UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September~~June 30, ~~2021~~2022.

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

For the transition period from to .

Commission File Number 001-16537

ORASURE TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in Its Charter)



Delaware		36-4370966
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)



220 East First Street, Bethlehem, Pennsylvania		18015
(Address of Principal Executive Offices)		(Zip 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(s)

Name of each exchange on which registered

Common Stock, $0.000001 par value per share

OSUR

The NASDAQ Stock Market LLC

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

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	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 checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 1, 2021,~~August 5, 2022, the registrant had ~~72,038,439~~72,619,055 shares of common stock, $.000001 par value per share, outstanding.

PART I. FINANCIAL INFORMATION



	Page No.

Item 1. Financial Statements (Unaudited)

Consolidated Balance Sheets at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021	3

Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	4

Consolidated Statements of Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	5

Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	6

Notes to the Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1819

Item 3. Quantitative and Qualitative Disclosures About Market Risk	2931

Item 4. Controls and Procedures	2931

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	2931

Item 1A. Risk Factors	2931

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3132

Item 3. Defaults Upon Senior Securities	3132

Item 4. Mine Safety Disclosures	3132

Item 5. Other Information	3132

Item 6. Exhibits	3233

Signatures	3334

Item 1. FINANCIAL STATEMENTS

ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except per share amounts)


	September 30, 2021			December 31, 2020			June 30, 2022			December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents	$	134,962		$	160,802		$	66,159		$	116,762
Short-term investments		50,065			48,599			29,625			36,279
Accounts receivable, net of allowance for doubtful accounts of $4,891 and $3,654		40,075			38,835
Accounts receivable, net of allowance for doubtful accounts of $3,222 and $3,418								62,886			45,323
Inventories		53,583			31,863			71,304			53,138
Prepaid expenses		8,103			3,860			5,477			7,939
Other current assets		2,439			4,934			31,855			28,990
Total current assets		289,227			288,893			267,306			288,431
Noncurrent Assets:
Property, plant and equipment, net		77,586			51,860			93,697			88,164
Operating right-of-use assets, net		9,615			4,461			16,451			9,056
Finance right-of-use assets, net		4,629			1,312			1,887			2,493
Intangible assets, net		15,221			17,904			12,851			14,343
Goodwill		40,264			40,351			36,038			40,279
Long-term investments		17,271			47,718			—			17,009
Other noncurrent assets		1,944			1,973			1,024			1,215
Total noncurrent assets		166,530			165,579			161,948			172,559
TOTAL ASSETS	$	455,757		$	454,472		$	429,254		$	460,990
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	23,778		$	17,407		$	36,226		$	28,024
Deferred revenue		3,488			4,811			2,660			2,936
Accrued expenses and other current liabilities		22,610			22,227			23,165			33,778
Finance lease liability		1,912			517
Operating lease liability		2,178			1,125
Finance lease liabilities								1,182			939
Operating lease liabilities								2,054			2,181
Acquisition-related contingent consideration obligation		201			402			199			206
Total current liabilities		54,167			46,489			65,486			68,064
Noncurrent Liabilities:
Finance lease liability		2,834			895
Operating lease liability		7,740			3,591
Finance lease liabilities								1,445			1,952
Operating lease liabilities								14,978			7,202
Acquisition-related contingent consideration obligation		318			2,049			117			354
Other noncurrent liabilities		1,998			1,682			489			651
Deferred income taxes		880			1,195			2,547			2,234
Total noncurrent liabilities		13,770			9,412			19,576			12,393
TOTAL LIABILITIES		67,937			55,901			85,062			80,457
Commitments and contingencies (Note 11)
Commitments and contingencies (Note 12)
STOCKHOLDERS' EQUITY
Preferred stock, par value $.000001, 25,000 shares authorized, NaN issued		—			—			—			—
Common stock, par value $.000001, 120,000 shares authorized, 72,038 and 71,738 shares issued and outstanding		0			0
Common stock, par value $.000001, 120,000 shares authorized, 72,572 and 72,069 shares issued and outstanding								0			0
Additional paid-in capital		508,601			505,123			515,928			511,063
Accumulated other comprehensive loss		(10,721	)		(9,097	)		(12,514	)		(10,077	)
Accumulated deficit		(110,060	)		(97,455	)		(159,222	)		(120,453	)
Total stockholders' equity		387,820			398,571			344,192			380,533
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	455,757		$	454,472		$	429,254		$	460,990

See accompanying notes to the consolidated financial statements.

ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share amounts)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
NET REVENUES:
Products and services	$	53,229		$	46,749		$	165,549		$	105,972		$	79,167		$	55,741		$	144,403		$	112,320
Other		688			1,262			4,557			2,894			1,064			1,866			3,535			3,869
		53,917			48,011			170,106			108,866			80,231			57,607			147,938			116,189
COST OF PRODUCTS AND SERVICES SOLD		32,449			17,722			79,639			45,182			52,647			26,934			96,082			47,190
Gross profit		21,468			30,289			90,467			63,684			27,584			30,673			51,856			68,999
OPERATING EXPENSES:
Research and development		8,596			8,007			25,270			20,575			9,068			7,682			17,481			16,674
Sales and marketing		13,886			7,849			33,836			25,339			11,684			10,420			24,401			19,950
General and administrative		12,499			10,108			33,680			30,442			17,579			10,993			36,735			21,181
Loss on impairment														10,542			—			10,542			—
Change in the estimated fair value of acquisition-related contingent consideration		(500	)		(60	)		(1,526	)		390			—			(220	)		(36	)		(1,026	)
		34,481			25,904			91,260			76,746			48,873			28,875			89,123			56,779
Operating income (loss)		(13,013	)		4,385			(793	)		(13,062	)		(21,289	)		1,798			(37,267	)		12,220
OTHER INCOME		100			314			429			1,960			1,318			448			1,265			329
Income (loss) before income taxes		(12,913	)		4,699			(364	)		(11,102	)		(19,971	)		2,246			(36,002	)		12,549
INCOME TAX EXPENSE		2,102			3,659			12,241			5,680
INCOME TAX EXPENSE (BENEFIT)														(1,169	)		3,610			2,767			10,139
NET INCOME (LOSS)	$	(15,015	)	$	1,040		$	(12,605	)	$	(16,782	)	$	(18,802	)	$	(1,364	)	$	(38,769	)	$	2,410
INCOME (LOSS) PER SHARE:
BASIC	$	(0.21	)	$	0.01		$	(0.18	)	$	(0.25	)	$	(0.26	)	$	(0.02	)	$	(0.54	)	$	0.03
DILUTED	$	(0.21	)	$	0.01		$	(0.18	)	$	(0.25	)	$	(0.26	)	$	(0.02	)	$	(0.54	)	$	0.03
SHARES USED IN COMPUTING INCOME (LOSS) PER SHARE:
BASIC		72,023			71,537			71,962			66,088			72,496			71,983			72,361			71,931
DILUTED		72,023			72,662			71,962			66,088			72,496			71,983			72,361			72,683

See accompanying notes to the consolidated financial statements.

ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
NET INCOME (LOSS)	$	(15,015	)	$	1,040		$	(12,605	)	$	(16,782	)	$	(18,802	)	$	(1,364	)	$	(38,769	)	$	2,410
OTHER COMPREHENSIVE INCOME (LOSS)
Currency translation adjustments		(4,117	)		1,953			(1,362	)		(3,542	)		(4,349	)		1,403			(2,593	)		2,755
Unrealized gain (loss) on marketable securities		(161	)		(266	)		(262	)		83			82			(122	)		156			(101	)
COMPREHENSIVE INCOME (LOSS)	$	(19,293	)	$	2,727		$	(14,229	)	$	(20,241	)	$	(23,069	)	$	(83	)	$	(41,206	)	$	5,064

See accompanying notes to the consolidated financial statements.

ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2021			2020			2022			2021
OPERATING ACTIVITIES:
Net loss	$	(12,605	)	$	(16,782	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Net income (loss)							$	(38,769	)	$	2,410
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation		5,155			5,913			6,804			2,937
Depreciation and amortization		8,479			6,880			7,464			5,144
Loss on impairment								10,542			—
Other non-cash amortization		664			171			313			380
Provision for doubtful accounts		1,228			1,141			(152	)		747
Inventory reserve								1,989			1,168
Unrealized foreign currency gain		(319	)		(41	)		(62	)		(364	)
Interest expense on finance leases		84			56			55			35
Deferred income taxes		(324	)		(764	)		361			(218	)
Loss on sale of fixed assets		—			104
Loss on disposal of fixed assets								718			—
Change in the estimated fair value of acquisition-related contingent consideration		(1,526	)		390			(36	)		(1,026	)
Payment of acquisition-related contingent consideration		(142	)		(496	)		—			(142	)
Changes in assets and liabilities
Accounts receivable		(2,102	)		5,228			(18,646	)		3,680
Inventories		(21,689	)		(7,425	)		(20,385	)		(17,233	)
Prepaid expenses and other assets		(1,942	)		2,420			(4,416	)		154
Accounts payable		2,790			3,269			11,942			4,400
Deferred revenue		(1,331	)		1,664			(252	)		(630	)
Accrued expenses and other liabilities		982			468			(2,959	)		(4,914	)
Net cash (used in) provided by operating activities		(22,598	)		2,196
Net cash used in operating activities								(45,489	)		(3,472	)
INVESTING ACTIVITIES:
Purchases of investments		(25,443	)		(90,137	)		—			(10,428	)
Proceeds from maturities and redemptions of investments		53,745			102,616			23,017			43,745
Purchases of property and equipment		(27,508	)		(11,234	)		(25,440	)		(22,929	)
Proceeds from escrow associated with business acquisitions		—			126
Acquisition of businesses, net of cash acquired		—			(3,037	)
Purchase price adjustment related to business acquisition		(18	)		—
Purchase of patent and product rights		—			(2,250	)
Purchase of property and equipment under government contracts								(33,803	)		—
Proceeds from funding under government contract								33,962			—
Other investing activities								—			(18	)
Net cash (used in) provided by investing activities		776			(3,916	)		(2,264	)		10,370
FINANCING ACTIVITIES:
Cash payments for lease liabilities		(1,111	)		(521	)		(392	)		(510	)
Proceeds from exercise of stock options								15			121
Payment of acquisition-related contingent consideration		(264	)		(3,004	)		(208	)		(264	)
Issuance of common stock in connection with public offering, net		—			95,036
Proceeds from exercise of stock options		247			2,115
Repurchase of common stock		(1,924	)		(2,076	)		(1,954	)		(1,877	)
Net cash (used in) provided by financing activities		(3,052	)		91,550
Net cash used in financing activities								(2,539	)		(2,530	)
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH		(966	)		(2,686	)		(311	)		(7,050	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(25,840	)		87,144
NET DECREASE IN CASH AND CASH EQUIVALENTS								(50,603	)		(2,682	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		160,802			75,715			116,762			160,802
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	134,962		$	162,859		$	66,159		$	158,120

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	12,540		$	3,888		$	9,107		$	10,329
Non-cash investing and financing activities
Accrued property and equipment purchases	$	4,382		$	2,093			1,900			896
Accrued property and equipment purchases under government contracts								2,023			—
Unrealized gain (loss) on marketable securities	$	(262	)	$	83			156			(101	)

See accompanying notes to the consolidated financial statements.

ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(in thousands, except per share amounts, unless otherwise indicated)

1.~~The Company~~

The overall 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. Our business consists of 2 ~~segments: our “Diagnostics” segment, and our “Molecular Solutions” segment.~~

Our Diagnostics business primarily consists of the development, manufacture, marketing and sale of oral fluid diagnostic products and specimen collection devices using our proprietary technologies, as well as other diagnostic products including immunoassays and other ~~in vitro~~ diagnostic tests that are used on other specimen types. The Diagnostics business includes tests for diseases including HIV and Hepatitis C that are performed on a rapid basis at the point of care and tests 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 HIV product is also sold in a consumer-friendly format in the over-the-counter (“OTC”) market in the U.S. and as a self-test to individuals in a number of other countries. Our Diagnostics business includes the operations of UrSure, Inc. (“UrSure”), which was acquired and merged into OraSure in 2020. This part of the Diagnostics business develops and commercializes products that measure adherence to HIV medications including pre-exposure prophylaxis or PrEP, the daily medication to prevent HIV, and anti-retroviral medications to suppress HIV. These products include laboratory-based tests that can measure levels of the medications in a patient’s urine or blood, as well as point-of-care products currently in development. In 2020, we began developing a rapid antigen self-test for COVID-19 and a COVID-19 antibody enzyme-linked immunosorbent assay (“ELISA”) for use in laboratory settings. In June 2021, we received three Emergency Use Authorizations ("EUA") from the U.S. Food and Drug Administration ("FDA") for our InteliSwabTM ~~COVID-19 Rapid Antigen Tests for non-prescription OTC, professional point-of-care and prescription use. We began recording revenues on the sales of our InteliSwab~~TM COVID-19 Rapid Antigen Tests during the third quarter of 2021. Following discussions with the FDA and their de-prioritization of antibody testing in the U.S., we decided to no longer pursue EUAs for the ELISA test. We have, however, continued to offer the product for research use to labs and other parties interested in COVID antibody surveillance and research applications.

Our Molecular Solutions business is operated by our subsidiaries, DNA Genotek Inc. (“DNAG”), Diversigen, Inc. (“Diversigen”), and Novosanis NV (“Novosanis”). In our DNAG business, we manufacture and sell kits that are used to collect, stabilize, transport and store a biological sample of genetic material for molecular testing. Our products are used for academic research and commercial applications, including ancestry, disease risk management, lifestyle and animal testing. Three of our collection devices are used in connection with COVID-19 molecular testing. We also sell research-use-only collection products into the microbiome market. We offer our customers a suite of genomics and microbiome services that range from package customization and study design optimization to extraction, analysis and reporting services. The microbiome laboratory and bioinformatics services are provided by Diversigen, which includes the operations of CoreBiome, Inc. (“CoreBiome”), a subsidiary we acquired in early 2019. CoreBiome and Diversigen were merged together in 2020. Novosanis manufactures and sells the Colli-Pee® collection device for the volumetric collection of first-void urine for use in research, screening and diagnostics in the liquid biopsy and sexually transmitted infection markets. Our Molecular Solutions business serves customers in many countries worldwide, including many leading research universities and hospitals.

2.1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation. The accompanying interim unaudited consolidated financial statements include the accounts of OraSure Technologies, Inc. (“OraSure”) and its wholly-owned subsidiaries, ~~DNAG,~~DNA Genotek Inc. (“DNAG”), Diversigen, Inc. (“Diversigen”), and ~~Novosanis.~~Novosanis NV (“Novosanis”). All intercompany transactions and balances have been eliminated. References herein to “we,” “us,” “our,” or the “Company” mean OraSure and its consolidated subsidiaries, unless otherwise indicated. The unaudited financial statements, in the opinion of management, include all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of our financial position and results of operations for these interim periods. These financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. Results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 are not necessarily indicative of the results of operations expected for the full year.

Summary of Significant Accounting Policies. There have been no changes to the Company's significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020~~2021 that have had a material impact on the consolidated financial statements and related notes except as discussed herein.

Investments. We consider all investments in debt securities to be available-for-sale securities. These securities consist of guaranteed investment certificates and corporate bonds purchased 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.

We record an allowance for credit loss for our available-for-sale securities when a decline in investment market value is due to credit-related factors. When evaluating an investment for impairment, we review 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. ~~As of September~~During the six months ended June 30, ~~2021,~~2022, we ~~determined that the decline in the market value of~~recognized a provision for expected credit losses for our available-for-sale ~~investment was not due to credit-related factors and as such no allowance for credit-loss was necessary.~~securities of $72.

The following is a summary of our available-for-sale securities as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2021
June 30, 2022
Guaranteed investment certificates	$	33,122	$	0	$	0		$	33,122	$	24,860	$	—	$	—		$	24,860
Corporate bonds		34,824		0		(610	)		34,214		5,043		—		(278	)		4,765
Total available-for-sale securities	$	67,946	$	0	$	(610	)	$	67,336	$	29,903	$	—	$	(278	)	$	29,625
December 31, 2020
December 31, 2021
Guaranteed investment certificates	$	25,132	$	0	$	0		$	25,132	$	33,249	$	—	$	—		$	33,249
Corporate bonds		71,533		135		(483	)		71,185		20,473		—		(434	)		20,039
Total available-for-sale securities	$	96,665	$	135	$	(483	)	$	96,317	$	53,722	$	—	$	(434	)	$	53,288
At September 30, 2021, maturities of our available-for-sale securities were as follows:
At June 30, 2022, maturities of our available-for-sale securities were as follows:
Less than one year	$	50,510	$	0	$	(445	)	$	50,065	$	29,903	$	—	$	(278	)	$	29,625
Greater than one year	$	17,436	$	0	$	(165	)	$	17,271	$	—	$	—	$	—		$	—

Fair Value of Financial Instruments. As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~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

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 our available-for-sale debt securities are measured as Level 2 instruments as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. Our available-for-sale guaranteed investment certificates are measured as Level 1 instruments as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Included in cash and cash equivalents at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, was $~~23,862~~5,636 and $~~71,489~~1,160 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 ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 was $~~2,503~~1,576 and $~~2,565~~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 noncurrent assets with the same amount included in accrued expenses and other noncurrent liabilities in the accompanying consolidated balance sheets.

~~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 our customers and our historical experience related to write-offs.

~~Inventories.~~ Inventories are stated at the lower of cost or net realizable value, with cost determined on a 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, 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 inventories, based on prior experience as well as estimated forecasts of product sales. We reserve for unidentified scrap or spoilage based on historical write-off rates. We also consider items identified through specific identification procedures in assessing the adequacy of our reserve. When factors indicate that impairment has occurred, either a reserve is established against the inventories’ carrying value or the inventories are completely written off, as in the case of lapsing expiration dates. ~~During the third quarter of 2021, we reserved $1,750~~ ~~of COVID-19 antibody inventory, which we do not believe we can sell as a result of the decision to no longer pursue EUAs for the ELISA test.~~

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 depreciated over twenty to ~~forty~~ years, while computer equipment, machinery and equipment, and furniture and fixtures are depreciated over two to ten 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 operations. Accumulated depreciation of property, plant and equipment as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 was $~~58,755~~66,468 and $~~53,604~~61,157, respectively.

Intangible Assets. Intangible assets consist of customer relationships, patents and product rights, acquired technology and tradenames. 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 five to fifteen years. Accumulated amortization of intangible assets as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 was $~~29,554~~30,988 and $~~27,107~~30,412, respectively. The decrease in ~~intangibles~~intangible assets from $~~17,904~~14,343 as of December 31, ~~2020~~2021 to $~~15,221~~12,851 as of ~~September~~June 30, ~~2021~~2022 was due to $~~2,455~~1,120 in amortization expense and foreign currency translation losses of $~~228~~372.

~~Goodwill~~Impairment of Long-Lived Assets. ~~Goodwill represents~~Long-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 ~~excess~~carrying amount of the ~~purchase price~~assets may not be fully recoverable. We assess the recoverability of our 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 measure 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 our assumptions about selling prices, volumes, costs and market conditions over a reasonable period of time.

During the three months ended June 30, 2022, management decided to move three idle manufacturing cells to storage due to changes in forecasted demand for the products the cells are intended to produce. As a result of this decision, we determined that the carrying values of the equipment is not recoverable and recorded an aggregate pre-tax asset impairment charge of $6,938 during the three months ended June 30, 2022 to write the assets down their estimated fair values. This charge is reported within loss on impairments in the consolidated statement of operations.

We estimated the fair value of the ~~net tangible and identifiable intangible~~impaired long-lived assets acquired. 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 (“GAAP”) permitusing a market approach, which required us to ~~make a qualitative evaluation about~~estimate the ~~likelihood~~value that would be received for the equipment in the principal or most advantageous market for that equipment in an orderly transaction between market participants. Due to the extremely specialized nature of ~~goodwill impairment. If we conclude that it is more likely than not that~~ the ~~carrying value of a reporting unit is greater than its~~manufacturing equipment and various market data points, the estimated fair value ~~then we would be required to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s~~was not significant. Our fair value ~~provided~~estimates were representative of Level 3 measurements within the ~~impairment charge does not exceed the total amount of goodwill allocated~~fair value hierarchy due to the ~~reporting unit.~~significant level of estimation involved and the lack of transparency as to the inputs used.

~~The decrease in goodwill from $40,351~~ ~~as of December 31, 2020 to $40,264~~ ~~as of September 30, 2021 was a result of an adjustment of $105~~ ~~associated with foreign currency translation and a purchase price adjustment of $~~18 ~~related to a business acquisition.~~

Foreign Currency Translation. The assets and liabilities of our 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 a functional currency are included in our consolidated statements of ~~income~~operations in the period in which the change occurs. Net foreign exchange gains resulting from

foreign currency transactions that are included in other income (loss) in our consolidated statements of ~~income~~operations were $7783 and $70198 for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Net foreign exchange gains (losses) were $54 and $(~~371~~379) ~~and $563~~for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~and 2020.~~respectively.

Accumulated Other Comprehensive ~~Income (Loss)~~Loss. We classify items of other comprehensive ~~income (loss)~~loss by their nature and disclose the accumulated balance of other comprehensive loss separately from accumulated deficit and additional paid-in capital in the stockholders’ equity section of our consolidated balance sheets.

We have defined the Canadian dollar as the functional currency of our Canadian subsidiary, DNAG, and we have defined the Euro as the functional currency of our Belgian subsidiary, Novosanis. The results of operations for those subsidiaries are translated into U.S. dollars, which is the reporting currency of the Company. Accumulated other comprehensive loss at ~~September~~June 30, ~~2021~~2022 consisted of $~~10,111~~12,236 of currency translation adjustments and $~~610~~278 of net unrealized losses on marketable securities, which represents the fair market value adjustment for our

investment portfolio. Accumulated other comprehensive loss at December 31, ~~2020~~2021 consists of $~~8,749~~9,643 of currency translation adjustments and $~~348~~434 of net unrealized losses on marketable securities, which represents the fair market value adjustment for our investments portfolio.

Recent Accounting Pronouncements.

In March 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The purpose of this update 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 ~~update are elective and are~~ASU were effective upon issuance and could be applied prospectively through December 31, 2022. The FASB issued a proposed amendment to the ASU in April 2022 which, if approved, will extend the date for ~~all entities.~~prospective application to December 31, 2024. Management ~~is evaluating the impact of~~has evaluated this ASU and ~~does~~concluded that it will not ~~expect this update to~~ have a material impact on the Company's Consolidated Financial Statements.

2. Government Capital Contracts

~~3. Business Combinations~~In September 2021, we 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 our InteliSwab® COVID-19 Rapid Tests as part of the nation’s pandemic preparedness plan. Funding will be paid to the Company based on achievement of milestones through March 2024 for the design, acquisition, installation, qualification and acceptance of the manufacturing equipment, as set forth in the agreement. In accordance with the milestone payment schedule, 15% of the total will not be funded until the completion of the final equipment validation, which is scheduled to occur in late 2023 or early 2024. We began making payments to vendors for the capital project during the fourth quarter of 2021 and began receiving funds from the DOD in January 2022.

~~UrSure~~

On July 22, 2020, the Company acquired all of the outstanding capital stock of UrSure, Inc. (“UrSure”), pursuant to the terms of a merger agreement. The initial aggregate purchase price of this transaction wasAdditionally, during 2021, we received $~~3,000~~531~~, adjusted~~ in funding from the Commonwealth of Pennsylvania, acting through the Department of Community and Economic Development, for ~~certain transaction costs, indebtedness, and holdback amounts, and was funded with cash on hand. A portion of~~ the purchase ~~price was deposited into~~of machinery and equipment as part of an ~~escrow account for a limited period after closing, pursuant to indemnification obligations under the merger agreement.~~

~~During the nine months ended September 30, 2020, we incurred acquisition~~expansion of manufacturing operations in Pennsylvania. All related ~~costs of $393~~ ~~including accounting, legal, and other professional fees, all of which~~purchases were ~~expensed and reported as a component of general and administrative expense~~completed in ~~the consolidated statement of operations.~~ ~~NaN~~ ~~such costs were incurred for the nine months ended September 30,~~ 2021.

~~Pursuant~~Activity for these capital contracts is accounted for pursuant to International Accounting Standard ("IAS") 20, Accounting for Government Grants and Disclosure of Government Assistance. Funding earned 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. Amounts earned in excess of our ~~merger agreement, we were to pay up to an additional~~expected cost of the project for project management are recognized straight-line in other income over the term of the government contract. We recognized $~~28,000~~561 and $1,123 of ~~contingent consideration over~~such income for the three ~~years~~ ~~following the acquisition date based on the achievement~~and six months ended June 30, 2022, respectively, which is reported as other income (loss) in our consolidated statement 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, determines the estimated fair value of the contingent consideration. The fair value is determined using a probability-weighted model based on our 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 is 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.operations.

The ~~following table represents the change in contingent consideration:~~

Balance as of December 31, 2020
$
2,451
��
Payments made during the period

(406
)
Change in fair value during the period

(1,526
)
Balance as of September 30, 2021
$
519

The change in fair value during the nine months ended September 30, 2021 is as a result of delays in achieving certain product development milestones and a decrease in associated revenue forecasts as a result of these delays.

~~Revenues from UrSure primarily consist of grant money received~~balances corresponding to ~~fund the development of certain new technology. Effective as of July 22, 2020, the financial results of UrSure are~~government contracts included in our ~~Diagnostics segment.~~consolidated balance sheet are as follows:


	June 30, 2022			December 31, 2021
Other current assets:
Billed receivables	$	—		$	9,913
Unbilled receivables		15,748			9,716
Total other current assets		15,748			19,629
Property, plant and equipment, net:
Cost of assets, cumulative		47,321			11,495
Reduction for funding earned to date, not yet received		(12,828	)		(10,964	)
Reduction for funding received to date		(34,493	)		(531	)
Total property, plant and equipment, net		—			0
Accrued expenses and other current liabilities		(620	)		(8,103	)

3. Inventories

~~4. Inventories~~


	June 30, 2022		December 31, 2021
Raw materials	$	37,292	$	33,168
Work in process		2,348		2,252
Finished goods		31,664		17,718
	$	71,304	$	53,138

September 30,
2021

December 31,
2020

Raw materials

$
28,306

$
15,425

Work in process

2,653

2,572

Finished goods

22,624

13,866

$
53,583

$
31,863

5.4. 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. 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. Basic and dilutive computations of net loss per share are the same in periods in which a net loss exists as the dilutive effects of excluded items would be anti-dilutive.

The computations of basic and diluted earnings (loss) per share are as follows:


	Three Months					Nine Months
	Ended September 30,					Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020		2021			2020			2022			2021			2022			2021

Net income (loss)	$	(15,015	)	$	1,040	$	(12,605	)	$	(16,782	)	$	(18,802	)	$	(1,364	)	$	(38,769	)	$	2,410
Weighted-average shares of common stock outstanding:
Basic		72,023			71,537		71,962			66,088			72,496			71,983			72,361			71,931
Dilutive effect of stock options, restricted stock, and performance stock units		—			1,125		—			—			—			—			—			752
Diluted		72,023			72,662		71,962			66,088			72,496			71,983			72,361			72,683
Earnings (loss) per share:
Basic	$	(0.21	)	$	0.01	$	(0.18	)	$	(0.25	)	$	(0.26	)	$	(0.02	)	$	(0.54	)	$	0.03
Diluted	$	(0.21	)	$	0.01	$	(0.18	)	$	(0.25	)	$	(0.26	)	$	(0.02	)	$	(0.54	)	$	0.03

For the three months ended ~~September~~June 30, 2022, three months ended June 30, 2021 and six months ended June 30, 2022, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 226, 603, and 381 shares, respectively, were excluded from the computation of diluted loss per share. For the six months ended June 30, 2021, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing ~~859~~ ~~shares were excluded from the computation of diluted loss per share.~~ ~~For the three months ended September 30, 2020, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing~~ ~~136~~604 shares were excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive.~~For the nine months ended September 30, 2021 and 2020, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing~~ ~~847~~ ~~and~~ ~~917~~ ~~shares, respectively, were excluded from the computation of diluted loss per share.~~

6.5. Revenues

Revenues by product line. The following table represents total net revenues by product line:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
COVID-19 (1)	$	43,378	$	12,070	$	74,411	$	40,215
Genomics (1)		15,486		19,498		30,578		30,316
HIV		10,357		10,944		18,523		19,722
HCV		3,691		4,300		6,948		6,668
Substance abuse		2,630		2,629		5,191		4,591
Microbiome (1)		1,832		2,447		3,822		4,198
Laboratory services		1,204		3,114		2,938		5,611
Other product and service revenues		589		739		1,992		999
Net product and services revenues		79,167		55,741		144,403		112,320
Royalty income		642		875		1,326		2,136
Other non-product revenues		422		991		2,209		1,733
Other revenues		1,064		1,866		3,535		3,869
Net revenues	$	80,231	$	57,607	$	147,938	$	116,189

Three Months Ended September 30,
Nine Months Ended September 30,

2021

2020

2021

2020

Infectious disease testing

$
12,932

$
13,224

$
39,664

$
36,625

Risk assessment testing

2,674

2,253

7,265

6,786

Genomics (1)

19,018

8,454

49,333

23,224

Microbiome (1)

1,693

1,530

5,888

3,869

COVID-19 (1)

13,930

18,867

54,147

27,918

Laboratory services

2,406

2,280

8,017

6,798

Other product and service revenues

576

141

1,235

752

Net product and services revenues

53,229

46,749

165,549

105,972

Royalty income

500

450

2,636

1,623

Other non-product revenues

188

812

1,921

1,271

Other revenues

688

1,262

4,557

2,894

Net revenues

$
53,917

$
48,011

$
170,106

$
108,866

(1) ~~2020~~2021 COVID-19, Genomics ~~Microbiome,~~ and ~~COVID-19~~Microbiome revenues were reclassified to reflect the correct classification of the product line sales. The reclassification increased (decreased) the product line revenues for the three months ended ~~September~~June 30, ~~2020~~2021 by $490, $(6584) and $(406), $(~~298), and $363, respectively and~~respectively. The reclassification increased (decreased) the product line ~~revenue~~revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 by $1,073, $(~~157~~330) and $(743), $(respectively~~390), and $547, respectively.~~.

Revenues by geographic area. The following table represents total net revenues by geographic area, based on the location of the customer:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
United States	$	42,969	$	38,594	$	139,669	$	82,125	$	70,320	$	47,601	$	128,307	$	96,700
Europe		2,411		2,789		10,288		8,663		2,436		3,325		6,722		7,877
Other regions		8,537		6,628		20,149		18,078		7,475		6,681		12,909		11,612
	$	53,917	$	48,011	$	170,106	$	108,866	$	80,231	$	57,607	$	147,938	$	116,189

Customer and Vendor Concentrations. At ~~September~~June 30, ~~2021,~~2022, one non-commercial customer accounted for 1348% of our accounts receivable and another commercial customer accounted for 10% of our accounts receivable. ~~Another customer~~No customers accounted for more than 1110% of our accounts receivable as of December 31, ~~2020.~~2021. One non-commercial customer accounted for 56% and 39% of net consolidated revenues for the three and six months ended June 30, 2022. One customer accounted for 14% of net consolidated revenues for the three months ended ~~September~~June 30, 2021. Another customer accounted for 10% ~~of net consolidated revenues for the nine months ended September 30, 2021. One customer accounted for~~and 1114%, respectively, of net consolidated revenues for the three and six months ended ~~September~~June 30, ~~2020.~~2021.

We currently purchase certain products and critical components of our products from sole-supply vendors. If these vendors are unable or unwilling to supply the required components and products, we could be subject to increased costs and substantial delays in the delivery of our products to our customers. Third-party suppliers also manufacture certain products. Our inability to have a timely supply of any of these components and products could have a material adverse effect on our business, as well as our financial condition and results of operations.

Deferred Revenue. We record deferred revenue when funds are received prior to the recognition of the associated revenue. Deferred revenue as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 includes customer prepayments of $~~2,340~~1,746 and $~~3,216~~1,843, respectively. Deferred revenue as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 also includes $~~1,148~~914 and $~~1,595~~1,093, respectively, associated with a long-term contract that has variable pricing based on volume. The average price over the life of the contract was determined and revenue is recognized at that average price.

6. Goodwill

The following table represents the changes in goodwill by operating segment for the six months ended June 30, 2022:


	June 30, 2022
	Diagnostics			Molecular Solutions
Balance as of January 1	$	3,604		$	36,675
Impairment		(3,604	)		—
Change related to foreign currency translation		—			(637	)
Balance as of June 30	$	—		$	36,038

We perform an annual goodwill impairment assessment as of July 31 each year by comparing the estimated fair values of our reporting units to their respective carrying values. 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 a reporting unit below its carrying amount.

During the three months ended June 30, 2022, we determined that a triggering event occurred in relation to the depressed market price of the Company's common stock and corresponding significant decline in our market capitalization. As a result, we performed an interim goodwill impairment test and concluded that the carrying value of our Diagnostics reporting unit exceeded its estimated fair value and the goodwill balance for that segment was fully impaired. Thus, we recognized a pre-tax impairment charge of $3.6 million during the three months ended June 30, 2022, which is reported in loss on impairments in our condensed consolidated statement of operations.

We estimated fair values of both of our reporting units using a combined income-based approach and market-based approach. Our income approach utilized projected future cash flows that were discounted at a rate of 22% for the Diagnostic reporting unit and 20% for the Molecular Solutions reporting unit based on a weighted-average cost of capital analysis that reflected current market conditions. The market comparable approach primarily considered earnings, revenue and other multiples of comparable companies and applied those multiples to certain key drivers of the reporting units. This market approach utilized a revenue multiple weighted by year for the Diagnostics reporting unit and both a revenue and EBITDA multiple for the Molecular Solutions reporting unit. We assigned a weight of 75% to the results of our income-based approach and 25% to the results from the market-based approach for estimation of the reporting units' fair value. Our fair value estimates utilize significant unobservable inputs and thus represent Level 3 fair value measurements.

7. Accrued Expenses and other current liabilities

September 30, 2021

December 31, 2020

Payroll and related benefits

$
13,728

$
14,769

Professional fees

1,831

978

Sales tax payable

2,858

2,400

Other

4,193

4,080

$
22,610

$
22,227



	June 30, 2022		December 31, 2021
Payroll and related benefits	$	11,636	$	15,570
Commitment to purchase under government contract		—		8,103
Deferred income for government contract		620		—
Professional fees		3,799		3,335
Sales tax payable		1,807		2,227
Other		5,303		4,543
	$	23,165	$	33,778

8. Leases

We determine whether an arrangement is a lease at inception. We have operating and finance leases for corporate offices, warehouse space and equipment (including vehicles). As of ~~September~~June 30, ~~2021,~~2022, we are the lessee in all agreements. Our leases have remaining lease terms of 1 to 711 years, some of which include options to extend the leases based on agreed upon terms, and some of which include options to terminate the leases within 1 year.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

We have lease agreements that contain both lease and non-lease components (e.g., common-area maintenance). For these agreements, we account for lease components separate from non-lease components.

The components of lease expense are as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Operating Lease Cost

$
655

$
330

$
1,574

$
964

Finance Lease Cost

Amortization of right-of use assets

571

150

910

476

Interest on lease liabilities

49

17

84

56

Total Finance Lease Cost

$
620

$
167

$
994

$
532


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Operating lease cost	$	811	$	499	$	1,510	$	919
Variable and short-term lease cost		152		—		227		—
Finance lease cost:
Amortization of right-of use assets		306		212		691		339
Interest on lease liabilities		23		21		55		35
Total finance lease cost		329		233		746		374
Total lease cost	$	1,292	$	732	$	2,483	$	1,293

Supplemental cash flow information related to leases is as follows:

Nine Months Ended September 30,

2021

2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

$
1,182

$
965

Operating cash flows from financing leases

84

56

Financing cash flows from financing leases

1,111

521

Non-cash activity:

Right-of-use assets obtained in exchange for operating lease obligations

45

498

Right-of-use assets obtained in exchange for finance lease obligations

2,746

46


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,027	$	416	$	2,213	$	824
Operating cash flows from financing leases		23		21		55		35
Financing cash flows from financing leases		239		228		392		510
Non-cash activity:
Right-of-use assets obtained in exchange for operating lease obligations		5,131		7,205		8,797		7,834
Right-of-use assets obtained in exchange for finance lease obligations		-		—		117		—

Supplemental balance sheet information related to leases is as follows:

September 30, 2021

December 31, 2020

Operating Leases

Right-of-use assets

$
9,615

$
4,461

Current lease liabilities

2,178

1,125

Non-current lease liabilities

7,740

3,591

Total operating lease liabilities

$
9,918

$
4,716

Finance Leases

Right-of-use assets

$
4,629

$
1,312

Current lease liabilities

1,912

517

Non-current lease liabilities

2,834

895

Total finance lease liabilities

$
4,746

$
1,412


~~Weighted Average Remaining Lease Term~~
~~Weighted-average remaining lease term—operating leases~~	~~5.42~~
~~Weighted-average remaining lease term—finance leases~~	~~2.49~~

~~Weighted Average Discount Rate~~
~~Weighted-average discount rate—operating leases~~	~~3.92~~	%
~~Weighted-average discount rate—finance leases~~	~~3.45~~	%



	June 30, 2022		December 31, 2021
Operating Leases
Right-of-use assets	$	16,451	$	9,056
Lease liabilities:
Current lease liabilities		2,054		2,181
Non-current lease liabilities		14,978		7,202
Total operating lease liabilities	$	17,032	$	9,383


Finance Leases
Right-of-use assets	$	1,887	$	2,493
Lease liabilities:
Current lease liabilities		1,182		939
Non-current lease liabilities		1,445		1,952
Total finance lease liabilities	$	2,627	$	2,891


Weighted Average Remaining Lease Term
Weighted-average remaining lease term—operating leases	7.73 years			5.26 years
Weighted-average remaining lease term—finance leases	1.82 years			2.21 years

Weighted Average Discount Rate
Weighted-average discount rate—operating leases		4.27	%		3.90	%
Weighted-average discount rate—finance leases		3.52	%		3.57	%

As of ~~September~~June 30, ~~2021,~~2022, minimum lease payments by period are expected to be as follows:

Finance

Operating

2021 (excluding the nine months ended September 30, 2021)
$
510

$
628

2022

2,040

2,493

2023

1,810

1,776

2024

582

1,808

2025

4

1,443

Thereafter

—

2,808

Total Minimum Lease Payments

4,946

10,956

Less: imputed interest

(200
)

(1,038
)
Present Value of Lease Liabilities
$
4,746

$
9,918


	Finance			Operating
2022 (excluding the six months ended June 30, 2022)	$	710		$	1,496
2023		1,283			1,879
2024		740			2,969
2025		19			2,619
2026		11			2,422
Thereafter		—			9,021
Total minimum lease payments		2,763			20,406
Less: imputed interest		(136	)		(3,374	)
Present value of lease liabilities	$	2,627		$	17,032

9.9. Stockholders’ Equity


Reconciliation of the changes in stockholders' equity for the three and six months ended June 30, 2022 and 2021
	Common Stock					Additional Paid-in			Accumulated Other Comprehensive			Accumulated
	Shares			Amount		Capital			Loss			Deficit			Total
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		352			—		—			—			—			—
Purchase and retirement of common shares		(116	)		—		(1,049	)		—			—			(1,049	)
Stock-based compensation		—			—		3,524			—			—			3,524
Net loss		—			—		—			—			(19,967	)		(19,967	)
Currency translation adjustments		—			—		—			1,756			—			1,756
Unrealized gain on marketable securities		—			—		—			74			—			74
Balance at March 31, 2022		72,307		$	—	$	513,553		$	(8,247	)	$	(140,420	)	$	364,886
Vesting of restricted stock and performance stock units		407			—		—			—			—			—
Purchase and retirement of common shares		(142	)		—		(905	)		—			—			(905	)
Stock-based compensation		—			—		3,280			—			—			3,280
Net loss		—			—		—			—			(18,802	)		(18,802	)
Currency translation adjustments		—			—		—			(4,349	)		—			(4,349	)
Unrealized gain on marketable securities		—			—		—			82			—			82
Balance at June 30, 2022		72,572		$	—	$	515,928		$	(12,514	)	$	(159,222	)	$	344,192

Reconciliation of the changes in stockholders' equity for the three and nine months ended September 30, 2021 and 2020

Common Stock

Additional
Paid-in

Accumulated
Other
Comprehensive

Accumulated

Shares

Amount

Capital

Loss

Deficit

Total

Balance at December 31, 2020

71,738

$
—

$
505,123

$
(9,097
)

$
(97,455
)

$
398,571

Common stock issued upon exercise of options

11

—

92

—

—

92

Vesting of restricted stock and performance stock units

318

—

—

—

—

Purchase and retirement of common shares

(111
)

—

(1,730
)

—

—

(1,730
)
Stock-based compensation

—

—

1,464

—

—

1,464

Net income

—

—

—

—

3,774

3,774

Currency translation adjustments

—

—

—

1,352

—

1,352

Unrealized gain on marketable securities

—

—

—

21

—

21

Balance at March 31, 2021

71,956

$
—

$
504,949

$
(7,724
)

$
(93,681
)

$
403,544

Common stock issued upon exercise of options

3

—

29

—

—

29

Vesting of restricted stock and performance stock units

64

—

—

—

—

—

Purchase and retirement of common shares

(15
)

—

(147
)

—

—

(147
)
Stock-based compensation

—

—

1,473

—

—

1,473

Net loss

—

—

—

—

(1,364
)

(1,364
)
Currency translation adjustments

—

—

—

1,403

—

1,403

Unrealized loss on marketable securities

—

—

—

(122
)

—

(122
)
Balance at June 30, 2021

72,008

$
—

$
506,304

$
(6,443
)

$
(95,045
)

$
404,816

Common stock issued upon exercise of options

18

—

126

—

—

126

Vesting of restricted stock and performance stock units

16

—

—

—

—

—

Purchase and retirement of common shares

(4
)

—

(47
)

—

—

(47
)
Stock-based compensation

—

—

2,218

—

—

2,218

Net loss

—

—

—

—

(15,015
)

(15,015
)
Currency translation adjustments

—

—

—

(4,117
)

—

(4,117
)
Unrealized loss on marketable securities

—

—

—

(161
)

—

(161
)
Balance at September 30, 2021

72,038

$
—

$
508,601

$
(10,721
)

$
(110,060
)

$
387,820

Common Stock

Additional
Paid-in

Accumulated
Other
Comprehensive

Accumulated

Shares

Amount

Capital

Loss

Deficit

Total

Balance at December 31, 2019

61,731

$
—

$
401,814

$
(12,136
)

$
(82,533
)

$
307,145

Common stock issued upon exercise of options

6

—

30

—

—

30

Vesting of restricted stock and performance stock units

486

—

—

—

—

—

Purchase and retirement of common shares

(197
)

—

(1,408
)

—

—

(1,408
)
Stock-based compensation

—

—

1,376

—

—

1,376

Net loss

—

—

—

—

(7,328
)

(7,328
)
Currency translation adjustments

—

—

—

(9,221
)

—

(9,221
)
Unrealized loss on marketable securities

—

—

—

(442
)

—

(442
)
Balance at March 31, 2020

62,026

$
—

$
401,812

$
(21,799
)

$
(89,861
)

$
290,152

Common stock issued upon exercise of options

71

—

530

—

—

530

Vesting of restricted stock and performance stock units

161

—

—

—

—

—

Purchase and retirement of common shares

(50
)

—

(656
)

—

—

(656
)
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

—

—

2,672

—

—

2,672

Net loss

—

—

—

—

(10,494
)

(10,494
)
Currency translation adjustments

—

—

—

3,726

—

3,726

Unrealized gain on marketable securities

—

—

—

791

—

791

Balance at June 30, 2020

71,408

$
—

$
499,394

$
(17,282
)

$
(100,355
)

$
381,757

Common stock issued upon exercise of options

202

—

1,555

—

—

1,555

Vesting of restricted stock and performance stock units

2

—

—

—

—

—

Purchase and retirement of common shares

(1
)

—

(12
)

—

—

(12
)
Stock-based compensation

—

—

1,865

—

—

1,865

Net income

—

—

—

—

1,040

1,040

Currency translation adjustments

—

—

—

1,953

—

1,953

Unrealized loss on marketable securities

—

—

—

(266
)

—

(266
)
Balance at September 30, 2020

71,611

$
—

$
502,802

$
(15,595
)

$
(99,315
)

$
387,892



	Common Stock						Additional Paid-in			Accumulated Other Comprehensive			Accumulated
	Shares				Amount		Capital			Loss			Deficit			Total
Balance at December 31, 2020		71,738			$	—	$	505,123		$	(9,097	)	$	(97,455	)	$	398,571
Common stock issued upon exercise of options		11				—		92			—			—			92
Vesting of restricted stock and performance stock units		318				—					—			—			—
Purchase and retirement of common shares		(111	)			—		(1,730	)		—			—			(1,730	)
Stock-based compensation		—				—		1,464			—			—			1,464
Net income		—				—		—			—			3,774			3,774
Currency translation adjustments		—				—		—			1,352			—			1,352
Unrealized gain on marketable securities		—				—		—			21			—			21
Balance at March 31, 2021		71,956			$	—	$	504,949		$	(7,724	)	$	(93,681	)	$	403,544
Common stock issued upon exercise of options		3				—		29			—			—			29
Vesting of restricted stock and performance stock units		64				—		—			—			—			—
Purchase and retirement of common shares		(15	)			—		(147	)		—			—			(147	)
Stock-based compensation		—				—		1,473			—			—			1,473
Net loss		—				—		—			—			(1,364	)		(1,364	)
Currency translation adjustments		—				—		—			1,403			—			1,403
Unrealized loss on marketable securities		—		��		—		—			(122	)		—			(122	)
Balance at June 30, 2021		72,008			$	—	$	506,304		$	(6,443	)	$	(95,045	)	$	404,816

Stock-Based Awards

We grant 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. We account for stock-based compensation to employees and directors using the fair value method. We recognize 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 recognize compensation expense related to performance-based restricted stock units based on assumptions as to what percentage of each performance target will be achieved. We evaluate these target assumptions on a quarterly basis and adjust 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 issue new shares rather than shares purchased on the open market.

Total compensation ~~cost~~expense related to stock options for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 was $~~793~~879 and $~~683~~521, respectively.

The following table summarizes the stock option activity for the six months ended June 30, 2022:


	Options
Outstanding on January 1, 2022		1,410
Granted		589
Exercised		(2	)
Expired		(20	)
Forfeited		(173	)
Outstanding on June 30, 2022		1,804

Compensation ~~cost~~expense of $~~2,891~~5,071 and $~~3,329~~2,066 related to restricted shares was recognized during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

The following table summarizes time-vested restricted stock award and restricted stock unit activity for the six months ended June 30, 2022:


	Units
Issued and unvested, January 1, 2022		701
Granted		2,782
Vested		(571	)
Forfeited		(249	)
Issued and unvested, June 30, 2022		2,663

We grant performance-based restricted stock units (“PSUs”) to certain executives. Vesting of these PSUs is dependent upon achievement of certain performance-based metrics during a one-year or three-year period from the date of grant. Assuming achievement of each performance-based metric, the executive must also generally remain employed for three years from the grant date. If the one-year target is achieved, the PSUs will then vest three years from grant date. If the three-year target is achieved, the corresponding PSUs will then vest three years from grant date. PSUs are converted into shares of our common stock once vested.

Compensation ~~cost~~expense of $~~1,471~~854 and $~~1,901~~350 related to PSUs was recognized during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

15The following table summarizes the PSU activity for the six months ended June 30, 2022:

~~Public Offering~~


	Units
Issued and unvested, January 1, 2022		622
Granted (1)		532
Performance adjustment (2)		36
Vested		(188	)
Forfeited		(171	)
Issued and unvested, June 30, 2022		831

On June 1, 2020, we 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(1) Grant activity for all PSUs disclosed at target

(2) Reflects the ~~issuance and sale of~~ ~~8,000~~ ~~shares of our common stock. The price to~~performance adjustment based on actual performance measured at the ~~public in the offering was $11.00~~ ~~per share. Under the terms~~end of the ~~underwriting agreement, we 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, we announced the full exercise by the underwriters of their option to purchase these additional shares.~~performance period

The offering was made pursuant to an effective registration statement on Form S-3 (File No. 333-228877) we 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.~~

Stock Repurchase Program

On August 5, 2008, our Board of Directors approved a share repurchase program pursuant to which we are permitted to acquire up to $25,000 of our outstanding common shares. NaN shares were purchased and retired during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

10.Transition costs

On December 31, 2021, the Company's Board of Directors approved the termination of Stephen S. Tang, the Company’s former 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 ("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. 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, we recognized a net $128 and $1,508 of expense in relation to Dr. Tang's stock compensation during the three and six months ended June 30, 2022, respectively.

On April 1, 2022 the Company's Board of Directors appointed Nancy J. Gagliano, M.D., M.B.A., to serve as the Company’s Interim Chief Executive Officer. In connection therewith, the Company and Dr. Gagliano entered into an employment agreement, dated as of March 21, 2022 (the “Employment Agreement”). Pursuant to the Employment Agreement, on April 1, 2022, Dr. Gagliano began receiving a monthly base salary of $56 per month and was also granted a one-time award of fully vested shares of the Company’s common stock with a grant date fair value of $100. Additionally, she was granted a one-time restricted stock unit award with a grant date fair value of $670 scheduled to vest in twelve equal monthly installments starting in April through her employment term, of which $168 vested during the three months ended June 30, 2022 and the remainder was forfeited when her employment ceased in June 2022.

On May 20, 2022, the Company entered into an employment agreement with Carrie Eglinton Manner, and in connection therewith, the Company's Board of Directors appointed Ms. Eglinton Manner as the Company’s President and Chief Executive Officer, effective June 4, 2022 (the “Effective Date”). Pursuant to the Employment Agreement, Ms. Eglinton Manner’s initial annual base salary is $700 and she will participate in the Company’s annual incentive plan with a target annual incentive amount of at least 100% of her annual base salary. Additionally, she received inducement grants comprised of (i) a restricted stock unit award with a grant date fair value of $4,000, which vests on the second anniversary of the Effective Date (ii) a restricted stock award with a grant date fair value of $1,600, which vests annually starting on the first anniversary of the Effective Date and (iii) a PSU award with a grant date fair value of $1,600, which will be subject to the same vesting and performance conditions as are applicable to the 2022 performance-based restricted stock unit awards granted to the Company’s other executive officers.

11. Income Taxes

During the three and ~~nine~~six months ended ~~September~~June 30, 2022, we recorded an income tax expense (benefit) of $(1,169) and $2,767, respectively. Tax expense for 2022 includes $1,702 of withholding tax due on the repatriation of $65,000 of unremitted earnings from Canada to the United States. The remaining tax expense for the first half of 2022 is comprised of U.S. state income taxes of $400 and foreign taxes of $665. During the three and six months ended June 30, 2021, we recorded income tax expense of $~~2,102~~3,610 and $~~12,241~~10,139, ~~respectively,~~ which primarily ~~consisted~~consists of foreign tax expense. ~~During the three and nine months ended September 30, 2020, we recorded income tax expense of $3,659~~ ~~and $5,680, respectively, which also primarily consisted of a foreign tax expense.~~

Tax expense reflects taxes due to the taxing authorities and the tax effects of temporary differences between the basis of assets and liabilities recognized for financial reporting and tax purposes, and net operating loss and tax credit carryforwards. The significant components of our total deferred tax liability as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 relate to the tax effects of the basis difference between the intangible assets acquired in our acquisitions for financial reporting and for tax purposes along with basis differences arising from accelerated tax depreciation of fixed assets.

In 2008, we established a full valuation allowance against our U.S. deferred tax asset. Management believes the full valuation allowance is still appropriate at both ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 since the facts and circumstances necessitating the allowance have not changed.

~~11.~~12. Commitments and Contingencies

~~Litigation~~

Litigation

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.

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. ~~We believe Spectrum's counterclaims are without merit and we~~DNAG filed a motion to dismiss ~~both claims~~Spectrum’s counterclaims in October ~~2021. We are seeking injunctive relief and damages in this matter.~~

~~Commitments~~

~~As of~~2021, which was denied by the Court on March 30, 2022. The final pretrial conference is set for September 30, 2021, we have entered in several new contracts associated with the manufacture and supply of our COVID-19 antigen products and our molecular collection solutions products that include unconditional commitments to purchase certain materials through the latest of the first quarter of 2026 in the aggregate amount of $~~126,499~~.7, 2023.

~~12.~~13. Business Segment Information

Our business consists of 2 segments: our “Diagnostics” business, which primarily consists of the development, manufacture, ~~marketing~~ and sale of rapid diagnostic tests used to determine if a person has a variety of infectious diseases including, HIV, HCV, and COVID-19. The Diagnostic business also manufactures and sells oral fluid diagnostic products and specimen collection devices using our proprietary technologies, other diagnostic products including immunoassays and other in vitro diagnostic tests that are used on other specimen types. Our Diagnostics segment includes the financial results of UrSure.substance abuse testing products. Our “Molecular Solutions” business is operated by our wholly-owned subsidiaries DNAG, Diversigen, and Novosanis. This segment of the business consists of the development, manufacture, ~~marketing~~ and sale of ~~specimen collection~~ kits that are used to collect, stabilize, transport and store ~~samples~~a biological sample of genetic material for molecular testing. ~~Our collection kits are also used for the collection of first-void urine for liquid biopsy in the prostate and bladder cancer markets; and in the sexually transmitted infection screening market.~~ In addition, our Molecular Solutions business provides microbiome laboratory services that accelerate research and discovery for customers in the pharmaceutical, agricultural, and academic research markets. Financial results of Diversigen and Novosanis are included in our Molecular Solutions segment.services.

We organized our 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)1). We evaluate performance of our operating segments based on revenue and operating income. We do not allocate interest income, interest expense, other income, other expenses or income taxes to our 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 three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, and asset information as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Net revenues:
Diagnostics	$	23,511		$	16,314		$	57,368		$	44,533		$	60,455		$	19,311		$	98,765		$	33,857
Molecular Solutions		30,406			31,697			112,738			64,333			19,776			38,296			49,173			82,332
Total	$	53,917		$	48,011		$	170,106		$	108,866		$	80,231		$	57,607		$	147,938		$	116,189
Operating income (loss):
Diagnostics	$	(18,638	)	$	(9,951	)	$	(42,755	)	$	(31,116	)	$	(11,776	)	$	(11,850	)	$	(31,563	)	$	(23,967	)
Molecular Solutions		5,625			14,336			41,962			18,054			(9,513	)		13,648			(5,704	)		36,187
Total	$	(13,013	)	$	4,385		$	(793	)	$	(13,062	)	$	(21,289	)	$	1,798		$	(37,267	)	$	12,220
Depreciation and amortization:
Diagnostics	$	1,136		$	934		$	2,965		$	2,448		$	1,903		$	939		$	3,630		$	1,829
Molecular Solutions		2,199			1,517			5,514			4,432			1,879			1,716			3,834			3,315
Total	$	3,335		$	2,451		$	8,479		$	6,880		$	3,782		$	2,655		$	7,464		$	5,144
Capital expenditures:
Loss on impairment:
Diagnostics	$	3,647		$	2,186		$	19,797		$	5,634		$	8,517		$	—		$	8,517		$	—
Molecular Solutions		932			3,011			7,711			5,600			2,025			—			2,025			—
Total	$	4,579		$	5,197		$	27,508		$	11,234		$	10,542		$	—		$	10,542		$	—
Capital expenditures:
Diagnostics(1)													$	4,302		$	8,513		$	23,434		$	16,150
Molecular Solutions														919			3,355			2,006			6,779
Total													$	5,221		$	11,868		$	25,440		$	22,929

(1)Excludes $5,615 and $33,803 for purchases of property and equipment under government contracts for the three and six months ended June 30, 2022, respectively.


	September 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Total assets:
Diagnostics	$	206,668	$	242,613	$	249,123	$	209,674
Molecular Solutions		249,089		211,859		180,131		251,316
Total	$	455,757	$	454,472	$	429,254	$	460,990

1718

Item 2.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 Federal securities laws. These may include statements about our expected revenues, earnings, losses, expenses, or other financial performance, future product performance or development, 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: ~~ability of the Company to manufacture sufficient quantities of the Inteliswab~~TM

COVID-19 rapid test and resolve manufacturing challenges and the expected time frame for doing so; ability to successfully manage and integrate acquisitions of other companies in a manner that complements or leverages •

our existing business, or otherwise expands or enhances our portfolio of products and our end-to-end service offerings, and the diversion of management’s attention from our ongoing business and regular business responsibilities to effect such integration; the expected economic benefits of acquisitions (and increased returns for our stockholders), including that the anticipated synergies, revenue enhancement strategies and other benefits from the acquisitions may not be fully realized or may take longer to realize than expected and our actual integration costs may exceed our estimates; impact of increased or different risks arising from the acquisition of companies located in foreign countries; 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;

•

the impact of significant customer concentration in the genomics business;

•

our ability to successfully scale-up our manufacturing 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;

•

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;

•

our 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 “FDA”), or other regulators;

•

the impact of the ~~novel coronavirus (“COVID-19”)~~COVID-19 pandemic on our business and labor force and supply chain;

•

our ability to successfully develop new products, validate the expanded use of existing ~~collection~~collector products, receive necessary regulatory approvals and authorizations, transport work-in-process goods and finished products and commercialize such products for COVID-19 testing;

•

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 our products;

•

our ability to diversify our customer base;

•

the ~~Company’s products;~~ impact of replacing ~~distributors;~~ distributors on our business;

•

inventory levels at distributors and other customers;

•

our ability ~~of the Company~~ to achieve ~~its~~our financial and strategic objectives and continue to increase ~~its~~our revenues, including the ability to expand international sales; ~~ability to identify, complete, integrate and realize~~

•

the ~~full benefits of future acquisitions;~~ impact of competitors, competing products and technology ~~changes;~~ changes on our business;

•

reduction or deferral of public funding available to customers;

•

competition from new or better technology or lower cost products;

•

our ability to develop, commercialize and market new products;

•

market acceptance of oral fluid or urine testing, collection or other products;

•

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”~~or (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;

•

our reliance on sole supply sources for critical products and components;

•

the 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;~~government on our business;

•

the impact of negative economic ~~conditions;~~conditions on our business; including as a result of inflation, hostilities or war;

•

our ability to achieve and maintain sustained profitability;

•

our ability to increase our gross margins;

•

our ability to utilize net operating loss carry forwards or other deferred tax assets;

•

the volatility of ~~the Company’s~~our stock price;

•

uncertainty relating to patent protection and potential patent infringement claims;

•

uncertainty and costs of litigation relating to patents and other intellectual property;

•

the availability of licenses to patents or other technology;

•

our ability to enter into international manufacturing agreements;

•

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 movements in foreign currency exchange rates;

•

loss or impairment of sources of capital;

•

our ability to attract and retain qualified personnel;

•

our exposure to product liability and other types of litigation;

•

changes in international, federal or state laws and regulations;

•

customer consolidations and inventory practices;

•

equipment failures and ability to obtain needed raw materials and components;

•

the impact of terrorist attacks, civil unrest, hostilities and ~~civil unrest;~~war; and

•

general political, business and economic conditions.

These and other factors that could affect our results are discussed more fully in our Securities and Exchange Commission (“SEC”) filings, including our registration statements, Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, Quarterly Reports on Form 10-Q, and other filings with the SEC. 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 are made as of the date of this Report, and we undertake no duty to update these statements.

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 material non-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.

The following discussion should be read in conjunction with our consolidated financial statements contained herein and the notes thereto, along with the Section entitled “Critical Accounting Policies and Estimates,” set forth below.

1820

Overview and Business Segments

The overall goal of our Company is to empower the global community to improve health and wellness by providing access to accurate essential information. Our business consists of two segments: our “Diagnostics” segment and our “Molecular Solutions” segment.

Our Diagnostics business primarily consists of the development, manufacture, marketing and sale of ~~oral fluid~~simple, easy to use diagnostic products and specimen collection devices using our proprietary technologies, as well as other diagnostic products including immunoassays and other in vitrodiagnostic tests that are used on other specimen types. The 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 ~~product is~~products are also sold in a consumer-friendly format in the ~~OTC~~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. ~~Our~~Through our Diagnostics business ~~includes the operations of UrSure, which was acquired~~we are also developing and ~~merged into OraSure in 2020. This part of the Diagnostics business develops and commercializes~~commercializing products that measure adherence to HIV medications including pre-exposure prophylaxis ~~or PrEP,~~("PrEP"), the daily medication to prevent HIV, and anti-retroviral medications to suppress HIV. These products include laboratory-based tests that can measure levels of the ~~medication~~medications in a patient’s urine or blood, as well as ~~point- of-care~~point-of-care products currently in development. We began recording revenues on the sales of our InteliSwab®COVID-19 Rapid Tests during the third quarter of 2021.

Our Molecular Solutions business is operated by our wholly-owned subsidiaries, ~~DNAG,~~DNA Genotek, Inc. ("DNAG"), Diversigen, Inc. ('Diversigen"), and ~~Novosanis. In this~~Novosanis NV ("Novosanis"). Our Molecular Solutions business ~~we manufacture~~sells its products and ~~sell kits that are used~~services directly to ~~collect, stabilize, transport~~its customers, primarily through its internal sales force in the U.S. domestic market, and ~~store a biological sample of genetic material for molecular testing.~~in many international markets, also through distributors. Our products ~~are~~primarily consist of collection kits and services used ~~for academic research and commercial applications, including ancestry, disease risk management, lifestyle~~by clinical laboratories, direct-to-consumer laboratories, researchers, pharmaceutical companies, and animal ~~testing. Included~~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, ~~area are pharmacogenomics testing, hereditary disease screening, prenatal or cancer screening, population health initiatives~~diagnostics, pharmaceutical, biotech, companion animal and ~~other molecular testing using DNA or RNA for diagnosis~~environmental markets.

We have expanded the market focus of ~~acute disease. We also sell research-use-only~~our Molecular Solutions business by selling existing collection products ~~into~~for use with COVID-19 tests. Demand for COVID-19 PCR testing has declined driven by the availability of antigen tests and the wider availability of vaccines, thereby negatively impacting the sales of the collection products. We have also developed new collection devices for the emerging microbiome market, which focuses on studying microbes and their effect on human health. Our primary product offering in the microbiome ~~market.~~market, OMNIgene® • GUT, is focused on the human gut microbiome (microbes living in human stool). In 2021, the OMNIgene® • GUT collection device (OMD-200) was granted “FDA De Novo classification for the preservation and stabilization of the relative abundance of microbial nucleic acids in clinical samples.” We ~~offer~~leverage our existing sales force and global research connections to engage microbiome customers ~~a suite~~worldwide to establish ourselves among the leaders in ease-of-collection, stabilization, and transport of genomics and microbiome services that range from package customization and study design optimization to extraction, analysis and reporting services. The microbiome laboratory and bioinformatics services are provided by Diversigen, whichthis challenging sample type.

Our Molecular Solutions segment includes the ~~operations of CoreBiome, a~~Colli-Pee® device, developed and sold by our Novosanis subsidiary, ~~we acquired in early 2019. CoreBiome and Diversigen were merged together in 2020. Novosanis manufactures and sells the Colli-Pee® collection device~~ for the volumetric collection of ~~first-void urine for use~~first void urine. This product is in ~~research, screening~~its early stages, and ~~diagnostics~~initial sales are occurring primarily through distributors and collaborations in the liquid biopsy and sexually transmitted ~~infection~~disease markets. Our Molecular Solutions business ~~serves~~also offers laboratory and analytical services for both genomics and microbiome customers ~~in many countries worldwide, including many leading~~to more fully meet their needs. These services are primarily provided to pharmaceutical, biotech companies, and research ~~universities and hospitals.~~institutions.

Recent Developments

Impact of COVID-19

~~The~~As COVID-19 ~~pandemic~~ 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 operations 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 ~~operations~~(which excludes COVID-19 testing) and itperiods of significant demand for our COVID-19 testing product, with demand generally fluctuating in line with changes in prevalence of the virus and related variants. It is ~~not possible~~difficult for us to predict the duration or magnitude of the outbreak’s effects on our business or results of operations. During 2020, traditional HIV and HCV testing programs and drug testing in the workplace market were reduced or terminated as a result of the various “stay-at-home” orders and social distancing guidelines issued by federal, state and local governments to contain the spread of the COVID-19 pandemic and we continued to see this impact our business in early 2021. However, during the second and third quarters of 2021, we saw a resumption of HIV and HCV testing in the U.S. as domestic sales of our non-COVID diagnostic products began returning to pre-pandemic levels. On the international front, professional HIV and HCV testing in Europe and Asia also started to pick up. However, more recently we have experienced reductions and stoppages of HIV self-testing in Southern and Eastern African countries due to the COVID-19 pandemic. In our Molecular Solutions segment, COVID-related disruption in clinical and research work, particularly in the academic market, had reduced demand for our products in 2020 and early 2021, but demand levels started to return to normal in the second and third quarters of 2021. Although the negative trends that materially impacted our results of operations during 2020 and early 2021 are starting to abate, it is impossible to predict if this improvement will continue and these negative trends may adversely impact certain parts of our business in future periods and for an indeterminate time period, depending on the duration and severity of the COVID-19 pandemic, the impact of COVID-19 variants and the scope and success of vaccination programs globally.

We also have experienced significant opportunities, and continue to believe there are potentially more significant opportunities, for increased revenues as a result of the COVID-19 pandemic. In 2020, we began selling our saliva collection devices for use in molecular COVID-19 testing. In the first nine months of 2021, we generated revenues of approximately $46.2 million from sales of our molecular collection devices related to COVID-19 testing. In the U.S., public health customers purchased increased quantities of our OraQuick® In-Home HIV Test in order to permit continued HIV testing while allowing clients and patients to adhere to “stay-at-home” and social distancing requirements. In addition, we saw increased demand for our molecular collection products from customers who conduct both saliva and blood-based testing. As it became more difficult to collect blood in clinics or healthcare settings, these customers increasingly relied on the saliva collection alternative. However, demand for molecular COVID-19 testing during the second and third quarters of 2021 began to decline primarily due to the availability of vaccines. We believe this trend will continue in future periods.

~~In June 2021, we received three Emergency Use Authorizations ("EUAs") from the U.S. Food and Drug Administration ("FDA") for our InteliSwab~~TM ~~COVID-19 Rapid Tests for non-prescription OTC, professional point-of-care and prescription use. These lateral flow, rapid antigen~~

Appointment of New CEO

~~diagnostic tests are designed~~Carrie Eglinton Manner was appointed President and Chief Executive Officer, 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 detect active COVID-19 infection with a simple, easy-to-use workflow, using samples self-collected from the lower nostrils. After users swab their lower nostrils, the test stick is swirled in a pre-measured buffer solution. No instrumentation, batteries, smart phone or laboratory analysis is needed to read the result, which appearsserve on the ~~test stick a short time later. During the third quarter of 2021 and for nine-month period ending September 30, 2021, we recorded $7.7 million of InteliSwab~~TM ~~sales.~~

Following discussions with the FDA and their de-prioritization of antibody testing in the U.S., we decided to no longer pursue EUAs for a COVID-19 antibody enzyme-linked immunosorbent assay ("ELISA") for use in laboratory settings. We are, however, continuing to offer this product for research use only to labs and other parties interested in COVID antibody surveillance and research applications.

~~DLA Procurement Contract~~

In September 2021, we entered into a contract with the Defense Logistics Agency ("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, the Company will provide its InteliSwab™ COVID-19 Rapid Test to up to 25,000 sites throughout the United States. The contract will run from October 2021 through September 2022.OraSure Board.

Ms. Eglinton Manner, age 48, has years of leadership experience across multiple disciplines. Prior to joining the Company, Ms. Eglinton Manner served as Senior Vice President, Advanced & General Diagnostic and Clinical Solutions at Quest Diagnostics since January 2017. Prior to Quest, Ms. Eglinton Manner spent over 20 years in various leadership roles in healthcare businesses at GE Healthcare. From 2009 through 2016, she served as President & CEO of four distinct GE Healthcare global businesses in the areas of diagnostic imaging, lab services and medical devices. She has served as a director of Repligen Corporation since June 2020. Ms. Eglinton Manner holds a B.S. in mechanical engineering from the University of Notre Dame.

~~BARDA 510(k) funding~~

Exploration of Strategic Alternatives

Ms. Eglinton Manner’s appointment as CEO came in tandem with a decision by the OraSure Board to conclude its previously announced review of strategic alternatives and for the Company to move forward under her leadership. Market conditions and the Board’s belief in the Company’s ability to further build upon recent operational successes with Ms. Eglinton Manner’s leadership were factors in the decision.

In September 2021, we entered into an agreement with the Biomedical Advanced Research Development Authority (“BARDA”), which is part of the office of the Assistant Secretary for Preparedness and Response at the U.S. Department of Health and Human Services (“HHS”), pursuant to which BARDA will provide up to $13.6 million in funding for us to obtain 510(k) clearance and Clinical Laboratory Improvement Amendments (“CLIA”) waiver of our InteliSwab™ COVID-19 rapid test from the U.S. Food and Drug Administration (“FDA”).

~~DOD Manufacturing Capacity funding~~

In September 2021, we also entered into an agreement for $109 million 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 our InteliSwab™ COVID-19 rapid tests as part of the nation’s pandemic preparedness plan. Under this agreement, the funding will be used to expand our production capacity by 100 million tests annually. Funding will be paid to the Company based on achievement of milestones through March 2024 for the design, acquisition, installation, qualification and acceptance of the manufacturing equipment, as set forth in the agreement. An existing Company location in Bethlehem, PA will be retrofitted to accommodate increased manufacturing and an additional new facility will be added in another U.S. location to be determined.

Current Consolidated Financial Results

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, our consolidated net revenues increased ~~56%~~27% to ~~$170.1~~$147.9 million, compared to ~~$108.9~~$116.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Net product and services revenues during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 increased ~~56%~~29% when compared to the same period of ~~2020,~~2021, largely due to ~~increased~~the inclusion of $65.3 million of InteliSwab® COVID-19 rapid test revenues. We began selling this product in August of 2021 resulting in no comparable revenues ~~across all products lines, other than our international HIV self-test. The biggest contributors to~~in the ~~increased revenues for the period were higher~~first half of 2021. Declines in sales of ~~our genomics products and~~ our molecular sample collection kits for COVID-19 testing, lower laboratory services revenues, and ~~the first time inclusion of~~a decline in domestic sales of our ~~InteliSwab~~TM ~~COVID-19 rapid tests.~~HIV products partially offset this positive driver of revenue. Other revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 were ~~$4.6~~$3.5 million compared to ~~$2.9~~$3.9 million in the same period of ~~2020.~~2021. This ~~increase~~decrease was largely due to ~~increased research and development funding for the development of our COVID-19 tests and higher~~lower royalty income.

Our consolidated net loss for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$12.6~~$38.8 million, or ~~$0.18~~$0.54 per share on a fully diluted basis, compared to a consolidated net ~~loss~~income of ~~$16.8~~$2.4 million, or ~~$0.25~~$0.03 per share on a fully diluted basis, for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Results for the ~~nine~~six months ended ~~September~~June 30, ~~2021 included a $1.5 million non-cash pre-tax benefit~~2022 were impacted by lower gross margins rates caused by an unfavorable product mix of higher sales of lower margin products, increases in inventory reserves associated with ~~the change~~excess inventory levels and manufacturing inefficiencies that occurred in the ~~fair value~~first quarter of ~~acquisition-related contingent consideration~~2022, lower absorption of labor costs and the absence of the Gates subsidy which ~~accounted for approximately $0.02 per share.~~ ~~Results for~~expired in June 2021. Also contributing to our net loss is an increase in operating expense as a result of impairment charges taken in the ~~nine months ended September 30, 2020 included~~ ~~a $390,000 non-cash pre-tax charge~~second quarter of 2022 on idle manufacturing lines and goodwill, severance charges and accelerated stock compensation expense associated with ~~the change in the fair value~~our CEO transition and termination of ~~acquisition-related contingent consideration~~our general counsel, and ~~$393,000 of acquisition related transaction~~nonrecurring costs associated with ~~the UrSure acquisition, which together accounted for approximately $0.01 per share.~~our strategic alternatives process.

Cash used in operating activities during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$22.6~~$45.5 million. Cash ~~provided by~~used in operating activities during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was ~~$2.2~~$3.5 million. During the first half of 2022, our cash flow used in operating activities increased significantly as a result of our net loss and increased working capital requirements we scale our InteliSwab® manufacturing capacity to meet higher demand. As of ~~September~~June 30, ~~2021,~~2022, we had ~~$202.3~~$95.8 million in cash, cash equivalents and available-for-sale ~~securities, compared to $257.1 million at December 31, 2020.~~securities.

Results of Operations

Three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~September~~June 30, ~~2020~~2021

CONSOLIDATED NET REVENUES

The table below shows a breakdown of total consolidated net revenues (dollars in thousands) generated by each of our business segments during the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

Three Months Ended September 30,

Dollars

Percentage of Total Net Revenues

2021

2020

% Change

2021

2020

Diagnostics

$
23,281

$
15,540

50

%

43

%

32

%
Molecular Solutions

29,948

31,209

(4
)

56

65

Net product and services revenues

53,229

46,749

14

99

97

Other

688

1,262

(45
)

1

3

Net revenues

$
53,917

$
48,011

12

%

100

%

100

%


	For the Three Months Ended June 30,
	Dollars								Percentage of Total Net Revenues
	2022		2021		% Change				2022			2021
Diagnostics	$	59,976	$	18,252		229		%		75	%		32	%
Molecular Solutions		19,191		37,489		(49	)			24			65
Net product and services revenues		79,167		55,741		42				99			97
Other		1,064		1,866		(43	)			1			3
Net revenues	$	80,231	$	57,607		39		%		100	%		100	%

Consolidated net product and services revenues increased ~~14%~~42% to ~~$53.2~~$79.2 million for the three months ended ~~September~~June 30, ~~2021~~2022 from ~~$46.7~~$55.7 million for the three months ended ~~September~~June 30, ~~2020.~~2021. The increase in revenues ~~was~~ is largely ~~driven by increased genomic product sales and~~due to the ~~first time~~ inclusion of s~~ales~~$43.1 million of ~~our~~ InteliSwabTM® COVID-19 rapid ~~tests~~test revenues. We began selling this product in August of 2021 resulting in no comparable revenues in the second quarter of 2021. Declines in,

revenues across all other product line partially offset ~~by a decline in sales~~this positive driver of ~~ourmolecular sample collection kits for COVID-19 testing.~~revenue. Other revenues for the three months ended ~~September~~June 30, ~~2021~~2022 decreased ~~45%~~43% to ~~$688,000~~$1.1 million from ~~$1.3~~$1.9 million for the three months ended ~~September~~June 30, ~~2020~~2021 due to ~~expected~~ lower research and development funding ~~for~~associated with the development of our InteliSwab®COVID-19 ~~tests~~rapid test and ~~our HIV medication adherence tests~~lower royalty income..

Consolidated net revenues derived from products sold to customers outside of the United States were ~~$10.9~~$9.9 million and ~~$9.4~~$10.0 million, or ~~20%~~12% and 17% of total net revenues, ~~in each period,~~ for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~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

Diagnostics Segment

The table below shows a breakdown of total net revenues (dollars in thousands) generated by our Diagnostics segment during the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.


	Three Months Ended September 30,														For the Three Months Ended June 30,
	Dollars								Percentage of Total Net Revenues						Dollars								Percentage of Total Net Revenues
Market	2021		2020		% Change				2021			2020			2022		2021		% Change				2022			2021
Infectious disease testing	$	12,932	$	13,224		(2	)	%		55	%		81	%
Infectious disease testing:
COVID-19		7,675		63	NM					33		NM			$	43,114	$	89	NM			%		71	%		0	%
Risk assessment testing		2,674		2,253		19				11			14
Other																14,232		15,534		(8	)			23			80
Total infectious disease testing																57,346		15,623		267				95			81
Substance abuse testing																2,630		2,629		0				4			14
Net product revenues		23,281		15,540		50				99			95			59,976		18,252		229				99			95
Other		230		774		(70	)			1			5			479		1,059		(55	)			1			5
Net revenues	$	23,511	$	16,314		44		%		100	%		100	%	$	60,455	$	19,311		213		%		100	%		100	%

NM - not meaningful

Infectious Disease Testing Market

~~Sales to the infectious disease testing market decreased 2% to $12.9~~COVID-19 revenues were $43.1 million for the three months ended ~~September~~June 30, 2022, driven by sales of our InteliSwab® COVID-19 rapid test. We first began selling this product in August of 2021 ~~from $13.2~~and there are no comparable sales in the second quarter of 2021.

Sales to the other infectious disease testing markets decreased 8% to $14.2 million for the three months ended ~~September~~June 30, ~~2020.~~2022 from $15.5 million for the three months ended June 30, 2021. This decrease resulted from lower ~~world-wide~~worldwide OraQuick® HIV and international OraQuick® HCV product ~~sales, partially offset by higher domestic OraQuick~~® ~~HCV product~~ sales.

The table below shows a breakdown of our total net OraQuick® HIV and HCV product revenues (dollars in thousands) during the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

Three Months Ended September 30,

Market

2021

2020

% Change

Domestic HIV

$
3,440

$
3,909

(12
)
%
International HIV

6,582

6,865

(4
)

Net HIV revenues

10,022

10,774

(7
)

Domestic HCV

1,827

1,186

54

International HCV

888

1,033

(14
)

Net HCV revenues

2,715

2,219

22

Net OraQuick® revenues

$
12,737

$
12,993

(2
)
%


	For the Three Months Ended June 30,
Market	2022		2021		% Change
Domestic HIV	$	3,741	$	4,135		(10	)	%
International HIV		6,616		6,809		(3	)
Net HIV revenues		10,357		10,944		(5	)
Domestic HCV		2,537		2,571		(1	)
International HCV		1,154		1,729		(33	)
Net HCV revenues		3,691		4,300		(14	)
Net OraQuick® revenues	$	14,048	$	15,244		(8	)	%

Domestic OraQuick® HIV sales decreased ~~12%~~10% to ~~$3.4~~$3.7 million for the three months ended ~~September~~June 30, ~~2021~~2022 from ~~$3.9~~$4.1 million for the three months ended ~~September~~June 30, ~~2020,~~2021, primarily as a result of a large second quarter 2021 order of our OraQuick® In-Home HIV test shipped to the ~~timing~~CDC and used in an initiative to drive increased in-home HIV testing. A similar order did not occur in the second quarter of ~~orders placed for our~~ ~~OraQuick~~® ~~In-Home test.~~2022.

International sales of our OraQuick® HIV tests decreased 4%3% to $6.6 million for the three months ended ~~September~~June 30, ~~2021~~2022 from ~~$6.9~~$6.8 million for the three months ended ~~September~~June 30, ~~2020.~~ ~~This~~2021 due to the absence of the Gates Foundation subsidy which expired in June 2021 and is not included in revenues in the second quarter of 2022, initial stocking orders into Asia that did not recur in 2022, and the impact of the Russian and Ukraine war. These decline in revenues ~~was primarily due to lower subsidies for~~were partially offset by increased sales into Africa as the ~~international sale of our HIV Self-Test under the charitable support agreement with the Gates Foundation. The Gates agreement and subsidy provided thereunder expired on June 30, 2021.~~COVID-19 impact lessens.

Domestic OraQuick® HCV sales ~~increased 54% to $1.8~~remained largely flat at $2.5 million for the three months ended ~~September~~June 30, ~~2021 from $1.2~~2022 compared to $2.6 million for the three months ended ~~September~~June 30, ~~2020, due to the re-opening of testing programs previously closed as a result of the COVID-19 pandemic and as resources used for COVID-19 testing and vaccinations were redirected back to HCV testing.~~2021.

International OraQuick® HCV sales decreased ~~14%~~33 % to ~~$888,000 for the three months ended September 30, 2021 from $1.0~~$1.2 million for the three months ended ~~September~~June 30, ~~2020 due~~2022 compared to ~~customer ordering patterns.~~

~~COVID-19 Testing Market~~

~~During~~$1.7 million for the three months ended ~~September~~June 30, 2021 ~~COVID-19 revenues were $7.7 million, driven by the first time sales of our InteliSwab~~TM ~~COVID-19 rapid test~~due to a stock order into Korea which ~~were limited by manufacturing constraints~~did no repeat in ~~the quarter.~~2022.

~~Risk Assessment~~Substance Abuse Testing Market

Sales to the ~~risk~~substance abuse testing assessment market ~~increased 19% to $2.7~~remained flat at $2.6 million for both the three months ended ~~September~~June 30, ~~2021 compared to $2.3 million for the three months ended September 30, 2020 due to hiring increases driven by the economic recovery from the COVID-19 pandemic.~~2022 and 2021.

Other Revenues

Other revenues for the three months ended ~~September~~June 30, ~~2021~~2022 decreased 55% to ~~$230,000~~$479,000 from ~~$774,000~~$1.1 million for the three months ended ~~September~~June 30, ~~2020,~~2021, due to lower research and development funding associated with our InteliSwab~~funding for the development of our~~® COVID-19 ~~tests and our HIV medication adherence tests~~rapid test..

Molecular Solutions Segment

The table below shows a breakdown of our total net revenues (dollars in thousands) during the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.


		Three Months Ended September 30,									For the Three Months Ended June 30,
Market	Market	2021		2020		% Change				Market	2022		2021		% Change
Genomics		$	19,018	$	8,454		125		%		$	15,486	$	19,498		(21	)	%
Microbiome			1,693		1,530		11					1,832		2,447		(25	)
COVID-19			6,255		18,804		(67	)				264		11,981		(98	)
Laboratory services			2,406		2,280		6					1,204		3,114		(61	)
Other product and service revenues			576		141		309					405		449		(10	)
Net molecular product and services revenues		$	29,948	$	31,209		(4	)			$	19,191		37,489		(49	)
Other			458		488		(6	)				585		807		(28	)
Net molecular product and services revenues		$	30,406	$	31,697		(4	)	%
Net molecular revenues											$	19,776	$	38,296		(48	)	%

Sales of our genomics products ~~increased 125%~~decreased 21% to ~~$19.0~~$15.5 million for the three months ended ~~September~~June 30, ~~2021~~2022, compared to ~~$8.5~~$19.5 million for the three months ended ~~September~~June 30, ~~2020,~~2021, as ~~this product line experienced a strong rebound from the impact~~result of ~~the COVID-19 pandemic in the prior period and benefited from~~customer ordering ~~patterns of our larger customers.~~patterns.

Microbiome kit sales ~~increased 11%~~decreased 25% to ~~$1.7~~$1.8 million for the three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$1.5~~$2.4 million for the three months ended ~~September~~June 30, ~~2020,~~2021, due to ~~customer ordering patterns.~~lower sales to certain Clinical Research Organizations ("CROs") as a result of delays in microbiome clinical studies.

Sales of our molecular sample collection kits for COVID-19 testing decreased ~~67%~~98% to ~~$6.3~~$264,000 for the three months ended June 30, 2022 compared to $12.0 million during the comparable period 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 and high inventory levels held by some of those customers and the termination of public funding for PCR testing.

Laboratory services revenues declined 61% to $1.2 million for the three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$18.8 million during the comparable period in 2020 due to lower COVID-19 PCR testing demand and the impact of the wider availability of vaccines.~~

~~Laboratory services revenues increased 6% to $2.4~~$3.1 million for the three months ended ~~September~~June 30, 2021 ~~compared to $2.3 million for the three months ended September 30, 2020~~ as a result of a large customer ceasing its operations and due to ~~customers resuming activities delayed by the COVID-19 pandemic~~.timing of clinical trials.

Other product and service revenues ~~increased 309% to $576,000 for~~remained largely unchanged at $405,000 in the ~~three months ended September 30, 2021~~second quarter of 2022 compared to ~~$141,000 for~~$449,000 in the ~~three months ended September 30, 2020 due to increased sales~~second quarter of ~~our Colli-Pee® collection device.~~2021.

Other revenues for the three months ended ~~September~~June 30, ~~2021~~2022 decreased 6%28% to ~~$458,000~~$585,000 from ~~$488,000~~$807,000 for the three months ended ~~September~~June 30, ~~2020,~~2021, largely as a result of lower royalty income received under a litigation settlement agreement.

CONSOLIDATED OPERATING RESULTS

Consolidated gross profit ~~percentage was 40%~~margins were 34% for the three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~63%~~53% for the three months ended ~~September~~June 30, ~~2020.~~ 2021. The decrease in gross profit ~~percentage~~margins was primarily due to a less favorable product mix and increased scrap expense ~~lower absorption of labor, and~~ associated with reserves for excess inventory.~~lower subsidies for the international sale of our HIV Self-Test under the charitable support agreement with the Gates Foundation~~.

Consolidated operating loss for the three months ended ~~September~~June 30, ~~2021~~2022 was ~~$13.0~~$21.3 million, a ~~$17.4~~$23.1 million decrease from the ~~$4.4~~$1.8 million operating income reported for the three months ended ~~September~~June 30, ~~2020.~~2021. Results for the three months ended ~~September~~June 30, ~~2021~~2022 were negatively impacted by the

lower gross profit ~~percentage and~~margin described above coupled with an increase in operating ~~expenses.~~expenses as described below, including an aggregate impairment charge of $10.5 million.

OPERATING INCOME (LOSS) BY SEGMENT

We evaluate performance of our operating segments based on revenue and operating income. Reportable segments have no inter-segment revenue and inter-segment expenses are eliminated in consolidation, including the fees associated with an intercompany service agreement between ~~Diagnostics~~the U.S. and ~~Molecular Solutions.~~Canadian entities.

Diagnostics Segment

The gross profit ~~percentage~~margin for the Diagnostics segment was ~~16%~~36% for the three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~44%~~34% for the three months ended ~~September~~June 30, ~~2020.~~2021. This ~~decrease~~increase is due to ~~an increase in scrap costs associated with the production of our InteliSwab~~TM ~~test, and the recording of a reserve for COVID-19 antibody inventory, lower absorption of labor costs as we have increased headcount in anticipation~~improved product mix of higher ~~production demands, and~~ ~~lower~~margin product sales partially offset by the June 2021 expiration of subsidies ~~for the international sale of our HIV Self-Test~~ under the ~~charitable~~ support agreement with the Gates ~~Foundation~~Foundation..

Research and development expenses increased 3%26% to ~~$5.9~~$6.3 million for the three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$5.7~~$5.0 million for the three months ended ~~September~~June 30, ~~2020~~2021 largely due to ~~higher~~increased staffing costs associated with higher head count, increased clinical study activities related to obtaining CE mark for our InteliSwab® rapid test and higher subscription costs associated with our new quality system. Sales and marketing expenses increased 19% to $7.8 million for three months ended June 30, 2022 from $6.6 million for the three months ended June 30, 2021 due to increased staffing costs associated with higher head count and increased travel, trade show, and annual meetings expenses as travel and in person events have resumed as COVID-19 restrictions have been lifted. These increases in spend ~~to investigate InteliSwab~~TM ~~manufacturing issues,~~were partially offset by a decline in ~~COVID-19 lab supply~~advertising and market research costs associated with ~~reduced product development activities from the prior year period. Sales~~our InteliSwab® test. General and ~~marketing~~administrative expenses increased ~~83%~~54% to ~~$9.0 million for three months ended September 30, 2021 from $4.9~~$11.0 million for the three months ended ~~September~~June 30, ~~2020~~ ~~due to an increase in advertising spend associated with the introduction of our InteliSwab~~TM ~~test into the market, higher commissions associated with the revenue increase, and increased consulting expense associated with business strategy planning. General and administrative expenses increased 24% to $8.0~~2022 from $7.1 million for the three months ended ~~September~~June 30, 2021 ~~from $6.5 million for the three months ended September 30, 2020~~ largely due to ~~increased business development consulting spend, increased staffing~~severance costs and accelerated stock compensation expense associated with our former general counsel's employment and termination agreements, stock compensation costs associated with ~~increased headcount~~restricted stock awards granted to certain board members with immediate vesting provisions, and higher ~~recruiting expenses. We are anticipating higher~~legal, accounting, and information technologies contract 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 flow and minimal resale or salvage value. Diagnostic operating expenses also included a goodwill impairment charge of $3.6 million. The decline in the ~~fourth quarter~~Company's stock price was identified as a triggering event which required the Company to perform an quantitative goodwill impairment analysis. The results of ~~2021 as several of our on-going InteliSwab~~TM ~~post marketing clinical studies will lead~~this analysis indicated the Diagnostic segment's goodwill was impaired and was written down to ~~higher research and development expenses. In addition, we expect higher sales and marketing and general and administrative costs as we prepare for significant commercial ramp up of our InteliSwab~~TM ~~business in 2022.~~$0.

All of the above contributed to the Diagnostics segment’s operating loss of ~~$18.6~~$11.8 million for the three months ended ~~September~~June 30, ~~2021,~~2022, which included the non-cash impairment charges of $8.5 million, non-cash charges of ~~$1.1~~$1.9 million for depreciation and amortization and ~~$1.9~~$2.8 million for stock-based compensation. The Diagnostics

segment operating loss ~~also~~in the second quarter of 2021 included a $220,000 non-cash pre-tax benefit ~~of $500,000~~ associated with the change in the fair value of acquisition-related contingent consideration. There was no similar benefit recorded in the second quarter of 2022.

Molecular Solutions Segment

The gross profit ~~percentage~~margin for the Molecular Solutions segment was ~~58%~~31% for the three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~73%~~63% for the three months ended ~~September~~June 30, ~~2020.~~2021. This decrease was due to an increase in reserves for excess inventory as result of a forecasted decline in demand of certain products used in COVID PCR testing and a less favorable product ~~mix associated with the higher sales of lower gross profit percentage product and an increase in costs at our third party contract manufacturers resulting from the capacity expansion at those vendors.~~mix.

Research and development expenses ~~increased 17% to~~remained relatively flat at $2.8 for the three months ended June 30, 2022 from $2.7 million for the three months ended ~~September~~June 30, 2021 ~~from $2.3~~. Sales and marketing expenses also remained flat at $3.9 million for the three months ended ~~September~~June 30, ~~2020 due to higher staffing costs. Sales~~2022 and ~~marketing~~2021. General and administrative expenses increased ~~67%~~70% to ~~$4.9~~$6.6 million for the three months ended ~~September~~June 30, ~~2021~~2022 from ~~$2.9~~$3.9 million for the three months ended ~~September~~June 30, ~~2020~~2021 due to increased ~~consulting expense associated with business strategy planning,~~legal fees.

Operating expenses for the Molecular segment also include an ~~increase in our reserve for uncollectible accounts, and higher staffing costs~~. ~~General and administrative expenses increased 23% to $4.4~~impairment charge of $2.0 million for the three months ended ~~September~~June 30, ~~2021 from $3.6 million~~2022 associated with two idle manufacturing lines for ~~the three months ended September 30, 2020 due to increased legal fees~~which there are no projected cash flow and ~~staffing costs.~~minimal resale or salvage value.

All of the above contributed to the Molecular Solutions segment’s operating ~~income~~loss of ~~$5.6~~$9.5 million for the three months ended ~~September~~June 30, ~~2021,~~2022, which included ~~$2.2~~the non-cash impairment charge of $2.0 million, non-cash charges of $1.9 million for depreciation and amortization and ~~$301,000~~$529,000 for stock-based compensation.

CONSOLIDATED INCOME TAXES

We continue to believe the full valuation allowance established against our total U.S. deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed. For the three months ended ~~September~~June 30, ~~2021,~~2022, we recorded a U.S. state tax ~~benefit~~expense of ~~$102,000~~$183,000 compared to ~~a $629,000~~$54,000 of state income tax benefit for the three months ended ~~September~~June 30, ~~2020.~~2021. For the three months ended ~~September~~June 30, ~~2021,~~2022, we recorded a foreign tax ~~expense~~benefit of ~~$2.2~~$1.3 million compared to foreign tax expense of ~~$4.3~~$3.7 million for the three months ended ~~September~~June 30, ~~2020. The~~2021. This overall decrease in foreign tax expense is largely a result of the decrease in income before taxes generated by our Canadian subsidiary.

~~Nine~~

Six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~September~~June 30, ~~2020~~

2021

CONSOLIDATED NET REVENUES

The table below shows a breakdown of total consolidated net revenues (dollars in thousands) generated by each of our business segments ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.


	Nine Months Ended September 30,													For the Six Months Ended June 30,
	Dollars							Percentage of Total Net Revenues						Dollars								Percentage of Total Net Revenues
	2021		2020		% Change			2021			2020			2022		2021		% Change				2022			2021
Diagnostics	$	54,867	$	43,473		26	%		32	%		40	%	$	96,372	$	31,585		205		%		65	%		27	%
Molecular Solutions		110,682		62,499		77			65			57			48,031		80,735		(41	)			33			69
Net product and services revenues		165,549		105,972		56			97			97			144,403		112,320		29				98			96
Other		4,557		2,894		57			3			3			3,535		3,869		(9	)			2			4
Net revenues	$	170,106	$	108,866		56	%		100	%		100	%	$	147,938	$	116,189		27		%		100	%		100	%

Consolidated net product and services revenues increased ~~56%~~29% to ~~$165.5~~$144.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$106.0~~$112.3 million for the ~~comparable period of 2020,~~ six months ended June 30, 2021. The increase in revenues is largely due to ~~increased~~the inclusion of $65.3 million of InteliSwab® COVID-19 rapid test revenues. We began selling this product in August of 2021 resulting in no comparable revenues ~~across all products lines, other than our international HIV self-test. The biggest contributors to~~in the ~~increased revenues for the period were higher~~first half of 2021. Declines in sales of ~~our genomics products and~~ our molecular sample collection kits for COVID-19 testing ~~and the first time inclusion~~partially offset this positive driver of ~~sales of our InteliSwab~~TM ~~COVID-19 rapid tests.~~revenue. Other revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2021 increased 57%~~2022 decreased 9% to ~~$4.6~~$3.5 million from ~~$2.9~~$3.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020. This increase was~~2021 largely due to ~~increased research and development funding for the development of our COVID-19 tests and higher~~lower royalty income.

Consolidated net revenues derived from products sold to customers outside of the United States were ~~$30.4~~$19.6 million and ~~$26.7~~$19.5 million, or ~~18%~~13% and ~~25%~~17% of total net revenues, infor the ~~first nine~~six months ofended June 30, 2022 and 2021, ~~and 2020,~~ 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

Diagnostics Segment

The table below shows a breakdown of total net revenues (dollars in thousands) generated by our Diagnostics segment during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

Nine Months Ended September 30,

Dollars

Percentage of Total Net Revenues

Market

2021

2020

% Change

2021

2020

Infectious disease testing

$
39,664

$
36,625

8

%

69

%

82

%
COVID-19

7,938

63

NM

14

NM

Risk assessment testing

7,265

6,786

7

13

15

Net product revenues

54,867

43,474

26

96

97

Other

2,501

1,060

136

4

3

Net revenues

$
57,368

$
44,534

29

%

100

%

100

%


	For the Six Months Ended June 30,
	Dollars								Percentage of Total Net Revenues
Market	2022		2021		% Change				2021			2020
Infectious disease testing:
COVID-19	$	65,250	$	262	NM			%		66	%		0	%
Other		25,931		26,732		(3	)			25			79
Total infectious disease testing		91,181		26,994		238				92			80
Substance abuse testing		5,191		4,591		13				5			14
Net product revenues		96,372		31,585		205				97			94
Other		2,393		2,272		5				3			6
Net revenues	$	98,765	$	33,857		192		%		100	%		100	%

NM - not meaningful

Infectious Disease Testing Market

COVID-19 revenues were $65.3 million for the six months ended June 30, 2022, driven by sales of our InteliSwab® COVID-19 rapid test. We first began selling this product in August of 2021 and there are no comparable sales in the first half of 2021.

Sales to the other infectious disease testing ~~market increased 8%~~markets decreased 3% to ~~$39.7~~$25.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$36.6~~$26.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. This ~~increase~~decrease resulted from lower domestic OraQuick® HIV and international OraQuick® HCV product sales, partially offset by higher ~~domestic sales of our~~international OraQuick® HIV and ~~HCV products and higher international~~ domestic OraQuick® H~~VC product sales, partially offset by lower sales of our international~~ ~~OraQuick~~® ~~HIV Self-Test~~s.HCV sales.

The table below shows a breakdown of our total net OraQuick® HIV and HCV product revenues (dollars in thousands) during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

Nine Months Ended September 30,

Market

2021

2020

% Change

Domestic HIV

$
12,490

$
11,323

10

%
International HIV

17,255

17,697

(2
)

Net HIV revenues

29,745

29,020

2

Domestic HCV

5,580

3,437

62

International HCV

3,802

2,772

37

Net HCV revenues

9,382

6,209

51

Net OraQuick® revenues

$
39,127

$
35,229

11

%


	Six Months Ended June 30,
Market	2022		2021		% Change
Domestic HIV	$	7,506	$	9,050		(17	)	%
International HIV		11,017		10,672		3
Net HIV revenues		18,523		19,722		(6	)
Domestic HCV		4,574		3,754		22
International HCV		2,374		2,914		(19	)
Net HCV revenues		6,948		6,668		4
Net OraQuick® revenues	$	25,471	$	26,390		(3	)	%

Domestic OraQuick® HIV sales ~~increased 10%~~decreased 17% to ~~$12.5~~$7.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$11.3~~$9.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020. This increase was~~2021, primarily ~~the~~as a result of ~~higher~~ ~~sales~~a large order fulfilled in the first half of 2021 for our ~~OraQuick~~®OraQuick® In-Home HIV test shipped to the CDC and used in ~~a Centers for Disease Control and Prevention ("CDC")~~an initiative to drive increased in-home HIV ~~testing~~.

testing. A similar order did not occur in the first half of 2022.

International sales of our OraQuick® HIV tests ~~decreased 2%~~increased 3% to ~~$17.3~~$11.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$17.7~~$10.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020 largely~~2021 due to ~~pricing associated with~~increased sales into Africa as the ~~expiration~~COVID-19 impact lessens. This increase to revenues was partially offset by the absence of the Gates Foundation subsidy, ~~for certain international tests.~~

which expired in June 2021 and is not included in revenues in the first quarter of 2022, as well as the impact of the Russia and Ukraine war.

Domestic OraQuick® HCV sales increased ~~62%~~22% to ~~$5.6~~$4.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$3.4~~$3.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020 due to the re-opening of testing programs previously closed as a result of the COVID-19 pandemic and as resources used for COVID-19~~2021, driven by new funding granted by certain state governments, increased legislation regarding drug testing and ~~vaccinations were redirected back to HCV~~rise in drug use requiring more testing.

International OraQuick® HCV sales ~~increased 37%~~decreased 19% to ~~$3.8~~$2.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$2.8~~$2.9 million for the ~~nine~~six months ended ~~September 30, 2020 as sales into certain international markets continued to return to pre-pandemic levels.~~

~~COVID-19 Testing Market~~

~~During the nine months ended September~~June 30, 2021 ~~COVID-19 revenues were $7.9 million, driven by the first time sales of our InteliSwab~~TM ~~COVID-19 rapid antigen test which began~~due to large stock ordering shipped to Korea that did not repeat in ~~the third quarter of 2021.~~

~~Risk Assessment Market~~

2022.

Sales to the ~~risk~~substance abuse testing assessment market increased 7%13% to ~~$7.3~~$5.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$6.8~~$4.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 due to ~~hiring increases driven by the economic recovery from the COVID-19 pandemic.~~market share gains.

Other Revenues

Other revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 increased minimally to ~~$2.5~~$2.4 million from ~~$1.1~~$2.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020, largely~~2021, due ~~higher~~to research and development funding for 510(k) clearance and CLIA waiver of our InteliSwab®COVID-19 ~~tests and the inclusion of~~rapid test partially offset by lower royalty ~~income under the terms of a new licensing agreement related to our proprietary buffer solution used for the preservation and stabilization of oral fluid specimens.~~income.

Molecular Solutions Segment

The table below shows a breakdown of our total net revenues (dollars in thousands) during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.


	Six Months Ended June 30,
Market	2022		2021		% Change
Genomics	$	30,578	$	30,316		1		%
Microbiome		3,822		4,198		(9	)
COVID-19		9,161		39,953		(77	)
Laboratory services		2,938		5,611		(48	)
Other product revenues		1,532		657		133
Net molecular product and services revenues	$	48,031	$	80,735		(41	)
Other		1,142		1,597		(28	)
Net molecular product and services revenues	$	49,173	$	82,332		(40	)	%

Nine Months Ended September 30,

Market
2021

2020

% Change

Genomics

$
49,333

$
23,224

112

%
Microbiome

5,888

3,869

52

COVID-19

46,209

27,855

66

Laboratory services

8,017

6,798

18

Other product revenues

1,235

752

64

Net molecular product and services revenues

$
110,682

$
62,498

77

Other

2,056

1,834

12

Net molecular product and services revenues

$
112,738

$
64,332

75

%

Sales of our genomics products remained largely flat and increased ~~112%~~only 1% to ~~$49.3~~$30.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022, compared to ~~$23.2~~$30.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020 as we continued to see our customers' businesses recover from the COVID-19 pandemic and strong organic growth from customers in the commercial animal markets.~~2021.

Microbiome kit sales ~~increased 52%~~decreased 9% to ~~$5.9~~$3.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$3.9~~$4.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, due to a ~~recovery~~decline in revenues to CROs driven by the ~~market from the COVID-19 pandemic.~~timing of microbiome clinical studies.

Sales of our molecular sample collection kits for COVID-19 testing ~~increased 66%~~decreased 77% to ~~$46.2~~$9.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$27.9~~$40.0 million during the comparable period in ~~2020~~2021 due to ~~increased demand as~~lower COVID-19 PCR testing sales to our core customers, driven by the ~~COVID-19 pandemic began late in~~availability of antigen tests, the ~~first quarter~~wider availability of ~~2020~~vaccines, lower public funding for PCR testing, and ~~testing ramped up in the second and third quarters~~high inventory levels held by some of ~~2020 and continued into the first half of 2021 contributing to the revenue growth for the nine month period.~~those customers.

Laboratory services revenues ~~increased 18%~~declined 48% to ~~$8.0~~$2.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$6.8~~$5.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020, due to customers resuming activities delayed by the COVID-19 pandemic.~~2021 as a result of a large customer ceasing its operations and a slowdown in clinical trials.

Other product and service revenues increased ~~64%~~133% to ~~$1.2~~$1.5 million for the ~~nine~~six months ended ~~September~~June 30, 2022 compared to $657,000 for the six months ended June 30, 2021 ~~compared to $752,000 for the nine months ended September 30, 2020~~largely due to increased sales ofby our ~~Colli-Pee® collection device.~~Novosanis subsidiary.

Other revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2021 increased 12%~~2022 decreased 28% to ~~$2.1~~$1.1 million from ~~$1.8~~$1.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, largely as a result of ~~higher~~lower royalty income received under a litigation settlement agreement.

CONSOLIDATED OPERATING RESULTS

Consolidated gross profit ~~percentage was 53%~~margins were 35% for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to 59% for the ~~nine~~six months ended ~~September~~June 30, ~~2020. Gross~~2021. The decrease in gross profit ~~percentage for~~margins was caused by an unfavorable product mix of higher sales of lower margin product, increases in inventory reserves associated with excess inventory levels and manufacturing inefficiencies that occurred in the ~~nine months ended September 30, 2021 declined as a result~~first quarter of ~~increased scrap expense,~~2022, lower absorption of labor costs and ~~lower subsidies under~~ the ~~charitable support agreement with~~absence of the Gates ~~Foundation, partially offset by~~ ~~an improved product mix associated with an increase~~subsidy which expired in ~~higher gross profit percentage product sales.~~June 2021.

Consolidated operating loss for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$793,000~~$37.3 million, a ~~$12.3~~$49.5 million ~~improvement~~decrease from the ~~$13.1~~$12.2 million operating ~~loss~~income reported for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Results for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 were ~~positively~~

negatively impacted ~~by the increased revenues and the inclusion of an $1.5 million non-cash benefit relatedto the fair value change in acquisition-related contingent consideration partially offset~~ by the lower gross profit ~~percentage and increased~~margin described above coupled with an increase in operating ~~expenses.~~expenses as described below, including an aggregate impairment charge of $10.5 million.

OPERATING INCOME (LOSS) BY SEGMENT

Diagnostics Segment

The gross profit ~~percentage~~margin for the Diagnostics segment was 29% for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~43%~~38% for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. This decrease ~~was~~is due to ~~an increase~~inefficiencies in ~~scrap costs associated with the production of~~ our InteliSwabTM ®~~test and~~ manufacturing process experienced in the ~~recording~~beginning of ~~a reserve for COVID-19 antibody inventory, and lower absorption~~the year causing high scrap rates, under-absorption of labor costs, ~~as we have increased headcount in anticipation~~and the June 2021 expiration of ~~higher production demands~~subsidies under the support agreement with the Gates Foundation, and a less favorable product mix..

Research and development expenses increased ~~29%~~2% to ~~$17.4~~$11.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021 from $13.5~~2022 compared to $11.5 million for the ~~nine~~six months ended September 30, 2020, largely due to higher staffing costs and increased COVID-19 product development expenses. Sales and marketing expenses increased 35% to $21.7 million for the nine months ended SeptemberJune 30, 2021 ~~from $16.1 million for the nine months ended September 30, 2020, due to higher market research and advertising spending associated with the~~ ~~introduction of our InteliSwab~~TM ~~test into the market~~, higher commissions directly related to the increase in revenues and increased consulting costs associated with business strategy planning. General and administrative expenses increased 4% to $21.6 million for the nine months ended September 30, 2021 from $20.7 million for the nine months ended September 30, 2020largely due to higher staffing costs associated with increased ~~headcount,~~head count offset by lower product development activities related to our InteliSwab® rapid test which did not repeat in the first half of 2022 as we received EUA authorization in June 2021. Sales and marketing expenses increased 25% to $15.9 million for six months ended June 30, 2022 from $12.8 million for the six months ended June 30, 2021 due to increased staffing costs associated with higher head count, increased travel and annual meetings expenses as travel and in person events have resumed as COVID-19 restrictions have been lifted, increased consultant costs, higher advertising and market research expenses and higher ~~business development consulting~~subscription costs associated with our new CRM system. This increase in spending was partially offset by a decline in our reserve for uncollectible accounts, lower recruiting fees and a decrease in commission expense. General and administrative expenses increased 82% to $24.7 million for the six months ended June 30, 2022 from $13.6 million for the six months ended June 30, 2021 largely due to increased consulting costs, higher stock compensation expense associated with accelerated vesting of shares under our former CEO's and general counsel's employment agreements, higher staffing costs associated with increased head count, increased legal costs, severance costs associated with our former general counsel, increased accounting fees, and higher recruitment expense largely associated with our CEO search.

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 flow and minimal resale or salvage value. Diagnostic operating expenses also included a ~~lower allocation~~goodwill impairment charge of ~~building costs~~$3.6 million. The decline in the Company's stock price was identified as ~~administrative space~~a triggering event which required the Company to perform an quantitative goodwill impairment analysis. The results of this analysis indicated the Diagnostic segment's goodwill was ~~repurposed for manufacturing,~~impaired and ~~increased intercompany service fees allocated~~was written down to ~~the Molecular Solutions segment.~~$0.

All of the above contributed to the Diagnostics segment’s operating loss of ~~$42.8~~$31.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, which included the non-cash impairment charge of $8.5 million, non-cash charges of ~~$3.0~~$3.6 million for depreciation and amortization and ~~$4.7~~$5.9 million for stock-based compensation. The Diagnostics segment operating loss also included a non-cash pre-tax benefit of ~~$1.5 million~~$36,000 associated with the change in the fair value of acquisition-related contingent consideration. This is in comparison to an $1.0 million benefit recorded in the first half of 2021.

Molecular Solutions Segment

The gross profit ~~percentage~~margin for the Molecular Solutions segment was ~~66%~~47% for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~69%~~68% for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. This decrease iswas due to an increase in reserves for excess inventory as result of a forecasted decline in demand and a less favorable product ~~mix associated with increased sales of lower gross profit percentage product and increased cost~~mix.~~s at our third party contract manufacturers.~~

Research and development expenses increased 11% to ~~$7.9~~$5.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$7.1~~$5.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 due to ~~increased~~higher staffing ~~and consulting~~ costs. Sales and marketing expenses increased ~~31%~~18% to ~~$12.1~~$8.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$9.2~~$7.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 due to higher staffing costs related to increased head count, increased consulting ~~costs~~expense associated with business strategy planning, and an increase in ~~our reserve for uncollectible accounts~~travel costs as COVID-19 restrictions are lifted. These increases in expenses were partially offset by lower amortization expense associated with an intangible asset that was fully amortized at the end of 2021.. General and administrative expenses increased ~~24%~~58% to $12.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$9.7~~$7.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 due to increased ~~intercompany service~~legal fees ~~allocated from~~and staffing costs.

Operating expenses for the ~~Diagnostics~~Molecular segment ~~estimated penalties incurred on delinquent sales tax filings that were not recognized in~~also includes an impairment charge of $2.0 million for the ~~prior year period, higher staffing costs,~~six months ended June 30, 2022 associated with two idle manufacturing lines for which there are no projected cash flow and ~~increased legal fees.~~minimal resale or salvage value.

All of the above contributed to the Molecular Solutions segment’s operating ~~income~~loss of ~~$42.0~~$5.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, which included ~~$5.5~~the non-cash impairment charge of $2.0 million, $3.8 million for depreciation and amortization and ~~$496,000~~$924,000 for stock-based compensation.

CONSOLIDATED INCOME TAXES

We continue to believe the full valuation allowance established against our total U.S. deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we recorded U.S. state tax expense of ~~$13,000~~$400,000 compared to ~~$612,000~~$115,000 of state income tax ~~benefit~~expense for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Additionally, in the first half of 2022, we recorded approximately $1.7 million of withholding taxes due to the Canada Revenue Agency associated with our repatriation of $65.0 million of cash from Canada to the United States. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we recorded foreign tax expense of ~~$12.2 million~~$665,000 compared to foreign tax expense of ~~$6.3~~$10.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020. The~~2021. This overall ~~increase~~decrease in foreign tax expense is largely a result of the ~~increase~~decrease in income before taxes generated by our Canadian subsidiary.

Liquidity and Capital Resources


	September 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
	(In thousands)				(In thousands)
Cash and cash equivalents	$	134,962	$	160,802	$	66,159	$	116,762
Available for sale securities		67,336		96,317		29,625		53,288
Working capital		235,060		242,404		201,820		220,367

Our cash and cash equivalents and available-for-sale securities decreased to ~~$202.3~~$95.8 million at ~~September~~June 30, ~~2021~~2022 from ~~$257.1~~$170.1 million at December 31, ~~2020.~~2021. Our working capital decreased to ~~$235.1~~$201.8 million at ~~September~~June 30, ~~2021~~2022 from ~~$242.4~~$220.4 million at December 31, ~~2020.~~2021.

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, net cash used in operating activities was ~~$22.6~~$45.5 million. Our net loss of ~~$12.6~~$38.8 million included non-cash charges ~~for~~of $10.5 million associated with impairment charges taken against idle manufacturing lines and goodwill, depreciation and amortization expense of ~~$8.5~~$7.5 million, stock-based compensation expense of ~~$5.2~~$6.8 million, ~~a provision for doubtful accounts~~an inventory reserve of ~~$1.2~~$2.0 million, and other non-cash expense of $105,000. Operating activities also included a benefit for the change in the estimated fair value of acquisition-related contingent consideration of $1.5 million and a $142,000 contingent consideration payment representing the excess of the total contingent consideration payment made during the nine months ended September 30, 2021 over the fair value of the liability estimated at the time of acquisition. Sources of cash generated from$1.2 million. Cash used to fund our working capital accounts included an increase in inventory of $20.4 million to meet

anticipated demand to support COVID-19 testing program, an increase in accounts receivable of $18.6 million largely associated with product shipped to the U.S. government, a ~~$2.8~~$4.1 million increase in prepaid expenses and other assets associated with tax installments made to the Canadian Revenue Agency and a $2.9 million decrease in accrued expenses and other liabilities largely due to payment of our 2021 bonuses and severance payments to our former CEO. Offsetting these uses of cash was a $11.9 million increase in accounts payable due to the timing of invoices received and payments ~~made and an increase in accrued expenses and other liabilities of $982,000~~ made.~~associated with increased accruals for professional fees and higher sales tax payable~~. Offsetting these sources of cash were an increase in inventory of $21.7 million to meet anticipated demand to support COVID-19 testing programs, an increase in accounts receivable of $2.1 million due to orders placed late in the quarter, an increase in prepaid expenses and other assets of $1.9 million ~~due to prepayments made on a manufacturing contract~~ ~~and~~ ~~a decrease in deferred revenue of $1.3 million due to the recognition of revenue from customer prepayments.~~

Net cash ~~provided by~~used in investing activities was ~~$776,000~~$2.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, which reflects proceeds from the maturities and redemptions of investments of ~~$53.8 million~~$23.0 million. This was offset by ~~$27.5~~$25.4 million ~~used~~ to acquire property and equipment largely to increase our manufacturing ~~capacity and $25.5 million used to purchase investments.~~capacity.

Net cash used in financing activities was ~~$3.1~~$2.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, which ~~reflects $1.9~~is largely comprised of $2.0 million used for the repurchase of common stock to satisfy withholding taxes related to the vesting of restricted shares awarded to our ~~employees, payments of lease liabilities of $1.1 million and $264,000 used for payment of our contingent consideration obligation, partially offset by proceeds from stock option exercises of $247,000.~~employees.

We expect current balances of cash and cash equivalents and available-for-sale securities to be sufficient to fund our current ~~and foreseeable~~ operating and capital ~~needs.~~needs as well as those arising over the next twelve months. 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, ~~including continued investment to expand our capacity to manufacture products for COVID-19 testing,~~ 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, ~~$129.2~~$74.7 million or ~~64%~~78% of our ~~$202.3~~$95.8 million in cash, cash equivalents and available-for-sale securities belongs to our Canadian subsidiary. ~~Repatriation~~In the first quarter of ~~such~~2022, we repatriated $65.0 million of cash from Canada into the United States ~~exceeding certain levels~~and 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 our intention going forward to continue to permanently reinvest the historical undistributed earnings of our foreign subsidiaries.

A summary of our obligations to make future payments under contracts existing at December 31, ~~2020~~2021 is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. As of ~~September~~June 30, ~~2021, except as described in note 11 within the notes to the consolidated financial statements,~~2022, there were no significant changes to this information.

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 estimates and assumptions 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 an on-going basis, we evaluate our judgments and estimates, including those related to the 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.

A more detailed review of our critical accounting policies is contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed with the SEC. ~~During the first nine months of 2021, there were~~Except as presented below, no material changes have been made to ~~our~~such critical accounting ~~policies.~~policies during the six months ended June 30, 2022.

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 If it is determined that it is more likely than not that the fair value does not exceed 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 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.

The process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment, including the identification of reporting units, qualitative evaluation of events and circumstances to determine if it is more likely than not that an impairment exists, and, if necessary, the estimation of the fair value of the applicable reporting unit.

Item 3. 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 ~~September~~June 30, ~~2021,~~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 ~~5.2%~~3.5% of our total revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. We do have foreign currency exchange risk related to our operating subsidiaries in Canada and in Belgium. The principal foreign currencies in which we conduct business are the Canadian dollar and the Euro. Fluctuations in the exchange rate between the U.S. dollar and these foreign currencies could affect year-to-year comparability of operating results and cash flows. Our foreign subsidiaries had net assets, subject to translation, of ~~$194.2~~$130.9 million in U.S. Dollars, which are included in the Company’s consolidated balance sheet as of ~~September~~June 30, ~~2021.~~2022. A 10% unfavorable change in the Canadian-to-U.S. dollar and Euro-to-U.S. dollar exchange rates would have decreased our comprehensive income by approximately ~~$16.8~~$13.1 million in the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022.

Item 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s Chief Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of ~~September~~June 30, ~~2021.~~2022. Based on that evaluation, the Company’s management, including such officers, concluded that the Company’s disclosure controls and procedures were effective as of ~~September~~June 30, ~~2021~~2022 to provide reasonable assurance that material information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 was accumulated and communicated to the Company’s management, including the Chief Executive Officer and Interim Chief Financial Officer, to allow timely decisions regarding required disclosure and was recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

(b) Changes in Internal Control Over Financial Reporting. There was no change in the Company’s internal control over financial reporting that occurred during the three months ended ~~September~~June 30, ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

From time to time, we are 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 are not expected, individually or in the aggregate, to have a material adverse effect on our future financial position or results of operations.

Spectrum Patent Litigation

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. ~~We believe Spectrum's counterclaims are without merit and we~~DNAG filed a motion to dismiss ~~both claims~~Spectrum’s counterclaims in October ~~2021.~~2021, which was denied by the Court on March 30, 2022. On April 8, 2022, the Court assigned a new judge to preside over the matter, which vacated all dates for the trial. We ~~are seeking injunctive relief and damages in this matter.~~await new dates to be set by the Court.

Item 1A. RISK FACTORS

~~The risk factors set forth in this report update should be read together with~~There have been no material changes to the risk factors ~~discussed~~disclosed in Item 1A, ofentitled “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021, other than as set forth below.

Customer Concentration Creates Risk for Our ~~U.S. Government Contracts Require Compliance With Numerous Laws~~Business.

One non-commercial customer accounted for 56% and ~~Increases Our Risk~~39% of net consolidated revenues for the three and ~~Liability.~~six months ended June 30, 2022. We

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

2931

~~Administration. During the third quarter of 2021, we entered into a contract with the Defense Logistics Agency ("DLA") for the procurement of our InteliSwab~~TM COVID-19 Rapid Test for over-the-counter use, with an estimated value of $205 million. During the same quarter, we entered into a contract with the Biomedical Advanced Research Development Authority to provide us with up to $13.6 million in funding to obtain FDA 510(k) clearance and Clinical Laboratory Improvement Amendments ("CLIA") waiver for our InteliSwabTM COVID-19 Rapid Test. In September 2021, we entered into a contract with the U.S. Department of Defense, in coordination with the Department of Health and Human Services, for $109 million in funding to build additional manufacturing capacity in the United States for our InteliSwabTM ~~COVID-19 Rapid Test.~~

~~As a result of our U.S. government funding and product~~expect that sales to the ~~U.S. government, we must comply with laws and regulations relating~~large non-commercial customer will continue to ~~the award, administration and performance of U.S. government contracts. U.S. government contracts typically contain~~be a ~~number of extraordinary provisions that would not typically be found in commercial contracts and which may create a disadvantage and additional risks~~significant contributor 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 anyour net consolidated revenue. Certain parts of our ~~obligations.~~

Asbusiness may continue to have a ~~U.S. government contractor, we are subject~~high customer concentration and depend disproportionately on a few large customers. To the extent that such a large customers fail 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 ourmeet their purchase commitments, change their ordering patterns or business and have an adverse effect on our consolidated financial performance. The U.S. government recently announced that federal contractors who are party to a broad range of contracts with the government must require their employees to be vaccinated against the COVID-19 virus and comply with current masking and social distancing safety procedures. If we become subject to these requirements, we could experience a loss of personnel and difficulty in recruiting new employees, each of which could adversely affect our business.

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. Fines and penalties could be imposed for failing to follow procurement integrity and bidding rules, employing improper billing practicesstrategies, or otherwise ~~failing to follow rules relating to billing on cost-plus contracts, receiving~~reduce their purchases 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 Inability to Manufacture Products in Accordance With 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 causestop purchasing our products, or if we experience difficulty in meeting the ~~materials used to produce or assemble~~high demand by these larger customers for 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.

~~In June 2021, we received FDA Emergency Use Authorization for our InteliSwab~~TM COVID-19 Rapid Test. Although there has been significant demand for this product, we have experienced difficulties manufacturing our test in accordance with applicable specifications. We believe these difficulties are the result of variability in certain incoming raw materials used in the product and certain processing steps. As a result, we have not been able to meet the demand for our product and sales of our InteliSwabTM ~~COVID-19 Rapid Test have been negatively impacted. If we are not able to resolve the manufacturing difficulties in a timely manner, or at all,~~ our revenues and results of operations ~~may not meet expectations and~~ could be adversely affected.

~~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 raw 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. Recently, the global supply chain has experienced significant disruptions caused by the COVID-19 pandemic, resulting in shortages of labor and equipment. These conditions, if not mitigated or remedied in a timely manner, could delay or preclude delivery of raw materials needed to manufacture our products or delivery of our products to customers, particularly in international markets. This in turn could have an adverse impact on our business, financial condition, results of operations or cash flows.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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)

July 1, 2021 - July 31, 2021

594

(3)

$
10.40

—

11,984,720

August 1, 2021 - August 31, 2021

3,673

(3)

11.15

—

11,984,720

September 1, 2021 - September 30, 2021

—

—

—

11,984,720

4,267

—


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)
April 1, 2022 - April 30, 2022		107,316	(3)	$	7.08		—		11,984,720
May 1, 2022 - May 31, 2022		21,979	(3)		5.17		—		11,984,720
June 1, 2022 - June 30, 2022		12,311			3.83		—		11,984,720
		141,606					—

(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 and performance shares, these shares were retired to satisfy minimum tax withholdings.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None

Item 4. MINE SAFETY DISCLOSURES

Not applicable

Item 5. OTHER INFORMATION

None

3132

Item 6. EXHIBITS



Exhibit Number		Exhibit

10.1* **		~~Change of Control Severance Letter of Michele Miller, Vice President, Finance and Controller.~~

10.2*		~~$109 million Capital Funding Agreement With the U.S. Department of Defense, in coordination with the Department of Health and Human Services~~.

10.3**		~~Description of~~Amended and Restated OraSure Technologies, Inc. ~~2021 Incentive~~2000 Stock Award Plan is incorporated by reference to ~~Item 5.02~~Exhibit 10.1 to the Company's Current Report on Form ~~8-k~~8-K filed ~~August 13, 2021~~May 18, 2022.
.

10.410.2*		~~Description~~Employment Agreement dated as of ~~Long Term Incentive Policy~~May 20, 2022, between OraSure Technologies, Inc. and ~~2021 Award Performance Measures~~Carrie Eglinton-Manner is incorporated by reference to ~~Item 5.02~~Exhibit 10.1 to the Company's Current Report on Form ~~8-k~~8-K filed ~~August 13, 2021~~May 26, 2022..

31.1*		Certification of ~~Stephen S. Tang~~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 Scott Gleason required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.

32.1*+		Certification of ~~Stephen S. Tang~~Carrie Eglinton-Manner required by Rule 13a-14(b) or Rule 15d-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 Scott Gleason a required by Rule 13a-14(b) or Rule 15d-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 – the Instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 104		Cover Page from the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2021 has been formatted in Inline XBRL

*Filed herewith

** Management contract or compensatory plan or arrangement.

+This certification is deemed not filed for purposes of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


	ORASURE TECHNOLOGIES, INC.

		/s/ Scott Gleason
Date: ~~November 4, 2021~~August 9, 2022		Scott Gleason
		~~Interim Chief Financial Officer~~Senior Vice President, Investor Relations and Corporate Communications
		(Principal Financial Officer)

		/s/Michele M. Miller
Date: ~~November 4, 2021~~August 9, 2022		Michele M. Miller
		Senior Vice President, ~~Finance~~Controller and ~~Controller~~Chief Accounting Officer
		(Principal Accounting Officer)

3334


Balance as of December 31, 2020	$	2,451	��
Payments made during the period		(406	)
Change in fair value during the period		(1,526	)
Balance as of September 30, 2021	$	519


	September 30, 2021		December 31, 2020
Raw materials	$	28,306	$	15,425
Work in process		2,653		2,572
Finished goods		22,624		13,866
	$	53,583	$	31,863



	Finance			Operating
2021 (excluding the nine months ended September 30, 2021)	$	510		$	628
2022		2,040			2,493
2023		1,810			1,776
2024		582			1,808
2025		4			1,443
Thereafter		—			2,808
Total Minimum Lease Payments		4,946			10,956
Less: imputed interest		(200	)		(1,038	)
Present Value of Lease Liabilities	$	4,746		$	9,918