million, respectively, in additional funding for our OraQuick® Ebola test. Amounts related to this grant are recorded as other revenue in our consolidated statements of income as the activities are being performed and the related costs are incurred. During 2017, 2016 and 2015, $2.0 million, $1.7 million and $1.8 million, respectively, were recognized in connection with this grant.

In August 2016, we were awarded a contract for up to $16.6 million in total funding from BARDA related to our rapid Zika test. Thesix-year, multi-phased contract includes an initial commitment of $7.0 million and options for up to an additional $9.6 million to fund the evaluation of additional product enhancements and clinical and regulatory activities. In May 2017, BARDA exercised an option to provide $2.6 million in additional funding for

our rapid Zika test. Funding received under this contract is recorded as other revenue in our consolidated statements of income as the activities are being performed and the related costs are incurred. During 2017 and 2016, $2.4 million and $616,000, respectively, were recognized in connection with this grant.

In June 2017, we entered into a four-year Charitable Support Agreement with the Bill & Melinda Gates Foundation (“Gates Foundation”) that will enable us to offer our OraQuick® HIV self-test at an affordable price in 50 developing countries with funding from the Gates Foundation. The funding will consist of support payments tied to volume of product sold by us and reimbursement of certain related costs. The funding from the Gates Foundation will be in an aggregate amount not to exceed $20.0 million over the four-year term or $6.0 million each year of the agreement. Funding received under this agreement in the form of support payments for product purchases is recorded as a component of product revenue. During 2017, $1.0 million of support payments were recognized in product revenue in connection with this agreement. Funding received in the form of reimbursement of certain related costs in the amount of $689,000 was also recorded as other revenue in our consolidated statements of income.

Inventories. Our inventories are valuedstated at the lower of cost or net realizable value, with cost determined on afirst-infirst-out first-in, first-out basis, and include the cost of raw materials, labor and overhead. The majority of our inventories are subject to expiration dating.dating, which can be extended in certain circumstances. We continually evaluate quantities on hand and the carrying value of our inventories to determine the need for reserves for excess and obsolete inventoriesnet realizable value adjustments, based primarily on prior experience with consideration of expected changes in the business and estimated forecastforecasts of product sales. When, in the opinion of management, factors indicate that impairment has occurred, either aWe reserve is established against the inventories’ carrying valuefor unidentified scrap or the inventories are completely written off, as in the case of lapsing expiration dates. In addition to reserving for thesespoilage based on historical write-off rates. We also consider items identified through specific identification procedures we also reserve for unidentified scrap or spoilage under a fixed-formula methodology. During 2017, 2016, and 2015 wewrote-off inventory which had a costin assessing the adequacy of $3.3 million, $739,000 and $2.6 million, respectively. These write-offs were a result of quality, scrap and product expiration issues.our reserve. Although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand could have a significant impact on the carrying value of our inventories and reported operating results.

Deferred Tax Assets

62


Goodwill



Goodwill is not amortized, but rather is tested annually for impairment or more frequently if we believe that indicators of impairment exist. Current generally accepted accounting principles permit us to make a qualitative evaluation about the likelihood of goodwill impairment
and Liabilities
. Were-measured our Federal net deferred tax asset based on the federal rate at which they were expected to reverse in the future which is 21% pursuant to the recently enacted Tax Act. We alsore-measured our state net deferred asset since the future Federal benefit was reduced to 21%.

At December 31, 2017, we had federal Net Operating Loss (“NOL”) carryforwards of $66.2 million. The net deferred tax assets, before the valuation allowance, associated with these NOLs and other temporary differences were $27.3 million at December 31, 2017. Net operating losses will begin to expire in 2020. In assessing the realizability of deferred tax assets, we consider whetherif it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible or the NOLs and credit carryforwards can be utilized. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

We currently have a full valuation allowance recorded against our total U.S. deferred tax asset as we had determined in 2008 that it was more likely than not that we would not realize the benefits associated with our deferred tax asset in the immediate future. Each year, we continue to reevaluate our valuation allowance position and believe that it is more likely than not that our U.S. deferred income tax asset willthe fair value does not be realizedexceed the carrying amount, then a quantitative test is performed. The quantitative goodwill impairment test involves a comparison of the estimated fair value of the reporting unit to the respective carrying amount. An impairment charge is recognized in the immediate future. As such, we maintain a full valuation allowance as of December 31, 2017 and 2016 against our deferred tax assets associated withamount by which the operations subject to income tax incarrying amount exceeds the U.S.

The Tax Reform Act of 1986 contains provisions under Internal Revenue Code (“IRC”) Section 382 that limitreporting unit’s fair value, provided the annualimpairment charge does not exceed the total amount of federalgoodwill allocated to the reporting unit.



The process of evaluating the potential impairment of goodwill is highly subjective
and state NOLs availablerequires significant judgment, including the identification of reporting units, qualitative evaluation of events and circumstances to be used in any given year indetermine if it is more likely than not that an impairment exists, and, if necessary, the eventestimation of a significant change in ownership. Our abilitythe fair value of the applicable reporting unit.

ITEM 7A.Quantitative and Qualitative Disclosures About Market Risk.

The information with respect to use our federalforward-looking statements within “Management’s Discussion and state NOL carryforwards to offset future federal income tax obligations could be limitedAnalysis of Financial Condition and Results of Operations” of this Annual Report is incorporated herein by changes in the ownership of our stock. The Company does not believe,

reference.

however, that there is a Section 382 limitation that will impair our future ability to utilize NOLs to offset our future taxable income and the Company continues to review ownership changes on an annual basis.

ITEM 7A.Quantitative and Qualitative Disclosures About Market Risk.

We do not hold any amounts of derivative financial instruments or derivative commodity instruments and, accordingly, we have no material derivative risk to report under this Item.

As of December 31, 2017,2022, we did not have any foreign currency exchange contracts or purchase currency options to hedge local currency cash flows. Sales denominated in foreign currencies comprised 3.5%2.0% of our total revenues for the year ended December 31, 2017.2022. We do have foreign currency exchange risk related to our operating subsidiarysubsidiaries in Canada. WhileCanada and in Belgium. The principal foreign currencies in which we conduct business are the majority of their revenues are recorded in U.S. dollars, almost all of their operating expenses are denominated in Canadian dollars.dollar and the Euro. Fluctuations in the exchange rate between the U.S. dollar and the Canadian dollarthese foreign currencies could affectyear-to-year comparability of operating results and cash flows. Our Canadian subsidiaryforeign subsidiaries had net assets, subject to translation, of $102.6$120.3 million Canadian dollars ($81.6 million USD),in U.S. Dollars, which are included in the Company’s consolidated balance sheet as of December 31, 2017.2022. A 10% unfavorable change in theCanadian-to-U.S. dollar and Euro-to-U.S. dollar exchange raterates would have decreasedincreased our comprehensive incomeloss by $8.2approximately $12.0 million in 2017.the year ended December 31, 2022.

ITEM 8.Financial Statements and Supplementary Data.

ITEM 8.Consolidated Financial Statements and Supplementary Data.

Information with respect to this Item is contained in our Consolidated Financial Statements included inunder Item 15 of this Annual ReportReport.

ITEM 9.Changes in and Disagreements with Accountants on Form10-K.

Accounting and Financial Disclosure.

ITEM 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

ITEM 9A.Controls and Procedures.

ITEM 9A.Controls and Procedures.

(a)Evaluation of Disclosure Controls and Procedures.

The Company’s management, with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and Chief FinancialAccounting Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934) as of December 31, 2017.2022. Based on that evaluation, the Company’s management, including such officers, concluded that as of December 31, 20172022 the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to the Company’s management, including the Chief Executive Officer, Chief Financial Officer and Chief FinancialAccounting Officer, to allow timely decisions regarding required disclosure and is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

(b)Management’s Report on Internal Control Over Financial Reporting.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule13a-15(f) and15d-15(f) under the Securities Exchange Act of 1934. Under the supervision and with the participation of the Company’s management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework inInternal Control - Integrated

63


Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework, our management concluded that our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles as of December 31, 2017.2022.

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.

The effectiveness of our internal control over financial reporting as of December 31, 20172022 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, which is included below.

(c)Changes in Internal Control Over Financial Reporting.

There wereDuring the quarter ended December 31, 2022, management identified and remediated a material weakness in internal control over financial reporting related to user access controls to adequately restrict access over our information technology system that supports our financial reporting processes. No misstatement arose as a result of this deficiency.

Except for the foregoing, there was no changeschange in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a or 15d of the Exchange Act that occurred during the fiscal quarter ended December 31, 20172022 that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting.

(d)Report of Independent Registered Public Accounting Firm.

The

To the Stockholders and Board of Directors and Stockholders


OraSure Technologies, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited OraSure Technologies, Inc.’s and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2017,2022, based on criteria established inInternal Control—Control – Integrated Framework (2013)(2013) issued by the Committee of

Sponsoring Organizations of the Treadway Commission (COSO).OraSure Technologies, Inc.’sCommission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated March 3, 2023 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s 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 generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the

64


company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s 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.

In our opinion, OraSure Technologies, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established inInternal Control—Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of OraSure Technologies, Inc. and subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2017, and our report dated February 28, 2018 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Philadelphia, Pennsylvania
March 3, 2023

February 28, 2018

ITEM 9B.Other Information.

ITEM 9B.Other Information.

Not applicable.

ITEM 9C. Disclosure regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

65


PART III

We have omitted from Part III the information that will appear in our Definitive Proxy Statement for our 20182023 Annual Meeting of Stockholders (the “Proxy“2023 Proxy Statement”), which will be filed within 120 days after the end of our fiscal year pursuant to Regulation 14A.

ITEM 10.Directors, Executive Officers and Corporate Governance.

ITEM 10.Directors, Executive Officers and Corporate Governance.

CertainThe information required by this Item 10 will be included in our 2023 Proxy Statement and is incorporated herein by reference to the information under the captions “Proposal No. 1. Election of Directors,” “Corporate Governance - Governance Guidelines and Code of Conduct,” “Corporate Governance – Committees of the Board,” “Executive Officers,” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement.

reference. Our Board of Directors has adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer and principal accounting officer, as well as to the members of our Board of Directors and our other officers and employees. This Code of Business Conduct and Ethics is available on our website atwww.orasure.com. We intend to satisfy the amendment and waiver disclosure requirements under applicable securities regulations by posting any amendments of, or waivers to, the Code of Business Conduct and Ethics on our website.

ITEM 11.Executive Compensation.

ITEM 11.Executive Compensation.

The information required by this Item 11 will be included in our 2023 Proxy Statement and is incorporated herein by reference to the information under the captions “Compensation Committee Matters,” (including the “Compensation Committee Report”), “Compensation Discussionreference.

ITEM 12.Security Ownership of Certain Beneficial Owners and Analysis,” “Compensation Tables,” “Employment AgreementsManagement and Potential Payments Upon Termination or Change in Control,” and “Director Compensation” in the Proxy Statement.Related Stockholder Matters.

ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item with respect to the securities ownership of certain beneficial owners12 will be included in our 2023 Proxy Statement and management, and equity compensation plan information, is incorporated herein by reference to the information under the captions “Stock Ownership of reference.

ITEM 13.Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item 13 will be included in our 2023 Proxy Statement and is incorporated herein by reference to the information under the captions “Transactions with Related Persons”reference.

ITEM 14.Principal Accountant Fees and “Corporate Governance - Director Independence” in the Proxy Statement.Services.

ITEM 14.Principal Accountant Fees and Services.

The information required by this Item 14 will be included in our 2023 Proxy Statement and is incorporated herein by reference to the information under the caption “Audit Committee Matters” in the Proxy Statement.

reference.

66


PART IV

ITEM 15.Exhibits and Consolidated Financial Statement Schedules.

ITEM 15.Exhibits and Consolidated Financial Statement Schedules.

(a)(1) and (a)(2).Consolidated Financial Statements and Schedules. For a list of the consolidated financial statements filed herewith, see the Index to Consolidated Financial Statements following the signature page to this Annual Report. No schedules are included with the consolidated financial statements because the required information is inapplicable or is presented in the consolidated financial statements or related notes thereto.

(a)(3).Exhibits. See Index to Exhibits following the consolidated financial statements in this Annual Report.

ITEM 16.

Exhibit

Number

Exhibit

3.1.1

Certificate of Incorporation of OraSure Technologies, Inc. is incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-4 (No. 333-39210), filed June 14, 2000.

3.1.2

Certificate of Amendment to Certificate of Incorporation dated May 23, 2000 is incorporated by reference to Exhibit 3.1.1 to the Company’s Registration Statement on Form S-4 (No. 333-39210), filed June 14, 2000.

3.2

Bylaws of OraSure Technologies, Inc., as amended and restated as of February 19, 2018, are incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K Summary. for the year ended December 31, 2017.

4.1

Description of Securities is incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the year-ended December 31, 2019.

10.1

Employment Agreement dated as of January 3, 2018, between OraSure Technologies, Inc. and Stephen S. Tang, Ph.D., is incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 4, 2018.*

   10.2

Transition Agreement dated as of January 2, 2022, between OraSure Technologies, Inc. and Stephen S. Tang, Ph.D. is incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-k filed January 6, 2022*

10.3

Employment Agreement, dated as of January 1, 2019, between Kathleen G. Weber, DNA Genotek, Inc. and OraSure Technologies, Inc. is incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.*

10.4

Amendment No. 1 to Employment Agreement, dated as of December 20, 2021, between Kathleen G. Weber, DNA Genotek, Inc. and OraSure Technologies, Inc. is incorporated by reference to exhibit 10.10 to the Company's Annual Report on form 10-K for the year ended December 31, 2021*

10.5+

Amendment No. 2 to Employment Agreement, dated as of November 7, 2022, between Kathleen G. Weber, DNA Genotek, Inc. and OraSure Technologies, Inc.*

10.6

Employment Agreement, dated as of May 11, 2020, between OraSure Technologies, Inc. and Lisa Nibauer is incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on form 10-Q for the quarter ended June 30, 2020.*

  10.7

Employment Agreement, dated as of November 29, 2021, between OraSure Technologies, Inc. and Agnieszka M. Gallagher. is incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 2021.*

  10.8

Employment Agreement dated as of March 21, 2022, between OraSure Technologies, Inc. and Nancy J. Gagliano, M.D., M.B.A. is incorporated by reference to item 10.1 to the Company's Current Report on Form 8-K filed on March 23, 2022*

7

  10.9

Employment Agreement, dated as of May 20, 2022, between OraSure Technologies, Inc. and Carrie Eglinton-Manner is incorporated by reference to exhibit 10.1 to the company's Current Report on Form 8-K filed on May 26, 2022.

  10.10

Employment Agreement dated August 8, 2022, between OraSure Technologies, Inc. and Kenneth J. McGrath is incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 12, 2022.*

  10.11

Severance Letter Agreement, dated August 25, 2021, between OraSure Technologies, Inc. and Michele M. Miller is incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 2021.*

10.12

Description of Non-Employee Director Compensation Policy, as amended, is incorporated by reference to Item 5.02 to the Company’s Current Report on form 8-K filed August 14, 2019.*

10.13

Amended and Restated Epitope, Inc. 1991 Stock Award Plan is incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.*

None67


10.14

OraSure Technologies, Inc. Employee Incentive and Non-Qualified Stock Option Plan, as amended and restated effective September 29, 2000, is incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000.*

10.15

Amended and Restated OraSure Technologies, Inc. Stock Award Plan, effective April 4, 2020, is incorporated by reference to Exhibit A to the Company’s Proxy Statement, filed April 9, 2020, for the 2020 Annual Meeting of Stockholders.*

10.16

Amended and Restated OraSure Technologies, Inc. 2000 Stock Award Plan, Effective April 1, 2022, is incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed May 18, 2022.*

10.17

Form of Restricted Share Award Agreement (Executive Officers – Employment Agreements) is incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.*

10.18

Form of Restricted Unit Award Agreement (Executive Officers – Employment Agreements) is incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. *

10.19

Form of Restricted Unit Award Agreement (Executive Officers-Employment Agreements) for 2021 awards is incorporated by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 2021.*

10.20

Form of Restricted Share Grant Agreement (Non-Employee Directors) is incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.*

10.21

Nonqualified Stock Option Award General Terms and Conditions (Executive Officers) is incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.*

10.22

Nonqualified Stock Option Award General Terms and Conditions (Non-Employee Directors) is incorporated by reference to Exhibit 10.26 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.*

10.23

OraSure Technologies, Inc. Deferred Compensation Plan is incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed December 21, 2011.*

10.24

Adoption Agreement related to OraSure Technologies, Inc. Deferred Compensation Plan is incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed December 21, 2011.*

10.25

Amended and Restated Code of Business Conduct and Ethics of OraSure Technologies, Inc. is incorporated by reference to Exhibit 14.1 to the Company’s Current Report on Form 8-K filed November 10, 2021.

10.26

$109 Million Capital Funding Agreement with the U.S. Department of Defense, in coordination with the Department of Health and Human Services is incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on From 10-Q for the period ended September 30, 2021, filed November 4, 2021.

10.27

Industrial Lease between Core5 at Laughman Farms Phase 1, LLC as Landlord and OraSure Technologies, Inc. as Tenant, dated January 3, 2022 is incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

21

Subsidiaries of the Company are incorporated by reference to Exhibit 21 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

23+

Consent of KPMG LLP.

24+

Powers of Attorney.

31.1+

Certification of Carrie Eglinton Manner. required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.

31.2+

Certification of Kenneth J. McGrath required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.

32.1+

Certification of Carrie Eglinton Manner. required by Rule 13a-14(b) or Rule 15a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2+

Certification of Kenneth J. McGrath required by Rule 13a-14(b) or Rule 15a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS Inline XBRL Instance Document

SIGNATURES101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

68


101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase document

104 The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, has been formatted in Inline XBRL.

+ Filed herewith.

* Management contract or compensatory plan or arrangement.

ITEM 16.Form 10-K Summary.

None

69


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on February 28, 2018.March 3, 2023.

ORASURE TECHNOLOGIES, INC.

By:

/s/ Douglas A. Michels

Douglas A. Michels

By:

/s/ Carrie Eglinton Manner

Carrie Eglinton Manner

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on February 28, 2018,March 3, 2023, by the following persons on behalf of the Registrant and in the capacities indicated.

SIGNATURETITLE

/s/ Douglas A. Michels

Douglas A. Michels

President, Chief Executive Officer and Director (Principal Executive Officer)

/s/ Ronald H. Spair

Ronald H. Spair

Chief Operating Officer, Chief Financial Officer and Director (Principal Financial Officer)

/s/ Mark L. Kuna

Mark L. Kuna

Senior Vice President, Finance and Controller (Principal Accounting Officer)

*MARA ASPINALL

Mara Aspinall

Director

*MICHAEL CELANO

Michael Celano

Director

*EAMONN P. HOBBS

Eamonn P. Hobbs

Director

*RONNY B. LANCASTER

Ronny B. Lancaster

Director

*CHARLES W. PATRICK

Charles W. Patrick

Director

*ARADHANA SARIN

Aradhana Sarin

Director

*STEPHEN S. TANG

Stephen S. Tang

Director

*By:

/s/ Jack E. Jerrett

Jack E. Jerrett
(Attorney-in-Fact)

Index to Consolidated Financial Statements

SIGNATURE

Page

TITLE

/s/ Carrie Eglinton Manner

President, Chief Executive Officer and Director

 (Principal Executive Officer)

Carrie Eglinton Manner

/s/ Kenneth J. McGrath

Chief Financial Officer

(Principal Financial Officer)

Kenneth J. McGrath

/s/ Michele Anthony

Senior Vice President, Controller & Chief Accounting Officer

(Principal Accounting Officer)

Michele Anthony

*MARA ASPINALL

Mara Aspinall

Director

*JAMES A. DATIN

James A. Datin

Director

*NANCY J. GAGLIANO

Nancy J. Gagliano

Director

*LELIO MARMORA

Lelio Marmora

Director

*DAVID J. SHULKIN, M.D.

David J. Shulkin, M.D.

Director

*ANNE C. WHITAKER

Anne C. Whitaker

Director

*By:

/s/Stefano Taucer

Stefano Taucer

(Attorney-in-Fact)

70


Index to Consolidated Financial Statements

Page

Report of Independent Registered Public Accounting Firm (KPMG LLP, Philadelphia, PA, Auditor Firm ID:185)

F-2

Consolidated Balance Sheets

F-3

F-4

Consolidated Statements of IncomeOperations

F-4

F-5

Consolidated Statements of Comprehensive Income (Loss)

F-5

F-6

Consolidated Statements of Stockholders’ Equity

F-6

F-7

Consolidated Statements of Cash Flows

F-7

F-8

Notes to the Consolidated Financial Statements

F-8

F-9

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMF-1


Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors


OraSure Technologies, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of OraSure Technologies, Inc. and subsidiaries (the Company) as of December 31, 20172022 and 2016,2021, the related consolidated statements of income,operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2017,2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172022 and 2016,2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2017,2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017,2022, based on criteria established inInternal Control – Integrated Framework (2013) (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2018March 3, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of net realizable value adjustments to inventories for excess or obsolescence

As discussed in Notes 2 and 5 to the consolidated financial statements, the Company has inventories with a carrying value of $96,232 thousand as of December 31, 2022. Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. The majority of the inventories are subject to expiration dating, which can be extended in certain circumstances. The Company continually evaluates quantities on hand and the carrying value of inventories to determine the need for net realizable value adjustments for excess and obsolete inventories, based primarily on prior experience with consideration of expected changes in the business and estimated forecasts of product sales. The Company reserves for unidentified scrap or spoilage based on historical write-off rates. The Company also considers items identified through specific identification procedures in assessing the adequacy of the reserve.

We identified the evaluation of net realizable value adjustments to inventories for excess or obsolescence as a critical audit matter. Evaluating the Company’s specific identification procedures, which included reviewing historical inventory consumption as compared to inventory balances as of year-end and the resulting inventory consumption and ability to extend inventory expiration dates, required a high degree of auditor judgment.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process for determining net realizable value adjustments for inventory excess or obsolescence, which included controls related to the review of the specific identification

F-2


procedures. For a selection of inventory items, we compared the Company’s historic estimates of net realizable value adjustments for excess and obsolescence to the actual physical inventory disposals to evaluate the Company’s ability to accurately estimate the net realizable value adjustments. In addition, we selected inventory items from the underlying data used in the Company’s analysis and evaluated the Company’s determination of net realizable value adjustments for those items by: (1) testing historical inventory consumption by independently recalculating the historical consumption and comparing it to the company determined consumption, (2) comparing that consumption to inventory balances as of year-end, and (3) evaluating changes in the business that could impact future inventory consumption, as applicable. We also selected inventory items from the underlying data used in the Company’s analysis and evaluated the ability to extend the expiration dates by inspecting relevant supporting documentation.

/s/ KPMG LLP

We have served as the Company’s auditor since 2002.

Philadelphia, Pennsylvania
March 3, 2023

February 28, 2018

F-3


ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

   December 31, 2017  December 31, 2016 

ASSETS

   

CURRENT ASSETS:

   

Cash and cash equivalents

  $71,029  $107,959 

Restricted cash

   1,840   1,831 

Short-term investments

   83,028   11,160 

Accounts receivable, net of allowance for doubtful accounts of $471 and $484

   42,521   19,827 

Inventories

   19,343   11,799 

Prepaid expenses

   1,658   1,722 

Other current assets

   2,486   2,143 
  

 

 

  

 

 

 

Total current assets

   221,905   156,441 

PROPERTY AND EQUIPMENT, net

   21,372   20,033 

INTANGIBLE ASSETS, net

   8,223   10,337 

GOODWILL

   20,083   18,793 

LONG TERM INVESTMENTS

   20,690   —   

OTHER ASSETS

   3,928   2,331 
  

 

 

  

 

 

 
  $296,201  $207,935 
  

 

 

  

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

   

CURRENT LIABILITIES:

   

Accounts payable

  $10,228  $4,633 

Deferred revenue

   1,314   1,388 

Accrued expenses

   20,695   11,314 
  

 

 

  

 

 

 

Total current liabilities

   32,237   17,335 
  

 

 

  

 

 

 

OTHER LIABILITIES

   3,932   2,304 
  

 

 

  

 

 

 

DEFERRED INCOME TAXES

   1,951   2,446 
  

 

 

  

 

 

 

COMMITMENTS AND CONTINGENCIES (Note 11)

   

STOCKHOLDERS’ EQUITY

   

Preferred stock, par value $.000001, 25,000 shares authorized, none issued

   —     —   

Common stock, par value $.000001, 120,000 shares authorized, 60,662 and 56,001 shares issued and outstanding

   —     —   

Additionalpaid-in capital

   387,931   350,528 

Accumulated other comprehensive loss

   (10,340  (14,220

Accumulated deficit

   (119,510  (150,458
  

 

 

  

 

 

 

Total stockholders’ equity

   258,081   185,850 
  

 

 

  

 

 

 
  $296,201  $207,935 
  

 

 

  

 

 

 

 

December 31, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

$

83,980

 

 

$

116,762

 

Short-term investments

 

26,867

 

 

 

36,279

 

Accounts receivable, net of allowance for doubtful accounts of $2,365 and $3,418

 

70,797

 

 

 

45,323

 

Inventories

 

96,232

 

 

 

53,138

 

Prepaid expenses

 

6,273

 

 

 

7,939

 

Other current assets

 

41,569

 

 

 

39,865

 

Total current assets

 

325,718

 

 

 

299,306

 

Noncurrent Assets:

 

 

 

 

 

Property, plant and equipment, net

 

59,413

 

 

 

73,435

 

Operating right-of-use assets, net

 

10,399

 

 

 

9,056

 

Finance right-of-use assets, net

 

1,293

 

 

 

2,493

 

Intangible assets, net

 

11,694

 

 

 

14,343

 

Goodwill

 

35,104

 

 

 

40,279

 

Long-term investments

 

 

 

 

17,009

 

Other noncurrent assets

 

1,087

 

 

 

5,069

 

Total noncurrent assets

 

118,990

 

 

 

161,684

 

TOTAL ASSETS

$

444,708

 

 

$

460,990

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

$

39,349

 

 

$

28,024

 

Deferred revenue

 

2,273

 

 

 

2,936

 

Accrued expenses and other current liabilities

 

25,762

 

 

 

33,778

 

Finance lease liability

 

1,179

 

 

 

939

 

Operating lease liability

 

1,764

 

 

 

2,181

 

Acquisition-related contingent consideration obligation

 

65

 

 

 

206

 

Total current liabilities

 

70,392

 

 

 

68,064

 

Noncurrent Liabilities:

 

 

 

 

 

Finance lease liability

 

503

 

 

 

1,952

 

Operating lease liability

 

9,101

 

 

 

7,202

 

Acquisition-related contingent consideration obligation

 

99

 

 

 

354

 

Other noncurrent liabilities

 

581

 

 

 

651

 

Deferred income taxes

 

408

 

 

 

2,234

 

Total noncurrent liabilities

 

10,692

 

 

 

12,393

 

TOTAL LIABILITIES

 

81,084

 

 

 

80,457

 

Commitments and contingencies (Note 14)

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

Preferred stock, par value $.000001, 25,000 shares authorized, none issued

 

 

 

 

 

Common stock, par value $.000001, 120,000 shares authorized, 72,734 and 72,069 shares issued and outstanding

 

 

 

 

 

Additional paid-in capital

 

520,446

 

 

 

511,063

 

Accumulated other comprehensive loss

 

(18,435

)

 

 

(10,077

)

Accumulated deficit

 

(138,387

)

 

 

(120,453

)

Total stockholders' equity

 

363,624

 

 

 

380,533

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

444,708

 

 

$

460,990

 

See accompanying notes to the consolidated financial statements.

F-4


ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS

(in thousands, except per share amounts)

  For the years ended December 31, 

 

For the years ended December 31,

 

  2017 2016   2015 

 

2022

 

 

2021

 

 

2020

 

NET REVENUES:

     

 

 

 

 

 

 

 

Product

  $161,988  $106,924   $104,458 

Products and services

 

$

378,047

 

 

$

226,897

 

 

$

166,381

 

Other

   5,076  21,274    15,261 

 

 

9,432

 

 

 

6,777

 

 

 

5,340

 

  

 

  

 

   

 

 

 

 

387,479

 

 

 

233,674

 

 

 

171,721

 

   167,064  128,198    119,719 

COST OF PRODUCTS SOLD

   68,108  40,171    39,426 
  

 

  

 

   

 

 

COST OF PRODUCTS AND SERVICES SOLD

 

 

239,842

 

 

 

116,074

 

 

 

69,853

 

Gross profit

   98,956  88,027    80,293 

 

 

147,637

 

 

 

117,600

 

 

 

101,868

 

  

 

  

 

   

 

 

OPERATING EXPENSES:

     

 

 

 

 

 

 

 

Research and development

   13,365  9,754    11,654 

 

 

36,237

 

 

 

34,170

 

 

 

31,032

 

Sales and marketing

   28,532  29,652    35,088 

 

 

49,238

 

 

 

44,751

 

 

 

34,459

 

General and administrative

   29,321  28,356    25,493 

 

 

68,206

 

 

 

50,328

 

 

 

42,653

 

Gain on litigation settlement

   (12,500  —      —   

Loss on impairments

 

 

17,101

 

 

 

 

 

 

 

Change in the estimated fair value of acquisition-related contingent consideration

 

 

(188

)

 

 

(1,485

)

 

 

(1,099

)

  

 

  

 

   

 

 

 

 

170,594

 

 

 

127,764

 

 

 

107,045

 

   58,718  67,762    72,235 
  

 

  

 

   

 

 

Operating income

   40,238  20,265    8,058 

Operating loss

 

 

(22,957

)

 

 

(10,164

)

 

 

(5,177

)

OTHER INCOME

   794  58    774 

 

 

6,481

 

 

 

872

 

 

 

1,653

 

  

 

  

 

   

 

 

Income before income taxes

   41,032  20,323    8,832 

Loss before income taxes

 

 

(16,476

)

 

 

(9,292

)

 

 

(3,524

)

INCOME TAX EXPENSE

   10,084  603    665 

 

 

1,458

 

 

 

13,706

 

 

 

11,398

 

  

 

  

 

   

 

 

NET INCOME

  $30,948  $19,720   $8,167 
  

 

  

 

   

 

 

EARNINGS PER SHARE:

     

NET LOSS

 

$

(17,934

)

 

$

(22,998

)

 

$

(14,922

)

LOSS PER SHARE:

 

 

 

 

 

 

 

BASIC

  $0.52  $0.35   $0.14 

 

$

(0.25

)

 

$

(0.32

)

 

$

(0.22

)

  

 

  

 

   

 

 

DILUTED

  $0.51  $0.35   $0.14 

 

$

(0.25

)

 

$

(0.32

)

 

$

(0.22

)

  

 

  

 

   

 

 

SHARES USED IN COMPUTING EARNINGS PER SHARE:

     

SHARES USED IN COMPUTING LOSS PER SHARE:

 

 

 

 

 

 

 

BASIC

   59,050  55,615    56,397 

 

 

72,505

 

 

 

71,981

 

 

 

67,505

 

  

 

  

 

   

 

 

DILUTED

   61,024  56,513    56,846 

 

 

72,505

 

 

 

71,981

 

 

 

67,505

 

  

 

  

 

   

 

 

See accompanying notes to the consolidated financial statements.

F-5


ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

   For the years ended December 31, 
   2017  2016   2015 

NET INCOME

  $30,948  $19,720   $8,167 

OTHER COMPEHENSIVE INCOME (LOSS)

     

Currency translation adjustments

   4,433   1,419    (7,791

Unrealized loss on marketable securities

   (553  —      —   
  

 

 

  

 

 

   

 

 

 

COMPREHENSIVE INCOME

  $34,828  $21,139   $376 
  

 

 

  

 

 

   

 

 

 

 

 

For the years ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

NET LOSS

 

$

(17,934

)

 

$

(22,998

)

 

$

(14,922

)

OTHER COMPREHENSIVE LOSS

 

 

 

 

 

 

 

 

 

Currency translation adjustments

 

 

(8,572

)

 

 

(894

)

 

 

3,273

 

Unrealized gain (loss) on marketable securities

 

 

214

 

 

 

(86

)

 

 

(234

)

COMPREHENSIVE LOSS

 

$

(26,292

)

 

$

(23,978

)

 

$

(11,883

)

See accompanying notes to the consolidated financial statements.

F-6


ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the years ended December 31, 2017, 20162022, 2021 and 20152020

(in thousands)

  

 

Common Stock

  

 

Additional Paid-in

Capital

  Accumulated
Other
Comprehensive

Loss
  

 

Accumulated

Deficit

    
  Shares  Amount     Total 

Balance at January 1, 2015

  56,187  $—    $344,894  $(7,848 $(178,345 $158,701 

Common stock issued upon exercise of options

  74   —     404   —     —     404 

Vesting of restricted stock

  354   —     —     —     —     —   

Purchase and retirement of common shares

  (910  —     (6,090  —     —     (6,090

Compensation cost for restricted stock

  —     —     2,642   —     —     2,642 

Compensation cost for stock option grants

  —     —     3,403   —     —     3,403 

Net income

  —     —     —     —     8,167   8,167 

Currency translation adjustments

  —     —     —     (7,791  —     (7,791
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2015

  55,705   —     345,253   (15,639  (170,178  159,436 

Common stock issued upon exercise of options

  405   —     2,656   —     —     2,656 

Vesting of restricted stock

  446   —     —     —     —     —   

Purchase and retirement of common shares

  (555  —     (3,444  —     —     (3,444

Compensation cost for restricted stock

  —     —     2,861   —     —     2,861 

Compensation cost for stock option grants

  —     —     2,691   —     —     2,691 

Compensation cost for performance stock units

  —     —     511   —     —     511 

Net income

  —     —     —     —     19,720   19,720 

Currency translation adjustments

  —     —     —     1,419   —     1,419 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2016

  56,001   —     350,528   (14,220  (150,458  185,850 

Common stock issued upon exercise of options

  4,413   —     31,670   —     —     31,670 

Vesting of restricted stock

  378   —     —     —     —     —   

Purchase and retirement of common shares

  (130  —     (1,240  —     —     (1,240

Compensation cost for restricted stock

  —     —     2,705   —     —     2,705 

Compensation cost for stock option grants

  —     —     2,045   —     —     2,045 

Compensation cost for performance stock units

  —     —     2,223   —     —     2,223 

Net income

  —     —     —     —     30,948   30,948 

Currency translation adjustments

     4,433    4,433 

Unrealized loss on marketable securities

  —     —     —     (553  —     (553
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2017

  60,662  $—    $387,931  $(10,340 $(119,510 $258,081 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Total

 

Balance at January 1, 2020

 

 

61,731

 

 

$

 

 

$

401,814

 

 

$

(12,136

)

 

$

(82,533

)

 

$

307,145

 

Common stock issued upon exercise
   of options

 

 

402

 

 

 

 

 

 

3,222

 

 

 

 

 

 

 

 

 

3,222

 

Vesting of restricted stock and performance stock units

 

 

653

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase and retirement of common shares

 

 

(248

)

 

 

 

 

 

(2,088

)

 

 

 

 

 

 

 

 

(2,088

)

Issuance of common stock in connection with public offering, net of commissions and expenses of $6,200

 

 

9,200

 

 

 

 

 

 

95,036

 

 

 

 

 

 

 

 

 

95,036

 

Stock-based compensation

 

 

 

 

 

 

 

 

7,139

 

 

 

 

 

 

 

 

 

7,139

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,922

)

 

 

(14,922

)

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

3,273

 

 

 

 

 

 

3,273

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(234

)

 

 

 

 

 

(234

)

Balance at December 31, 2020

 

 

71,738

 

 

$

 

 

$

505,123

 

 

$

(9,097

)

 

$

(97,455

)

 

$

398,571

 

Common stock issued upon exercise
   of options

 

 

33

 

 

 

 

 

 

246

 

 

 

 

 

 

 

 

 

246

 

Vesting of restricted stock and performance stock units

 

 

451

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase and retirement of common shares

 

 

(153

)

 

 

 

 

 

(2,113

)

 

 

 

 

 

 

 

 

(2,113

)

Stock-based compensation

 

 

 

 

 

 

 

 

7,807

 

 

 

 

 

 

 

 

 

7,807

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,998

)

 

 

(22,998

)

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

(894

)

 

 

 

 

 

(894

)

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(86

)

 

 

 

 

 

(86

)

Balance at December 31, 2021

 

 

72,069

 

 

$

 

 

$

511,063

 

 

$

(10,077

)

 

$

(120,453

)

 

$

380,533

 

Common stock issued upon exercise
   of options

 

 

2

 

 

 

 

 

 

15

 

 

 

 

 

 

 

 

 

15

 

Vesting of restricted stock and performance stock units

 

 

992

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase and retirement of common shares

 

 

(329

)

 

 

 

 

 

(2,254

)

 

 

 

 

 

 

 

 

(2,254

)

Stock-based compensation

 

 

 

 

 

 

 

 

11,622

 

 

 

 

 

 

 

 

 

11,622

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,934

)

 

 

(17,934

)

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

(8,572

)

 

 

 

 

 

(8,572

)

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

214

 

 

 

 

 

 

214

 

Balance at December 31, 2022

 

 

72,734

 

 

$

 

 

$

520,446

 

 

$

(18,435

)

 

$

(138,387

)

 

$

363,624

 

See accompanying notes to the consolidated financial statements.

F-7


ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

For the years ended December 31,

 

 

2022

 

 

2021

 

 

2020

 

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(17,934

)

 

$

(22,998

)

 

$

(14,922

)

 

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

11,622

 

 

 

7,807

 

 

 

7,139

 

 

Depreciation and amortization

 

 

15,308

 

 

 

11,658

 

 

 

9,387

 

 

Loss on impairments

 

 

17,101

 

 

 

 

 

 

 

 

Other non-cash amortization

 

 

228

 

 

 

837

 

 

 

327

 

 

Provision for doubtful accounts

 

 

(1,032

)

 

 

(253

)

 

 

941

 

 

Inventory reserve

 

 

(754

)

 

 

6,731

 

 

 

736

 

 

Unrealized foreign currency (gain) loss

 

 

(161

)

 

 

(210

)

 

 

269

 

 

Interest expense on finance leases

 

 

94

 

 

 

82

 

 

 

72

 

 

Deferred income taxes

 

 

(1,651

)

 

 

1,026

 

 

 

(392

)

 

Loss on sale of fixed assets

 

 

729

 

 

 

 

 

 

114

 

 

Gain on sale of product line

 

 

 

 

 

 

 

 

(225

)

 

Change in the estimated fair value of acquisition-related contingent consideration

 

 

(188

)

 

 

(1,485

)

 

 

(1,099

)

 

Payment of acquisition-related contingent consideration

 

 

 

 

 

(142

)

 

 

(496

)

 

Changes in assets and liabilities

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(25,162

)

 

 

(6,451

)

 

 

(2,324

)

 

Inventories

 

 

(43,048

)

 

 

(27,941

)

 

 

(9,343

)

 

Prepaid expenses and other assets

 

 

(7,091

)

 

 

(8,674

)

 

 

(104

)

 

Accounts payable

 

 

3,963

 

 

 

3,234

 

 

 

7,379

 

 

Deferred revenue

 

 

(596

)

 

 

(1,891

)

 

 

1,051

 

 

Accrued expenses and other liabilities

 

 

1,370

 

 

 

3,288

 

 

 

7,297

 

 

Net cash (used in) provided by operating activities

 

 

(47,202

)

 

 

(35,382

)

 

 

5,807

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Purchases of investments

 

 

(22,873

)

 

 

(25,822

)

 

 

(90,137

)

 

Proceeds from maturities and redemptions of investments

 

 

47,415

 

 

 

67,925

 

 

 

107,718

 

 

Proceeds from sale of assets

 

 

121

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(6,774

)

 

 

(21,893

)

 

 

(26,674

)

 

Purchase of property and equipment under government contracts

 

 

(57,135

)

 

 

(26,224

)

 

 

 

 

Proceeds from funding under government contract

 

 

60,331

 

 

 

531

 

 

 

 

 

Purchase of patent and product rights

 

 

 

 

 

 

 

 

(2,250

)

 

Acquisition of businesses, net of cash acquired

 

 

 

 

 

 

 

 

(3,037

)

 

Other investing activities

 

 

 

 

 

(18

)

 

 

351

 

 

Net cash (used in) provided by investing activities

 

 

21,085

 

 

 

(5,501

)

 

 

(14,029

)

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Cash payments for lease liabilities

 

 

(1,381

)

 

 

(686

)

 

 

(687

)

 

Issuance of common stock in connection with public offering, net

 

 

 

 

 

 

 

 

95,036

 

 

Proceeds from exercise of stock options

 

 

15

 

 

 

246

 

 

 

3,222

 

 

Payment of acquisition-related contingent consideration

 

 

(208

)

 

 

(264

)

 

 

(3,004

)

 

Repurchase of common stock

 

 

(2,254

)

 

 

(2,113

)

 

 

(2,088

)

 

Net cash (used in) provided by financing activities

 

 

(3,828

)

 

 

(2,817

)

 

 

92,479

 

 

EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH

 

 

(2,837

)

 

 

(340

)

 

 

830

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

(32,782

)

 

 

(44,040

)

 

 

85,087

 

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

116,762

 

 

 

160,802

 

 

 

75,715

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

83,980

 

 

$

116,762

 

 

$

160,802

 

 

 

 

 

 

 

 

 

 

 

 

 

   For the years ended December 31, 
   2017  2016  2015 

OPERATING ACTIVITIES:

    

Net income

  $30,948  $19,720  $8,167 

Adjustments to reconcile net income to net cash provided by operating activities:

    

Stock-based compensation

   6,973   6,063   6,045 

Depreciation and amortization

   6,402   5,640   5,806 

Unrealized foreign currency loss

   156   122   367 

Loss (gain) on sale of fixed assets

   (25  (28  80 

Deferred income taxes

   (649  (529  48 

Changes in assets and liabilities

    

Accounts receivable

   (22,116  (576  (3,739

Inventories

   (7,391  1,476   2,348 

Prepaid expenses and other assets

   (384  (652  (1,415

Accounts payable

   5,157   46   (2,648

Deferred revenue

   (93  (8,350  1,706 

Accrued expenses and other liabilities

   9,178   1,666   (992
  

 

 

  

 

 

  

 

 

 

Net cash provided by operating activities

   28,156   24,598   15,773 
  

 

 

  

 

 

  

 

 

 

INVESTING ACTIVITIES:

    

Purchases of investments

   (161,269  (34,133  (26,895

Proceeds from maturities and redemptions of investments

   69,253   30,421   23,934 

Purchases of property and equipment

   (4,337  (4,353  (3,744
  

 

 

  

 

 

  

 

 

 

Net cash used in investing activities

   (96,353  (8,065  (6,705
  

 

 

  

 

 

  

 

 

 

FINANCING ACTIVITIES:

    

Payments for debt issue costs

   —     (367  —   

Proceeds from exercise of stock options

   31,675   2,656   404 

Repurchase of common stock

   (1,240  (3,444  (6,090
  

 

 

  

 

 

  

 

 

 

Net cash provided by (used in) financing activities

   30,435   (1,155  (5,686
  

 

 

  

 

 

  

 

 

 

EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH

   841   318   (2,155

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

   (36,921  15,696   1,227 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD

   109,790   94,094   92,867 
  

 

 

  

 

 

  

 

 

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD

  $72,869  $109,790  $94,094 
  

 

 

  

 

 

  

 

 

 

See accompanying notes to the consolidated financial statements.

F-8


ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts, unless otherwise indicated)

1.THE COMPANY:

1.THE COMPANY:

OurThe primary goal of OraSure Technologies, Inc. (“OraSure” or “the Company”) is to empower the global community to improve health and wellness by providing access to accurate essential information through effortless tests, collection kits and services. OraSure's business is comprisedconsists of two segments: Our “OSUR”our “Diagnostics” segment, and our “Molecular Solutions” segment.

The Company's Diagnostics business primarily consists of the development, manufacture, marketing and sale of oral fluidsimple, easy to use diagnostic products and specimen collection devices using ourthe Company's proprietary technologies, as well as other diagnostic products including immunoassays and otherin vitrodiagnostic tests that are used on other specimen types. Our molecular collections systems or “DNAG”The Diagnostics business consists of the manufactureincludes tests for diseases including COVID-19, HIV and sale of specimen collection kits that are used to collect, stabilize, transport and store samples of genetic material for molecular testing in the consumer genetic, clinical genetic, academic research, pharmacogenomics, personalized medicine, microbiome and animal genetics markets.

Our OSUR diagnostic products include testsHepatitis C that are performed on a rapid basis at the point of care, and tests for drugs of abuse that are processed in a laboratory. These products are sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, and other public health organizations, distributors, government agencies, physicians’ offices, and commercial and industrial entities. We also manufactureThe Company's COVID-19 and sell medical devices used for the removal of benign skin lesions by cryosurgery or freezing. These cryosurgicalHIV products are also sold in both professional anda consumer-friendly format in the over-the-counter (“OTC”) marketsmarket in North America,the U.S. and, in the case of the HIV product, as a self-test to individuals in a number of other countries. In 2022, after obtaining a CE mark, the Company launched the OraQuick® HIV Self-Test, an oral swab in-home test for HIV-1 and HIV-2, in Europe, Centralmaking it available in several European countries. Through the Company’s Diagnostics business the Company is also developing and South America, and Australia.    commercializing products that measure adherence to HIV medications including pre-exposure prophylaxis ("PrEP").

Our “DNAG” or molecular collection systems

The Company's Molecular Solutions business is operated by our subsidiary,its wholly-owned subsidiaries, DNA Genotek Inc. ("DNAG"), a company basedDiversigen, Inc. ("Diversigen"), and Novosanis NV ("Novosanis"). The Company's Molecular Solutions business sells its products and services directly to its customers, primarily through its internal sales force in Ottawa, Canada. DNAG’s Oragene® DNA samplethe U.S. domestic market, and in many international markets, also through distributors. The Company's products primarily consist of collection kit provides anall-in-one system forkits and services used by clinical laboratories, direct-to-consumer laboratories, researchers, pharmaceutical companies, and animal health service and product providers. Most of the collection, stabilization, transportationCompany's Molecular Solutions revenues are derived from product sales to commercial customers and storage of DNA from human saliva. We also sell research use only sample collection productssales into the microbiomeacademic and tuberculosis marketsresearch markets. A significant portion of the Company's total sales is from repeat customers in both markets. Molecular Solutions customers span the disease risk management, diagnostics, pharmaceutical, biotech, companion animal and we offer our customers a suite of genomics and microbiome services called “GenoFINDTM”, which range from package customization and study design optimization to extraction, analysis and reporting services. We serve customers worldwide, including many leading research universities and hospitals.environmental markets.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of OraSure Technologies, Inc. (“OraSure”) and its wholly-owned subsidiary, DNA Genotek Inc. (“DNAG”).subsidiaries, DNAG, Diversigen, and Novosanis. All intercompany transactions and balances have been eliminated. References herein to “we,” “us,” “our,”“we”, “us”, “our”, or the “Company” mean OraSure and its consolidated subsidiary,subsidiaries, unless otherwise indicated.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. These estimates and underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the fair value of assets acquired and liabilities assumed for business combinations, the valuation of accounts receivable and inventories and assumptions utilized in impairment testing for intangible assets and goodwill, as well as calculationsestimates related to accruals, taxes, contingent consideration, and performance-based compensation expense, among others.expense. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis, using historical experience and other factors, which management believes to be reasonable under the circumstances, including the current economic environment. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment and other factors will be reflected in the financial statements in those future periods.

Employee Retention Credit

In December 2021, the Company applied for the Employee Retention Credit for payroll taxes paid in the first and second quarters of 2021 as provided by the Coronavirus Aid, Relief and Economic Security Act. The amount due from the Internal Revenue Service of $5,728 is recorded in other current assets in the Company's consolidated balance sheet as of December 31, 2022 and 2021. The amount

F-9


was received in 2023. The credit is reported in the Company's consolidated statement of operations, for the year ended December 31, 2021, within cost of products and services sold, research and development, sales and marketing and general and administrative costs in the amounts of $2,536, $1,134, $924, and $1,134, respectively.

Supplemental Cash Flow Information

In 2017, 20162022, 2021 and 2015, we2020, the Company paid income taxes of $4,309, $1,123$9,446, $13,727 and $719,$9,263, respectively.

In 2017, 2016

The Company had account receivable write-offs of $2,296, $115, and 2015, we recorded through the consolidated statements of income an increase$501 in our allowance for doubtful accounts of $172, $402022, 2021, and $341,2020, respectively. We had $200 and $369 in write-offs against the allowance for doubtful accounts in 2017 and 2016, respectively. We had no material write-offs against the allowance for doubtful accounts in 2015.

As of December 31, 2017, 20162022, 2021 and 2015, we2020, the Company had accruals for purchases of property and equipment of $449, $302$227, $8,166 and $1,256,$802, respectively.

Investments

Investments

We considerThe Company considers all investments in debt securities to beavailable-for-sale securities. These securities are comprised of guaranteed investment certificates and corporate bonds with purchased maturities greater than ninety days.Available-for-sale securities are carried at fair value, based upon quoted market prices, with unrealized gains and losses, if any, reported in stockholders’ equity as a component of accumulated other comprehensive loss.

The Company records an allowance for credit loss for the Company's available-for-sale securities when a decline in investment market value is due to credit-related factors. When evaluating an investment for impairment, the Company reviews factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value, and the probability that the scheduled cash payments will continue to be made.

The following is a summary of ourthe Company's available-for-sale securities as of December 31, 20172022 and 2016:2021:

  Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
 Fair Value 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair Value

 

December 31, 2017

       

December 31, 2022

 

 

 

 

 

 

 

 

 

Guaranteed investment certificates

  $22,261   $—     $—    $22,261 

 

$

22,109

 

 

$

 

 

$

 

 

$

22,109

 

Corporate bonds

   82,010    —      (553 81,457 

 

 

4,978

 

 

 

 

 

 

(220

)

 

 

4,758

 

Total available-for-sale securities

 

$

27,087

 

 

$

 

 

$

(220

)

 

$

26,867

 

December 31, 2021

 

 

 

 

 

 

 

 

 

Guaranteed investment certificates

 

$

33,249

 

 

$

 

 

$

 

 

$

33,249

 

Corporate bonds

 

 

20,473

 

 

 

 

 

 

(434

)

 

 

20,039

 

Total available-for-sale securities

 

$

53,722

 

 

$

 

 

$

(434

)

 

$

53,288

 

At December 31, 2022, maturities of the Company's available-for-sale securities were as follows:

 

 

 

 

 

 

 

 

 

  

 

   

 

   

 

  

 

 

 

 

 

 

 

 

 

 

 

Totalavailable-for-sale securities

  $104,271   $—     $(553 $103,718 
  

 

   

 

   

 

  

 

 

December 31, 2016

       

Guaranteed investment certificates

  $11,160   $—     $—    $11,160 
  

 

   

 

   

 

  

 

 

Totalavailable-for-sale securities

  $11,160   $—     $—    $11,160 
  

 

   

 

   

 

  

 

 

At December 31, 2017 maturities of ouravailable-for-sale securities were as follows:

       

Less than one year

  $83,403   $—     $(375 $83,028 

 

$

27,087

 

 

$

 

 

$

(220

)

 

$

26,867

 

  

 

   

 

   

 

  

 

 

Greater than one year

  $20,868   $—     $(178 $20,690 

 

$

 

 

$

 

 

$

 

 

$

 

  

 

   

 

   

 

  

 

 

Fair Value of Financial Instruments

As of December 31, 2022 and 2021, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their respective fair values based on their short-term nature.

Fair value measurements of all financial assets and liabilities that are being measured and reported on a fair value basis are required to be classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

F-10


Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and un-observable (i.e., supported by little or no market activity).

All of the Company's available-for-sale debt securities are measured as Level 2 instruments as of December 31, 2022 and 2021. The Company's guaranteed investment certificates are measured as Level 1 instruments as of December 31, 2022 and 2021.

Included in cash and cash equivalents at December 31, 2022 and 2021, was $1,730 and $1,160 invested in government money market funds. These funds have investments in government securities and are measured as Level 1 instruments.

The Company offers a nonqualified deferred compensation plan for certain eligible employees and members of the Company's Board of Directors. The assets of the plan are held in the name of the Company at a third-party financial institution. Separate accounts are maintained for each participant to reflect the amounts deferred by the participant and all earnings and losses on those deferred amounts. The assets of the plan are held in mutual funds. The fair value of the plan assets as of December 31, 2022 and 2021 was $747 and $1,763, respectively, and was calculated using the quoted market prices of the assets as of those dates. All investments in the plan are classified as trading securities and measured as Level 1 instruments. The fair value of plan assets is included in both current assets and other non-current assets with the same amounts included in accrued expenses and other non-current liabilities in the accompanying consolidated balance sheets.

As further discussed in Note 3, Business Combinations, the Company has identified the Company's contingent consideration obligations as Level 3 liabilities due to significant inputs that are required to measure the fair value of these obligations.

Accounts Receivable

Accounts receivable have been reduced by an estimated allowance for amounts that may become uncollectible in the future. This estimated allowance is based primarily on management’s evaluation of specific balances as they become past due, the financial condition of ourthe Company's customers and ourthe Company's historical experience related to write-offs.

Inventories

Inventories are stated at the lower of cost or net realizable value, with cost determined on afirst-in,first-out basis, and include the cost of raw materials, labor and overhead. The majority of ourthe Company's inventories are subject to expiration dating. Wedating, which can be extended in certain circumstances. The Company continually evaluateevaluates quantities on hand and the carrying value of ourthe Company's inventories to determine the need for reserves for excess and obsolete inventories,net realizable value adjustments, based primarily on prior experience with consideration of expected changes in the business and estimated forecastforecasts of product sales. When factors indicate that impairment has occurred, either a reserve is established against the inventories’ carrying valueThe Company reserves for unidentified scrap or the inventories are completely written off, as in the case of lapsing expiration dates. In addition to reserving for thesespoilage based on historical write-off rates. The Company also considers items identified through specific identification procedures we also reserve for unidentified scrap or spoilage underin assessing the adequacy of the Company's reserve. Although the Company makes every effort to ensure the accuracy of its forecasts of future product demand, any significant unanticipated changes in demand could have a fixed-formula methodology.significant impact on the carrying value of its inventories and reported operating results

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Additions or improvements are capitalized, while repairs and maintenance are charged to expense. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets. Buildings are typically depreciated over twenty to forty years, while computer equipment and software, machinery and equipment, and furniture and fixtures are depreciated over two to ten years.years. Building improvements are amortized over their estimated useful lives. When assets are sold, retired, or discarded, the related property amounts are relieved from the accounts, and any gain or loss is recorded in the consolidated statements of income.operations.

Intangible Assets

Intangible assets consist of a customer list,relationships, patents and product rights, acquired technology and tradenames.trade names. Patents and product rights consist of costs associated with the acquisition of patents, licenses and product distribution rights. Intangible assets are amortized using the straight-line method over their estimated useful lives of sevenfive to fifteen years.years.

F-11


Impairment of Long-Lived Assets

We assess the recoverability of our long-livedLong-lived assets, which include property and equipment and definite-lived intangible assets, are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company assesses the recoverability of the Company's long-lived assets by determining whether the carrying value of such assets can be recovered through the sum of the undiscounted future cash flows generated from the use and eventual disposition of the asset. If indicators of impairment exist, we measurethe Company measures the amount of such impairment by comparing the carrying value of the assets to the fair value of these assets, which is generally determined based on the present value of the expected future cash flows associated with the use of the assets. Expected future cash flows reflect the Company's assumptions about selling prices, volumes, costs and market conditions over a reasonable period of time. See Note 6 for discussion of impairments recorded in 2022.

Goodwill

Goodwill

Goodwill represents the excess of the purchase price we paid over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in our acquisition of DNAG in August 2011.acquired. Goodwill is not amortized but rather is tested annually for impairment or more frequently if we believethe Company believes that indicators of impairment exist. Current U.S. generally accepted accounting principles permit usthe Company to make a qualitative evaluation about the likelihood of goodwill impairment. If we concludethe Company concludes that it is more likely than not that the carrying value of a reporting unit is greater than its fair value, then wethe Company would be required to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, provided the impairment charge does not exceed the total amount of goodwill allocated to the reporting unit.

We performed our

The Company performs an annual goodwill impairment assessment as of July 31 2017 utilizingeach year. Historically this involved a qualitative evaluation and concludedanalysis that resulted in a conclusion that it was more likely than not that the fair value of our DNAGthe Company's reporting unitunits is greater than itstheir carrying value. We believe we have made reasonable estimates and assumptions to calculate

A more frequent evaluation is performed if an event occurs or circumstances change between annual tests that could more likely than not reduce the fair value of oura reporting unit. If actual future results are not consistent with management’s estimates and assumptions, we may haveunit below its carrying amount.

Revenue

Product sales. Revenue from product sales is recognized upon transfer of control of a product to takea customer based on an impairment charge inamount that reflects the future relatedconsideration the Company is entitled to, our goodwill. Future impairment tests will continue to be performed annually in the fiscal third quarter, or sooner if a triggering event occurs. As of December 31, 2017, we believe no indicators of impairment exist.

Revenue Recognition

We recognize product revenues when there is persuasive evidence that an arrangement exists, the price is fixed or determinable, title has passed and collection is reasonably assured. Product revenues are recorded net of allowances for any discounts or rebates. Other than

The Company generally does not grant product return rights to the Company's customers, except for warranty returns and return rights on sales of ourthe Company's OraQuick®In-Home HIV test to the retail trade, we do not grant price protection or product return rightsand InteliSwab®products to our customers except for warranty returns. the retail trade and certain customers.

Historically, returns arising from warranty issues have been infrequent and immaterial. Accordingly, we expensethe Company expenses warranty returns as incurred.

Our net revenues recorded on sales of the OraQuick®In-Home HIV test represent total gross revenues, less an allowance for expected returns, and customer allowances for cooperative advertising, discounts, rebates, and chargebacks. The allowance for expected returns is an estimate established by management, based upon currently available information, and is adjusted to reflect known changes in the factors that impact this estimate. Other customer allowances are at contractual rates and are recorded as a reduction of gross revenue when recognized in our consolidated statements of income.

We recordCompany records shipping and handling charges billed to ourthe Company's customers as product revenue and the related expense as cost of products sold. Taxes assessed by governmental authorities, such

Service revenues. Service revenues represent microbiome laboratory testing and analytical services. The Company recognizes revenues when the Company satisfies its performance obligations for services rendered.

Arrangements with multiple-performance obligations. In arrangements involving more than one performance obligation, which largely applies to the Company's service revenue stream, each required performance obligation is evaluated to determine whether it qualifies as salesa distinct performance obligation based on whether (i) the customer can benefit from the good or value-added taxes,service either on its own or together with other resources that are excludedreadily available and (ii) the good or services is separately identifiable from product revenues.

On June 10, 2014, we entered into a Master Program Services andCo-Promotion Agreement with AbbVie toco-promote our OraQuick® HCV testother promises in the United States. On June 30, 2016, we mutually agreedcontract. The consideration under the arrangement is then allocated to terminate our agreement effectiveeach separate distinct performance obligation based on their respective relative stand-alone selling price. The estimated selling price of each deliverable is determined using an observable cost plus margin approach. The consideration allocated to each distinct performance obligation is recognized as revenue when control is transferred for the related goods or services or when the performance obligation has been satisfied.

Other revenues. Other revenues consist primarily of royalty income and funding from grants of research and development efforts. For the year ended December 31, 2016. Accordingly, we did not record any revenue from thisco-promotion agreement during 2017. During 2016 and 2015, $18,951 and $13,479, respectively, in exclusivity revenues were recognized and recorded as2021, other revenue also included cost reimbursements under a charitable support agreement which ended in our consolidated statementsJune 2021. Royalties from licensees are based on third-party sales of income.

On June 12, 2015, we were awarded a grant for up to $10,400 in total funding fromlicensed products and are recorded when the U.S. Department of Health and Human Services (“HHS”) Office of the Assistant Secretary for Preparedness and Response’s Biomedical Advancedrelated third-party product sale occurs. Research and Development Authority (“BARDA”) relateddevelopment grant revenue is recognized pursuant to our OraQuick® Ebola rapid antigen test.International Accounting Standard 20,

F-12


Accounting for Government Grants and Disclosure of Government Assistance ("IAS 20"). The three-year, multi-phased grant included an initial commitment of $1,800 and options for up to an additional $8,600 to fund certain clinical and regulatory activities. In September 2015 and July 2017, BARDA exercised options to provide $7,200 and $1,330, respectively, in additional funding for our OraQuick® Ebola test. Amounts related to this grantexpenses are recorded asin research and development expense and the reimbursements are recorded in other revenue in our consolidated statementsrevenue. Funding of incomeresearch and development efforts and charitable support reimbursements are recorded as the activities are being performed and the related costs are incurred. During 2017, 2016 and 2015, $1,999, $1,707 and $1,783, respectively, were recognized in connection with this grant.

In August 2016, we were awarded a contract for up to $16,600 in total funding from BARDA related to our rapid Zika test. Thesix-year, multi-phased contract includes an initial commitment of $7,000 and options for up to an additional $9,600 to fund the evaluation of additional product enhancements, and clinical and regulatory activities. In May 2017, BARDA exercised an option to provide $2,600 in additional funding for our rapid Zika test. Funding received under this contract is recorded as other revenue in our consolidated statements of income as the activities are being performed and the related costs are incurred. During 2017 and 2016, $2,388 and $616, respectively, were recognized in connection with this grant.

In June 2017, we entered into a four-year Charitable Support Agreementaccordance with the Bill & Melinda Gates Foundation (“Gates Foundation”) that will enable us to offer our OraQuick® HIV self-test at an affordable price in 50 developing countries with funding from the Gates Foundation. respective agreements.

Deferred Revenue.The funding will consist of support payments tied to volume of product sold by us and reimbursement of certain related costs. The funding from the Gates Foundation will be in an aggregate amount not to exceed $20,000 over the four-year term or $6,000 each year of the agreement. Funding received under this agreement in the form of support payments for product purchases is recorded as a component of product revenue. During 2017, $1,047 of support payments were recognized in product revenue in connection with this agreement. Funding received in the form of reimbursement of certain related costs is recorded as other revenue in our consolidated statements of income. During 2017, $689 was recognized in other revenue in connection with this agreement.

Customer Sales Returns and Allowances

We do not grant return rights to our customers for any product, except for our OraQuick®In-Home HIV test. Accordingly, we have recorded an estimate of expected returns as a reduction of gross OraQuick®In-Home HIV product revenues in our consolidated statements of income. This estimate reflects our historical sales experience to retailers and consumers, as well as other retail factors, and is reviewed regularly to ensure that it reflects

potential product returns. As of December 31, 2017 and 2016, the reserve for sales returns and allowances was $217. If actual product returns differ materially from our reserve amount, or if a determination is made that this product’s distribution would be discontinued in whole or in part by certain retailers, then we would need to adjust our reserve. Should the actual level of product returns vary significantly from our estimates, our operating and financial results could be materially affected.

Deferred Revenue

We recordCompany records deferred revenue when funds are received prior to the recognition of the associated revenue. Deferred revenue as of December 31, 20172022 and 2016 includes2021 included customer prepayments of $1,314$1,533 and $1,388,$1,843, respectively. Deferred revenue as of December 31, 2022 and 2021 also included $740 and $1,093, respectively, associated with a long-term contract that has variable pricing based on volume. The average price over the life of contract was determined based on expected revenues and revenue is recognized at that rate when the product is delivered to the customer.

Financing and Payment. The Company's payment terms vary by the type and location of our customer and products or services offered. Payment terms differ by jurisdiction and customer but payment is generally required in a term ranging from 30 to 120 days from date of shipment or satisfaction of the performance obligation.

For certain products or services and customer types, the Company may require payment before the products are delivered or services are rendered to the customer.

Practical expedients and exemptions. Taxes assessed by governmental authorities, such as sales or value-added taxes, are excluded from product revenues.

Sales commissions are expensed when incurred if the amortization period is one year or less. These costs are recorded in sales and marketing expense in the consolidated statements of operations. If the amortization period exceeds one year, the Company defers the cost of the commission and expenses it over the life of the related sales contract.

Revenues by product. The following table represents total net revenues by product line:

 

 

Years ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

COVID-19

 

$

243,325

 

 

$

76,874

 

 

$

50,927

 

Genomics

 

 

54,335

 

 

 

63,350

 

 

 

36,878

 

HIV

 

 

38,812

 

 

 

42,144

 

 

 

44,224

 

HCV

 

 

13,369

 

 

 

11,783

 

 

 

8,448

 

Risk assessment testing

 

 

10,269

 

 

 

9,678

 

 

 

9,194

 

Microbiome

 

 

7,503

 

 

 

7,944

 

 

 

5,474

 

Laboratory services

 

 

7,296

 

 

 

11,840

 

 

 

8,746

 

Other product and service revenues

 

 

3,138

 

 

 

3,284

 

 

 

2,490

 

Net product and services revenues

 

$

378,047

 

 

$

226,897

 

 

$

166,381

 

Royalty income

 

 

2,683

 

 

 

4,420

 

 

 

3,432

 

Other non-product revenues

 

 

6,749

 

 

 

2,357

 

 

 

1,908

 

Other revenues

 

 

9,432

 

 

 

6,777

 

 

 

5,340

 

Net revenues

 

$

387,479

 

 

$

233,674

 

 

$

171,721

 

Revenues by geographic area. The following table represents total net revenues by geographic area, based on the location of the customer:

 

 

Years ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

United States

 

$

350,206

 

 

$

188,383

 

 

$

130,835

 

Europe

 

 

11,536

 

 

 

13,799

 

 

 

12,068

 

Other regions

 

 

25,737

 

 

 

31,492

 

 

 

28,818

 

 

 

$

387,479

 

 

$

233,674

 

 

$

171,721

 

Customer and Vendor Concentrations

One of our customersConcentrations. The Company had one customer that accounted for 37% and 15%more than 57% of ourthe Company's consolidated accounts receivable as of December 31, 20172022 and 2016, respectively.none as of December 31, 2021. The same customer accounted for approximately 25%58% of our netthe Company's consolidated revenues for the year ended December 31, 2017. Another customer2022. The Company had no customers that accounted for approximately 15% and 12%more than 10% of ourthe Company's consolidated net consolidated revenues for the years ended December 31, 20162021 and 2015, respectively.    2020.

WeF-13


The Company currently purchasepurchases certain products and critical components of ourthe Company's products from sole-supply vendors. If these vendors are unable or unwilling to supply the required components and products, wethe Company could be subject to increased costs and substantial delays in the delivery of ourthe Company's products to ourthe Company's customers. Also, our subsidiary, DNAG, uses two third-partyThird-party suppliers toalso manufacture itscertain products. OurThe Company's inability to have a timely supply of any of these components and products could have a material adverse effect on ourthe Company's business, as well as ourthe Company's financial condition and results of operations.

The Company’s Intercept i2®he collection device is manufactured and supplied under a long-term agreement with Thermo Fisher, the sole-source supplier for these products. DNAG has three long-term contract manufacturing relationships to supply virtually all of its products, including the Oragene® product line. Many of the raw materials and components used in these products are also purchased from third parties, some of which are purchased from a single source supplier. The Company is actively seeking to qualify other suppliers that can manufacture and supply the raw materials and components for the DNAG products.

Business Combinations and Contingent Consideration

Acquired businesses are accounted for using the acquisition method of accounting, which requires that the purchase price be allocated to the net assets acquired at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Amounts allocated to contingent consideration are recorded to the balance sheet at the date of acquisition based on their relative fair values. The purchase price allocation requires the Company to make significant estimates and assumptions, especially at the acquisition date, with respect to intangible assets. Although the Company believes the assumptions and estimates it has made are reasonable, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

The Company accounts for contingent consideration in accordance with applicable guidance provided within the business combination accounting standard. As part of the Company's consideration for the recent acquisitions, the Company is contractually obligated to pay certain consideration resulting from the outcome of future events. Therefore, the Company is required to update the Company's underlying assumptions each reporting period, based on new developments, and record such contingent consideration liabilities at fair value until the contingency is resolved. Changes in the fair value of the contingent consideration liabilities are recognized each reporting period and included in the Company's consolidated statements of operations. The Company's estimates of fair value are based on assumptions the Company believes to be reasonable, but the assumptions are uncertain and involve significant judgment by management. Updates to these assumptions could have a significant impact on the Company's results of operations in any given period and any updates to the fair value of the contingent consideration could differ materially from the previous estimates.

Examples of critical estimates used in valuing certain intangible assets and contingent consideration include:

future expected cash flows from sales and acquired developed technologies;
the acquired company's trade name and customer relationships as well as assumptions about the period of time the acquired trade name and customer relationships will continue to be used in the combined company's portfolio;
the probability of meeting the future events; and
discount rates used to determine the present value of estimated future cash flows.

These estimates are inherently uncertain and unpredictable, and if different estimates were used the purchase price for the acquisition could be allocated to the acquired assets and liabilities differently from the allocation that the Company has made. In addition, unanticipated events and circumstances may occur, which may affect the accuracy or validity of such estimates, and if such events occur the Company may be required to record a charge against the value ascribed to an acquired asset or an increase in the amounts recorded for assumed liabilities.

Research and Development

Research and development expenses consist of costs incurred in performing research and development activities, including salaries and benefits, facilities expenses, overhead expenses, clinical trial and related clinical manufacturing expenses, contract services and other outside expenses. Research and development costs are charged to expense as incurred.

F-14


Advertising Expenses

Advertising costs are charged to expense as incurred. During 2017, 2016,2022, 2021, and 2015, we2020, the Company incurred $717, $626,$4,849, $5,103, and $623,$1,126, respectively, in advertising expenses.

Stock-Based Compensation

We accountThe Company accounts for stock-based compensation to employees and directors using the fair value method. We recognizeThe Company recognizes compensation expense for stock option and restricted stock awards issued to employees and directors on a straight-line basis over the requisite service period of the award. We recognizeThe Company recognizes compensation expense related to performance-based restricted stock units based on assumptions as to what percentage of each performance target will be achieved. We evaluateThe Company evaluates these target assumptions on a quarterly basis and adjustadjusts compensation expense related to these awards, as appropriate. To satisfy the exercise of options, issuance of restricted stock, or redemption of performance-based restricted stock units, we issuethe Company issues new shares rather than purchase shares in the open market.

Income Taxes

We followThe Company follows the asset and liability method for accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial

statement carrying amounts of existing assets and liabilities and the respective tax basis of assets and liabilities, as well as operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates for the respective taxing jurisdiction that are expected to apply to taxable income in the years in which those temporary differences and operating loss and credit carryforwards are expected to be recovered, settled or utilized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

We assessThe Company assesses the realizability of ourthe Company's net deferred tax assets on a quarterly basis. If, after considering all relevant positive and negative evidence, it is more likely than not that some portion or all of the net deferred tax assets will not be realized, we reduce ourthe Company reduces its net deferred tax assets by a valuation allowance. The realization of the net deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of ourthe Company's net operating loss carryforwards.

Foreign Currency Translation

The assets and liabilities of ourthe Company's foreign operations are translated into U.S. dollars at current exchange rates as of the balance sheet date, and revenues and expenses are translated at average exchange rates for the period. Resulting translation adjustments are reflected in accumulated other comprehensive loss, which is a separate component of stockholders’ equity.

Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than functional currency are included in ourthe Company's consolidated statements of incomeoperations in the period in which the change occurs. Net foreign exchange gains (losses) gains resulting from foreign currency transactions that are included in other income (expense) in ourthe Company's consolidated statements of incomeoperations were $(1,442)$1,553, $(607)$(667), and $1,005$(337) for the years ended December 31, 2017, 2016,2022, 2021, and 2015,2020, respectively.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed in a manner similar to basic earnings (loss) per share except that the weighted-average number of shares outstanding is increased to include incremental shares from the assumed vesting or exercise of dilutive securities, such as common stock options, unvested restricted stock or performance stock units, unless the impact is antidilutive.anti-dilutive. The number of incremental shares is calculated by assuming that outstanding stock options were exercised and unvested restricted shares and performance stock units were vested, and the proceeds from such exercises or vesting were used to acquire shares of common stock at the average market price during the reporting period.

The Basic and dilutive computations of basic and diluted earningsnet loss per share are the same in periods in which a net loss exists as follows:the dilutive effects of excluded items would be anti-dilutive.

   Year ended December 31, 
   2017   2016   2015 

Net income

  $30,948   $19,720   $8,167 
  

 

 

   

 

 

   

 

 

 

Weighted average shares of common stock outstanding:

      

Basic

   59,050    55,615    56,397 

Dilutive effect of stock options, restricted stock, and performance stock units

   1,974    898    449 
  

 

 

   

 

 

   

 

 

 

Diluted

   61,024    56,513    56,846 
  

 

 

   

 

 

   

 

 

 

Earnings per share:

      

Basic

  $0.52   $0.35   $0.14 
  

 

 

   

 

 

   

 

 

 

Diluted

  $0.51   $0.35   $0.14 
  

 

 

   

 

 

   

 

 

 

For the years ended December 31, 2017, 2016,2022, 2021, and 2015,2020 outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 180, 2,546,436, 769, and 4,314984 shares, respectively, were excluded from the computation of diluted earningsloss per share as their inclusion would have been anti-dilutive.share.

F-15


Accumulated Other Comprehensive Loss

We classifyThe Company classifies items of other comprehensive income (loss) by their nature and disclosediscloses the accumulated balance of other comprehensive loss separately from accumulated deficit and additionalpaid-in capital in the stockholders’ equity section of ourthe Company's consolidated balance sheets.

We haveThe Company has defined the Canadian dollar as the functional currency of ourthe Company's Canadian subsidiary, DNAG, and the Company has defined the Euro as such, the functional currency of the Company's Belgian subsidiary, Novosanis. The results of its operations are translated into U.S. dollars, which is the reporting currency of the Company. Accumulated other comprehensive loss at December 31, 20172022 consists of $9,787$18,215 of currency translation adjustments and $553$220 of net unrealized losses on marketable securities. Accumulated other comprehensive loss at December 31, 2021 consists of $9,643 of currency translation adjustments and $434 of net unrealized losses on marketable securities, which represents the fair market value adjustment for ourthe Company's investments portfolio. Accumulated other comprehensive loss at December 31, 2016 consists of $14,220 of currency translation adjustments.

Fair Value of Financial Instruments

As of December 31, 2017 and 2016, the carrying values of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable approximate their respective fair values based on their short-term nature.

Fair value measurements of all financial assets and liabilities that are being measured and reported on a fair value basis are required to be classified and disclosed in one of the following three categories:

Level 1:Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2:Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3:Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

All of ouravailable-for-sale securities are measured as Level 1 instruments as of December 31, 2017 and 2016.

Included in cash and cash equivalents at December 31, 2017 and 2016, was $40,760 and $83,704 invested in government money market funds. These funds have investments in government securities and are measured as Level 1 instruments.

We offer a nonqualified deferred compensation plan for certain eligible employees and members of our Board of Directors. The assets of the plan are held in the name of the Company at a third-party financial institution. Separate accounts are maintained for each participant to reflect the amounts deferred by the participant and all earnings and losses on those deferred amounts. The assets of the plan are held in mutual funds and Company stock. The fair value of the plan assets as of December 31, 2017 and 2016 was $3,514 and $1,980, respectively, and was calculated using the quoted market prices of the assets as of those dates. All investments in the plan are classified as trading securities and measured as Level 1 instruments. The fair value of plan assets is included in other assets with the same amount included in other liabilities in the accompanying consolidated balance sheets.

In 2017, we purchased certificates of deposit (“CDs”) from a commercial bank. The CDs bear interest at rates ranging from 0.89% to 1.03% and mature periodically through January 22, 2018. The carrying values of the CDs approximate their fair value. These CDs serve as collateral for certain standby letters of credit and are reported as restricted cash on the accompanying consolidated balance sheets. Also see Note 11 – Commitments and Contingencies.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued converged guidance on recognizing revenue in contracts with customers, ASU2014-09,Revenue from Contracts with Customers. The intent of the new standard is to improve financial reporting and comparability of revenue globally. The core principle of the standard is for a company to recognize revenue in a manner that depicts the transfer of goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of the time value of money in the transaction price, and in certain circumstances, allowing estimates of variable consideration to be recognized before contingencies are resolved. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2017.

We have completed our evaluation of the new standard and have assessed the impacts of adoption on our consolidated financial statements and disclosures. Based on our evaluation of our current contracts and revenue streams, revenue recognition is mostly consistent under both the previous and new standard, with the exception of one revenue stream within our drug testing kits segment, which is described below.

We believe the key changes in the standard that impact our revenue recognition relate to the allocation of the transaction price to performance obligations and the estimate of unexercised rights (“breakage”) associated with the contracts. Prior to the adoption of ASU2014-09, we used the residual value method to allocate the transaction prices related to our drug testing kits. With the issuance of ASU2014-09, we have determined the more appropriate method to be based on the stand-alone selling price. This change in methodology also impacts our estimated breakage amount.

The FASB allows two adoption methods under ASU2014-09. The guidance may be adopted through either retrospective application to all periods presented in the consolidated financial statements (full retrospective) or through a cumulative effect adjustment to retained earnings at the effective date (modified retrospective). We adopted the new standard effective January 1, 2018 using the modified retrospective transition method. Under that method, we applied the rules to all contracts existing as of January 1, 2018. We estimate the cumulative effect recorded to the opening balance of retained earnings of the above impacted revenue stream is approximately $163.

The disclosures in our notes to the consolidated financial statements related to revenue recognition will be significantly expanded under the new standard, specifically around the quantitative and qualitative information about performance obligations, changes in contract assets and liabilities, and disaggregation of revenue.    

In July 2015,March 2020, the FASB issued ASU2015-11,SimplifyingAccounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848) Facilitation of the MeasurementEffects of Inventory, which requires an entity that uses thefirst-in,first-out method for inventory measurement to report inventory cost at the lower of cost and net realizable value versus the current measurement principle of lower of cost or market.Reference Rate Reform on Financial Reporting. The ASU requires prospective adoption for inventory measurements for fiscal years beginning after December 15, 2016.    We adopted ASU2015-11 on January 1, 2017. The adoptionpurpose of this standard didupdate is to provide optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU were effective upon issuance and could be applied prospectively through December 31, 2022. The FASB issued an amendment, ASU 2022-06, Deferral of the Sunset Date of Topic 848, in December 2022, which, extends the date for prospective application to December 31, 2024. Management has evaluated this ASU and concluded that it will not have a material impact on ourthe Company's Consolidated Financial Statements.

Reclassifications

Certain prior period amounts have been reclassified to conform to current year presentation. See Note 4 for discussion of the reclassification related to the U.S. Department of Defense contract.

3.BUSINESS COMBINATIONS

UrSure

On July 22, 2020, the Company acquired all of the outstanding stock of UrSure, Inc. (“UrSure”), pursuant to the terms of a merger agreement. The initial aggregate purchase price of this transaction was $3,000, adjusted for certain transaction costs, indebtedness, and holdback amounts, and was funded with cash on hand. A portion of the purchase price was deposited into an escrow account for a limited period after closing, pursuant to indemnification obligations under the merger agreement.

During the year ended December 31, 2020, the Company incurred a total of $393 of acquisition related costs, including accounting, legal, and other professional fees, all of which were expensed and reported as a component of general and administrative expense in the consolidated statement of operations for the year ended December 31, 2020.

Pursuant to the Company's acquisition agreement, the Company was to pay up to an additional $28,000 of contingent consideration over the three years following the acquisition date based on the achievement of certain performance criteria as defined under the agreements, including generating certain revenue dollars, and the achievement of certain clinical milestones associated with the development of certain new technology. The Company, with the assistance of an independent valuation specialist, determined the estimated acquisition-date fair value of the acquisition-related contingent consideration of $3,440. The fair value was determined using a probability-weighted model based on the Company's assessment of the likelihood that the benchmarks will be achieved. The probability-weighted payments were then discounted using a discount rate based on an internal rate of return analysis using the probability-weighted cash flows. The fair value measurement was based on significant inputs, including the likelihood of the achievement of clinical milestones and revenue forecasts, not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. As of December 31, 2022, it is not likely the Company will be required to make a material payment.

The following table represents the change in contingent consideration:

F-16


Estimated fair value of contingent consideration as of acquisition date

 

$

3,440

 

Change in fair value during the period

 

 

(989

)

Balance as of December 31, 2020

 

 

2,451

 

Payments made during the period

 

 

(406

)

Change in fair value during the period

 

 

(1,485

)

Balance as of December 31, 2021

 

 

560

 

Payments made during the period

 

 

(208

)

Change in fair value during the period

 

 

(188

)

Balance as of December 31, 2022

 

$

164

 

The change in fair value during the years ended December 31, 2022, 2021 and 2020 is a result of delays in achieving certain product development milestones and a decrease in associated revenue forecasts as result of these delays.

Revenues from UrSure primarily consist of grant money received to fund the development of certain new technology. Effective as of July 22, 2020, the financial statementsresults of UrSure are included in the Company's Diagnostics segment.

The Company finalized its valuation of the assets acquired and related disclosures.liabilities assumed. The total consideration of $3,037 was allocated to assets acquired and liabilities assumed as of the acquisition date as follows:

Assets Acquired

 

 

 

Accounts receivable

 

$

285

 

Other current assets

 

 

24

 

Other assets

 

 

6

 

Intangibles

 

 

3,600

 

Goodwill

 

 

3,586

 

Total assets acquired

 

 

7,501

 

Liabilities Assumed

 

 

 

Current liabilities

 

 

335

 

Deferred tax liability

 

 

689

 

Total liabilities assumed

 

 

1,024

 

Net Assets Acquired

 

 

6,477

 

Fair value of contingent consideration

 

 

(3,440

)

Net Cash Paid (net of cash acquired of $111)

 

$

3,037

 

In February 2016,The purchase price was allocated to the FASB issued ASU2016-02,Leases, which requires entities to begin recordingtangible assets and identifiable intangible assets acquired and liabilities from leasesassumed based on their acquisition-date estimate fair values. The identifiable intangible assets principally included developed technology, which is subject to amortization on a straight-line basis and is being amortized over a ten year estimated useful life.

The Company, with the assistance of an independent valuation specialist, assessed the fair value of the assets of UrSure. The income approach was used to value the acquired intangibles and the fair value measurements were primarily based on significant inputs that are not observable in the market and are considered Level 3 fair value measurements. The income approach estimates fair value for an asset based on the balance sheet. The new guidance will also require significant additional disclosures about the amount, timing and uncertaintypresent value of cash flows from leases. projected to be generated by the asset. Projected cash flows are discounted at a required rate of return that reflects the relative risk of achieving the cash flows and the time value of money.

The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2018, using a modified retrospective approach. Early adoption is permitted. We are evaluating the effect that ASU2016-02 may have on our consolidated financial statements and related disclosures.

In March 2016, the FASB issued authoritative guidance under ASU2016-09,Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. ASU2016-09 provides for simplification of several aspectsuseful lives of the accountingintangible assets were estimated based on the expected future economic benefit of the assets and are being amortized over the estimated useful life in proportion to the economic benefits consumed using the straight-line method.

The amortization of intangible assets is not deductible for share-based payment transactions, including income tax consequences, classification of awardspurposes.

Goodwill is calculated as either equity or liabilities and classification on the statement of cash flows. We adopted ASU2016-09 on January 1, 2017. Since we have a full valuation allowance against our U.S. net deferred tax assets, the adoption of this standard for recognition of the tax effect of deductions for employee share awards in excess of compensation costs (“windfall”) did not have a material impact on our consolidated financial statements and related disclosures. See Note 8 – Income Taxes, for additional information. Should our full valuation allowance be reversed in future periods, the adoption of this new guidance will introduce more volatility in the calculation of our effective tax rate, depending on the Company’s share price at exercise or vesting of share-based awards as compared to grant date. The other provisions of ASU2016-09 did not have a material impact on our consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance related to cash flows presentation and is effective for annual reporting periods beginning after December 15, 2017, subject to early adoption. The majority of the guidance in ASU2016-15 is consistent with our current cash flow classifications and we do not expect the adoption of this standard will have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU2017-04,Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amountacquisition date fair value of the consideration transferred and the fair value of the reporting unit. This updatenet assets acquired, and represents the future economic benefits that the Company expects to achieve as a result of the acquisition. The Company believes the goodwill related to the acquisition was a result of gaining a complementary product offering that will enable the Company to leverage those products with existing and new customers. The goodwill is not deductible for income tax purposes. All of the goodwill identified above has been allocated to the Company's Diagnostics segment.

4.GOVERNMENT CAPITAL CONTRACTS:

F-17


In September 2021, the Company entered into an agreement for $109,000 in funding from the U.S. Department of Defense (the “DOD”), in coordination with the Department of Health and Human Services, to build additional manufacturing capacity in the United States for the Company's InteliSwab® COVID-19 Rapid Tests as part of the nation’s pandemic preparedness plan. Funding will be effectivepaid to the Company based on achievement of milestones expected to occur through December 2023 for annualthe design, acquisition, installation, qualification and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. We adopted ASU2017-04acceptance of the manufacturing equipment, as set forth in the secondagreement. In accordance with the milestone payment schedule, 15% of the total will not be funded until the completion of the final validation testing, which is scheduled to occur in late 2023. The Company began making payments to vendors for the capital project during the fourth quarter of 2017.2021. The adoptionCompany began receiving funds from the DOD in January 2022 and has received $60,331 as of the date of this standard did not have a material impact on our consolidated financial statements and related disclosures.

In March 2017, the FASB issued ASU2017-08,Receivables-Nonrefundable Fees and Other Costs (Subtopic310-20): Premium Amortization on Purchased Callable Debt Securities, which shortens the premium amortization period for purchasednon-contingently callable debt securities. Shortening the amortization periodreport. The remaining $48,669 is generally expected to more closely alignbe collected within the interest income recognitionnext year.

Activity for these capital contracts is accounted for pursuant to IAS 20, Accounting for Government Grants and Disclosure of Government Assistance. Funding received in relation to capital-related costs incurred for government contracts is recorded as a reduction to the cost of property, plant and equipment and reflected within investing activities in the consolidated statements of cash flows; and associated unpaid liabilities and government proceeds receivable are considered non-cash changes in such balances within the operating section of the consolidated statements of cash flows. Property, plant and equipment in the amount of $14,729 that was recorded on the Company's consolidated balance sheet as of December 31, 2021 was reclassified in 2022 as the assets were allocated to the DOD build out. The consolidated balance sheet as of December 31, 2021 has been updated to reflect a reduction of $14,729 in property, plant and equipment and an increase in other current assets of $10,875 and other noncurrent assets of $3,854 for amounts due from DOD. The respective investing activities on the consolidated cash flows for the year ended December 31, 2021 have also been reclassified.

The DOD also reimburses the Company for certain engineering consulting costs. These expenses are reflected in research and development expenses as incurred with the expectations incorporatedcorresponding amount presented in other income. For the year ended December 31, 2022, $1,422 was recorded in research and development expenses and other income. Amounts earned in excess of the Company's expected costs for the project for project management are recognized straight-line in other income over the term of the government contract. The Company recognized $2,246 and $561 of such income, which is reported as other income in the market pricing onCompany's consolidated statement of operations for the underlying securities. This ASU is effectiveyear ended December 31, 2022 and 2021, respectively.

Additionally, during 2021, the Company received $531 in funding from the Commonwealth of Pennsylvania, acting through the Department of Community and Economic Development, for annualthe purchase of machinery and interim periodsequipment as part of an expansion of manufacturing operations in fiscal years beginning after December 15, 2018. Early adoption is permitted. WePennsylvania. All related purchases were completed in 2021.

The balances corresponding to government contracts included in the Company's consolidated balance sheet are evaluating the effect that ASU2017-08 may have on our consolidated financial statements and related disclosures, but do not anticipate the adoption will have a material impact on our financial results.as follows:

In May 2017, the FASB issued ASU No. 2017-09,Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, to provide clarity to which changes

 

 

December 31,
2022

 

 

December 31,
2021

 

Other current assets:

 

 

 

 

 

 

Billed receivables

 

$

 

 

$

9,913

 

Unbilled receivables

 

 

27,013

 

 

 

20,591

 

Total other current assets

 

 

27,013

 

 

 

30,504

 

Other non-current assets

 

 

 

 

 

3,854

 

Accrued expenses and other current liabilities

 

$

(318

)

 

$

(8,103

)

The activity corresponding to the terms or conditionsgovernment contracts included in the Company's consolidated statements of a share-based payment award require an entity to apply modification accounting in Topic 718. This update will be effective for annual periods and interim periods in fiscal years beginning after December 15, 2017 with early adoption permitted. We do not expect the adoption will have a material effect on our consolidated financial statements.cashflows is as follows:

 

 

December 31,
2022

 

 

December 31,
2021

 

Cost of assets, cumulative

 

$

83,359

 

 

$

26,224

 

Reduction for funding earned to date, not yet received

 

 

(22,497

)

 

 

(25,693

)

Reduction for funding received to date

 

 

(60,862

)

 

 

(531

)

Total property, plant and equipment, net

 

$

 

 

$

 

F-18


5. INVENTORIES:

 

3.INVENTORIES:

 

 

December 31,

 

 

 

2022

 

 

2021

 

Raw materials

 

$

42,445

 

 

$

33,168

 

Work in process

 

 

2,335

 

 

 

2,252

 

Finished goods

 

 

51,452

 

 

 

17,718

 

 

 

$

96,232

 

 

$

53,138

 

During 2022, 2021, and 2020, the Company recorded adjustments to inventory which had a cost of $15,618, $13,400, and $2,564, respectively. The adjustments in 2021 included a write-off of $3,008 of COVID-19 antibody inventory, which the Company does not believe the Company can sell as a result of the decision to no longer pursue an EUA for the ELISA antibody test. Additionally, a significant portion of the Company's 2022 and 2021 adjustments were related to production and tech-transfer issues associated with the Company's COVID-19 rapid test.

6.PROPERTY, PLANT AND EQUIPMENT:

 

   December 31, 
   2017   2016 

Raw materials

  $10,299   $5,399 

Work in process

   199    1,034 

Finished goods

   8,845    5,366 
  

 

 

   

 

 

 
  $19,343   $11,799 
  

 

 

   

 

 

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

Land

 

$

1,118

 

 

$

1,118

 

Buildings and improvements

 

 

35,582

 

 

 

35,420

 

Machinery and equipment

 

 

60,725

 

 

 

57,919

 

Computer equipment and software

 

 

16,681

 

 

 

14,700

 

Furniture and fixtures

 

 

4,064

 

 

 

4,228

 

Construction in progress

 

 

11,124

 

 

 

21,207

 

 

 

 

129,294

 

 

 

134,592

 

Less accumulated depreciation

 

 

(69,881

)

 

 

(61,157

)

 

 

$

59,413

 

 

$

73,435

 

4.PROPERTY AND EQUIPMENT:
During the year ended December 31, 2022, management determined several manufacturing lines and associated supporting assets will not be utilized due to changes in forecasted demand for the products the lines are intended to produce. As a result of this decision, the Company determined that the carrying values of the equipment are not recoverable and recorded aggregate pre-tax asset impairment charges of $8,585 and $4,912 to the Molecular Solutions and Diagnostics segments, respectively, to write the assets down to their estimated fair values. This resulted in the assets being fully impaired. This charge is reported within loss on impairments in the consolidated statement of operations.

   December 31, 
   2017   2016 

Land

  $1,118   $1,118 

Buildings and improvements

   20,726    20,179 

Machinery and equipment

   26,685    22,764 

Computer equipment and software

   9,131    8,357 

Furniture and fixtures

   2,194    2,113 

Construction in progress

   897    1,569 
  

 

 

   

 

 

 
   60,751    56,100 

Less accumulated depreciation

   (39,379   (36,067
  

 

 

   

 

 

 
  $21,372   $20,033 
  

 

 

   

 

 

 

The Company estimated the fair value of the impaired long-lived assets using a market approach, which required the Company to estimate the value that would be received for the equipment in the most advantageous market for that equipment in an orderly transaction between market participants. Due to the extremely specialized nature of the manufacturing equipment and various market data points, the estimated fair value was not significant. The Company's fair value estimates were representative of Level 3 measurements within the fair value hierarchy due to the significant level of estimation involved and the lack of transparency as to the inputs used.

Depreciation expense was $3,434, $3,149,$11,740, $7,498, and $2,992$5,514 for 2017, 2016,2022, 2021, and 2015,2020, respectively. See Note 4 for discussion of prior year reclassification.

7.GOODWILL AND OTHER INTANGIBLE ASSETS:

5.GOODWILL AND OTHER INTANGIBLE ASSETS:

The following table represents total goodwill by operating segment:

F-19


 

 

December 31,

 

 

 

2022

 

 

2021

 

Diagnostics

 

$

 

 

$

3,604

 

Molecular Solutions

 

 

35,104

 

 

 

36,675

 

 

 

$

35,104

 

 

$

40,279

 

The changes in goodwill are as follows:

  December 31, 

 

December 31,

 

  2017   2016 

 

2022

 

 

2021

 

Balance as of January 1

  $18,793   $18,250 

 

$

40,279

 

 

$

40,351

 

Impairment

 

 

(3,604

)

 

 

 

Purchase price adjustment

 

 

 

 

 

18

 

Change related to foreign currency translation

   1,290    543 

 

 

(1,571

)

 

 

(90

)

  

 

   

 

 

Balance as of December 31

  $20,083   $18,793 

 

$

35,104

 

 

$

40,279

 

  

 

   

 

 

During the second quarter of 2022, the Company determined that a triggering event occurred in relation to the depressed market price of the Company's common stock and corresponding decline in the Company's market capitalization. As a result, the Company performed an interim quantitative goodwill impairment test and concluded that the carrying value of the Company's Diagnostics reporting unit exceeded its estimated fair value and the goodwill balance for that segment was fully impaired. The Company recognized a pre-tax impairment charge of $3,604 during the year ended December 31, 2022, which is reported in loss on impairments in the Company's consolidated statement of operations. The Company's quantitative goodwill impairment test concluded that the carrying value of the Company's Molecular Solutions reporting unit exceeded its estimated fair value and no impairment of the related goodwill exists.

Intangible assets consist of the following:

      December 31, 2017 

 

December 31, 2022

 

  Amortization
Period (Years)
   Gross   Accumulated
Amortization
   Net 

 

Amortization
Period (Years)

 

Gross

 

 

Accumulated Amortization

 

 

Net

 

Customer list

   10   $9,960   $(6,122  $3,838 

Customer relationships

 

10

 

$

14,286

 

 

$

(11,011

)

 

$

3,275

 

Patents and product rights

   10    5,400    (4,258   1,142 

 

5

 

 

7,620

 

 

 

(6,615

)

 

 

1,005

 

Acquired technology

   7    7,737    (6,690   1,047 

Developed technology

 

7-10

 

 

15,478

 

 

 

(9,940

)

 

 

5,538

 

Tradename

   15    3,818    (1,622   2,196 

 

5-15

 

 

5,387

 

 

 

(3,511

)

 

 

1,876

 

    

 

   

 

   

 

 

 

 

 

$

42,771

 

 

$

(31,077

)

 

$

11,694

 

    $26,915   $(18,692  $8,223 
    

 

   

 

   

 

 
      December 31, 2016 
  Amortization
Period (Years)
   Gross   Accumulated
Amortization
   Net 

Customer list

   10   $9,321   $(4,830  $4,491 

Patents and product rights

   10    5,400    (3,808   1,592 

Acquired technology

   7    7,240    (5,279   1,961 

Tradename

   15    3,573    (1,280   2,293 
    

 

   

 

   

 

 
    $25,534   $(15,197  $10,337 
    

 

   

 

   

 

 

 

 

 

 

December 31, 2021

 

 

 

Amortization
Period (Years)

 

Gross

 

 

Accumulated
Amortization

 

 

Net

 

Customer relationships

 

10

 

$

15,016

 

 

$

(11,205

)

 

$

3,811

 

Patents and product rights

 

5

 

 

7,785

 

 

 

(6,241

)

 

 

1,544

 

Developed technology

 

7-10

 

 

16,293

 

 

 

(9,725

)

 

 

6,568

 

Tradename

 

5-15

 

 

5,661

 

 

 

(3,241

)

 

 

2,420

 

 

 

 

 

$

44,755

 

 

$

(30,412

)

 

$

14,343

 

Patents and products rights are made up of the following:

   December 31, 
   2017   2016 

HIV-related

  $900   $900 

HCV-related

   4,500    4,500 
  

 

 

   

 

 

 
   5,400    5,400 

Less accumulated amortization

   (4,258   (3,808
  

 

 

   

 

 

 
  $1,142   $1,592 
  

 

 

   

 

 

 

Amortization expense for 2017, 2016,2022, 2021, and 20152020 was $2,641, $2,538,$2,269, $3,260, and $2,704,$3,246, respectively.

Amortization expense for each of the five succeeding fiscal years and beyond is estimated as follows:

2023

 

$

2,221

 

2024

 

 

2,183

 

2025

 

 

1,947

 

2026

 

 

1,591

 

2027

 

 

1,520

 

Beyond

 

 

2,232

 

 

 

$

11,694

 

F-20


8.ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:

 

2018

  $2,639 

2019

   1,626 

2020

   1,417 

2021

   1,173 

2022

   246 

Beyond

   1,122 
  

 

 

 
  $8,223 
  

 

 

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

Payroll and related benefits

 

$

14,103

 

 

$

15,570

 

Commitment to purchase under government contract

 

 

 

 

 

8,103

 

Professional fees

 

 

4,685

 

 

 

3,335

 

Sales tax payable

 

 

1,519

 

 

 

2,227

 

Other

 

 

5,455

 

 

 

4,543

 

 

 

$

25,762

 

 

$

33,778

 

6.ACCRUED EXPENSES:

9.LEASES:

   December 31, 2017   December 31, 2016 

Payroll and related benefits

  $9,265   $7,685 

Income taxes payable (receivable)

   6,469    (39

Professional fees

   1,064    982 

Royalties

   845    715 

Other

   3,052    1,971 
  

 

 

   

 

 

 
  $20,695   $11,314 
  

 

 

   

 

 

 

7.CREDIT FACILITY:

On September 30, 2016, we entered intoThe Company determines whether an arrangement is a credit agreement (the “Credit Agreement”) with a commercial bank.lease at inception. The Credit Agreement, as amended on December 20, 2017, providesCompany has operating and finance leases for revolving extensions of credit in an initial aggregate amount of up to $10,000 (inclusive of a letter of creditsub-facility of $2,500), with an option to request, prior to the second anniversary of the closing date, that the lender, at its election, provide up to $5,000 of additional revolving commitments. Obligations under the Credit Agreement are secured by a first priority security interest in certain eligible accounts receivable, 65% of the equity of our subsidiary, DNAG,corporate offices, warehouse space and certain related assets. There were no borrowings under the facility during 2017 and 2016.

Borrowings under the Credit Agreement are subject to compliance with borrowing base limitations tied to eligibility of accounts receivable. Interest under the Credit Agreement is payable at the London Interbank Offered Rate for one, two, three orsix-month loans, as selected by the Company, plus 2.50% per year. The Credit Agreement is subject to an unused line fee of 0.375% per year on the unused portion of the commitment under the Credit Agreement during the revolving period. The maturity date of the Credit Agreement is September 30, 2019.

In connection with the Credit Agreement, under certain circumstances, we must comply with a minimum fixed charge coverage ratio of 1.10 to 1.00, measured as of the last day of each fiscal month and for the twelve-fiscal month period ending on such date.equipment (including vehicles). As of December 31, 20172022, the Company is the lessee in all agreements. The Company's leases have remaining lease terms of 1 to 10 years, some of which include options to extend the leases based on agreed upon terms, and 2016, we weresome of which include options to terminate the leases within 1 year. The Company presents the operating right-of-use asset amortization and the change in complianceoperating lease liabilities on the same line item, other non-cash amortization on the statement of cash flows.

As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

The Company has lease agreements that contain both lease and non-lease components (e.g., common-area maintenance). For these agreements, the Company accounts for lease components separately from non-lease components. During 2021, the Company entered into various purchase agreements for the Company's Molecular Solutions business which include a finance lease component for the use of specialized molds made and used by the vendor for purposes of manufacturing the goods to be purchased. The Company recorded an aggregate ROU asset and offsetting lease liability of $2,074 upon commencement of these contracts. The consideration to be paid under the agreements is variable based on the amounts purchased with all applicable covenantsa fixed amount charged if specified purchase minimums are not met. Only the fixed amount has been included in the Credit Agreement.measurement of the finance right-of-use asset and lease liability, and the variable costs are recognized as purchases are made within cost of products and services sold in the Company's consolidated statements of operations. The consideration for the contract has been allocated between the lease and non-lease components based on their relative estimated stand-alone selling prices.

The components of lease expense are as follows:

 

 

Years ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

Operating lease cost

 

$

2,910

 

 

$

2,226

 

 

$

1,291

 

Variable and short-term lease cost

 

 

521

 

 

 

201

 

 

 

 

Finance lease cost:

 

 

 

 

 

 

 

 

 

    Amortization of right-of use assets

 

 

1,299

 

 

 

900

 

 

 

627

 

    Interest on lease liabilities

 

 

94

 

 

 

82

 

 

 

72

 

Total finance lease cost

 

 

1,393

 

 

 

982

 

 

 

699

 

Total lease cost

 

$

4,824

 

 

$

3,409

 

 

$

1,990

 

Supplemental cash flow information related to leases is as follows:

F-21


 

 

Years ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

2,209

 

 

$

3,733

 

 

$

1,280

 

Operating cash flows from financing leases

 

 

94

 

 

 

82

 

 

 

72

 

Financing cash flows from financing leases

 

 

1,381

 

 

 

686

 

 

 

687

 

Non-cash activity:

 

 

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange for operating lease obligations

 

 

3,963

 

 

 

6,480

 

 

 

498

 

Right-of-use assets obtained in exchange for finance lease obligations

 

 

117

 

 

 

2,074

 

 

 

46

 

Supplemental balance sheet information related to leases is as follows:

 

 

December 31,

 

 

 

2022

 

 

2021

 

Operating Leases

 

 

 

 

 

 

Right-of-use assets

 

$

10,399

 

 

$

9,056

 

Lease liabilities:

 

 

 

 

 

 

Current lease liabilities

 

 

1,764

 

 

 

2,181

 

Non-current lease liabilities

 

 

9,101

 

 

 

7,202

 

   Total operating lease liabilities

 

$

10,865

 

 

$

9,383

 

Finance Leases

 

 

 

 

 

 

Right-of-use assets

 

$

1,293

 

 

$

2,493

 

Lease liabilities:

 

 

 

 

 

 

Current lease liabilities

 

 

1,179

 

 

 

939

 

Non-current lease liabilities

 

 

503

 

 

 

1,952

 

   Total finance lease liabilities

 

$

1,682

 

 

$

2,891

 

 

8.INCOME TAXES:

Weighted Average Remaining Lease Term

 

 

 

 

 

 

Weighted-average remaining lease term—operating leases

 

6.24 years

 

 

5.26 years

 

Weighted-average remaining lease term—finance leases

 

1.33 years

 

 

2.21 years

 

 

 

 

 

 

 

 

Weighted Average Discount Rate

 

 

 

 

 

 

Weighted-average discount rate—operating leases

 

 

4.06

%

 

 

3.90

%

Weighted-average discount rate—finance leases

 

 

3.44

%

 

 

3.57

%

As of December 31, 2022, minimum lease payments by period are expected to be as follows:

 

 

Finance

 

 

Operating

 

2023

 

$

1,216

 

 

$

1,898

 

2024

 

 

505

 

 

 

2,311

 

2025

 

 

20

 

 

 

1,928

 

2026

 

 

12

 

 

 

1,710

 

2027

 

 

 

 

 

1,544

 

Thereafter

 

 

 

 

 

3,083

 

Total minimum lease payments

 

 

1,753

 

 

 

12,474

 

Less: imputed interest

 

 

(71

)

 

 

(1,609

)

Present value of lease liabilities

 

$

1,682

 

 

$

10,865

 

F-22


10.INCOME TAXES:

Income (loss) before income tax expense consists of the following:

  Years Ended December 31, 

 

Years Ended December 31,

 

  2017   2016   2015 

 

2022

 

 

2021

 

 

2020

 

United States

  $2,270   $18,492   $5,302 

 

$

(7,912

)

 

$

(60,500

)

 

$

(47,995

)

Canada

   38,762    1,831    3,530 

Foreign

 

 

(8,564

)

 

 

51,208

 

 

 

44,471

 

  

 

   

 

   

 

 

 

$

(16,476

)

 

$

(9,292

)

 

$

(3,524

)

  $41,032   $20,323   $8,832 
  

 

   

 

   

 

 

The components of income tax expense (benefit) are as follows:

  Years Ended December 31, 

 

Years Ended December 31,

 

  2017   2016   2015 

 

2022

 

 

2021

 

 

2020

 

Current

      

 

 

 

 

 

 

 

Federal

  $—     $—     $—   

 

$

 

 

$

 

 

$

 

State

   —      250    —   

 

 

955

 

 

 

163

 

 

 

(106

)

Canada

   10,733    882    617 
  

 

   

 

   

 

 
   10,733    1,132    617 

Foreign

 

 

2,154

 

 

 

12,517

 

 

 

11,896

 

  

 

   

 

   

 

 

 

 

3,109

 

 

 

12,680

 

 

 

11,790

 

Deferred

      

 

 

 

 

 

 

 

 

 

Federal

   10,297    6,508    1,511 

 

 

(2,250

)

 

 

(10,318

)

 

 

(20,946

)

State

   (827   569    311 

 

 

(633

)

 

 

(965

)

 

 

(1,053

)

Canada

   (649   (529   48 

Foreign

 

 

(2,617

)

 

 

(151

)

 

 

(410

)

  

 

   

 

   

 

 

 

 

(5,500

)

 

 

(11,434

)

 

 

(22,409

)

   8,821    6,548    1,870 

Decrease in valuation allowance

   (9,470   (7,077   (1,822
  

 

   

 

   

 

 
   (649   (529   48 

Increase (decrease) in valuation allowance

 

 

3,849

 

 

 

12,460

 

 

 

22,017

 

  

 

   

 

   

 

 

 

 

(1,651

)

 

 

1,026

 

 

 

(392

)

Total income tax expense

  $10,084   $603   $665 

 

$

1,458

 

 

$

13,706

 

 

$

11,398

 

  

 

   

 

   

 

 

For the years ended December 31, 2017, 2016,2022, 2021, and 2015 we2020 the Company recorded foreign income tax expense of $10,084, $353,$503, $13,543, and $665,$12,185, respectively.

The Tax Cuts and Jobs Act

On December 22, 2017,Company's 2022 income tax expense is comprised of $1,703 of Canadian withholding taxes paid on the U.S. enacted the Tax Cuts and Jobs Act (“Tax Act”) that instituted fundamental changes to the taxation on multinational corporations. Although the Tax Act is generally effective January 1, 2018, U.S. generally accepted accounting principles requires recognitionrepatriation of the tax effects of new legislation during the reporting period that includes the enactment date,Canadian earnings which was December 22, 2017. Among the numerous provisions, the Tax Act includes two provisions in particular which require consideration for 2017 financial reporting: a permanent reductionoccurred in the corporatefirst quarter of 2022, $955 of U.S. state income taxes, and a foreign income tax rate to 21%;benefit of $1,200 associated with the Company's Canadian subsidiary. The Company's 2021 income tax expense is comprised of U.S. state income taxes of $163 and aone-time transitionforeign tax imposed onexpense associated with the Company's Canadian subsidiary of $13,543. The Company's 2020 income tax expense is comprised of a U.S. shareholder’s historical undistributed earningsstate income tax benefit of a $794 and foreign affiliates.

The reduction in the U.S. corporate tax rate to 21% is effective in 2018. However, this change results in are-measurement of our net deferred tax balance at the end of 2017 with no net financial statement impact due to a comparable decrease in our deferred tax valuation allowance.

Theone-time tax on undistributed and previously untaxed post-1986 foreign earnings and profits (E&P) of foreign affiliates owned by U.S. shareholders as of December 31, 2017 was analyzed for our Canadian subsidiary. As of December 31, 2017, our U.S. federal taxable loss exceeded and offset the provisional mandatory repatriation net inclusion and as such, no additional taxes will be due as a result of the deemed repatriation of these foreign earnings.

In addition, the Tax Act also includes changes to the taxation of foreign earnings by implementing a dividend exemption system, expansion of the current anti-deferral rules, a minimum tax onlow-taxed foreign earnings and new measures to deter base erosion and promote U.S. production. The Tax Act also includes repeal of the corporate alternative minimum tax, expensing of capital investment, changes to the Federal net operating loss (“NOL”) utilization and carryforward rules, and limitations of the deduction for interest expense and certain employee compensation.

As a result of the complex impact of the Tax Act, the SEC provided guidance under Staff Accounting Bulletin No. 118 (“SAB 118”) that allows the Company to record provisional amounts as of December 31, 2017 for the impact of the Tax Act, provided that the provisional amounts can be reasonably determined andassociated with the requirement that the final accounting be completed in a period not to exceed one year from the dateCompany's Canadian subsidiary of enactment. As of December 31, 2017, the Company has not completed the accounting for the tax effects of the Tax Act, and therefore, has recorded provisional amounts which include:$12,192.

(a)An estimate of the impact of theone-time transition tax on existing net operating loss and foreign tax credit carryforwards generated, as well as the related offsetting valuation allowances. These results are subject to change as there is limited information for federal and state taxing authorities regarding the application and interpretation of the recently enacted legislation. In addition, the results are based on estimates and are affected by the interaction of various provision of the Tax Act on future taxable income. The Company will disclose the impact to the provisional amount in the reporting period in which the accounting is completed, which will not exceed one year from the date of the enactment.

(b)The valuation allowance for the Company’s deferred tax assets as of December 31, 2017, is primarily dependent on forecasted future taxable income in the U.S. and Canada and may be impacted by the provisions of the Tax Act. Any increase or reduction in estimated forecasted future taxable income may require the Company to adjust the valuation allowance against the remaining deferred tax asset. The Company will continue to assess the impact of the Tax Act on the valuation allowance during the provisional period.

The Tax Act imposes a U.S. tax on global intangible low taxed income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder effective in 2018. GILTI is generally intended to impose tax on the earnings of a foreign corporation that are deemed to exceed a certain threshold return relative to the underlying tangible property. The computation of GILTI is still subject to interpretation and additional clarifying guidance is expected. The Company has not yet made a policy election related to its treatment of GILTI as either a current period expense in the reporting period in which the tax is incurred or recognizing deferred taxes when a basis differences exists that is expected to affect the amount of the GILTI inclusion upon reversal. The Company is still in the process of analyzing the expected impact of GILTI in future periods.

A reconciliation of the statutory United States federal income tax rate to ourthe Company's effective tax rate for each of the years ended December 31, 2017, 2016,2022, 2021, and 20152020 is as follows:

  2017 2016 2015 

 

2022

 

 

2021

 

 

2020

 

 

Statutory U.S. federal income tax rate

   34.0 34.0 34.0

 

 

21.0

 

%

 

21.0

 

%

 

21.0

 

%

Deemed repatriation tax

   7.8   —     —   

Statutory rate change, deferred tax impact

   29.4   —     —   

Excess tax benefits for share-based payment awards

   (16.0  —     —   

Tax effect of Canadian items

   (9.8 (4.9 (13.1

Nondeductible executive compensation

 

 

(5.5

)

 

 

(6.1

)

 

 

(0.9

)

 

Impact of share-based payment awards

 

 

(4.8

)

 

 

(3.3

)

 

 

(12.4

)

 

Tax effect of foreign items

 

 

(5.7

)

 

 

(30.8

)

 

 

(70.7

)

 

State income taxes, net of federal benefit

   (1.1 2.0  1.5 

 

 

(0.8

)

 

 

6.8

 

 

 

26.0

 

 

U.S. and foreign tax credits

 

 

3.6

 

 

 

2.5

 

 

 

34.9

 

 

Nondeductible transaction costs

 

 

 

 

 

 

 

 

(2.8

)

 

Nondeductible expenses and other

   3.4  6.7  5.7 

 

 

7.0

 

 

 

(4.0

)

 

 

(2.6

)

 

NOL adjustment due to change in GILTI regulations

 

 

 

 

 

 

 

 

308.9

 

 

Change in valuation allowance, federal and state

   (23.1 (34.8 (20.6

 

 

(23.7

)

 

 

(133.6

)

 

 

(624.8

)

 

  

 

  

 

  

 

 

Effective tax rate

   24.6 3.0 7.5

 

 

(8.9

)

%

 

(147.5

)

%

 

(323.4

)

%

  

 

  

 

  

 

 

F-23


Deferred income taxes reflect the tax effects of temporary differences between the basis of assets and liabilities recognized for financial reporting purposes and tax purposes, and net operating loss and tax credit carryforwards. Significant components of ourthe Company's deferred tax assets (liabilities) as of December 31, 20172022 and 20162021 are as follows:

  2017   2016 

 

2022

 

 

2021

 

Deferred tax assets (liabilities):

    

 

 

 

 

 

 

Net operating loss carryforwards

  $15,338   $17,673 

 

$

39,783

 

 

$

44,191

 

Inventories

   1,179    1,680 

 

 

4,504

 

 

 

4,642

 

Capitalized research and development costs

   2,402    4,711 

 

 

6,505

 

 

 

453

 

Accruals and reserves currently not deductible

   3,103    3,282 

 

 

2,799

 

 

 

3,245

 

Acquired intangible assets

   (1,825   (2,268

 

 

(2,641

)

 

 

(3,117

)

Depreciation and amortization

   (621   (212

 

 

(6,227

)

 

 

(8,536

)

Right-of-use assets

 

 

(2,775

)

 

 

(2,777

)

Lease liabilities

 

 

2,990

 

 

 

2,957

 

Stock-based compensation

   976    6,110 

 

 

3,032

 

 

 

1,891

 

Tax credit carryforwards

   6,722    1,751 

 

 

4,509

 

 

 

3,855

 

  

 

   

 

 

Net deferred tax asset

   27,274    32,727 

 

 

52,479

 

 

 

46,804

 

Valuation allowance

   (29,225   (35,173

 

 

(52,887

)

 

 

(49,038

)

  

 

   

 

 

Net deferred tax liability

  $(1,951  $(2,446

 

$

(408

)

 

$

(2,234

)

  

 

   

 

 

In assessing the realizability of ourthe Company's deferred tax asset, we considerthe Company considers all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent upon several factors, including the generation of sufficient taxable income prior to the expiration of the NOL carryforwards. In 2008, wethe Company established a full valuation allowance against ourthe Company's U.S. deferred tax asset, and management believes the full valuation allowance is still appropriate as of December 31, 20172022 and 20162021 since the facts and circumstances necessitating the allowance have not changed. As a result, no U.S. federal income tax benefit was recorded for the years ended December 31, 2017, 2016, or 2015. 2022, 2021, and 2020.

The valuation allowance primarily decreased by $9,470 in 2017 due to itsre-measurement to the new corporate tax rate of 21% effective in 2018.

OurCompany's Federal NOL carryforwards expire as follows:

Year of Expiration

  NOLs 

2020 - 2025

  $16,268 

2026 - 2030

   11,956 

2031 - 2037

   37,937 
  

 

 

 
  $66,161 
  

 

 

 

The new accounting guidance under ASU2016-09 allows for the recognition of excess tax benefits associated with stock based compensation awards regardless of whether the deduction reduces taxes payable. On January 1, 2017, we recorded a cumulative adjustment to retained earnings of $3,391 to recognize the increase in our net operating loss carryforwards from the cumulative excess tax benefits not recognized in periods prior to January 1, 2017. A corresponding $3,391 increase to our valuation allowance associated with this tax benefit was also recorded to retained earnings thereby resulting in no impact to retained earnings.

Year of Expiration

 

NOLs

 

2030 - 2033

 

$

36,107

 

2034 - 2037

 

 

12,055

 

Non-Expiring

 

 

117,885

 

 

 

$

166,047

 

The Tax Reform Act of 1986 contains provisions under Internal Revenue Code (“IRC”) Section 382 that limit the annual amount of federal and state NOL carryforwards that can be used in any given year in the event a significant change in ownership. The Company does not believe that there is a Section 382 limitation that will impair ourthe Company's future ability to utilize NOLs to offset ourthe Company's future taxable income. The Company continues to review ownership changes on an annual basis and we dothe Company does not believe we haveit has had a subsequent ownership change that would impact the NOLs.

Effective

In January 1, 2018, there2022, approximately $65,000 was repatriated from the Company's Canadian subsidiary as a one-time event. Associated with this repatriation the Company paid $1.7 million in Canadian withholding tax which is a transition to a participation exemption system whereby distributions fromincluded in the Company's foreign subsidiaries to U.S. shareholders are generally exempt from taxation; therefore,income tax expense within the deferred tax liability on undistributed earningstable further above. It is limited to any foreign withholding or other local taxes. The Company’sstill the Company's intention is to continue to permanently reinvest the historical undistributed earnings of our Canadianthe Company's foreign subsidiary to the extent that wethe Company will not incur any additional tax expense associated with foreign withholding or other local tax expense on the future cash transfers. As such, deferred taxes have not been recorded on the unremitted earnings of the foreign subsidiary as of December 31, 2022.

F-24


As of December 31, 2017, our2022, the Company's gross unrecognized tax benefits totaled $1,663,$373, and based upon the valuation allowance for ourthe Company's U.S. operations, the recognition of any tax benefit would not impact ourthe Company's effective tax rate. We recordThe Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. Interest and penalties were immaterial in 2017, 20162022, 2021, and 2015.2020. As a result of ourthe Company's net operating loss carryforward position, we arethe Company is subject to audit by the Internal Revenue Service since ourthe Company's inception, as well as by several state jurisdictions for the years ended September 30, 1998 through December 31, 2017.2022.

A reconciliation of ourthe Company's unrecognized tax benefits is as follows:

  2017   2016   2015 

 

2022

 

 

2021

 

 

2020

 

Balance as of January 1

  $2,084   $2,088   $2,073 

 

$

805

 

 

$

1,172

 

 

$

1,308

 

Additions for tax positions of prior periods

   —      —      22 

 

 

1

 

 

 

1

 

 

 

1

 

Reductions for tax positions of prior periods

   (421   (4   (7

 

 

(433

)

 

 

(368

)

 

 

(137

)

  

 

   

 

   

 

 

Balance as of December 31

  $1,663   $2,084   $2,088 

 

$

373

 

 

$

805

 

 

$

1,172

 

  

 

   

 

   

 

 

9.STOCKHOLDERS’ EQUITY:

11.STOCKHOLDERS’ EQUITY:

Stock-Based Awards

We grantThe Company grants stock-based awards under the OraSure Technologies, Inc. Stock Award Plan, as amended (the “Stock Plan”). The Stock Plan permits stock-based awards to employees, outside directors and consultants or other third-party advisors. Awards which may be granted under the Stock Plan include qualified incentive stock options, nonqualified stock options, stock appreciation rights, restricted awards, performance awards and other stock-based awards.

As of December 31, 2017, 4,3552022, 3,921 shares were available for future grants under the Stock Plan.

Under the terms of the Stock Plan, nonqualified stock options may be granted to eligible employees, including ourthe Company's officers at a price not less than 75 percent of the fair market value of a share of common stock on the date of grant. The option term and vesting schedule of such awards may be either unlimited or have a specified period in which to vest and be exercised. To date, options generally have been granted withten-year exercise periods

and an exercise price not less than the fair market value on the date of grant. Options generally vest over four years, with one quarter of the options vesting one year after grant and the remainder vesting on a monthly basis over the next three years.

The fair value of each stock option was estimated on the date of the grant using the Black-Scholes option-pricing model using the following weighted-average assumptions:

  Years Ended December 31, 

 

Years Ended December 31,

Black-Scholes Option Valuation Assumptions  2017 2016 2015 

 

2022

 

 

2021

 

 

2020

 

 

Risk-free interest rate(1)

   2.22 1.76 1.49

 

 

1.65

 

%

 

0.47

 

%

 

1.33

 

%

Expected dividend yield

   —     —     —   

 

 

 

 

 

 

 

 

 

 

Expected stock price volatility(2)

   43 46 51

 

 

50

 

%

 

50

 

%

 

42

 

%

Expected life of stock options (in years)(2)

   7  7  7 

 

 

5

 

 

 

5

 

 

 

5

 

 

(1)Based on the constant maturity interest rate of U.S. Treasury securities whose term is consistent with the expected life of our stock options.
(2)Based upon historical experience.
(1)
Based on the constant maturity interest rate of U.S. Treasury securities whose term is consistent with the expected life of the Company's stock options.
(2)
Based upon historical experience.

The weighted-average grant date fair value of stock options granted during the years ended December 31, 2017, 20162022, 2021, and 20152020 was $4.71, $2.91$4.15, $6.14 and $4.86,$2.79, respectively.

Compensation expense recognized in the financial statements related to stock options was as follows:$1,515, 1,063, and $892 for the years ended December 31, 2022, 2021, and 2020, respectively.

   Years Ended December 31, 
   2017  2016  2015 

Total compensation cost during the year

  $2,045  $2,691  $3,403 

Amounts capitalized into inventory during the year

   (371  (270  (153

Amounts recognized in cost of products sold for amounts previously capitalized

   276   212   153 
  

 

 

  

 

 

  

 

 

 

Amounts charged against income

  $1,950  $2,633  $3,403 
  

 

 

  

 

 

  

 

 

 

The aggregate intrinsic value of options exercised during the years ended December 31, 2017, 2016,2022, 2021, and 20152020 (the amount by which the market price of the stock on the date of exercise exceeded the exercise price) was $35,631, $763,$4, $130, and $329,$3,117, respectively.

F-25


The following table summarizes the stock option activity under the Stock Plan:

  Options Weighted-Average
Exercise Price Per
Share
   Weighted-Average
Remaining
Contractual Term
(in years)
   Aggregate
Intrinsic
Value
 

 

Options

 

 

Weighted-
Average
Exercise Price
Per Share

 

 

Weighted-
Average
Remaining
Contractual
Term
(in years)

 

 

Aggregate Intrinsic Value

 

Outstanding on January 1, 2015

   5,740  $7.22     

Outstanding on January 1, 2022

 

 

1,410

 

 

$

10.73

 

 

 

 

 

 

Granted

   773  9.28     

 

 

589

 

 

 

8.86

 

 

 

 

 

 

Exercised

   (74 5.46     

 

 

(2

)

 

 

7.17

 

 

 

 

 

 

Expired

   (163 8.55     

 

 

(28

)

 

 

10.01

 

 

 

 

 

 

Forfeited

   (60 8.07     

 

 

(211

)

 

 

9.63

 

 

 

 

 

 

  

 

      

Outstanding on December 31, 2015

   6,216  7.46     

Granted

   347  6.00     

Exercised

   (405 6.57     

Expired

   (479 9.17     

Forfeited

   (223 7.31     
  

 

      

Outstanding on December 31, 2016

   5,456  7.28     

Granted

   231  9.92     

Exercised

   (4,413 7.20     

Expired

   (27 8.36     

Forfeited

   (46 7.79     
  

 

      

Outstanding on December 31, 2017

   1,201  $8.04    6.5   $12,986 
  

 

    

 

   

 

 

Vested or expected to vest as of December 31, 2017

   1,201  $8.04    6.5   $12,986 
  

 

  

 

   

 

   

 

 

Exercisable on December 31, 2017

   659  $7.81    5.2   $7,280 
  

 

  

 

   

 

   

 

 

Outstanding on December 31, 2022

 

 

1,758

 

 

$

10.25

 

 

 

6.54

 

 

$

 

Vested or expected to vest as of December 31, 2022

 

 

1,633

 

 

$

10.29

 

 

 

7.03

 

 

$

 

Exercisable on December 31, 2022

 

 

1,045

 

 

$

10.67

 

 

 

5.11

 

 

$

 

As of December 31, 2017,2022, there was $1,950$2,583 of unrecognized compensation expense related to unvested option awards that is expected to be recognized over a weighted-average period of 1.92.6 years.

Net cash proceeds from the exercise of stock options were $31,675, $2,656$15, $246 and $404$3,222 for the years ended December 31, 2017, 2016,2022, 2021, and 2015,2020, respectively. As a result of ourthe Company's net operating loss carryforward position, no actual income tax benefit was realized from stock option exercises for these periods.

The following table summarizes information about stock options outstanding as of December 31, 2017:2022:

Options outstanding

  Options exercisable 

Range of exercise prices

 Number
Outstanding
  Weighted-
Average
Remaining
Contractual
Term

(in years)
  Weighted-
Average
Exercise
Price Per
Share
  Number
Exercisable
   Weighted-
Average
Exercise
Price Per
Share
 

$2.79 -$5.19

  19   0.3  $3.46   19   $3.46 

$5.37

  158   8.0   5.37   45    5.37 

$5.47

  3   7.7   5.47   1    5.47 

$5.71

  149   5.9   5.71   116    5.71 

$5.79 - $7.05

  138   4.5   6.73   130    6.74 

$7.28 - $8.33

  122   6.4   7.81   95    7.74 

$8.33 - $8.63

  41   1.9   8.62   41    8.62 

$8.87

  167   8.9   8.87   —      0.00 

$8.93

  6   9.0   8.93   —      0.00 

$9.31 - $14.95

  398   6.5   10.32   212    10.40 
 

 

 

    

 

 

   
  1,201   6.5  $8.04   659   $7.81 
 

 

 

    

 

 

   

Options outstanding

 

 

Options exercisable

 

Range of exercise prices

 

Number
Outstanding

 

 

Weighted-
Average
Remaining
Contractual
Term
(in years)

 

 

Weighted-
Average
Exercise
Price Per
Share

 

 

Number
Exercisable

 

 

Weighted-
Average
Exercise
Price Per
Share

 

$5.37-$8.86

 

 

1,036

 

 

 

7.2

 

 

$

7.83

 

 

 

435

 

 

$

6.83

 

$8.87-$13.31

 

 

362

 

 

 

4.8

 

 

 

10.67

 

 

 

357

 

 

 

10.64

 

$14.95-$22.43

 

 

360

 

 

 

6.5

 

 

 

16.79

 

 

 

253

 

 

 

17.30

 

 

 

 

1,758

 

 

 

6.5

 

 

$

10.25

 

 

 

1,045

 

 

$

10.67

 

The Stock Plan also permits usthe Company to grant restricted shares and restricted units of ourthe Company's common stock to eligible employees, including officers, and ourthe Company's outside directors. Generally, these shares or units are nontransferable until vested and are subject to vesting requirements and/or forfeiture, as determined by ourthe Company's Compensation Committee or Board of Directors. The market value of these shares and units at the date of grant is recognized on a straight-line basis over the period during which the vesting restrictions lapse. Compensation cost of $2,705, $2,861$9,169, $4,094 and $2,642$4,094 related to restricted shares was recognized during the years ended December 31, 2017, 2016,2022, 2021, and 2015,2020, respectively.

The following table summarizes restricted stock award and restricted stock units activity under the Stock Plan:

  Units   Weighted-Average
Grant Date Fair
Value
 

 

Units

 

 

Weighted-
Average Grant
Date Fair
Value

 

Issued and unvested, January 1, 2015

   707   $6.50 

Issued and unvested, January 1, 2022

 

 

701

 

 

$

11.53

 

Granted

   362    8.25 

 

 

2,995

 

 

 

6.45

 

Vested

   (354   6.94 

 

 

(750

)

 

 

9.50

 

Forfeited

   (18   8.01 

 

 

(373

)

 

 

9.47

 

  

 

   

Issued and unvested, December 31, 2015

   697    7.14 

Granted

   632    5.63 

Vested

   (446   6.65 

Forfeited

   (133   6.43 
  

 

   

Issued and unvested, December 31, 2016

   750    6.28 

Granted

   329    9.77 

Vested

   (378   6.47 

Forfeited

   (30   7.57 
  

 

   

Issued and unvested, December 31, 2017

   671   $7.83 
  

 

   

 

 

Issued and expected to vest, December 31, 2017

   671   $7.83 
  

 

   

 

 

Issued and unvested, December 31, 2022

 

 

2,573

 

 

$

6.51

 

Issued and expected to vest, December 31, 2022

 

 

2,538

 

 

$

6.53

 

F-26


As of December 31, 2017,2022, there was $2,910$11,185 of unrecognized compensation expense related to unvested restricted stock awards and unvested restricted stock units that is expected to be recognized over a weighted average period of 1.71.8 years.

In connection with the vesting of restricted shares and exercise of stock options during the years ended December 31, 2017, 20162022, 2021, and 2015, we2020, the Company purchased and immediately retired 130, 132241, 107 and 133127 shares with aggregate values of $1,240, $784$1,621, $1,417 and $1,164,$1,219, respectively, in satisfaction of minimum tax withholding and exercise obligations.

Commencing in 2016, we grantedThe Company grants performance-based restricted stock units (“PSUs”) to certain executives. Vesting of these PSUs is dependent upon achievement of certain performance-based metrics during aone-year or three-year period, from the date of grant. Assuming achievement of each performance-based metric, the executive must also generally remain in ourthe Company's service for three years from the grant date. PerformancePrior to 2021, performance during theone-year period will bewas based on aone-year earnings per share income before tax target. If theone-year target is achieved, the PSUs will then vest three years from grant date. Performance during the three-year period will bewas based on achievement of a three-year compound annual growth rate for consolidated product revenues. IfIn 2021 and 2022, performance shares were granted based on the achievement of three-year target is achieved, the corresponding PSUs will then vest three years from grant date.cumulative revenue metrics with a market-based condition, or a total shareholder return modifier. PSUs are converted into shares of ourthe Company's common stock once vested.vested and the number of shares actually earned at the end of the performance period will vary, based on actual performance, from 0% to 200% of the target number of performance share units granted. Upon grant of the PSUs, we recognizethe Company recognizes compensation expense related to these awards based on assumptions as to what percentage of each target will be achieved. The Company evaluates these target assumptions on a quarterly basis and adjusts compensation expense related to these awards, as appropriate.

Compensation cost of $2,223$938, $2,650 and $511$2,153 related to the PSUs was recognized during the years ended December 31, 20172022, 2021, and 2016,2020, respectively.

The following table summarizes PSU activity under the Stock Plan:

  Units   Weighted-
Average Grant
Date Fair
Value
 

 

Units

 

 

Weighted-
Average Grant
Date Fair
Value

 

Issued and unvested, January 1, 2017

   456    5.46 

Issued and unvested, January 1, 2022

 

 

622

 

 

$

9.88

 

Granted(1)

   424    8.19 

 

 

532

 

 

 

8.86

 

Performance adjustment (2)

 

 

36

 

 

N/A

 

Vested

   0    0.00 

 

 

(241

)

 

 

11.09

 

Forfeited

   (28   6.71 

 

 

(234

)

 

 

10.50

 

  

 

   

Issued and unvested, December 31, 2017

   852   $6.78 
  

 

   

 

 

Issued and expected to vest, December 31, 2017

   852   $6.78 
  

 

   

 

 

Issued and unvested, December 31, 2022

 

 

715

 

 

$

6.86

 

Issued and expected to vest, December 31, 2022

 

 

698

 

 

$

6.82

 

(1) Grant activity for all PSUs disclosed at target.

(2) Reflects the performance adjustment based on actual performance measured at the end of the performance period.

As of December 31, 2022, there was $316 of unrecognized compensation expense related to unvested performance stock units that is expected to be recognized over a weighted average period of 1.6 years.

In connection with the vesting of performance stock units during the year ended December 31, 2022, 2021 and 2020, we purchased and immediately retired 88, 46, and 121 shares with aggregate values of $633, $696 and $869, respectively.

Public Offering

On June 1, 2020, the Company entered into an underwriting agreement with J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Evercore Group LLC, as representatives of several underwriters, relating to the issuance and sale of 8,000 shares of the Company's common stock. The price to the public in the offering was $11.00 per share. Under the terms of the underwriting agreement, the Company also granted the underwriters an option, exercisable for 30 days, to purchase up to an additional 1,200 shares of common stock. On June 3, 2020, the Company announced the full exercise by the underwriters of their option to purchase these additional shares.

The offering was made pursuant to an effective registration statement on Form S-3 (File No. 333-228877) the Company had previously filed with the SEC, and a prospectus supplement thereunder. The net proceeds from the offering were approximately $95,000 after deducting underwriting discounts and offering expenses paid by the Company.

F-27


Share Repurchase Program

On August 5, 2008, ourthe Company's Board of Directors approved a share repurchase program pursuant to which we arethe Company is permitted to acquire up to $25,000$25,000 of ourthe Company's outstanding common shares. No shares were purchased and retired in 2017. During2022, 2021, and 2020.

12. TRANSITION COSTS

On December 31, 2021, the yearsCompany's Board of Directors approved the termination of Stephen S. Tang, the Company’s President and Chief Executive Officer, without cause under his existing employment agreement with the Company, with such termination effective as of March 31, 2022. On January 2, 2022, Dr. Tang and the Company entered into a Transition Agreement providing for the terms of the cessation of Dr. Tang’s employment with the Company, including the cessation of his service as President and Chief Executive Officer of the Company and as a member of the Board. Under the Transition Agreement, Dr. Tang’s service to the Company in all capacities ended on March 31, 2022.

Pursuant to the Transition Agreement, Dr. Tang received severance of $1,569, which was accrued in the consolidated financial statements at December 31, 2021 and paid in April 2022. Additionally, in accordance with his Transition Agreement, certain of his unvested time-vesting restricted stock awards and unvested PSUs that were outstanding at March 31, 2022 vested on April 8, 2022. His remaining unvested time-vesting restricted stock awards and PSUs were forfeited on March 31, 2022. These payments, rights and benefits are substantially similar to the severance benefits contemplated by his previous employment agreement in respect to a termination without cause thereunder. In aggregate, the Company recognized $1,508 of expense in relation to Dr. Tang's stock compensation for the year ended December 31, 2016 and 2015, we purchased and retired 423 and 777 shares of common stock at an average price of $6.29 and $6.34 per share for a total cost of $2,660 and $4,926, respectively.    2022.

13.BUSINESS SEGMENT INFORMATION:

10.BUSINESS SEGMENT INFORMATION:

Our business is comprised of two segments: Our “OSUR”The Company's business consists of two segments, which are described in Note 1: the development, manufacture, marketingCompany's “Diagnostics” segment and sale of oral fluid diagnostic products and specimen collection devices using our proprietary technologies, as well as other diagnostic products including immunoassays and otherin vitro diagnostic tests that are used on other specimen types. Our molecular collections systems or “DNAG” business consists of the manufacture and sale of specimen collection kits that are used to collect, stabilize, transport and store samples of genetic material for molecular testing in the consumer genetic, clinical genetic, academic research, pharmacogenomics, personalized medicine, microbiome and animal genetics markets.Company's “Molecular Solutions” segment.

WeThe Company organized ourits operating segments according to the nature of the products included in those segments. The accounting policies of the segments are the same as those described in the summary of significant accounting

policies (see Note 2). We evaluateThe Company evaluates performance of ourits operating segments based on revenue and operating income. We doThe Company does not allocate interest income, interest expense, other income, other expenses or income taxes to ourits operating segments. Reportable segments have no inter-segment revenues and inter-segment expenses have been eliminated.

The following table summarizes operating segment information for the years ended December 31, 2017, 2016,2022, 2021, and 2015,2020, and asset information as of December 31, 20172022 and 2016:2021:

  Years Ended December 31, 

 

Years ended December 31,

 

  2017   2016   2015 

 

2022

 

 

2021

 

 

2020

 

Net revenues:

      

 

 

 

 

 

 

 

OSUR

  $91,965   $95,984   $89,795 

DNAG

   75,099    32,214    29,924 
  

 

   

 

   

 

 

Diagnostics

 

$

303,673

 

 

$

90,040

 

 

$

65,240

 

Molecular Solutions

 

 

83,806

 

 

 

143,634

 

 

 

106,481

 

Total

  $167,064   $128,198   $119,719 

 

$

387,479

 

 

$

233,674

 

 

$

171,721

 

  

 

   

 

   

 

 

Operating income (loss):

      

 

 

 

 

 

 

 

OSUR

  $(2,706  $15,606   $3,558 

DNAG

   42,944    4,659    4,500 
  

 

   

 

   

 

 

Diagnostics

 

$

(598

)

 

$

(57,177

)

 

$

(43,156

)

Molecular Solutions

 

 

(22,359

)

 

 

47,013

 

 

 

37,979

 

Total

  $40,238   $20,265   $8,058 

 

$

(22,957

)

 

$

(10,164

)

 

$

(5,177

)

  

 

   

 

   

 

 

Depreciation and amortization:

Depreciation and amortization:

 

    

 

 

 

 

 

 

 

OSUR

  $3,170   $2,751   $3,015 

DNAG

   3,232    2,889    2,791 
  

 

   

 

   

 

 

Diagnostics

 

$

8,099

 

 

$

4,325

 

 

$

3,345

 

Molecular Solutions

 

 

7,209

 

 

 

7,333

 

 

 

6,042

 

Total

  $6,402   $5,640   $5,806 

 

$

15,308

 

 

$

11,658

 

 

$

9,387

 

  

 

   

 

   

 

 

Capital expenditures:

      

 

 

 

 

 

 

 

OSUR

  $2,752   $2,145   $1,645 

DNAG

   1,585    2,208    2,099 
  

 

   

 

   

 

 

Diagnostics(1)

 

$

3,644

 

 

$

12,265

 

 

$

17,860

 

Molecular Solutions

 

 

3,130

 

 

 

9,628

 

 

 

8,814

 

Total

  $4,337   $4,353   $3,744 

 

$

6,774

 

 

$

21,893

 

 

$

26,674

 

  

 

   

 

   

 

 

   December 31, 
   2017   2016 

Total assets:

    

OSUR

  $192,352   $151,719 

DNAG

   103,849    56,216 
  

 

 

   

 

 

 

Total

  $296,201   $207,935 
  

 

 

   

 

 

 

The following table represents total net revenues by geographic area, based onF-28


(1) Excludes $57,135 and $26,224 for purchases of property and equipment under government contracts for the locationyears ended December 31, 2022 and 2021 respectively. No purchases of the customer:property and equipment under government contracts were made in 2020.

   Years Ended December 31, 
   2017   2016   2015 

United States

  $121,458   $99,758   $96,522 

Europe

   11,827    11,646    13,535 

Other regions

   33,779    16,794    9,662 
  

 

 

   

 

 

   

 

 

 
  $167,064   $128,198   $119,719 
  

 

 

   

 

 

   

 

 

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

Total assets:

 

 

 

 

 

 

Diagnostics

 

$

279,994

 

 

$

209,674

 

Molecular Solutions

 

 

164,714

 

 

 

251,316

 

Total

 

$

444,708

 

 

$

460,990

 

The following table represents total long-lived assets by geographic area:

  December 31, 

 

December 31,

 

  2017   2016 

 

2022

 

 

2021

 

United States

  $16,160   $15,737 

 

$

60,751

 

 

$

72,376

 

Canada

   5,083    4,286 

 

 

8,526

 

 

 

11,488

 

Other regions

   129    10 

 

 

1,828

 

 

 

1,120

 

  

 

   

 

 

 

$

71,105

 

 

$

84,984

 

  $21,372   $20,033 
  

 

   

 

 

11.COMMITMENTS AND CONTINGENCIES:

Sublicense Agreement14.COMMITMENTS AND CONTINGENCIES:

In June 2004, we entered into a sublicense agreement with a third party pursuant to which we have been granted a limited, worldwide,non-exclusive sublicense to certainHIV-2 patents held by such party. Under the terms of this sublicense agreement, we are obligated to pay royalties based on a percentage of our net sales of certain products, which incorporate the technology covered by the licensed patents. Royalties are expensed as an element of cost of goods sold. Future minimum payments under this agreement are $292 for 2018. Royalties from our commercial sale of products covered by the sublicense can be credited against these minimum royalty obligations.

Leases

We lease office space for our Canadian subsidiary and domestic warehouse facilities under operating lease agreements. Future payments required under thesenon-cancelable leases are as follows:

2018

  $617 

2019

   791 

2020

   828 

2021

   834 

2022

   845 

Thereafter

   1,242 
  

 

 

 
  $5,157 
  

 

 

 

Rent expense for 2017, 2016 and 2015 was $852, $715, and $481, respectively.

Purchase Commitments

As of December 31, 2017, we2022, the Company had outstandingnon-cancelable purchase commitments related to inventory, supplies, capital expenditures, and other goods or services as follows:

2018

   14,262 

2019

   383 

2020

   383 
  

 

 

 
  $15,028 
  

 

 

 

Employment Agreements

Under terms of employmentmanufacturing agreements with certain employees,third party vendors, in which extend through 2019, weminimum purchase commitments are required. If the minimum commitments are not achieved, the Company will be required to pay each individual a base salarymake annual penalty payments over the next three years. Based on current forecasts, these penalties aggregate to approximately $1,143 and are accrued for continuing employment with us. The agreements require payments totaling $1,729 and $330 in 2018 and 2019, respectively.

Standby Letters of Credit

We established standby letters of credit in the amount of $1,840, naming international customers as the beneficiaries. These letters of credit were required as a performance guarantee of our obligations under our product supply contracts with those customers and are collateralized by certificates of deposit maintained at a commercial bank. The standby letters of credit are recorded in restricted cash in the accompanying consolidated balance sheet. These estimated penalties can fluctuate based on changes in forecasted demand. The table below represents an estimate of future purchases under those agreements.

2023

 

$

21,710

 

2024

 

 

9,695

 

2025

 

 

6,928

 

2026

 

 

 

2027

 

 

 

 

 

$

38,333

 

Litigation

Litigation

From time to time, we arethe Company is involved in certain legal actions arising in the ordinary course of business. In management’s opinion, based upon the advice of counsel, the outcomes of such actions eitherare not expected, individually or in the aggregate, are not expected to have a material adverse effect on ourthe Company's future financial position or results of operations.


Spectrum Patent Litigation



In March 2021, DNAG filed a complaint against Spectrum Solutions, LLC ("Spectrum") in the United States District Court for the Southern District of California alleging that certain saliva collection devices manufactured and sold by Spectrum infringe a patent held by DNAG. Spectrum has filed an answer to the initial complaint, asserting that its device does not infringe DNAG's patent and that DNAG's patent is invalid. In August 2021, DNAG amended its complaint to add a second patent to this litigation. Spectrum responded to DNAG's amended complaint and asserted counterclaims for inequitable conduct and antitrust violations with respect to one of the patents in the litigation and subsequently filed a request for review of the second patent at the Patent and Trademark Office. DNAG filed a motion to dismiss Spectrum’s counterclaims in October 2021, which was denied by the Court on March 30, 2022. Expert discovery is ongoing. On November 29, 2022, the district court issued a claim construction order. On January 30, 2023, Spectrum filed

F-29

12.RETIREMENT PLANS:


a motion for summary judgment of noninfringement. DNAG oppossed the motion. Briefing is complete and the motion remains pendng. The final pretrial conference is set for September 7, 2023. The Patent and Trademark Office instituted review of the second patent on February 10, 2023, scheduling a hearing for November 14, 2023.

15.RETIREMENT PLANS:

Substantially all of ourthe Company's U.S. employees are eligible to participate in the OraSure Technologies, Inc. 401(k) Plan (the “401(k) Plan”). The 401(k) Plan permits voluntary employee contributions to be excluded from an employee’s current taxable income under provisions of Internal Revenue Code Section 401(k) and the regulations thereunder. The 401(k) Plan also provides for usthe Company to match employee contributions up to $4$4 per year. WeThe Company contributed $617, $619$1,763, $1,295 and $587$994 to the 401(k) Plan, net of forfeitures, in 2017, 2016,2022, 2021, and 2015,2020, respectively.

In addition to ourthe Company's 401(k) plan, we offerthe Company offers a nonqualified deferred compensation plan to permit eligible directors and highly compensated employees of the Company to defer receipt and taxation of their compensation each year. WeThe Company also may make discretionary contributions to the accounts of the participating employees in any amount either in cash or stock. Participants in the plan may not purchase OraSure stock as an investment vehicle. As of December 31, 20172022 and 2016,2021, the value of the assets associated with this plan was $3,514$747 and $1,980,$1,763, respectively, and is included in current assets and other assets in ourthe Company's consolidated balance sheets. OurThe Company's obligation related to the deferred compensation plan is included in accrued expenses and other liabilities in ourthe Company's consolidated balance sheets. As of December 31, 20172022 and 2016, our2021, the Company's total obligation under this plan was $3,514$747 and $1,980,$1,763, respectively.

Substantially all regular full-time Canadian employees are eligible to participate in the DNA Genotek Registered Retirement Savings Plan (the “RRSP”). The RRSP permits voluntary employee contributions to be excluded from an employee’s current taxable income and receive tax preferred treatment with Canada Revenue Canada.Agency. The RRSP also provides for DNAG to match employee contributions up to $2$4 CAD per year. WeThe Company contributed $145, $134$453, $448 and $134$366 to the RRSP in 2017, 2016,2022, 2021, and 2015,2020, respectively.

16.SUBSEQUENT EVENTS:

13.QUARTERLY DATA (Unaudited):

The following tables summarizeOn February 14, 2023, the quarterly results of operationsCompany announced a 11% reduction in its non-production workforce. This will be accounted for each ofpursuant to ASC 420, Exit or Disposal Cost Obligations, and the quarters in 2017 and 2016. These quarterly results are unaudited, butexpense will primarily be recorded in the opinionfirst quarter of management, have been prepared on the same basis as our audited financial information and include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the information set forth herein.2023.

F-30

   2017 Results 
   Three months ended 
   March 31,
2017
  June 30,
2017
   September 30,
2017
   December 31,
2017
 

Net revenues

  $32,546  $40,176   $42,314   $52,028 

Costs and expenses

   16,675(1)   33,289    34,995    41,867 
  

 

 

  

 

 

   

 

 

   

 

 

 

Operating income

   15,871(1)   6,887    7,319    10,161 

Other income, net

   467   96    113    118 
  

 

 

  

 

 

   

 

 

   

 

 

 

Income before income taxes

   16,338   6,983    7,432    10,279 

Income tax expense

   3,897   1,555    1,669    2,963 
  

 

 

  

 

 

   

 

 

   

 

 

 

Net income

  $12,441  $5,428   $5,763   $7,316 
  

 

 

  

 

 

   

 

 

   

 

 

 

Earnings per share

       

Basic

  $0.22  $0.09   $0.10   $0.12(2) 
  

 

 

  

 

 

   

 

 

   

 

 

 

Diluted

  $0.21  $0.09   $0.09   $0.12(2) 
  

 

 

  

 

 

   

 

 

   

 

 

 

   2016 Results 
   Three months ended 
   March 31,
2016
  June 30,
2016
  September 30,
2016
  December 31,
2016
 

Net revenues

  $29,089  $31,359  $32,251(3)  $35,499(3) 

Costs and expenses

   26,390   27,010   26,107   28,426 
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

   2,699   4,349   6,144   7,073 

Other income (expense), net

   (192  (340  498   92 
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

   2,507   4,009   6,642   7,165 

Income tax expense (benefit)

   61   173   400   (31
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $2,446  $3,836  $6,242  $7,196 
  

 

 

  

 

 

  

 

 

  

 

 

 

Earnings per share

     

Basic

  $0.04  $0.07  $0.11  $0.13 
  

 

 

  

 

 

  

 

 

  

 

 

 

Diluted

  $0.04  $0.07  $0.11  $0.13 
  

 

 

  

 

 

  

 

 

  

 

 

 

(1)Includes a $12,500 gain associated with the settlement of our litigation with Ancestry.com DNA LLC and its contract manufacturer, which was recorded as a reduction of operating expenses in the indicated period.
(2)The summation of the quarterly amounts may not equal theyear-end amounts as included in the consolidated financial statements due to the use of weighted-average shares for each period.
(3)Revenues in the last six months of 2016 include an additional $5,436 of exclusivity payments recognized in other revenues as a result of the early termination of our HCVco-promotion agreement with AbbVie.

14.SUBSEQUENT EVENTS:

In January 2018, we announced the retirement of our President and Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”) and Chief Operating Officer. Stephen S. Tang, Ph.D., who currently serves as

Chairman of the Board of Directors (the “Board”), was appointed as the Company’s new President and CEO, effective as of April 1, 2018. Dr. Tang will replace Douglas A. Michels, who will retire as President and CEO, and as a member of the Board, on March 31, 2018. In addition, Ronald H. Spair, our CFO and Chief Operating Officer, will be retiring on or before June 30, 2018, with his exact retirement date to be determined based on the timing for the Company’s appointment of a new CFO. Charges associated with these transitions are expected to total $8,590 in 2018. These charges primarily reflectnon-cash charges associated with modifications to existing stock grants held by the retiring executives and expenses associated with the onboarding of the Company’s new President and CEO.

INDEX TO EXHIBITS

Exhibit
Number

Exhibit

  3.1.1Certificate of Incorporation of OraSure Technologies, Inc. is incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on FormS-4 (No.333-39210), filed June 14, 2000.
  3.1.2Certificate of Amendment to Certificate of Incorporation dated May  23, 2000 is incorporated by reference to Exhibit 3.1.1 to the Company’s Registration Statement on FormS-4 (No.333-39210), filed June 14, 2000.
  3.2Bylaws of OraSure Technologies, Inc., as amended and restated as of February 19, 2018.
10.1Employment Agreement dated as of January  3, 2018, between OraSure Technologies, Inc. and Stephen S. Tang, Ph.D., is incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8-K filed January 4, 2018.*
10.2Employment Agreement, dated as of June  22, 2004, between OraSure Technologies, Inc. and Douglas A. Michels, is incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2004.*
10.3Amendment No. 1 to Employment Agreement, dated as of December  16, 2008, between the Company and Douglas A. Michels, is incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8-K filed December 19, 2008.*
10.4Amendment No. 2 to Employment Agreement, dated as of December  15, 2010, between the Company and Douglas A. Michels, is incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form10-K for the year ended December 31, 2010.*
10.5Amendment No. 3 to Employment Agreement, dated as of March  27, 2015, between the Company and Douglas A. Michels is incorporated by reference to Exhibit 99.1 to the Company’s current Report on Form8-K filed March 31, 2015.*
10.6Retirement Agreement, dated as of January  3, 2018 between OraSure Technologies, Inc. and Douglas A. Michels, is incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8-K filed January 4, 2018.*
10.7Employment Agreement, dated as of July  1, 2004, between OraSure Technologies, Inc. and Ronald H. Spair, is incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2004.*
10.8Amendment No. 1 to Employment Agreement, dated as of December  16, 2008, between the Company and Ronald H. Spair, is incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form8-K filed December 19, 2008.*
10.9Amendment No. 2 to the Employment Agreement, dated as of December  15, 2010, between the Company and Ronald H. Spair, is incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form10-K for the year ended December 31, 2010.*
10.10Amendment No. 3 to Employment Agreement, dated as of March  27, 2015, between the Company and Ronald H. Spair is incorporated by reference to Exhibit 99.2 to the Company’s current Report on Form8-K filed March 31, 2015.*
10.11Retirement Agreement dated as of January  31, 2018, between OraSure Technologies, Inc. and Ronald H. Spair is incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8-K filed February 2, 2018.*
10.12Employment Agreement, dated as of July  1, 2004, between OraSure Technologies, Inc. and Jack E. Jerrett, is incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2004.*


Exhibit
Number

Exhibit

10.13Amendment No. 1 to Employment Agreement, dated as of December  16, 2008, between the Company and Jack E. Jerrett, is incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form8-K filed December 19, 2008.*
10.14Amendment No. 2 to the Employment Agreement, dated as of December  15, 2010, between the Company and Jack E. Jerrett, is incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form10-K for the year ended December 31, 2010.*
10.15Amendment No. 3 to Employment Agreement, dated as of March  27, 2015, between the Company and Jack E. Jerrett is incorporated by reference to Exhibit 99.3 to the Company’s current Report on Form8-K filed March 31, 2015.*
10.16Employment Agreement, dated as of October  2, 2006, between Mark L. Kuna and OraSure Technologies, Inc., is incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form8-K filed October 5, 2006.*
10.17Amendment No. 1 to Employment Agreement, dated as of December  16, 2008, between the Company and Mark L. Kuna, is incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form8-K filed December 19, 2008.*
10.18Amendment No. 2 to the Employment Agreement, dated as of December  15, 2010, between the Company and Mark L. Kuna, is incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form10-K for the year ended December 31, 2010.*
10.19Amendment No. 3 to Employment Agreement, dated as of March  27, 2015, between the Company and Mark L. Kuna is incorporated by reference to Exhibit 99.4 to the Company’s current Report on Form8-K filed March 31, 2015.*
10.20Employment Agreement, dated as of January  3, 2011, between the Company and Anthony Zezzo II is incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form10-K for the year ended December 31, 2010.*
10.21Terms of Employment for Michael Reed, Senior Vice President and Chief Science Officer for OraSure Technologies, Inc., is incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2016.*
10.22Employment Agreement, dated as of January 7, 2008, between DNA Genotek, Inc. and Brian Smith, as amended July  25, 2011 and June 16, 2016, is incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2016.*
10.23Description ofNon-Employee Director Compensation Policy, as amended, is incorporated by reference to Item 5.02 to the Company’s Current Report on Form8-K filed February 24, 2017. *
10.24Amended and Restated Epitope, Inc. 1991 Stock Award Plan is incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form10-K for the year ended December 31, 2002.*
10.25OraSure Technologies, Inc. Employee Incentive andNon-Qualified Stock Option Plan, as amended and restated effective September 29, 2000, is incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form10-K for the year ended December 31, 2000.*
10.26Amended and Restated OraSure Technologies, Inc. Stock Award Plan, effective February  21, 2017, is incorporated by reference to Exhibit A to the Company’s Proxy Statement, filed April 5, 2017, for the 2017 Annual Meeting of Stockholders.*
10.27Form of Restricted Share Award Agreement (Executive Officers – Employment Agreements) is incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form10-K for the year ended December 31, 2015.*
10.28Form of Restricted Unit Award Agreement (Executive Officers – Employment Agreements) is incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form10-K for the year ended December 31, 2016. *


Exhibit
Number

Exhibit

10.29Form of Restricted Share Grant Agreement(Non-Employee Directors) is incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form10-K for the year ended December 31, 2011.*
10.30Nonqualified Stock Option Award General Terms and Conditions (Executive Officers) is incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form10-K for the year ended December 31, 2011.*
10.31Nonqualified Stock Option Award General Terms and Conditions(Non-Employee Directors) is incorporated by reference to Exhibit 10.26 to the Company’s Annual Report on Form10-K for the year ended December 31, 2011.*
10.32Description of the OraSure Technologies, Inc. 2017 Management Incentive Plan is incorporated by reference to Item 5.02 to the Company’s Current Report on Form8-K filed February 24, 2017.*
10.33Description of the OraSure Technologies, Inc. 2017 Incentive Plan is incorporated by reference to Item 5.02 to the Company’s Current Report on Form8-K filed May 19, 2017*.
10.34Description of the OraSure Technologies, Inc. 2018 Incentive Plan is incorporated by reference to Item 5.02 to the Company’s Current Report on Form8-K filed February 22, 2018.*
10.35Description of Amended Long-Term Incentive Policy is incorporated by reference to Item 5.02 to the Company’s Current Report on Form8-K filed May 14, 2015.*
10.36Description of Long-Term Incentive Policy, as amended, is incorporated by reference to Item 5.02 to the Company’s Current Report on Form8-K filed February 24, 2017.*
10.37OraSure Technologies, Inc. Deferred Compensation Plan is incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form8-K filed December 21, 2011.*
10.38Adoption Agreement related to OraSure Technologies, Inc. Deferred Compensation Plan is incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form8-K filed December 21, 2011.*
10.39Credit Agreement, between Wells Fargo Bank, National Association, and OraSure Technologies, Inc., is incorporated by reference to Exhibit 10 to the Company’s Quarterly Report on Form10-Q for the quarter ended September 30, 2016.
10.40First Amendment to Credit Agreement, dated as of December  20, 2017, by and among OraSure Technologies, Inc., Wells Fargo Bank, National Association, and the Lending Parties thereto, is incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-k filed December 21, 2017.
21Subsidiaries of the Company are incorporated by reference to Exhibit 21 to the Company’s Annual Report on Form10-K for the year ended December 31, 2013.
23Consent of KPMG LLP.
24Powers of Attorney.
31.1Certification of Douglas A. Michels required by Rule13a-14(a) or Rule15d-14(a) under the Securities Exchange Act of 1934, as amended.
31.2Certification of Ronald H. Spair required by Rule13a-14(a) or Rule15d-14(a) under the Securities Exchange Act of 1934, as amended.
32.1Certification of Douglas A. Michels required by Rule13a-14(b) or Rule15a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


Exhibit
Number

Exhibit

32.2Certification of Ronald H. Spair required by Rule13a-14(b) or Rule15a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INSXBRL Instance Document

101.SCHXBRL Taxonomy Extension Schema Document

101.CALXBRL Taxonomy Extension Calculation Linkbase Document

101.DEFXBRL Taxonomy Extension Definition Linkbase Document

101.LABXBRL Taxonomy Extension Label Linkbase Document

101.PREXBRL Taxonomy Extension Presentation Linkbase document

*Management contract or compensatory plan or arrangement.