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 March 31, ~~2022~~2023.

☐ 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	☒	~~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 May ~~5, 2022,~~3, 2023, the registrant had ~~72,455,507~~73,262,370 shares of common stock, ~~$.000001~~$0.000001 par value per share, outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the Federal securities laws. These may include statements about our expected revenues, earnings/losses per share, net income (loss), expenses, cash flow or other financial performance, or developments, clinical trial or development activities, expected regulatory filings and approvals, planned business transactions, views of future industry, competitive or market conditions, and other factors that could affect our future operations, results of operations or financial position. These statements often include words, such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “may,” “will,” “should,” “could,” or similar expressions.

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

•

Our ability to market and sell products, whether through our internal, direct sales force or third parties;

•

Our ability to fulfill our commitments under our contracts with the U.S. government for InteliSwab® COVID-19 Rapid Tests;

•

Failure of distributors or other customers to meet purchase forecasts, historic purchase levels or minimum purchase requirements for our products;

•

Significant customer concentrations that exist or may develop in the future:

•

Our ability to manufacture products in accordance with applicable specifications, performance standards and quality requirements;

•

Our ability to obtain, and timing and cost of obtaining, necessary regulatory approvals for new products or new indications or applications for existing products; ability to comply with applicable regulatory requirements;

•

Our ability to effectively resolve warning letters, audit observations and other findings or comments from the U.S. Food and Drug Administration or other regulators;

•

The impact of the COVID-19 pandemic on our business, supply chain and workforce;

•

The impact of the U.S. government ending the COVID-19 related Public Health Emergency;

•

Changes in relationships, including disputes or disagreements, with strategic partners or other parties and reliance on strategic partners for the performance of critical activities under collaborative arrangements;

•

Our ability to meet increased demand for our products;

•

The impact of replacing distributors on our business;

•

Inventory levels at distributors and other customers;

•

Our ability to achieve our financial and strategic objectives and continue to increase our revenues, including the ability to expand international sales;

•

The impact of competitors, competing products and technology 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 or other agencies; ability to fund research and development and other products and operations;

•

Our ability to obtain and maintain new or existing product distribution channels;

•

Reliance on sole supply sources for critical products and components;

•

Availability of related products produced by third parties or products required for use of our products;

•

The impact of contracting with the U.S. government on our business;

•

The impact of negative economic conditions on our business;

•

Our ability to maintain sustained profitability;

•

Our ability to increase our gross margins;

•

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

•

Volatility of 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;

•

Availability of licenses to patents or other technology;

•

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 and civil unrest; and

•

General political, business and economic conditions, including inflationary pressures and banking instability.

These and other factors that could affect our results are discussed more fully under the section titled “Risk Factors,” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q, if any, in Part I, Item 1A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 3, 2023, and in other SEC filings. 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, unless we are required to do so by law. If we do update one or more forward-looking statements, no inference should be drawn that we will make updates with respect to other forward-looking statements or that we will make any further updates to those forward-looking statements at any future time.

Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose any 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.

PART I. FINANCIAL INFORMATION



	Page No.

Item 1. Financial Statements (Unaudited)

Consolidated Balance Sheets at March 31, ~~2022~~2023 and December 31, ~~2021~~2022	3

Consolidated Statements of Operations for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022	4

Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022	5

Consolidated Statements of Cash Flows for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022	6

Notes to the Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1714

Item 3. Quantitative and Qualitative Disclosures About Market Risk	2518

Item 4. Controls and Procedures	2518

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	2519

Item 1A. Risk Factors	2519

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2619

Item 3. Defaults Upon Senior Securities	2620

Item 4. Mine Safety Disclosures	2620

Item 5. Other Information	2620

Item 6. Exhibits	2721

Signatures	2822

Item 1. FINANCIAL STATEMENTS

ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except per share amounts)


	March 31, 2022			December 31, 2021			March 31, 2023			December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	70,721		$	116,762		$	90,194		$	83,980
Short-term investments		41,503			36,279			22,178			26,867
Accounts receivable, net of allowance for doubtful accounts of $3,789 and $3,418		59,671			45,323
Accounts receivable, net of allowance of $2,297 and $2,365								107,445			70,797
Inventories		61,536			53,138			77,189			95,704
Prepaid expenses		8,906			7,939			6,161			6,273
Other current assets		26,027			28,990			40,428			41,569
Total current assets		268,364			288,431			343,595			325,190
Noncurrent Assets:
Property, plant and equipment, net		97,572			88,164
Property, plant and equipment, net of accumulated depreciation of $72,400 and $69,881								57,343			59,413
Operating right-of-use assets, net		12,169			9,056			9,922			10,399
Finance right-of-use assets, net		2,240			2,493			1,136			1,293
Intangible assets, net		13,692			14,343
Intangible assets, net of accumulated amortization of $31,732 and $31,077								11,184			11,694
Goodwill		40,389			40,279			35,204			35,104
Long-term investments		—			17,009
Other noncurrent assets		1,106			1,215			1,031			1,087
Total noncurrent assets		167,168			172,559			115,820			118,990
TOTAL ASSETS	$	435,532		$	460,990		$	459,415		$	444,180
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	27,057		$	28,024		$	27,396		$	38,020
Deferred revenue		2,906			2,936			1,989			2,273
Accrued expenses and other current liabilities		21,911			33,778			22,673			25,762
Finance lease liabilities		1,699			939
Operating lease liabilities		1,815			2,181
Finance lease liability								1,229			1,179
Operating lease liability								1,761			1,764
Acquisition-related contingent consideration obligation		199			206			75			65
Total current liabilities		55,587			68,064			55,123			69,063
Noncurrent Liabilities:
Finance lease liabilities		1,207			1,952
Operating lease liabilities		10,727			7,202
Finance lease liability								472			503
Operating lease liability								8,623			9,101
Acquisition-related contingent consideration obligation		117			354			—			99
Other noncurrent liabilities		552			651			609			581
Deferred income taxes		2,456			2,234			409			408
Total noncurrent liabilities		15,059			12,393			10,113			10,692
TOTAL LIABILITIES		70,646			80,457			65,236			79,755
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, 72,307 and 72,069 shares issued and outstanding		0			0
Preferred stock, par value $.000001, 25,000 shares authorized, none issued								—			—
Common stock, par value $.000001, 120,000 shares authorized, 73,254 and 72,734 shares issued and outstanding								—			—
Additional paid-in capital		513,553			511,063			521,964			520,446
Accumulated other comprehensive loss		(8,247	)		(10,077	)		(17,418	)		(18,435	)
Accumulated deficit		(140,420	)		(120,453	)		(110,367	)		(137,586	)
Total stockholders' equity		364,886			380,533			394,179			364,425
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	435,532		$	460,990		$	459,415		$	444,180

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 March 31,						Three Months Ended March 31,
	2022			2021			2023			2022
NET REVENUES:
Products and services	$	65,236		$	56,579		$	152,914		$	65,236
Other		2,471			2,003			2,049			2,471
		67,707			58,582			154,963			67,707
COST OF PRODUCTS AND SERVICES SOLD		43,435			20,256			89,148			43,408
Gross profit		24,272			38,326			65,815			24,299
OPERATING EXPENSES:
Research and development		8,413			8,992			10,560			8,634
Sales and marketing		12,717			9,530			12,142			12,717
General and administrative		19,156			10,188			17,711			19,156
Loss on impairments								1,105			—
Change in the estimated fair value of acquisition-related contingent consideration		(36	)		(806	)		(24	)		(36	)
		40,250			27,904			41,494			40,471
Operating income (loss)		(15,978	)		10,422			24,321			(16,172	)
OTHER INCOME (LOSS)		(53	)		(119	)
OTHER INCOME								2,673			168
Income (loss) before income taxes		(16,031	)		10,303			26,994			(16,004	)
INCOME TAX EXPENSE		3,936			6,529
INCOME TAX (BENEFIT) EXPENSE								(225	)		3,936
NET INCOME (LOSS)	$	(19,967	)	$	3,774		$	27,219		$	(19,940	)

INCOME (LOSS) PER SHARE:
BASIC	$	(0.28	)	$	0.05		$	0.37		$	(0.28	)
DILUTED	$	(0.28	)	$	0.05		$	0.37		$	(0.28	)
SHARES USED IN COMPUTING INCOME (LOSS) PER SHARE:
WEIGHTED-AVERAGE SHARES OUTSTANDING:
BASIC		72,194			71,878			73,112			72,194
DILUTED		72,194			72,766			73,966			72,194

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 March 31,					Three Months Ended March 31,
	2022			2021		2023		2022
NET INCOME (LOSS)	$	(19,967	)	$	3,774	$	27,219	$	(19,940	)
OTHER COMPREHENSIVE INCOME (LOSS)
OTHER COMPREHENSIVE INCOME
Currency translation adjustments		1,756			1,352		797		1,756
Unrealized gain on marketable securities		74			21		220		74
COMPREHENSIVE INCOME (LOSS)	$	(18,137	)	$	5,147	$	28,236	$	(18,110	)

See accompanying notes to the consolidated financial statements.

ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Three Months Ended March 31,						For the Three Months Ended March 31,
	2022			2021			2023			2022
OPERATING ACTIVITIES:
Net income (loss)	$	(19,967	)	$	3,774		$	27,219		$	(19,940	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Stock-based compensation		3,524			1,464			2,655			3,524
Depreciation and amortization		3,682			2,489			3,696			3,682
Loss on impairments								1,105			—
Other non-cash amortization		80			138			—			80
Provision for doubtful accounts		347			598
Inventory reserve		1,092			129
Unrealized foreign currency (gain) loss		169			(100	)
Provision for credit losses								(67	)		347
Unrealized foreign currency loss								44			169
Interest expense on finance leases		32			14			15			32
Deferred income taxes		200			(94	)		—			200
Loss on disposal of fixed assets		710			—
Loss on sale of fixed assets								—			710
Change in the estimated fair value of acquisition-related contingent consideration		(36	)		(806	)		(24	)		(36	)
Payment of acquisition-related contingent consideration		—			(142	)		(19	)		—
Changes in assets and liabilities
Accounts receivable		(15,295	)		2,188			(36,613	)		(15,295	)
Inventories		(9,374	)		(8,511	)		18,540			(8,198	)
Prepaid expenses and other assets		(736	)		(766	)		5,299			(736	)
Accounts payable		4,398			(253	)		(12,097	)		4,287
Deferred revenue		(44	)		(262	)		(279	)		(44	)
Accrued expenses and other liabilities		(4,603	)		(4,253	)		(3,472	)		(4,603	)
Net cash used in operating activities		(35,821	)		(4,393	)
Net cash provided by (used in) operating activities								6,002			(35,821	)
INVESTING ACTIVITIES:
Purchases of investments								(22,330	)		—
Proceeds from maturities and redemptions of investments		12,135			33,745			27,304			12,135
Purchases of property and equipment		(20,219	)		(11,061	)		(1,191	)		(20,219	)
Purchase of property and equipment under government contracts		(28,188	)		—			(2,767	)		(28,188	)
Proceeds from funding under government contract		26,333			—			—			26,333
Other investing activities		—			(19	)
Net cash (used in) provided by investing activities		(9,939	)		22,665
Net cash provided by (used in) investing activities								1,016			(9,939	)
FINANCING ACTIVITIES:
Cash payments for lease liabilities		(153	)		(282	)		(148	)		(153	)
Proceeds from exercise of stock options		15			92			66			15
Payment of acquisition-related contingent consideration		(208	)		(264	)		(46	)		(208	)
Repurchase of common stock		(1,049	)		(1,730	)		(1,203	)		(1,049	)
Net cash used in financing activities		(1,395	)		(2,184	)		(1,331	)		(1,395	)
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH		1,114			786			527			1,114
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(46,041	)		16,874
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS								6,214			(46,041	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		116,762			160,802			83,980			116,762
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	70,721		$	177,676		$	90,194		$	70,721

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	3,570		$	3,671		$	(10	)	$	3,570
Non-cash investing and financing activities
Non-cash investing activities
Accrued property and equipment purchases		642			4,267		$	733		$	642
Accrued property and equipment purchases under government contracts		1,905			—		$	—		$	1,905
Unrealized gain on marketable securities		74			21

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. 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, DNA Genotek Inc. (“DNAG”), Diversigen, Inc. (“Diversigen”), and 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~~the Company's 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~~the Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022. Results of operations for the three months ended March 31, ~~2022~~2023 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~~its Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 that have had a material impact on the consolidated financial statements and related notes except as discussed herein. See Note 11 for the discussion regarding the change in business segments.

Investments. ~~We consider~~The Company considers 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~~The Company records an allowance for credit loss for ~~our~~its 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~~the Company reviews factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. ~~During the three months ended March 31, 2022, we recognized a provision for expected credit losses for our available-for-sale securities of $~~65.

The following is a summary of ~~our~~the Company's available-for-sale ~~securities as of March 31, 2022 and December 31, 2021:~~securities:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2022
March 31, 2023
Guaranteed investment certificates	$	33,578	$	—	$	—		$	33,578	$	22,178	$	—	$	—		$	22,178
Corporate bonds		8,285		—		(360	)		7,925		—		—		—			—
Total available-for-sale securities	$	41,863	$	—	$	(360	)	$	41,503
December 31, 2021
Total										$	22,178	$	—	$	—		$	22,178
December 31, 2022
Guaranteed investment certificates	$	33,249	$	—	$	—		$	33,249	$	22,109	$	—	$	—		$	22,109
Corporate bonds		20,473		—		(434	)		20,039		4,978		—		(220	)		4,758
Total available-for-sale securities	$	53,722	$	—	$	(434	)	$	53,288
At March 31, 2022, maturities of our available-for-sale securities were as follows:
Total										$	27,087	$	—	$	(220	)	$	26,867
At March 31, 2023, maturities of the Company's available-for-sale securities were as follows:

Less than one year	$	41,863	$	—	$	(360	)	$	41,503	$	22,178	$	—	$	—		$	22,178
Greater than one year	$	—	$	—	$	—		$	—	$	—	$	—	$	—		$	—

Fair Value of Financial Instruments. As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, 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~~the Company's available-for-sale ~~debt securities~~corporate bonds are measured as Level 2 instruments as of ~~March 31, 2022 and~~ December 31, ~~2021. Our~~2022. The Company's available-for-sale guaranteed investment certificates are measured as Level 1 instruments as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

Included in cash and cash equivalents at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, was $~~2,386~~6,846 and $~~1,160~~1,730 invested in ~~government~~ money market funds. These money market funds have investments in government securities and are measured as Level 1 instruments.

~~We offer~~The Company offers a nonqualified deferred compensation plan for certain eligible employees and members of ~~our~~its 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 March 31, ~~2022~~2023 and December 31, ~~2021~~2022 was $~~1,660~~678 and $~~1,763~~747, 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.

~~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 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 March 31, 2022 and December 31, 2021 was $~~63,984~~ ~~and $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 March 31, 2022 and December 31, 2021 was $31,142~~ ~~and $30,412, respectively. The decrease in intangible assets from $14,343~~ ~~as of December 31, 2021 to $13,692~~ ~~as of March 31, 2022 was due to $568~~ ~~in amortization expense and foreign currency translation losses of $~~83.

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 in the period in which the change occurs. Net foreign exchange ~~losses~~gains and (losses) resulting from foreign currency transactions that are included in other income ~~(loss)~~ in ~~our~~the Company's consolidated statements of ~~income~~operations were $(50) and $729 ~~and $576~~ for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

Accumulated Other Comprehensive Loss. ~~We classify items of~~Changes in Accumulated other comprehensive loss by ~~their nature~~component is listed below.


	Foreign Currency			Marketable Securities			Total
Balance at December 31, 2022	$	(18,215	)	$	(220	)	$	(18,435	)
Other comprehensive gain		797			220			1,017
Balance at March 31, 2023	$	(17,418	)	$	0		$	(17,418	)

Immaterial Correction of Errors. Inventories, accounts payable and ~~disclose~~cost of products and services were reduced by $528, $1,329 and $801, respectively, as of and for the ~~accumulated balance~~year ended December 31, 2022 to correct for the accounting of ~~other comprehensive loss separately from accumulated deficit~~a vendor rebate earned in 2022. The tax impact of the vendor rebate was negligible. This correction was deemed to be immaterial to the consolidated financial statements as of and ~~additional paid-in capital~~for the year ended December 31, 2022. For the three months ended March 31, 2022, cost of products and services sold was reduced by $27. The respective operating activities on the consolidated statement of cash flows for the three months ended March 31, 2022 has also been adjusted. Furthermore, stockholder's equity at March 31, 2022 has been adjusted to reflect the reduction in ~~the stockholders’ equity section~~cost of ~~our consolidated balance sheets.~~products and services sold.

WeReclassification. Certain prior period amounts have ~~defined~~been reclassified to conform to current year presentations.For 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 atthree months ended March 31, 2022, ~~consisted of~~ $~~7,888~~221 of ~~currency translation adjustments~~research and $~~359~~development expenses were reclassed to other income in relation to the U.S. Department of ~~net unrealized losses~~Defense (the “DOD”) engineering consulting costs further described in Note 2. This reclassification was made to conform to the presentation in our Annual Report on ~~marketable securities, which represents~~Form 10-K for the ~~fair market value adjustment for our investment portfolio. Accumulated other comprehensive loss at~~year ended December 31, ~~2021 consists of $9,643~~ ~~of currency translation adjustments and $434~~ ~~of net unrealized losses on marketable securities, which represents the fair market value adjustment for 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 effective upon issuance for all entities. Management is evaluating the impact of this ASU and does not expect this update to have a material impact on the Company's Consolidated Financial Statements.2022.

2. Government Capital Contracts

In September 2021, wethe Company entered into an agreement for $109,000 in funding from the ~~U.S. Department of Defense (the “DOD”),~~DOD, in coordination with the Department of Health and Human Services, to build additional manufacturing capacity in the United States for ~~our~~its 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~~December 2023 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 testing, which is scheduled to occur in late ~~2023 or early 2024.~~ We2023. The Company began making payments to vendors for the capital project during the fourth quarter of ~~2021 and~~ 2021. The Company

began receiving funds from the DOD in January ~~2022.~~

~~Additionally, during 2021, we~~2022 and has received $~~531~~60,862, as of March 31, 2023. The remaining $48,138 in funding from the Commonwealth of Pennsylvania, acting through the Department of Community and Economic Development, for the purchase of machinery and equipment as part of an expansion of manufacturing operations in Pennsylvania. All related purchases were completed in 2021.is expected to be collected during 2023.

Activity for these capital contracts is accounted for pursuant to International Accounting ~~Standard~~Standards ("IAS") 20, Accounting for Government Grants and Disclosure of Government ~~Assistance.~~Assistance. Funding ~~earned~~received in relation to capital-related costs incurred for government contracts is recorded as a reduction to the cost of property, plant and equipment and reflected within investing activities in the consolidated statements of cash flows; and associated unpaid liabilities and government proceeds receivable are considered non-cash changes in such balances within the operating section of the consolidated statements of cash flows.

The DOD also reimburses the Company for certain engineering consulting costs. These expenses are reflected in research and development as incurred with the corresponding reimbursement presented in other income. For the three months ended March 31, 2023 and 2022, $1,051 and $221, respectively, were recorded in research and development and other income. Amounts earned in excess of ~~our~~the Company's expected ~~cost of~~costs for the project for project management are recognized straight-line in other income over the term of the government contract. WeThe Company recognized $561 of such income, which is reported as other income ~~(loss)~~ in ~~our~~the Company's consolidated statement of operations for both the three months ended March 31, 2023 and 2022.

The balances corresponding to government contracts included in ~~our~~the Company's consolidated balance sheet are as follows:


	March 31, 2023			December 31, 2022
Other current assets:
Billed receivables	$	17,792		$	—
Unbilled receivables		13,604			27,013
Total other current assets		31,396			27,013
Accrued expenses and other current liabilities	$	(679	)	$	(318	)

The activity corresponding to the government contracts included in the Company's consolidated statements of cash flows is as follows:

March 31, 2022

December 31, 2021

Other current assets:

Billed receivables
$
-

$
9,913

Unbilled receivables

16,857

9,716

Total other current assets

16,857

19,629

Property, plant and equipment, net:

Cost of assets

41,588

11,495

Reduction for funding earned, not yet received

(14,724
)

(10,964
)
Reduction for funding received

(26,864
)

(531
)
Total property, plant and equipment, net

—

0

Accrued expenses and other current liabilities

(788
)

(8,103
)


	March 31, 2023			December 31, 2022
Cost of assets, cumulative	$	86,126		$	83,359
Reduction for funding earned to date, not yet received		(25,264	)		(22,497	)
Reduction for funding received to date		(60,862	)		(60,862	)
Total property, plant and equipment, net	$	—		$	—

3. Inventories

March 31, 2022

December 31, 2021

Raw materials

$
40,211

$
33,168

Work in process

2,507

2,252

Finished goods

18,818

17,718

$
61,536

$
53,138


	March 31,		December 31,
	2023		2022
Raw materials	$	35,607	$	42,445
Work in process		2,182		2,335
Finished goods		39,400		50,924
	$	77,189	$	95,704

4. ~~Earnings~~Property, Plant and Equipment, net


	March 31,			December 31,
	2023			2022
Land	$	1,118		$	1,118
Buildings and improvements		35,626			35,582
Machinery and equipment		61,827			60,725
Computer equipment and software		16,917			16,681
Furniture and fixtures		4,068			4,064
Construction in progress		10,187			11,124
		129,743			129,294
Accumulated depreciation		(72,400	)		(69,881	)
	$	57,343		$	59,413

During the three months ended March 31, 2023, the Company determined several manufacturing lines will not be utilized due to changes in forecasted demand for the products the equipment is intended to produce. As a result of this decision, the Company determined that the carrying values of the equipment is not recoverable and recorded an aggregate pre-tax asset impairment charge of $1,105 during the three months ended March 31, 2023. This charge is reported within loss on impairments in the consolidated statement of operations.

The Company estimated the fair value of the impaired long-lived assets using a market approach, which required the Company to estimate the value that would be received for the equipment in the principal or most advantageous market for that equipment in an orderly transaction between market participants. Due to the extremely specialized nature of the manufacturing equipment and various market data points, the estimated fair value was zero.

5.Accrued Expenses and other current liabilities


	March 31,		December 31,
	2023		2022
Payroll and related benefits	$	7,989	$	14,103
Professional fees		7,981		4,685
Sales tax payable		1,512		1,519
Other		5,191		5,455
	$	22,673	$	25,762

6.Termination Benefits

On February 14, 2023, the Company announced a reduction in its non-production workforce. This was accounted for pursuant to Accounting Standards Codification ("ASC") 420, Exit or Disposal Cost Obligations.

The expense included in the Company's consolidated statements of operations are as follows:


	Three Months Ended March 31, 2023
Cost of products and services sold	$	35
Research and development		566
Sales and marketing		1,448
General and administrative		586
Total	$	2,635

As of March 31, 2023, the Company had $1,894 accrued and had paid $741 related to the reduction in workforce.

7. Revenues

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


	Three Months Ended March 31,
	2023		2022

COVID-19 (1)	$	118,409	$	31,032
HIV		13,904		8,166
Molecular Products (2)		12,942		17,933
HCV		3,186		3,257
Risk assessment testing		2,628		2,560
Molecular Services		1,379		1,733
Other product and service revenues		466		555
Net product and services revenues		152,914		65,236
Other non-product revenues (3)		2,049		2,471
Net revenues	$	154,963	$	67,707

(1) Includes COVID-19 Diagnostics and COVID-19 Molecular Products.

(2) Includes Genomics and Microbiome and Novosanis Products.

(3) Other non-product and services revenues include funded research and development contracts, royalty income, and grant revenues.

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


	Three Months Ended March 31,
	2023		2022
United States	$	145,019	$	57,987
Europe		1,852		4,286
Other regions		8,092		5,434
	$	154,963	$	67,707

Customer and Vendor Concentrations. At March 31, 2023, one non-commercial customer accounted for 77% of the Company's consolidated accounts receivable. The same non-commercial customer accounted for more than 57% of the Company's consolidated accounts receivable as of December 31, 2022. The same non-commercial customer also accounted for 78% and 18% of net consolidated revenues for the three months ended March 31, 2023 and 2022, respectively.

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

Deferred Revenue. The Company records deferred revenue when funds are received prior to the recognition of the associated revenue. Deferred revenue as of March 31, 2023 and December 31, 2022 included customer prepayments of $1,358 and $1,180, respectively. Deferred revenue as of March 31, 2023 and December 31, 2022 also included $631 and $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.

8.Income Taxes

During the three months ended March 31, 2023 and 2022, the Company recorded income tax expense (benefit) of $(225) and $3,936, respectively. Income taxes for 2023 is comprised of a U.S. state tax benefit. Income taxes for the first quarter of 2022 are primarily comprised of Canadian withholding tax on the repatriation of $65,000 of unremitted earnings from Canada to the United States with the remainder of tax primarily consisted of foreign tax expense. The decline in foreign tax expense in 2023 compared to 2022 is a result of the decrease in projected income before taxes expected to be generated by the Company's Canadian subsidiary.

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 the Company's total deferred tax liability as of March 31, 2023 and December 31, 2022 relate to the tax effects of the basis difference between the intangible assets acquired in its acquisitions for financial reporting and for tax purposes along with basis differences arising from accelerated tax depreciation of fixed assets.

A valuation allowance is recorded to the extent it is more likely than not that the some portion or all of the deferred tax assets will not be realized. A full valuation allowance was recorded on the Company’s U.S. deferred tax assets as of March 31, 2023 and December 31, 2022.

9. Income (Loss) Per Share

Basic ~~earnings~~income (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 Ended March 31,

2022

2021

Net income (loss)

$
(19,967
)

$
3,774

Weighted-average shares of common stock outstanding:

Basic

72,194

71,878

Dilutive effect of stock options, restricted stock, and performance stock units

—

888

Diluted

72,194

72,766

Earnings (loss) per share:

Basic

$
(0.28
)

$
0.05

Diluted

$
(0.28
)

$
0.05

For the three months ended March 31, 2022, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 463 shares, were excluded from the computation of diluted loss per share. For the three months ended March 31, ~~2021,~~2023, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing ~~421~~2,237 shares were excluded from the computation of ~~diluted~~dilute earnings per share as their inclusion would have been anti-dilutive.

510. ~~Revenues~~Stockholders’ Equity

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

Three Months Ended March 31,

2022

2021

COVID-19 (1)

$
31,032

$
27,972

Genomics (1)

15,093

10,818

HIV

8,166

8,778

HCV

3,257

2,367

Substance abuse

2,560

1,962

Microbiome (1)

1,990

1,751

Laboratory services

1,733

2,497

Other product and service revenues

1,405

434

Net product and services revenues

65,236

56,579

Royalty income

685

1,261

Other non-product revenues

1,786

742

Other revenues

2,471

2,003

Net revenues

$
67,707

$
58,582

~~(1)~~ 2021 COVID-19, Genomics and 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 March 31, 2021 by $~~583, $(246) and $(337), respectively.~~


Reconciliation of the changes in stockholder's equity for the three months ended March 31, 2023 and 2022.
	Common Stock					Additional Paid-in			Accumulated Other Comprehensive			Accumulated
	Shares			Amount		Capital			Loss			Deficit			Total
Balance at December 31, 2022		72,734		$	—	$	520,446		$	(18,435	)	$	(137,586	)	$	364,425
Common stock issued upon exercise of options		12			—		66			—			—			66
Vesting of restricted stock and performance stock units		737			—		—			—			—			—
Purchase and retirement of common shares		(229	)		—		(1,203	)		—			—			(1,203	)
Stock-based compensation		—			—		2,655			—			—			2,655
Net income		—			—		—			—			27,219			27,219
Currency translation adjustments		��			—		—			797			—			797
Unrealized gain on marketable securities		—			—		—			220			—			220
Balance at March 31, 2023		73,254		$	—	$	521,964		$	(17,418	)	$	(110,367	)	$	394,179

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		—			—		—			—			(19,940	)		(19,940	)
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	)	$	(140,393	)	$	364,913

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

Three Months Ended March 31,

2022

2021

United States

$
57,987

$
49,100

Europe

4,286

4,552

Other regions

5,434

4,930

$
67,707

$
58,582

~~Customer and Vendor Concentrations. At March 31, 2022, one non-commercial customer accounted for~~ 21~~% of our accounts receivable. No customers accounted for more than~~ 10~~% of our accounts receivable as of December 31, 2021. One non-commercial customer accounted for~~ 18~~% of net consolidated revenues for the three months ended March 31, 2022. Another customer accounted for~~ 17~~% of net consolidated revenues for the three months ended March 31, 2021.~~11. Business Segments

~~We currently purchase certain~~The Company is organized on the basis of products and ~~critical components of~~services under a new organizational structure. All products and services reside under the same reporting hierarchy. Historically there was separate management leading the Company's Diagnostics and Molecular Solutions businesses. In February 2023 the Company announced a corporate restructuring to combine the commercial and innovation teams across the Diagnostics and Molecular Solutions segments into one operating segment with sales, marketing, product development and research teams covering all product lines and reporting to a Chief Product Officer. Resources are allocated and performance is assessed on a consolidated basis by our ~~products from sole-supply vendors. If these vendors~~Chief Executive Officer, whom we have determined to be our Chief Operating Decision Maker ("CODM"). The CODM reviews the business based on individual product success. Therefore, our historical reportable segments, Diagnostics and Molecular Solutions are ~~unable or unwilling to supply~~now considered one reportable segment and there will no longer be a distinction between Diagnostics and Molecular Solutions, only 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.Company holistically.

~~Deferred Revenue. We record deferred revenue when funds are received prior to the recognition of the associated revenue. Deferred revenue as of March 31, 2022 and December 31, 2021 includes customer prepayments of $1,900~~ ~~and $1,843, respectively. Deferred revenue as of March 31, 2022 and December 31, 2021 also includes $1,006~~ ~~and $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.~~Accrued Expenses and other current liabilities~~

March 31,
2022

December 31,
2021

Payroll and related benefits

$
11,279

$
15,570

Commitment to purchase under government contract

—

8,103

Deferred income for government contract

788

—

Professional fees

3,537

3,335

Sales tax payable

1,725

2,227

Other

4,582

4,543

$
21,911

$
33,778

7~~. 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 March 31, 2022, we are the lessee in all agreements. Our leases have remaining lease terms of 1 to ~~11 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 March 31,

2022

2021

Operating lease cost

$
699

$
420

Variable and short-term lease cost

75

—

Finance lease cost:

Amortization of right-of use assets

385

127

Interest on lease liabilities

32

14

Total finance lease cost

417

141

Total lease cost

$
1,191

$
561

~~Supplemental cash flow information related to leases is as follows:~~

Three Months Ended March 31,

2022

2021

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

Operating cash flows from operating leases

$
1,186

$
408

Operating cash flows from financing leases

32

14

Financing cash flows from financing leases

153

282

Non-cash activity:

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

3,666

629

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

117

—

~~Supplemental balance sheet information related to leases is as follows:~~

March 31, 2022

December 31, 2021

Operating Leases

Right-of-use assets

$
12,169

$
9,056

Lease liabilities:

Current lease liabilities

1,815

2,181

Non-current lease liabilities

10,727

7,202

Total operating lease liabilities

$
12,542

$
9,383

Finance Leases

Right-of-use assets

$
2,240

$
2,493

Lease liabilities:

Current lease liabilities

1,699

939

Non-current lease liabilities

1,207

1,952

Total finance lease liabilities

$
2,906

$
2,891

Weighted Average Remaining Lease Term

Weighted-average remaining lease term—operating leases

6.86 years

5.26 years

Weighted-average remaining lease term—finance leases

2.04 years

2.21 years

Weighted Average Discount Rate

Weighted-average discount rate—operating leases

4.09
%

3.90
%
Weighted-average discount rate—finance leases

3.54
%

3.57
%

~~As of March 31, 2022, minimum lease payments by period are expected to be as follows:~~

Finance

Operating

2022 (excluding the three months ended March 31, 2022)

951

1,936

2023

1,285

1,729

2024

742

2,337

2025

20

1,968

2026

12

1,750

Thereafter

—

4,871

Total minimum lease payments

3,010

14,591

Less: imputed interest

(104
)

(2,049
)
Present value of lease liabilities

$
2,906

$
12,542

8.~~Stockholders’ Equity~~

Reconciliation of the changes in stockholders' equity for the three months ended March 31, 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

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

~~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 expense related to stock options for the three months ended March 31, 2022 and 2021 was $348and $250, respectively.~~

~~The following table summarizes the stock option activity for the three months ended March 31, 2022:~~


	~~Options~~
~~Outstanding on January 1, 2022~~		~~1,410~~
~~Granted~~		~~589~~
~~Exercised~~		(2	)
~~Expired~~		(6	)
~~Forfeited~~		(95	)
~~Outstanding on March 31, 2022~~		~~1,896~~

~~Compensation expense of $2,706and $1,036~~ ~~related to restricted shares was recognized during the three months ended March 31, 2022 and 2021, respectively.~~

~~The following table summarizes time-vested restricted stock award and restricted stock unit activity for the three months ended March 31, 2022:~~


	~~Units~~
~~Issued and unvested, January 1, 2022~~		~~701~~
~~Granted~~		~~1,332~~
~~Vested~~		(~~243~~	)
~~Forfeited~~		(~~120~~	)
~~Issued and unvested, March 31, 2022~~		~~1,670~~

~~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 expense of $470~~ ~~and $178~~ ~~related to PSUs was recognized during the three months ended March 31, 2022 and 2021, respectively.~~

~~The following table summarizes the PSU activity for the three months ended March 31, 2022:~~


	~~Units~~
~~Issued and unvested, January 1, 2022~~		~~622~~
~~Granted~~ ~~(1)~~		~~206~~
~~Performance adjustment~~ ~~(2)~~		36
~~Vested~~		(~~109~~	)
~~Forfeited~~		(~~152~~	)
~~Issued and unvested, March 31, 2022~~		~~603~~

~~(1)~~ ~~Grant activity for all PSUs disclosed at target~~

~~(2)~~ ~~Reflects the performance adjustment based on actual performance measured at the end of the performance period~~

~~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 three months ended March 31, 2022 and 2021.~~

9.~~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 totaling 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 $~~1,380~~ ~~of expense in relation to Dr. Tang's stock compensation during the three months ended March 31, 2022.~~

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, starting on April 1, 2022, Dr. Gagliano began receiving a monthly base salary of $56 ~~per month. Additionally, she was granted a one-time award of fully vested shares of the Company’s common stock with a~~

~~grant date fair value of $100~~ ~~and a one-time restricted stock unit award with a grant date fair value of $670~~, which vest in twelve equal monthly installments (with the first installment vesting on April 30, 2022 and subsequent installments vesting on the last day of the following eleven calendar months), subject to Dr. Gagliano’s continued employment as Interim Chief Executive Officer through the applicable vesting dates.

10.~~Income Taxes~~

~~During the three months ended March 31, 2022 and 2021, we recorded income tax expense of $3,936~~ ~~and $6,529, 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 balance of $2,234~~ ~~for the first quarter of 2022 primarily consisted of foreign tax expense. Income taxes for the first quarter of 2021 also primarily consisted of 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 March 31, 2022 and December 31, 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 March 31, 2022 and December 31, 2021 since the facts and circumstances necessitating the allowance have not changed.

~~11.~~12. Commitments and Contingencies

Litigation

From time to time, ~~we are~~the Company is 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~~the Company's future financial position or results of operations.

In March 2021, wethe Company 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~~the Company's patent and that ~~our~~the Company's patent is invalid. In August 2021, wethe Company amended ~~our~~its complaint to add a second patent to this litigation. Spectrum responded to ~~our~~the Company's amended complaint and asserted counterclaims for inequitable conduct and antitrust violations with respect to one of the patents in the ~~litigation. DNAG~~litigation and subsequently filed a request for review of the second patent at the Patent and Trademark Office ("PTO"), which was granted by the PTO. On May 2, 2023, the District Court issued two orders. First, the District Court granted Spectrum’s motion for summary judgment of noninfringement, holding that Spectrum’s saliva collection devices are not “kits for collecting and preserving a biological sample,” among other rulings. The Company intends to appeal the Court’s grant of summary judgment. Second, the Court denied Spectrum’s motion to ~~dismiss Spectrum’s~~supplement its allegations of alleged antitrust violations. A separate motion by Spectrum to amend its counterclaims remains pending. An inter partes review is currently pending before the PTO regarding the second asserted patent. The final pretrial conference in the District Court is set for October 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 await new dates to be set by the Court.26, 2023.

~~12.Business Segment Information~~

~~Our business consists of~~ 2 segments: our “Diagnostics” business, which primarily consists of the development, manufacture, 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 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, and sale of kits that are used to collect, stabilize, transport and store a biological sample of genetic material for molecular testing. In addition, our Molecular Solutions business provides microbiome laboratory 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 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.13. Subsequent Events

15In May 2023, the Company announced a reduction in its workforce and estimates the expense will be in the range of $

500 to $

~~The following table summarizes operating segment information~~600. This will be accounted for ~~the three months ended March 31, 2022 and 2020, and asset information as of March 31, 2022 and December 31, 2021:~~pursuant to ASC 420, Exit or Disposal Cost Obligations.

Three Months Ended March 31,

2022

2021

Net revenues:

Diagnostics

$
38,310

$
14,546

Molecular Solutions

29,397

44,036

Total

$
67,707

$
58,582

Operating income (loss):

Diagnostics

$
(19,787
)

$
(12,118
)

Molecular Solutions

3,809

22,540

Total

$
(15,978
)

$
10,422

Depreciation and amortization:

Diagnostics

$
1,727

$
890

Molecular Solutions

1,955

1,599

Total

$
3,682

$
2,489

Capital expenditures:

Diagnostics(1)

$
19,132

$
7,637

Molecular Solutions

1,087

3,424

Total

$
20,219

$
11,061

~~(1)Excludes $28,188 for purchases of property and equipment under government contracts for the three months ended March 31, 2022.~~

March 31,
2022

December 31,
2021

Total assets:

Diagnostics

$
245,961

$
209,674

Molecular Solutions

189,571

251,316

Total

$
435,532

$
460,990

1613

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~~

The following discussion and analysis 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~~condition 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 orshould be read in conjunction with (i) our unaudited condensed consolidated 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:

•

risk that our exploration of strategic alternatives may not result in any definitive transaction or enhance stockholder value and may create a distraction or uncertainty that may adversely affect operating results, business or investor perceptions.

•

~~the diversion of management’s attention from our ongoing business and regular business responsibilities and due to our exploration of strategic alternatives;~~

•

~~our ability to market and sell products, whether through our internal, direct sales force or third parties;~~

•

~~Our ability to fulfill our commitments under our contracts with the U.S. government for~~ ~~InteliSwab~~® ~~COVID-19 Rapid Tests;~~

•

~~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 (or “FDA”), or other regulators;~~

•

~~the impact of the COVID-19 pandemic on our business and labor force;~~

•

~~the impact of COVID-19 on our supply chain;~~

•

our ability to successfully develop new products, validate the expanded use of existing 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 impact of replacing distributors on our business;~~

•

~~inventory levels at distributors and other customers;~~

•

~~our ability to achieve our financial and strategic objectives and continue to increase our revenues, including the ability to expand international sales;~~

•

~~the impact of competitors, competing products and technology 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~~notes appearing elsewhere in ~~market acceptance~~this Quarterly Report on Form 10-Q and (ii) our audited consolidated financial statements and related notes and management’s discussion and analysis of ~~products based on product performance or other factors, including changes~~financial condition and results of operations included in testing guidelines, algorithms or other recommendations by the Centers for Disease Control and Prevention, or “CDC” or other agencies; ability to fund research and development and other products and operations;

•

our ~~ability to obtain and maintain new or existing product distribution channels;~~

•

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

•

~~availability of related products produced by third parties or products required for use of our products;~~

•

~~the impact of contracting with the U.S. government on our business;~~

•

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

•

~~our ability to maintain sustained profitability;~~

•

~~our ability to increase our gross margins;~~

•

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

•

~~volatility of 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;~~

•

~~availability of licenses to patents or other technology;~~

•

~~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 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, ~~2021,~~2022 filed with the Securities and Exchange Commission on March 3, 2023. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and impact and potential impacts on our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including, without limitation, those factors set forth in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2022 and the “Risk Factors” section of subsequent Quarterly Reports on Form 10-Q, ~~and other filings with~~our actual results or timing of certain events could differ materially from the ~~SEC. Although~~results or timing described in, or implied by, these 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~~.

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.

~~Overview and~~ Business ~~Segments~~Overview

The overall goal of ~~our~~the Company is to empower the global community to improve health and wellness by providing access to accurate essential ~~information. Our~~information through effortless tests, collection kits and services. In 2022, our business ~~consists~~previously consisted of two segments: our “Diagnostics” segment, and our “Molecular Solutions” segment. In February 2023, we announced a corporate restructuring to combine the commercial and innovation teams across the two segments into one business unit with sales, marketing, product development and research teams covering multiple product lines. This change is intended to accelerate innovation, enhance customer experience and result in operational synergies.

~~Our Diagnostics~~The Company's business ~~primarily~~ consists of the development, manufacture, marketing and sale of simple, easy to use diagnostic products and specimen collection devices using ~~our~~the Company's 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~~Company's diagnostic products 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~~The Company's COVID-19 and HIV products are also sold in a consumer-friendly format in the over-the-counter (“OTC”) market in the U.S. and, in the case of the HIV product, as a self-test to individuals in a number of other countries. Through our Diagnostics business we are also developing and commercializing 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. ~~We began recording revenues on the sales of our InteliSwab~~®~~COVID-19 Rapid Tests during the third quarter of 2021.~~

~~Our Molecular Solutions~~The Company's business is operated by our wholly-owned subsidiaries, DNA Genotek, Inc. ("DNAG"), Diversigen, Inc. ('Diversigen"), and Novosanis NV ("Novosanis"). Our Molecular Solutions business sells its products and services directly to its customers, primarily through its internal sales force in the U.S. domestic market, and in many international markets, also ~~through distributors. Our products primarily consist of~~includes molecular collection kits and services used by clinical laboratories, direct-to-consumer laboratories, researchers, pharmaceutical companies, and animal health service and product providers. ~~Most of our Molecular Solutions~~These 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~~Customers span the disease risk management, diagnostics, pharmaceutical, biotech, companion animal and environmental markets.

~~We have expanded the market focus of our Molecular Solutions business by selling existing collection products for use with COVID-19 tests. We have~~ The Company has also developed ~~new~~ collection devices for the emerging microbiome market, which focuses on studying ~~microbes~~microbiomes and their effect on human and animal health. ~~Our primary product offering in the microbiome market, OMNIgene® • GUT, is focused on the human gut microbiome (microbes living in human stool). In 2021, the OMNIgene® • GUT~~The Company also has a urine 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 leverage our existing sales force and global research connections to engage microbiome customers worldwide to establish ourselves among the leaders in ease-of-collection, stabilization, and transport of this challenging sample type.

~~Our Molecular Solutions segment includes the Colli-Pee® device, developed and sold by our Novosanis subsidiary,~~which allows for the volumetric collection of first void urine. This product is in its early stages, and initial sales are occurring primarily through distributors and collaborations in the liquid biopsy and sexually transmitted disease markets. ~~Our Molecular Solutions business also~~Additionally, the Company offers laboratory and analytical services for both genomics and microbiome customers to more fully meet their needs. These services are primarily provided to pharmaceutical, biotech companies, and research institutions.

~~Recent Developments~~

~~Impact of COVID-19~~

As COVID-19 continues to impact the economy of the United States and other countries around the world, we are committed to being a part of the response to this unprecedented challenge. We have made substantial investments to expand our 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 (which excludes COVID-19 testing) and periods of significant demand for COVID-19 testing product, with demand generally fluctuating in line with changes in prevalence of the virus and related variants. It is difficult for us to predict the duration or magnitude of the outbreak’s effects on our business or results of operations.

~~Exploration of Strategic Alternatives~~

The COVID-19 pandemic has provided us an opportunity to fundamentally transform into a higher growth, more innovative and efficient organization with broader customer reach, both within and outside the United States. We believe we are well positioned to address current public health challenges and capitalize on diagnostic trends in the market and enhance its operational and competitive profile. Against this backdrop, our Board of Directors is exploring and evaluating a broad range of strategic alternatives with the goal of maximizing value for stockholders.

1914

There can be no assurance that the exploration of strategic alternatives will result in any agreements or transactions, or that, if completed, any agreements or transactions will be successful or on attractive terms.

~~CEO Recruitment~~

We have hired an external search firm and are in the process of looking for a permanent full time Chief Executive Officer. Nancy J. Gagliano has been appointed as interim President and CEO by our Board of Directors but is not a candidate for the full-time position.

~~Current Consolidated Financial Results~~

During the three months ended March 31, 2022, our consolidated net revenues increased 16% to $67.7 million, compared to $58.6 million for the three months ended March 31, 2021. Net product and services revenues during the three months ended March 31, 2022 increased 15% when compared to the same period of 2021, largely due to the inclusion of $22.1 million of InteliSwab® COVID-19 rapid test revenues. We began selling this product in August of 2021 resulting in no comparable revenues in the first quarter of 2021. Also contributing to the increase in revenues was higher genomics sales and increased international sales of our HIV product. Declines in sales of our molecular sample collection kits for COVID-19 testing and in domestic sales of our HIV products partially offset these positive drivers of revenue. Other revenues for the three months ended March 31, 2022 were $2.5 million compared to $2.0 million in the same period of 2021. This increase was largely due to research and development funding for 510(k) clearance and CLIA waiver of our InteliSwab® ~~COVID-19 rapid test partially offset by lower royalty income.~~

Our consolidated net loss for the three months ended March 31, 2022 was $20.0 million, or $(0.28) per share on a fully diluted basis, compared to consolidated net income of $3.8 million, or $0.05 per share on a fully diluted basis, for the three months ended March 31, 2021. Results for the three months ended March 31, 2022 were impacted by lower gross margins rates caused by manufacturing inefficiencies and nonrecurring costs associated with our strategic alternatives process and our CEO transition.

Cash used in operating activities during the three months ended March 31, 2022 was $35.8 million. Cash used in operating activities during the three months ended March 31, 2021 was $4.4 million. During the first quarter of 2022, our cash flow used in operating activities increased significantly as a result of our net loss, increased receivables due from the U.S government for end of quarter shipments, and increased investment in building InteliSwab® ~~inventory levels to support expected demand. As of March 31, 2022, we had $112.2 million in cash, cash equivalents and available-for-sale securities.~~

Results of Operations

Three months ended March 31, ~~2022~~2023 compared to March 31, ~~2021~~2022

CONSOLIDATED NET REVENUES

The table below shows ~~a breakdown~~an outline of total consolidated net revenues (dollars in thousands) ~~generated by each of our business segments during~~for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022:

For the Three Months Ended March 31,

Dollars

Percentage of Total Net Revenues

2022

2021

% Change

2022

2021

Diagnostics

$
36,396

$
13,333

173

%

54

%

23

%
Molecular Solutions

28,840

43,246

(33
)

43

74

Net product and services revenues

65,236

56,579

15

97

97

Other

2,471

2,003

23

3

3

Net revenues

$
67,707

$
58,582

16

%

100

%

100

%


	Three Months Ended March 31,
	Dollars								Percentage of Total Net Revenues
	2023		2022		% Change				2023			2022
COVID-19 Diagnostics	$	118,254	$	22,136		434		%		76	%		33	%
Diagnostics (1)		17,090		11,423		50				11			17
Molecular Products		12,942		17,933		(28	)			8			26
Other products and services (2)		3,094		3,115		(1	)			2			5
Molecular Services		1,379		1,733		(20	)			1			3
COVID-19 Molecular Products		155		8,896		(98	)			1			12
Net product and services revenues		152,914		65,236		134				99			96
Non-product and services revenues		2,049		2,471		(17	)			1			4
Net revenues	$	154,963	$	67,707		129		%		100	%	$	100	%

(1) Includes HIV and HCV product revenues.

(2) Includes Risk assessment testing and other product and services revenues.

Product and Services Revenues

Consolidated net product and services revenues increased ~~15%~~134% to $152.9 million for the three months ended March 31, 2023 from $65.2 million for the three months ended March 31, ~~2022 from $56.6~~2022. The Company expects total net product and services revenues to taper off throughout 2023 as demand for its COVID-19 Diagnostic product has declined.

COVID-19 Diagnostics revenues increased by 434% to $118.3 million for the three months ended March 31, ~~2021.~~ ~~The increase in revenues is~~ ~~largely due~~2023 compared to ~~the inclusion of~~ $22.1 million ~~of InteliSwab~~® ~~COVID-19 rapid test revenues. We began selling this product~~ in August of 2021 resulting in no comparable revenues in the first quarter of 2021. Also contributing to the increase in revenues was higher genomics sales and increased international sales of our HIV product. Declines in sales of our molecular sample collection kits for COVID-19 testing and in domestic sales of our HIV products partially offset these positive drivers of revenue. Other revenues for the three months ended March 31, 2022 due to increased ~~23%~~sales of the Company's InteliSwab® tests through its government procurement contracts.

Sales of the Company's Diagnostics products increased 50% to ~~$2.5 million from $2.0~~$17.0 million for the three months ended March 31, ~~2021 due to research and development funding for 510(k) clearance and CLIA waiver of our InteliSwab~~® ~~COVID-19 rapid test partially offset by lower royalty income.~~

Consolidated net revenues derived from products sold to customers outside of the United States were $9.7 million and $9.5 million, or 14% and 16% of total net revenues, for the three months ended March 31, 2022 and 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 March 31, 2022 and 2021.~~

For the Three Months Ended March 31,

Dollars

Percentage of Total Net Revenues

Market

2022

2021

% Change

2022

2021

Infectious disease testing:

COVID-19

$
22,136

$
-

NM

%

58

%

0

%
Other

11,700

11,371

3

30

78

Total infectious disease testing

33,836

11,371

198

88

78

Substance abuse testing

2,560

1,962

30

7

13

Net product revenues

36,396

13,333

173

95

91

Other

1,914

1,213

58

5

9

Net revenues

$
38,310

$
14,546

163

%

100

%

100

%

~~NM - not meaningful~~

~~Infectious Disease Testing Market~~

~~COVID-19 revenues were $22.1 million for the three months ended March 31, 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 quarter of 2021.~~

~~Sales to the other infectious disease testing markets increased 3% to $11.7 million for the three months ended March 31, 2022~~2023 from $11.4 million for the three months ended March 31, ~~2021.~~2022. This increase ~~resulted from~~in revenues was primarily driven by higher sales of the Company's OraQuick® In-Home HIV tests in support of the CDC's "Together Take Me Home" HIV self-test program which commenced during the first quarter of 2023 and higher sales of the Company's OraQuick® HIV Self-Test in the international ~~OraQuick~~® ~~HIV and world-wide OraQuick~~® ~~HCV product sales, partially offset by lower domestic OraQuick~~® ~~HIV sales.~~markets due to customer ordering patterns.

~~The table below shows a breakdown of our total net OraQuick~~

® ~~HIV and HCV product~~Molecular Products revenues ~~(dollars in thousands) during~~decreased 28% to $12.9 million for the three months ended March 31, 2023 from $17.9 million for the three months ended March 31, 2022. Sales of the Company's Molecular Products are being impacted by macro-economic factors in the markets in which its customers operate. One of the Company's largest customer scaled down purchasing after they reorganized their business in the second half of 2022 and ~~2021.~~certain other customers placed large orders in Q1 2022 which did not repeat in the first quarter of 2023. Furthermore revenues are impacted by customer ordering patterns whereby customers purchased at the end of 2022 and did not require further inventory in the first quarter of 2023.

For the Three Months Ended March 31,

Market

2022

2021

% Change

Domestic HIV

$
3,765

$
5,293

(29
)
%
International HIV

4,401

3,486

26

Net HIV revenues

8,166

8,779

(7
)

Domestic HCV

2,036

1,182

72

International HCV

1,221

1,184

3

Net HCV revenues

3,257

2,366

38

Net OraQuick® revenues

$
11,423

$
11,145

2

%

Other products and services revenues were largely flat at $3.1 million for the three months ended March 31, 2023 and 2022.

~~Domestic OraQuick~~Molecular Services revenues, which are largely derived from the Company's laboratory services, decreased 20% to $1.4 million for the three months ended March 31, 2023 from $1.7 million for the three months ended March 31, 2022. The decline in services revenues was the direct result of loss of two large customers in 2022. One customer ceased operations in 2022 and the other deprioritized microbiome studies.®

~~HIV sales~~

Sales of the Company's COVID-19 Molecular Products collection kits decreased ~~29%~~significantly by 98% to ~~$3.8~~$0.2 million for the three months ended March 31, 2023 from $8.9 million for the three months ended March 31, 2022 ~~from $5.3 million~~due to decline in demand for COVID PCR testing given the ~~three months ended March 31, 2021, primarily as a result~~availability of a large first quarter 2021 order of our OraQuick® In-Home HIV test shipped to the Center for Disease Control and Prevention ("CDC") and used in an initiative to drive increased in-home HIV testing. A similar order did not occur in the first quarter of 2022.rapid antigen tests.

~~International sales of our OraQuick~~® HIV tests increased 26% to $4.4 million for the three months ended March 31, 2022 from $3.5 million for the three months ended March 31, 2021 due to customer ordering patterns and increased sales into Africa as the COVID-19 impact lessens. These increases to revenues were partially offset by the absence of the Gates Foundation subsidy which expired in June 2021 and is not included in revenues in the first quarter of 2022.

~~Domestic OraQuick~~Non-product and Services Revenues®

~~HCV sales increased 72%~~

Non-product and services revenues decreased 17% to $2.0 million for the three months ended March 31, ~~2022~~2023 from ~~$1.2 million for the three months ended March 31, 2021, driven by the timing of certain orders which occurred in the first quarter of 2022, compared to the second quarter of 2021.~~

~~International OraQuick~~® ~~HCV sales remained largely flat at $1.2 million for both the three months ended March 31, 2022 and 2021.~~

~~Substance Abuse Testing Market~~

~~Sales to the substance abuse testing assessment market increased 30% to $2.6~~$2.5 million for the three months ended March 31, 2022 ~~compared~~as a result the timing of activities under the Company's funded research and development agreements for the development of a second generation Ebola test and to ~~$2.0 million~~obtain 510(k) clearance and CLIA waiver for our InteliSwab® test coupled with lower royalty income.

CONSOLIDATED OPERATING RESULTS

Consolidated gross profit margin increased to 42.5% for the three months ended March 31, ~~2021 due to market share gains.~~

~~Other Revenues~~

~~Other revenues for the three months ended March 31,~~2023 and 2022 ~~increased to $1.9 million~~ from ~~$1.2 million for the three months ended March 31, 2021, due to research and development funding for 510(k) clearance and CLIA waiver of our InteliSwab~~® ~~COVID-19 rapid test partially offset by lower royalty income.~~

~~Molecular Solutions Segment~~

~~The table below shows a breakdown of our total net revenues (dollars in thousands) during the three months ended March 31, 2022 and 2021.~~

For the Three Months Ended March 31,

Market
2022

2021

% Change

Genomics

$
15,093

$
10,818

40

%
Microbiome

1,990

1,751

14

COVID-19

8,896

27,972

(68
)

Laboratory services

1,733

2,497

(31
)

Other product and service revenues

1,128

208

442

Net molecular product and services revenues

$
28,840

43,246

(33
)

Other

557

790

(29
)

Net molecular revenues

$
29,397

$
44,036

(33
)
%

Sales of our genomics products increased 40% to $15.1 million for the three months ended March 31, 2022, compared to $10.8 million for the three months ended March 31, 2021, as result of increased sales to several commercial customers due to customer ordering patterns, organic growth, and a return to pre-COVID-19 ordering levels.

Microbiome kit sales increased 14% to $2.0 million for the three months ended March 31, 2022 compared to $1.8 million for the three months ended March 31, 2021, as the company has expanded the number of customers and clinical research studies it is supporting.

Sales of our molecular sample collection kits for COVID-19 testing decreased 68% to $8.9 million for the three months ended March 31, 2022 compared to $28.0 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.

Laboratory services revenues declined 31% to $1.7 million for the three months ended March 31, 2022 compared to $2.5 million for the three months ended March 31, 2021 as the business continues to be impacted by delays in customer clinical trials due to COVID-19.

Other product and service revenues increased 442% to $1.1 million for the three months ended March 31, 2022 compared to $208,000 for the three months ended March 31, 2021 largely due to increased sales by our Novosanis subsidiary.

Other revenues for the three months ended March 31, 2022 decreased 29% to $557,000 from $790,000 for the three months ended March 31, 2021, largely as a result of lower royalty income received under a litigation settlement agreement.

~~CONSOLIDATED OPERATING RESULTS~~

~~Consolidated gross profit margins were~~ 36% for the three months ended March 31, 2022. This improvement in margins was driven by InteliSwab® sales which generated higher margins due to reduced costs associated with the correction of manufacturing inefficiencies which occurred during the first quarter of 2022, a packaging change implemented during the first quarter of 2023, and lower freight charges. These improved margins were partially offset by lower COVID-19 Molecular Products revenue which historically generated higher margins. Lower scrap expense in the first quarter of 2023 compared to ~~65%~~the first quarter of 2022 also contributed to the improved margins.

Consolidated operating income for the three months ended March 31, ~~2021.~~ ~~The decrease in gross profit margins~~2023 was primarily due to a less favorable product mix, increased scrap expense, lower absorption of labor, and no subsidies for the international sale of our HIV Self-Test under the charitable support agreement with the Gates Foundation which expired in June 2021.

~~Consolidated operating loss for the three months ended March 31, 2022 was $16.0~~$24.3 million, a ~~$26.4~~$40.5 million ~~decrease~~increase from the ~~$10.4~~$16.2 million operating ~~income~~loss reported for the three months ended March 31, ~~2021.~~2022. Results for the three months ended March 31, ~~2022~~2023 were ~~negatively~~positively impacted by the ~~lower~~increase in revenues and gross ~~profit margin~~margins described above ~~coupled with an increase in operating expenses as described below.~~and were partially offset by impairment charges of $1.1 million taken for idle manufacturing lines.

~~OPERATING INCOME (LOSS) BY SEGMENT~~

~~We evaluate performance~~Operating expenses in the first quarter of ~~our operating segments based on revenue~~2023, excluding the impairment charge, remained largely flat compared to the first quarter of 2022. Research and ~~operating income. Reportable segments have no inter-segment revenue and inter-segment~~development expenses ~~are eliminated in consolidation, including the fees associated with an intercompany service agreement between the U.S. and Canadian entities.~~

~~Diagnostics Segment~~

~~The gross profit margin for the Diagnostics segment was 19%~~increased 22% to $10.6 million for the three months ended March 31, ~~2022 compared to 43% for the three months ended March 31, 2021.This decrease is due to inefficiencies in our InteliSwab~~® manufacturing process including high scrap rates at the beginning of 2022 and under-absorption of labor costs as well a less favorable product mix and the June 2021 expiration of subsidies under the support agreement with the Gates Foundation. The inefficiencies in our InteliSwab® ~~manufacturing process were largely corrected by the end of the first quarter of 2022.~~

~~Research and development expenses decreased 16% to $5.5~~2023 from $8.6 million for the three months ended March 31, 2022 ~~compared~~largely due to ~~$6.6~~an increase in clinical study activities related to obtaining 510(k) clearance and CLIA waiver for our InteliSwab® rapid test, severance costs associated with our reduction in workforce that occurred during the quarter and higher costs incurred under our DOD expansion contract. Increased spend in research and development was offset by lower sales and marketing and general and administrative costs.

Sales and marketing expenses decreased 5% to $12.1 million for the three months ended March 31, ~~2021 largely due to clinical study activities in the first quarter of 2021 related to our InteliSwab~~® rapid test which did not repeat in the first quarter of 2022 as we received EUA authorization in June 2021. Sales and marketing expenses increased 30% to $8.1 million for three months ended March 31, 20222023 from ~~$6.2 million for the three months ended March 31, 2021~~ ~~due to an increase in spend associated with our InteliSwab~~® test, increased staffing costs associated with higher head count, and increased travel expenses as travel has resumed as COVID-19 restrictions have been lifted. These increases in spend were partially offset by a decline in reserves for uncollectible accounts~~. General and administrative expenses increased 112% to $13.7~~$12.7 million for the three months ended March 31, 2022 ~~from $6.4~~due to a decrease in our reserve for expected credit losses and lower consulting fees offset by severance cost related to our reduction in workforce. General and administrative expenses decreased 8% to $17.7 million for the three months ended March 31, ~~2021~~2023 from $19.2 million for the three months ended March 31, 2022 largely due to ~~increased~~lower consulting ~~costs, higher~~fees, stock compensation expense and recruitment fees. In the first quarter of 2022, the company incurred high stock compensation expense associated with the accelerated vesting of shares under our former CEO's employment agreement ~~increased legal costs, higher staffing costs associated with increased head count,~~ and higher recruitment expense ~~largely~~ associated with ~~our~~the new CEO search. These decreases in expense were partially offset by increased legal fees and severance costs associated with the reduction in workforce.

All of the above contributed to the ~~Diagnostics segment’s~~Company's operating income of $24.3 million for the three months ended March 31, 2023, which included the non-cash impairment charge of $1.1 million related to equipment that will no longer be used in production, non-cash charges of $3.7 million for depreciation and amortization and $2.7 million for stock-based compensation. The Company's operating loss of ~~$19.8~~$16.2 million for the three months ended March 31, 2022 ~~which~~ included non-cash charges of ~~$1.7~~$3.7 million for depreciation and amortization and ~~$3.1~~$3.5 million for stock-based compensation. The Diagnostics segment operating loss also included a non-cash pre-tax benefit of $36,000 associated with the change in the fair value of acquisition-related contingent consideration. This is in comparison to an $806,000 benefit recorded in the first quarter of 2021.

~~Molecular Solutions Segment~~

~~The gross profit margins for the Molecular Solutions segment was 58%~~Other income for the three months ended March 31, ~~2022~~2023 was $2.7 million compared to ~~73%~~$0.2 million for the ~~three~~ months ended March 31, ~~2021.~~2022. This ~~decrease was~~ increase is largely due to ~~a less favorable product mix.~~

~~Research~~the reimbursement of costs incurred under our DOD expansion contract which are presented in research and development expenses increased 20% to $2.9 million for the three months ended March 31, 2022 from $2.4 million for the three months ended March 31, 2021 due to higher staffing costs. Sales and marketing expenses increased 39% to $4.6 million for the three months ended March 31, 2022 from $3.3 million for the three months ended March 31, 2021 due to higher staffing costs related to increased head count, increased consulting expense associated with business strategy planning, and an increase in our reserve for uncollectible accounts. 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 47% to $5.5 million for the three months ended March 31, 2022 from $3.7 million for the three months ended March 31, 2021 due to increased legal fees and staffing costs.

All of the above contributed to the Molecular Solutions segment’s operating income of $3.8 million for the three months ended March 31, 2022, which included $2.0 million for depreciation and amortization and $396,000 for stock-based compensation.as discussed above.

CONSOLIDATED INCOME TAXES

~~We continue~~The Company continues to believe the full valuation allowance established against ~~our~~its total U.S. deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed. For the three months ended March 31, ~~2022, we~~2023, the Company recorded a U.S. state tax ~~expense~~benefit of ~~$216,000~~$0.2 million compared to ~~$169,000~~$3.9 million of ~~state income~~ tax expense for the three months ended March 31, ~~2021. Additionally, in the first quarter~~2022. The 2022 tax expense is comprised of ~~2022, we recorded approximately~~U.S. state tax expense of $0.2 million, $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 three months ended March 31, 2022, we recorded foreign~~States, and Canadian income tax expense of $2.0 ~~million compared to~~million. No foreign ~~tax expense of $6.4 million~~taxes were recorded for the three months ended March 31, ~~2021. This overall decrease in foreign~~2023 due to it being more likely than not that the Canadian subsidiary will not produce sufficient income to receive a tax ~~expense is largely a result of~~benefit for the ~~decrease in income before taxes generated by our Canadian subsidiary.~~year to date loss.

2316

Liquidity and Capital Resources


	March 31,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
	(In thousands)				(In thousands)
Cash and cash equivalents	$	70,721	$	116,762	$	90,194	$	83,980
Available for sale securities		41,503		53,288
Available-for-sale securities						22,178		26,867
Working capital		212,777		220,367		288,472		256,127

~~Our~~The Company's cash and cash equivalents and available-for-sale securities ~~decreased~~increased to ~~$112.2~~$112.4 million at March 31, ~~2022~~2023 from ~~$170.1~~$110.8 million at December 31, ~~2021. Our~~2022. $72.8 million or 65% of the $112.4 million in cash, cash equivalents and available-for-sale securities is held by DNAG, the Company's Canadian subsidiary. In 2022, the Company repatriated $65.0 million of cash into the United States and incurred $1.7 million of Canadian withholding tax. Further repatriation of cash from Canada into the United States could have additional adverse tax consequences. It is still the Company's intention going forward to continue to permanently reinvest the historical undistributed earnings of our foreign subsidiaries.

The Company's working capital ~~decreased~~increased to ~~$212.8~~$288.5 million at March 31, ~~2022~~2023 from ~~$220.4~~$256.1 million at December 31, ~~2021.~~2022. Working capital increased primarily due to increased accounts receivable of $36.6 million. Working capital is primarily a function of sales, purchase volumes, inventory requirements, and vendor payment terms.

Analysis of Our Cash Flows

Operating Activities

During the three months ended March 31, ~~2022,~~2023, net cash ~~used in~~provided by operating activities was ~~$35.8~~$6.0 million. ~~Our~~Cash flows from operations can be significantly impacted by factors such as timing of receipt from customers, inventory purchases, and payments to vendors. The Company's net ~~loss~~income of ~~$20.0~~$27.2 million included non-cash charges ~~for~~of depreciation and amortization expense of $3.7 million, stock-based compensation expense of ~~$3.5 million, an inventory reserve of $1.1~~$2.7 million, and ~~other non-cash expense~~impairment charges taken for idle equipment of ~~$1.5~~$1.1 million. Cash used to fund ~~our~~the working capital accounts included an increase in accounts receivable of ~~$15.3~~$36.6 million largely associated with ~~end of the quarter shipments of~~ product shipped to the U.S. government ~~an increase~~at the end of the first quarter 2023, a decreases in accounts payable of $12.1 million due to reduced inventory purchasing and the timing of ~~$9.4 million to meet anticipated demand to support COVD-19 testing programs,~~payments made and invoices received, and a ~~$4.6 million~~ decrease in accrued expenses ~~and other liabilities~~of $3.5 million largely ~~due to~~associated with the payment of ~~our 2021~~the Company's 2022 year-end bonuses. Offsetting these uses of cash was a ~~$4.4~~decrease in inventory of $18.5 million ~~increase~~as demand for the Company's InteliSwab® COVID-19 rapid test is declining, and a $5.3 million decrease in ~~accounts payable due to~~prepaid and other assets as the ~~timing~~Company received payment of ~~invoices received and payments made.~~its Employee Retention Credit filed for in 2021.

Investing Activities

Net cash used in investing activities was ~~$9.9~~$1.0 million for the three months ended March 31, ~~2022,~~2023, which reflects proceeds from the maturities ~~and redemptions~~ of investments of ~~$12.1 million. This was~~$27.3 million offset by ~~$20.2~~$22.3 million used to ~~acquire property and equipment largely to increase our manufacturing capacity. Cash used in investing activities also reflects net cash used of $1.8~~purchase investments, $2.8 million to build additional manufacturing capacity as required by ~~our~~the $109 million agreement with the ~~U.S. Department~~DOD and, $1.2 million to acquire property and equipment to support the normal operations of ~~Defense (the “DOD”), which is expected to be reimbursed in~~ the ~~second quarter of 2022.~~business.

Financing Activities

Net cash used in financing activities was ~~$1.4~~$1.3 million for the three months ended March 31, ~~2022,~~2023, which is largely comprised of ~~$1.0~~$1.2 million used for the repurchase of common stock to satisfy withholding taxes related to the vesting of restricted shares awarded to ~~our~~the Company's employees.

~~We expect current balances of~~Resources

The Company expects existing cash and cash equivalents and available-for-sale securities towill be sufficient to fund ~~our current and foreseeable~~its operating expenses and capital ~~needs. Our~~expenditure requirements over the next twelve months. The Company's 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~~its $109 million DOD contract, the scope and timing of future strategic acquisitions, the progress of ~~our~~its research and development programs, the scope and results of clinical testing, the cost of any future litigation, the magnitude of capital expenditures, changes in existing and potential relationships with business partners, the timing and cost of obtaining regulatory approvals, the timing and cost of future stock purchases, the costs involved in obtaining and enforcing patents, proprietary rights and any necessary licenses, the cost and timing of expansion of sales and marketing activities, market acceptance of new products, competing technological and market developments, the impact of the current economic environment and other factors. In addition, $72.7 million or 65% of our $112.2 million in cash, cash equivalents and available-for-sale securities belongs to our Canadian subsidiary. In the first quarter of 2022, we repatriated $65.0 million of cash from Canada into the United States 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~~the Company's obligations to make future payments under contracts existing at December 31, ~~2021~~2022 is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of ~~our~~its Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. As of March 31, ~~2022,~~2023, 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~~the Company's critical accounting policies is contained in ~~our~~its Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the SEC. ~~During~~No material changes have been made to such critical accounting policies during the ~~first~~ three months ~~of 2022, there were no material changes to our critical accounting policies.~~ended March 31, 2023.

CAUTIONARY NOTICE ABOUT FORWARD-LOOKING STATEMENTS

24This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Some of these statements can be identified by the use of terminology such as “believes,” “expects,” “anticipates,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “projects,” “plans,” “estimates,” or the negative of these words and other comparable terminology. The discussion of financial trends, strategy, plans, assumptions, or intentions may also include forward-looking statements. Readers should not place undue reliance on forward-looking statements, which speak only as of the date such statements were first made. Except to the extent required by law, we undertake no obligation to update or revise our forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated, or implied. Although it is not possible to predict or identify all such risks and uncertainties, they include, but are not limited to, factors described in the Risk Factors discussion in Item 1A of Part I of our most recently filed Annual Report.

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~~

There has been no material ~~derivative risk to report under this Item.~~

As of March 31, 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 5.1% of our total revenues for the three months ended March 31, 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 $139.4 million in U.S. Dollars, which are included in the Company’s consolidated balance sheet as of March 31, 2022. A 10% unfavorable change in the ~~Canadian-to-U.S. dollar~~Company's assessment of its sensitivity to market risk since its presentation set forth in Item 7A, "Quantitative and ~~Euro-to-U.S. dollar exchange rates would have decreased our comprehensive income by approximately $13.9 million~~Qualitative Disclosures About Market Risk," in its Annual Report on Form 10-K for the ~~three months~~year ended ~~March~~December 31, 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 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 March 31, ~~2022.~~2023. Based on that evaluation, the Company’s management, including such officers, concluded that the Company’s disclosure controls and procedures were effective as of March 31, ~~2022~~2023 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 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 March 31, ~~2022~~2023 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~~the Company is involved in certain legal actions arising in the ordinary course of business. In management’s opinion, based upon the advice of counsel, the outcomes of such actions are not expected, individually or in the aggregate, to have a material adverse effect on ~~our~~the Company's future financial position or results of operations.

Spectrum Patent Litigation

Item 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Item 1A, entitled “Risk Factors,” in ~~our~~the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022, other than as set forth below.

Conditions in the banking system and financial markets, including the failure of banks and financial institutions, could have an adverse effect on our operations and financial results.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10 and March 12, 2023, the Federal Deposit Insurance Corporation took control and was appointed receiver of Silicon Valley Bank, and Signature Bank and Silvergate Capital Corp, respectively, after each bank was unable to continue their operations. Since then, additional financial institutions have experienced similar failures and have been placed into receivership. It is possible that other banks will face similar difficulty in the future.

Although we do not maintain any deposit accounts, credit agreements or letters of credit with any financial institution currently in receivership, we are unable to predict the extent or nature of the impacts of these evolving circumstances at this time. If, for example, other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened. While it is not possible at this time to predict the extent of the impact that the failure of these financial institutions or the high market volatility and instability of the banking sector could have on economic activity and our business in particular, the failure of other banks and financial institutions and the measures taken by governments, businesses and other organizations in response to these events could adversely impact our business, financial condition and results of operations.

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)

January 1, 2022 - January 31, 2022

—

(3)

$
—

—

11,984,720

February 1, 2022 - February 28, 2022

116,149

(3)

8.86

—

11,984,720

March 1, 2022 - March 31, 2022

636

6.92

—

11,984,720

116,785

—


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)
January 1, 2023-January 31, 2023		158,726	(3)	$	5.64		—		11,984,720
February 1, 2023-February 28, 2023		70,685	(3)		5.14		—		11,984,720
March 1, 2023-March 31, 2023		—	(3)		—		—		11,984,720
		229,411					—

(1)

On August 5, 2008, ~~our~~the Company's Board of Directors approved a share repurchase program pursuant to which ~~we are~~the Company is 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~~The Company has 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

2620

Item 6. EXHIBITS



Exhibit Number		Exhibit

10.1*3.1		~~Transition Agreement dated~~Second Amended and Restated Bylaws of OraSure Technologies, Inc., as of ~~January 2, 2022, between OraSure Technologies, Inc. and Stephen S. Tang, Ph.D. is incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed January 6, 2022.~~

10.2**		Employment Agreement dated as of March 21, 2022 between OraSure Technologies, Inc. and Nancy J. Gagliano, M.D., M..B.A. is incorporated by reference to Item 10.1 to the Company's Current Report on Form 8-K Filed on March 23, 2022.

~~10.3~~		Industrial Lease between Core5 at Laughman Farms Phase 1, LLC as Landlord and OraSure Technologies, Inc. as Tenant, dated January 3, 2022, is incorporated by reference to Exhibit 10.30 to the Company's Annual Report on form 10-K filed March 1, 2022.May 9, 2023.

31.1*		Certification of ~~Nancy J. Gagliano, M.D., M.B.A.~~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~~Kenneth J. McGrath required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.

32.1*+		Certification of ~~Nancy J. Gagliano, M.D., M.B.A.~~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~~Kenneth J. McGrath 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~~September 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.

2721

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~~Kenneth J. McGrath
Date: May 10, ~~2022~~2023		~~Scott Gleason~~Kenneth J. McGrath
		~~Interim~~ Chief Financial Officer
		(Principal Financial Officer)

		/s/Michele M. ~~Miller~~Anthony
Date: May 10, ~~2022~~2023		Michele M. ~~Miller~~Anthony
		Senior Vice President, Controller and Chief Accounting Officer
		(Principal Accounting Officer)

2822



	March 31, 2022		December 31, 2021
Payroll and related benefits	$	11,279	$	15,570
Commitment to purchase under government contract		—		8,103
Deferred income for government contract		788		—
Professional fees		3,537		3,335
Sales tax payable		1,725		2,227
Other		4,582		4,543
	$	21,911	$	33,778



	March 31, 2022		December 31, 2021
Operating Leases
Right-of-use assets	$	12,169	$	9,056
Lease liabilities:
Current lease liabilities		1,815		2,181
Non-current lease liabilities		10,727		7,202
Total operating lease liabilities	$	12,542	$	9,383


Finance Leases
Right-of-use assets	$	2,240	$	2,493
Lease liabilities:
Current lease liabilities		1,699		939
Non-current lease liabilities		1,207		1,952
Total finance lease liabilities	$	2,906	$	2,891


Weighted Average Remaining Lease Term
Weighted-average remaining lease term—operating leases	6.86 years			5.26 years
Weighted-average remaining lease term—finance leases	2.04 years			2.21 years

Weighted Average Discount Rate
Weighted-average discount rate—operating leases		4.09	%		3.90	%
Weighted-average discount rate—finance leases		3.54	%		3.57	%


	Finance			Operating
2022 (excluding the three months ended March 31, 2022)		951			1,936
2023		1,285			1,729
2024		742			2,337
2025		20			1,968
2026		12			1,750
Thereafter		—			4,871
Total minimum lease payments		3,010			14,591
Less: imputed interest		(104	)		(2,049	)
Present value of lease liabilities	$	2,906		$	12,542


	March 31, 2022		December 31, 2021
Total assets:
Diagnostics	$	245,961	$	209,674
Molecular Solutions		189,571		251,316
Total	$	435,532	$	460,990


	For the Three Months Ended March 31,
Market	2022		2021		% Change
Domestic HIV	$	3,765	$	5,293		(29	)	%
International HIV		4,401		3,486		26
Net HIV revenues		8,166		8,779		(7	)
Domestic HCV		2,036		1,182		72
International HCV		1,221		1,184		3
Net HCV revenues		3,257		2,366		38
Net OraQuick® revenues	$	11,423	$	11,145		2		%