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

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

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.

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

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

As of ~~November 1, 2021,~~May 5, 2022, the registrant had ~~72,038,439~~72,455,507 shares of common stock, $.000001 par value per share, outstanding.


	September 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents	$	134,962		$	160,802		$	70,721		$	116,762
Short-term investments		50,065			48,599			41,503			36,279
Accounts receivable, net of allowance for doubtful accounts of $4,891 and $3,654		40,075			38,835
Accounts receivable, net of allowance for doubtful accounts of $3,789 and $3,418								59,671			45,323
Inventories		53,583			31,863			61,536			53,138
Prepaid expenses		8,103			3,860			8,906			7,939
Other current assets		2,439			4,934			26,027			28,990
Total current assets		289,227			288,893			268,364			288,431
Noncurrent Assets:
Property, plant and equipment, net		77,586			51,860			97,572			88,164
Operating right-of-use assets, net		9,615			4,461			12,169			9,056
Finance right-of-use assets, net		4,629			1,312			2,240			2,493
Intangible assets, net		15,221			17,904			13,692			14,343
Goodwill		40,264			40,351			40,389			40,279
Long-term investments		17,271			47,718			—			17,009
Other noncurrent assets		1,944			1,973			1,106			1,215
Total noncurrent assets		166,530			165,579			167,168			172,559
TOTAL ASSETS	$	455,757		$	454,472		$	435,532		$	460,990
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	23,778		$	17,407		$	27,057		$	28,024
Deferred revenue		3,488			4,811			2,906			2,936
Accrued expenses and other current liabilities		22,610			22,227			21,911			33,778
Finance lease liability		1,912			517
Operating lease liability		2,178			1,125
Finance lease liabilities								1,699			939
Operating lease liabilities								1,815			2,181
Acquisition-related contingent consideration obligation		201			402			199			206
Total current liabilities		54,167			46,489			55,587			68,064
Noncurrent Liabilities:
Finance lease liability		2,834			895
Operating lease liability		7,740			3,591
Finance lease liabilities								1,207			1,952
Operating lease liabilities								10,727			7,202
Acquisition-related contingent consideration obligation		318			2,049			117			354
Other noncurrent liabilities		1,998			1,682			552			651
Deferred income taxes		880			1,195			2,456			2,234
Total noncurrent liabilities		13,770			9,412			15,059			12,393
TOTAL LIABILITIES		67,937			55,901			70,646			80,457
Commitments and contingencies (Note 11)
STOCKHOLDERS' EQUITY
Preferred stock, par value $.000001, 25,000 shares authorized, NaN issued		—			—			—			—
Common stock, par value $.000001, 120,000 shares authorized, 72,038 and 71,738 shares issued and outstanding		0			0
Common stock, par value $.000001, 120,000 shares authorized, 72,307 and 72,069 shares issued and outstanding								0			0
Additional paid-in capital		508,601			505,123			513,553			511,063
Accumulated other comprehensive loss		(10,721	)		(9,097	)		(8,247	)		(10,077	)
Accumulated deficit		(110,060	)		(97,455	)		(140,420	)		(120,453	)
Total stockholders' equity		387,820			398,571			364,886			380,533
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	455,757		$	454,472		$	435,532		$	460,990


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
NET REVENUES:
Products and services	$	53,229		$	46,749		$	165,549		$	105,972		$	65,236		$	56,579
Other		688			1,262			4,557			2,894			2,471			2,003
		53,917			48,011			170,106			108,866			67,707			58,582
COST OF PRODUCTS AND SERVICES SOLD		32,449			17,722			79,639			45,182			43,435			20,256
Gross profit		21,468			30,289			90,467			63,684			24,272			38,326
OPERATING EXPENSES:
Research and development		8,596			8,007			25,270			20,575			8,413			8,992
Sales and marketing		13,886			7,849			33,836			25,339			12,717			9,530
General and administrative		12,499			10,108			33,680			30,442			19,156			10,188
Change in the estimated fair value of acquisition-related contingent consideration		(500	)		(60	)		(1,526	)		390			(36	)		(806	)
		34,481			25,904			91,260			76,746			40,250			27,904
Operating income (loss)		(13,013	)		4,385			(793	)		(13,062	)		(15,978	)		10,422
OTHER INCOME		100			314			429			1,960
OTHER INCOME (LOSS)														(53	)		(119	)
Income (loss) before income taxes		(12,913	)		4,699			(364	)		(11,102	)		(16,031	)		10,303
INCOME TAX EXPENSE		2,102			3,659			12,241			5,680			3,936			6,529
NET INCOME (LOSS)	$	(15,015	)	$	1,040		$	(12,605	)	$	(16,782	)	$	(19,967	)	$	3,774
INCOME (LOSS) PER SHARE:
BASIC	$	(0.21	)	$	0.01		$	(0.18	)	$	(0.25	)	$	(0.28	)	$	0.05
DILUTED	$	(0.21	)	$	0.01		$	(0.18	)	$	(0.25	)	$	(0.28	)	$	0.05
SHARES USED IN COMPUTING INCOME (LOSS) PER SHARE:
BASIC		72,023			71,537			71,962			66,088			72,194			71,878
DILUTED		72,023			72,662			71,962			66,088			72,194			72,766


	Nine Months Ended September 30,						Three Months Ended March 31,
	2021			2020			2022			2021
OPERATING ACTIVITIES:
Net loss	$	(12,605	)	$	(16,782	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Net income (loss)							$	(19,967	)	$	3,774
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		5,155			5,913			3,524			1,464
Depreciation and amortization		8,479			6,880			3,682			2,489
Other non-cash amortization		664			171			80			138
Provision for doubtful accounts		1,228			1,141			347			598
Unrealized foreign currency gain		(319	)		(41	)
Inventory reserve								1,092			129
Unrealized foreign currency (gain) loss								169			(100	)
Interest expense on finance leases		84			56			32			14
Deferred income taxes		(324	)		(764	)		200			(94	)
Loss on sale of fixed assets		—			104
Loss on disposal of fixed assets								710			—
Change in the estimated fair value of acquisition-related contingent consideration		(1,526	)		390			(36	)		(806	)
Payment of acquisition-related contingent consideration		(142	)		(496	)		—			(142	)
Changes in assets and liabilities
Accounts receivable		(2,102	)		5,228			(15,295	)		2,188
Inventories		(21,689	)		(7,425	)		(9,374	)		(8,511	)
Prepaid expenses and other assets		(1,942	)		2,420			(736	)		(766	)
Accounts payable		2,790			3,269			4,398			(253	)
Deferred revenue		(1,331	)		1,664			(44	)		(262	)
Accrued expenses and other liabilities		982			468			(4,603	)		(4,253	)
Net cash (used in) provided by operating activities		(22,598	)		2,196
Net cash used in operating activities								(35,821	)		(4,393	)
INVESTING ACTIVITIES:
Purchases of investments		(25,443	)		(90,137	)
Proceeds from maturities and redemptions of investments		53,745			102,616			12,135			33,745
Purchases of property and equipment		(27,508	)		(11,234	)		(20,219	)		(11,061	)
Proceeds from escrow associated with business acquisitions		—			126
Acquisition of businesses, net of cash acquired		—			(3,037	)
Purchase price adjustment related to business acquisition		(18	)		—
Purchase of patent and product rights		—			(2,250	)
Purchase of property and equipment under government contracts								(28,188	)		—
Proceeds from funding under government contract								26,333			—
Other investing activities								—			(19	)
Net cash (used in) provided by investing activities		776			(3,916	)		(9,939	)		22,665
FINANCING ACTIVITIES:
Cash payments for lease liabilities		(1,111	)		(521	)		(153	)		(282	)
Proceeds from exercise of stock options								15			92
Payment of acquisition-related contingent consideration		(264	)		(3,004	)		(208	)		(264	)
Issuance of common stock in connection with public offering, net		—			95,036
Proceeds from exercise of stock options		247			2,115
Repurchase of common stock		(1,924	)		(2,076	)		(1,049	)		(1,730	)
Net cash (used in) provided by financing activities		(3,052	)		91,550
Net cash used in financing activities								(1,395	)		(2,184	)
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH		(966	)		(2,686	)		1,114			786
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(25,840	)		87,144
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS								(46,041	)		16,874
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		160,802			75,715			116,762			160,802
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	134,962		$	162,859		$	70,721		$	177,676

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	12,540		$	3,888		$	3,570		$	3,671
Non-cash investing and financing activities
Accrued property and equipment purchases	$	4,382		$	2,093			642			4,267
Unrealized gain (loss) on marketable securities	$	(262	)	$	83
Accrued property and equipment purchases under government contracts								1,905			—
Unrealized gain on marketable securities								74			21

2.1. Summary of Significant Accounting Policies

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

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

Investments. We consider all investments in debt securities to be available-for-sale securities. These securities consist of guaranteed investment certificates and corporate bonds with purchased maturities greater than ninety days. Available-for-sale securities are carried at fair value, based upon quoted market prices, with unrealized gains and losses, if any, reported in stockholders’ equity as a component of accumulated other comprehensive loss.

We record an allowance for credit loss for our available-for-sale securities when a decline in investment market value is due to credit-related factors. When evaluating an investment for impairment, we review factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. ~~As of September 30, 2021,~~During the three months ended March 31, 2022, we ~~determined that the decline in the market value of~~recognized a provision for expected credit losses for our available-for-sale ~~investment was not due to credit-related factors and as such no allowance for credit-loss was necessary.~~securities of $65.

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


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2021
March 31, 2022
Guaranteed investment certificates	$	33,122	$	0	$	0		$	33,122	$	33,578	$	—	$	—		$	33,578
Corporate bonds		34,824		0		(610	)		34,214		8,285		—		(360	)		7,925
Total available-for-sale securities	$	67,946	$	0	$	(610	)	$	67,336	$	41,863	$	—	$	(360	)	$	41,503
December 31, 2020
December 31, 2021
Guaranteed investment certificates	$	25,132	$	0	$	0		$	25,132	$	33,249	$	—	$	—		$	33,249
Corporate bonds		71,533		135		(483	)		71,185		20,473		—		(434	)		20,039
Total available-for-sale securities	$	96,665	$	135	$	(483	)	$	96,317	$	53,722	$	—	$	(434	)	$	53,288
At September 30, 2021, maturities of our available-for-sale securities were as follows:
At March 31, 2022, maturities of our available-for-sale securities were as follows:
Less than one year	$	50,510	$	0	$	(445	)	$	50,065	$	41,863	$	—	$	(360	)	$	41,503
Greater than one year	$	17,436	$	0	$	(165	)	$	17,271	$	—	$	—	$	—		$	—

Fair Value of Financial Instruments. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their respective fair values based on their short-term nature.

Fair value measurements of all financial assets and liabilities that are being measured and reported on a fair value basis are required to be classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

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

Included in cash and cash equivalents at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, was $~~23,862~~2,386 and $~~71,489~~1,160 invested in government money market funds. These funds have investments in government securities and are measured as Level 1 instruments.

We offer a nonqualified deferred compensation plan for certain eligible employees and members of our Board of Directors. The assets of the plan are held in the name of the Company at a third-party financial institution. Separate accounts are maintained for each participant to reflect the amounts deferred by the participant and all earnings and losses on those deferred amounts. The assets of the plan are held in mutual funds and company stock. The fair value of the plan assets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was $~~2,503~~1,660 and $~~2,565~~1,763, respectively, and was calculated using the quoted market prices of the assets as of those dates. All investments in the plan are classified as trading securities and measured as Level 1 instruments. The fair value of plan assets is included in both current assets and noncurrent assets with the same amount included in accrued expenses and other noncurrent liabilities in the accompanying consolidated balance sheets.

~~Accounts Receivable.~~ Accounts receivable have been reduced by an estimated allowance for amounts that may become uncollectible in the future. This estimated allowance is based primarily on management’s evaluation of specific balances as they become past due, the financial condition of our customers and our historical experience related to write-offs.

~~Inventories.~~ Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis, and include the cost of raw materials, labor and overhead. The majority of our inventories are subject to expiration dating, which can be extended in certain circumstances. We continually evaluate quantities on hand and the carrying value of our inventories to determine the need for reserves for excess and obsolete inventories, based on prior experience as well as estimated forecasts of product sales. We reserve for unidentified scrap or spoilage based on historical write-off rates. We also consider items identified through specific identification procedures in assessing the adequacy of our reserve. When factors indicate that impairment has occurred, either a reserve is established against the inventories’ carrying value or the inventories are completely written off, as in the case of lapsing expiration dates. ~~During the third quarter of 2021, we reserved $1,750~~ ~~of COVID-19 antibody inventory, which we do not believe we can sell as a result of the decision to no longer pursue EUAs for the ELISA test.~~

Property, Plant and Equipment. Property, plant and equipment are stated at cost. Additions or improvements are capitalized, while repairs and maintenance are charged to expense. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets. Buildings are depreciated over twenty to ~~forty~~ years, while computer equipment, machinery and equipment, and furniture and fixtures are depreciated over two to ten years. Building improvements are amortized over their estimated useful lives. When assets are sold, retired, or discarded, the related property amounts are relieved from the accounts, and any gain or loss is recorded in the consolidated statements of operations. Accumulated depreciation of property, plant and equipment as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was $~~58,755~~63,984 and $~~53,604~~61,157, respectively.

Intangible Assets. Intangible assets consist of customer relationships, patents and product rights, acquired technology and tradenames. Patents and product rights consist of costs associated with the acquisition of patents, licenses, and product distribution rights. Intangible assets are amortized using the straight-line method over their estimated useful lives of five to fifteen years. Accumulated amortization of intangible assets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was $~~29,554~~31,142 and $~~27,107~~30,412, respectively. The decrease in ~~intangibles~~intangible assets from $~~17,904~~14,343 as of December 31, ~~2020~~2021 to $~~15,221~~13,692 as of ~~September 30, 2021~~March 31, 2022 was due to $~~2,455~~568 in amortization expense and foreign currency translation losses of $~~228~~83.

~~Goodwill~~. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired. Goodwill is not amortized but rather is tested annually for impairment or more frequently if we believe that indicators of impairment exist. Current generally accepted accounting principles (“GAAP”) permit us to make a qualitative evaluation about the likelihood of goodwill impairment. If we conclude that it is more likely than not that the carrying value of a reporting unit is greater than its fair value, then we would be required to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, provided the impairment charge does not exceed the total amount of goodwill allocated to the reporting unit.

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

Foreign Currency Translation. The assets and liabilities of our foreign operations are translated into U.S. dollars at current exchange rates as of the balance sheet date, and revenues and expenses are translated at average exchange rates for the period. Resulting translation adjustments are reflected in accumulated other comprehensive loss, which is a separate component of stockholders’ equity.

Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than a functional currency are included in our consolidated statements of income in the period in which the change occurs. Net foreign exchange ~~gains~~losses resulting from foreign currency transactions that are included in other income (loss) in our consolidated statements of income were $7729 and $70576 for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. ~~Net foreign exchange gains (losses) were $(371) and $563~~ ~~for the nine months ended September 30, 2021 and 2020.~~

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

We have defined the Canadian dollar as the functional currency of our Canadian subsidiary, DNAG, and we have defined the Euro as the functional currency of our Belgian subsidiary, Novosanis. The results of operations for those subsidiaries are translated into U.S. dollars, which is the reporting currency of the Company. Accumulated other comprehensive loss at ~~September 30, 2021~~March 31, 2022 consisted of $~~10,111~~7,888 of currency translation adjustments and $~~610~~359 of net unrealized losses on marketable securities, which represents the fair market value adjustment for our

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

Recent Accounting Pronouncements.

In March 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The purpose of this update is to provide optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments provide

optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are elective and are 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.

3. ~~Business Combinations~~Inventories

~~UrSure~~

On July 22, 2020, the Company acquired all of the outstanding capital stock of UrSure, Inc. (“UrSure”), pursuant to the terms of a merger agreement. The initial aggregate purchase price of this transaction was $~~3,000~~, adjusted for certain transaction costs, indebtedness, and holdback amounts, and was funded with cash on hand. A portion of the purchase price was deposited into an escrow account for a limited period after closing, pursuant to indemnification obligations under the merger agreement.

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

~~Pursuant to our merger agreement, we were to pay up to an additional $28,000~~ ~~of contingent consideration over the~~ ~~three years~~ following the acquisition date based on the achievement of certain performance criteria as defined under the agreements, including generating certain revenue dollars, and the achievement of certain clinical milestones associated with the development of certain new technology. The Company, with the assistance of an independent valuation specialist, determines the estimated fair value of the contingent consideration. The fair value is determined using a probability-weighted model based on our assessment of the likelihood that the benchmarks will be achieved. The probability-weighted payments were then discounted using a discount rate based on an internal rate of return analysis using the probability-weighted cash flows. The fair value measurement is based on significant inputs, including the likelihood of the achievement of clinical milestones and revenue forecasts, not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy.

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

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

(406
)
Change in fair value during the period

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


	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

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

Revenues from UrSure primarily consist of grant money received to fund the development of certain new technology. Effective as of July 22, 2020, the financial results of UrSure are included in our Diagnostics segment.

4. ~~Inventories~~

September 30,
2021

December 31,
2020

Raw materials

$
28,306

$
15,425

Work in process

2,653

2,572

Finished goods

22,624

13,866

$
53,583

$
31,863

5. Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed in a manner similar to basic earnings (loss) per share except that the weighted-average number of shares outstanding is increased to include incremental shares from the assumed vesting or exercise of dilutive securities, such as common stock options, unvested restricted stock or performance stock units, unless the impact is antidilutive. The number of incremental shares is calculated by assuming that outstanding stock options were exercised and unvested restricted shares and performance stock units were

vested, and the proceeds from such exercises or vesting were used to acquire shares of common stock at the average market price during the reporting period. Basic and dilutive computations of net loss per share are the same in periods in which a net loss exists as the dilutive effects of excluded items would be anti-dilutive.

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


	Three Months					Nine Months
	Ended September 30,					Ended September 30,						Three Months Ended March 31,
	2021			2020		2021			2020			2022			2021

Net income (loss)	$	(15,015	)	$	1,040	$	(12,605	)	$	(16,782	)	$	(19,967	)	$	3,774
Weighted-average shares of common stock outstanding:
Basic		72,023			71,537		71,962			66,088			72,194			71,878
Dilutive effect of stock options, restricted stock, and performance stock units		—			1,125		—			—			—			888
Diluted		72,023			72,662		71,962			66,088			72,194			72,766
Earnings (loss) per share:
Basic	$	(0.21	)	$	0.01	$	(0.18	)	$	(0.25	)	$	(0.28	)	$	0.05
Diluted	$	(0.21	)	$	0.01	$	(0.18	)	$	(0.25	)	$	(0.28	)	$	0.05

For the three months ended ~~September 30, 2021,~~March 31, 2022, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing ~~859~~463 shares were excluded from the computation of diluted loss per share. For the three months ended ~~September 30, 2020,~~March 31, 2021, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing ~~136~~421 shares were excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive.~~For the nine months ended September 30, 2021 and 2020, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing~~ ~~847~~ ~~and~~ ~~917~~ ~~shares, respectively, were excluded from the computation of diluted loss per share.~~

6.5. Revenues

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

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

2021

2020

2021

2020

Infectious disease testing

$
12,932

$
13,224

$
39,664

$
36,625

Risk assessment testing

2,674

2,253

7,265

6,786

Genomics (1)

19,018

8,454

49,333

23,224

Microbiome (1)

1,693

1,530

5,888

3,869

COVID-19 (1)

13,930

18,867

54,147

27,918

Laboratory services

2,406

2,280

8,017

6,798

Other product and service revenues

576

141

1,235

752

Net product and services revenues

53,229

46,749

165,549

105,972

Royalty income

500

450

2,636

1,623

Other non-product revenues

188

812

1,921

1,271

Other revenues

688

1,262

4,557

2,894

Net revenues

$
53,917

$
48,011

$
170,106

$
108,866


	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) ~~2020~~2021 COVID-19, Genomics ~~Microbiome,~~ and ~~COVID-19~~Microbiome revenues were reclassified to reflect the correct classification of the product line sales. The reclassification increased (decreased) the product line revenues for the three months ended ~~September 30, 2020~~March 31, 2021 by $($65583), $(~~298~~246), and $~~363, respectively and increased (decreased) the product line revenue for the nine months ended September 30, 2020 by~~ $(~~157~~337)~~, $(390), and $547~~, respectively.

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2021		2020		2021		2020		2022		2021
United States	$	42,969	$	38,594	$	139,669	$	82,125	$	57,987	$	49,100
Europe		2,411		2,789		10,288		8,663		4,286		4,552
Other regions		8,537		6,628		20,149		18,078		5,434		4,930
	$	53,917	$	48,011	$	170,106	$	108,866	$	67,707	$	58,582

Customer and Vendor Concentrations. At ~~September 30, 2021,~~March 31, 2022, one non-commercial customer accounted for 1321% of our accounts receivable. ~~Another customer~~No customers accounted for more than 1110% of our accounts receivable as of December 31, ~~2020.~~2021. One non-commercial customer accounted for 1418% of net consolidated revenues for the three months ended ~~September 30, 2021.~~March 31, 2022. Another customer accounted for 10~~% of net consolidated revenues for the nine months ended September 30, 2021. One customer accounted for~~ 1117% of net consolidated revenues for the three months ended ~~September 30, 2020.~~March 31, 2021.

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

Deferred Revenue. We record deferred revenue when funds are received prior to the recognition of the associated revenue. Deferred revenue as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 includes customer prepayments of $~~2,340~~1,900 and $~~3,216~~1,843, respectively. Deferred revenue as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 also includes $~~1,148~~1,006 and $~~1,595~~1,093, respectively, associated with a long-term contract that has variable pricing based on volume. The average price over the life of the contract was determined and revenue is recognized at that average price.

7.6. Accrued Expenses and other current liabilities

September 30, 2021

December 31, 2020

Payroll and related benefits

$
13,728

$
14,769

Professional fees

1,831

978

Sales tax payable

2,858

2,400

Other

4,193

4,080

$
22,610

$
22,227



	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

8.7. 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 ~~September 30, 2021,~~March 31, 2022, we are the lessee in all agreements. Our leases have remaining lease terms of 1 to 711 years, some of which include options to extend the leases based on agreed upon terms, and some of which include options to terminate the leases within 1 year.

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

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

The components of lease expense are as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Operating Lease Cost

$
655

$
330

$
1,574

$
964

Finance Lease Cost

Amortization of right-of use assets

571

150

910

476

Interest on lease liabilities

49

17

84

56

Total Finance Lease Cost

$
620

$
167

$
994

$
532


	Three Months Ended 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:

Nine Months Ended September 30,

2021

2020

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

Operating cash flows from operating leases

$
1,182

$
965

Operating cash flows from financing leases

84

56

Financing cash flows from financing leases

1,111

521

Non-cash activity:

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

45

498

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

2,746

46


	Three Months Ended 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:

September 30, 2021

December 31, 2020

Operating Leases

Right-of-use assets

$
9,615

$
4,461

Current lease liabilities

2,178

1,125

Non-current lease liabilities

7,740

3,591

Total operating lease liabilities

$
9,918

$
4,716

Finance Leases

Right-of-use assets

$
4,629

$
1,312

Current lease liabilities

1,912

517

Non-current lease liabilities

2,834

895

Total finance lease liabilities

$
4,746

$
1,412


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

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



	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 ~~September 30, 2021,~~March 31, 2022, minimum lease payments by period are expected to be as follows:

Finance

Operating

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

$
628

2022

2,040

2,493

2023

1,810

1,776

2024

582

1,808

2025

4

1,443

Thereafter

—

2,808

Total Minimum Lease Payments

4,946

10,956

Less: imputed interest

(200
)

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

$
9,918


	Finance			Operating
2022 (excluding the 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

9.8. 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

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

Common Stock

Additional
Paid-in

Accumulated
Other
Comprehensive

Accumulated

Shares

Amount

Capital

Loss

Deficit

Total

Balance at December 31, 2020

71,738

$
—

$
505,123

$
(9,097
)

$
(97,455
)

$
398,571

Common stock issued upon exercise of options

11

—

92

—

—

92

Vesting of restricted stock and performance stock units

318

—

—

—

—

Purchase and retirement of common shares

(111
)

—

(1,730
)

—

—

(1,730
)
Stock-based compensation

—

—

1,464

—

—

1,464

Net income

—

—

—

—

3,774

3,774

Currency translation adjustments

—

—

—

1,352

—

1,352

Unrealized gain on marketable securities

—

—

—

21

—

21

Balance at March 31, 2021

71,956

$
—

$
504,949

$
(7,724
)

$
(93,681
)

$
403,544

Common stock issued upon exercise of options

3

—

29

—

—

29

Vesting of restricted stock and performance stock units

64

—

—

—

—

—

Purchase and retirement of common shares

(15
)

—

(147
)

—

—

(147
)
Stock-based compensation

—

—

1,473

—

—

1,473

Net loss

—

—

—

—

(1,364
)

(1,364
)
Currency translation adjustments

—

—

—

1,403

—

1,403

Unrealized loss on marketable securities

—

—

—

(122
)

—

(122
)
Balance at June 30, 2021

72,008

$
—

$
506,304

$
(6,443
)

$
(95,045
)

$
404,816

Common stock issued upon exercise of options

18

—

126

—

—

126

Vesting of restricted stock and performance stock units

16

—

—

—

—

—

Purchase and retirement of common shares

(4
)

—

(47
)

—

—

(47
)
Stock-based compensation

—

—

2,218

—

—

2,218

Net loss

—

—

—

—

(15,015
)

(15,015
)
Currency translation adjustments

—

—

—

(4,117
)

—

(4,117
)
Unrealized loss on marketable securities

—

—

—

(161
)

—

(161
)
Balance at September 30, 2021

72,038

$
—

$
508,601

$
(10,721
)

$
(110,060
)

$
387,820

Common Stock

Additional
Paid-in

Accumulated
Other
Comprehensive

Accumulated

Shares

Amount

Capital

Loss

Deficit

Total

Balance at December 31, 2019

61,731

$
—

$
401,814

$
(12,136
)

$
(82,533
)

$
307,145


Common stock issued upon exercise of options	6			—		30			—			—			30
Vesting of restricted stock and performance stock units	486			—		—			—			—			—
Purchase and retirement of common shares	(197	)		—		(1,408	)		—			—			(1,408	)
Stock-based compensation	—			—		1,376			—			—			1,376
Net loss	—			—		—			—			(7,328	)		(7,328	)
Currency translation adjustments	—			—		—			(9,221	)		—			(9,221	)
Unrealized loss on marketable securities	—			—		—			(442	)		—			(442	)
Balance at March 31, 2020	62,026		$	—	$	401,812		$	(21,799	)	$	(89,861	)	$	290,152
Common stock issued upon exercise of options	71			—		530			—			—			530
Vesting of restricted stock and performance stock units	161			—		—			—			—			—
Purchase and retirement of common shares	(50	)		—		(656	)		—			—			(656	)
Issuance of common stock in connection with public offering, net of commissions and expenses of $6,200	9,200					95,036									95,036
Stock-based compensation	—			—		2,672			—			—			2,672
Net loss	—			—		—			—			(10,494	)		(10,494	)
Currency translation adjustments	—			—		—			3,726			—			3,726
Unrealized gain on marketable securities	—			—		—			791			—			791
Balance at June 30, 2020	71,408		$	—	$	499,394		$	(17,282	)	$	(100,355	)	$	381,757

																	Common Stock					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	202			—		1,555			—			—			1,555			11			—		92			—			—			92
Vesting of restricted stock and performance stock units	2			—		—			—			—			—			318			—					—			—			—
Purchase and retirement of common shares	(1	)		—		(12	)		—			—			(12	)		(111	)		—		(1,730	)		—			—			(1,730	)
Stock-based compensation	—			—		1,865			—			—			1,865			—			—		1,464			—			—			1,464
Net income	—			—		—			—			1,040			1,040			—			—		—			—			3,774			3,774
Currency translation adjustments	—			—		—			1,953			—			1,953			—			—		—			1,352			—			1,352
Unrealized loss on marketable securities	—			—		—			(266	)		—			(266	)
Balance at September 30, 2020	71,611		$	—	$	502,802		$	(15,595	)	$	(99,315	)	$	387,892
Unrealized gain on marketable securities																		—			—		—			21			—			21
Balance at March 31, 2021																		71,956		$	—	$	504,949		$	(7,724	)	$	(93,681	)	$	403,544

We grant stock-based awards under the OraSure Technologies, Inc. Stock Award Plan, as amended (the “Stock Plan”). The Stock Plan permits stock-based awards to employees, outside directors and consultants or other third-party advisors. Awards which may be granted under the Stock Plan include qualified incentive stock options, nonqualified stock options, stock appreciation rights, restricted awards, performance awards and other stock-based awards. We account for stock-based compensation to employees and directors using the fair value method. We recognize compensation expense for stock option and restricted stock awards issued to employees and directors on a straight-line basis over the requisite service period of the award. We recognize compensation expense related to performance-based restricted stock units based on assumptions as to what percentage of each performance target will be achieved. We evaluate these target assumptions on a quarterly basis and adjust compensation expense related to these awards, as appropriate. To satisfy the exercise of options, issuance of restricted stock, or redemption of performance-based restricted stock units, we issue new shares rather than shares purchased on the open market.

Total compensation ~~cost~~expense related to stock options for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was $~~793~~348 and $~~683~~250, respectively.

Compensation ~~cost~~expense of $~~2,891~~2,706 and $~~3,329~~1,036 related to restricted shares was recognized during the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

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

Compensation ~~cost~~expense of $~~1,471~~470 and $~~1,901~~178 related to PSUs was recognized during the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

~~shares of common stock. On June 3, 2020, we announced the full exercise by the underwriters of their option to purchase these additional shares.~~

The offering was made pursuant to an effective registration statement on Form S-3 (File No. 333-228877) we had previously filed with the SEC, and a prospectus supplement thereunder. The net proceeds from the offering were approximately $~~95,000~~ ~~after deducting underwriting discounts and offering expenses paid by the Company.~~

On August 5, 2008, our Board of Directors approved a share repurchase program pursuant to which we are permitted to acquire up to $25,000 of our outstanding common shares. NaN shares were purchased and retired during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

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

12. Business Segment Information

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

We organized our operating segments according to the nature of the products included in those segments. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2)1). We evaluate performance of our operating segments based on revenue and operating income. We do not allocate interest income, interest expense, other income, other expenses or income taxes to our operating segments. Reportable segments have no inter-segment revenues and inter-segment expenses have been eliminated.

The following table summarizes operating segment information for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and 2020, and asset information as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
Net revenues:
Diagnostics	$	23,511		$	16,314		$	57,368		$	44,533		$	38,310		$	14,546
Molecular Solutions		30,406			31,697			112,738			64,333			29,397			44,036
Total	$	53,917		$	48,011		$	170,106		$	108,866		$	67,707		$	58,582
Operating income (loss):
Diagnostics	$	(18,638	)	$	(9,951	)	$	(42,755	)	$	(31,116	)	$	(19,787	)	$	(12,118	)
Molecular Solutions		5,625			14,336			41,962			18,054			3,809			22,540
Total	$	(13,013	)	$	4,385		$	(793	)	$	(13,062	)	$	(15,978	)	$	10,422
Depreciation and amortization:
Diagnostics	$	1,136		$	934		$	2,965		$	2,448		$	1,727		$	890
Molecular Solutions		2,199			1,517			5,514			4,432			1,955			1,599
Total	$	3,335		$	2,451		$	8,479		$	6,880		$	3,682		$	2,489
Capital expenditures:
Diagnostics	$	3,647		$	2,186		$	19,797		$	5,634
Diagnostics(1)													$	19,132		$	7,637
Molecular Solutions		932			3,011			7,711			5,600			1,087			3,424
Total	$	4,579		$	5,197		$	27,508		$	11,234		$	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.

September 30, 2021

December 31, 2020

Total assets:

Diagnostics

$
206,668

$
242,613

Molecular Solutions

249,089

211,859

Total

$
455,757

$
454,472


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

Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements below regarding future events or performance are “forward-looking statements” within the meaning of the Federal securities laws. These may include statements about our expected revenues, earnings, losses, expenses, or other financial performance, future product performance or development, expected regulatory filings and approvals, planned business transactions, expected manufacturing performance, views of future industry, competitive or market conditions, and other factors that could affect our future operations, results of operations or financial position. These statements often include words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “may,” “will,” “should,” “could,” or similar expressions. Forward-looking statements are not guarantees of future performance or results. Known and unknown factors that could cause actual performance or results to be materially different from those expressed or implied in these statements include, but are not limited to: ~~ability~~

These and other factors that could affect our results are discussed more fully in our Securities and Exchange Commission (“SEC”) filings, including our registration statements, Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, Quarterly Reports on Form 10-Q, and other filings with the SEC. Although forward-looking statements help to provide information about future prospects, readers should keep in mind that forward-looking statements may not be reliable. Readers are cautioned not to place undue reliance on the forward-looking statements. The forward-looking statements are made as of the date of this Report, and we undertake no duty to update these statements.

Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of OraSure.

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

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

Our Diagnostics business primarily consists of the development, manufacture, marketing and sale of ~~oral fluid~~simple, easy to use diagnostic products and specimen collection devices using our proprietary technologies, as well as other diagnostic products including immunoassays and other in vitrodiagnostic tests that are used on other specimen types. The Diagnostics business includes tests for diseases including COVID-19, HIV and Hepatitis C that are performed on a rapid basis at the point of care, and tests for drugs of abuse that are processed in a laboratory. These products are sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, and other public health organizations, distributors, government agencies, physicians’ offices, and commercial and industrial entities. Our COVID-19 and HIV ~~product is~~products are also sold in a consumer-friendly format in the ~~OTC~~over-the-counter (“OTC”) market in the U.S. and, in the case of the HIV product, as a self-test to individuals in a number of other countries. ~~Our~~Through our Diagnostics business ~~includes the operations of UrSure, which was acquired~~we are also developing and ~~merged into OraSure in 2020. This part of the Diagnostics business develops and commercializes~~commercializing products that measure adherence to HIV medications including pre-exposure prophylaxis or PrEP, the daily medication to prevent HIV, and anti-retroviral medications to suppress HIV. These products include laboratory-based tests that can measure levels of the ~~medication~~medications in a patient’s urine or blood, as well as ~~point- of-care~~point-of-care products currently in development.We began recording revenues on the sales of our InteliSwab®COVID-19 Rapid Tests during the third quarter of 2021.

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

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

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

~~The~~As COVID-19 ~~pandemic~~ continues to impact the economy of the United States and other countries around the world, we are committed to being a part of the response to this unprecedented challenge. We have made substantial investments to expand our operations in order to manufacture product used for COVID-19 testing in the United States.

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

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

~~In June 2021,~~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 ~~received three Emergency Use Authorizations ("EUAs") from~~are well positioned to address current public health challenges and capitalize on diagnostic trends in the ~~U.S. Food~~market and ~~Drug Administration ("FDA")~~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 ~~our InteliSwab~~TM ~~COVID-19 Rapid Tests for non-prescription OTC, professional point-of-care and prescription use. These lateral flow, rapid antigen~~stockholders.

~~diagnostic tests are designed to detect active COVID-19 infection with a simple, easy-to-use workflow, using samples self-collected from~~There can be no assurance that the ~~lower nostrils. After users swab their lower nostrils, the test stick is swirled~~exploration of strategic alternatives will result in ~~a pre-measured buffer solution. No instrumentation, batteries, smart phone~~any agreements or ~~laboratory analysis is needed to read the result, which appears~~transactions, or that, if completed, any agreements or transactions will be successful or on ~~the test stick a short time later. During the third quarter of 2021 and for nine-month period ending September 30, 2021, we recorded $7.7 million of InteliSwab~~TM ~~sales.~~

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

In September 2021, we entered into a contract with the Defense Logistics Agency ("DLA") for the procurement of our InteliSwab™ COVID-19 Rapid Test for OTC use, which the DLA estimated to have a value of $205 million. Under the terms of the contract, the Company will provide its InteliSwab™ COVID-19 Rapid Test to up to 25,000 sites throughout the United States. The contract will run from October 2021 through September 2022.attractive terms.

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.

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

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

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, our consolidated net revenues increased ~~56%~~16% to ~~$170.1~~$67.7 million, compared to ~~$108.9~~$58.6 million for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. Net product and services revenues during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 increased ~~56%~~15% when compared to the same period of ~~2020,~~2021, largely due to ~~increased~~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 ~~across all products lines, other than our international HIV self-test. The biggest contributors~~in the first quarter of 2021. Also contributing to the increase in revenues was higher genomics sales and increased ~~revenues for the period were higher~~international sales of our ~~genomics products and~~HIV product. Declines in sales of our molecular sample collection kits for COVID-19 testing and ~~the first time inclusion of~~in domestic sales of our ~~InteliSwab~~TM ~~COVID-19 rapid tests.~~HIV products partially offset these positive drivers of revenue. Other revenues for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 were ~~$4.6~~$2.5 million compared to ~~$2.9~~$2.0 million in the same period of ~~2020.~~2021. This increase was largely due to ~~increased~~ research and development funding for ~~the development~~510(k) clearance and CLIA waiver of our InteliSwab®COVID-19 ~~tests and higher~~rapid test partially offset by lower royalty income.

Our consolidated net loss for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$12.6~~$20.0 million, or ~~$0.18~~$(0.28) per share on a fully diluted basis, compared to a consolidated net ~~loss~~income of ~~$16.8~~$3.8 million, or ~~$0.25~~$0.05 per share on a fully diluted basis, for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. Results for the ~~nine~~three months ended September 30, 2021 included a $1.5 million non-cash pre-tax benefit associated with the change in the fair value of acquisition-related contingent consideration which accounted for approximately $0.02 per share. ~~Results for the nine months ended September 30, 2020 included~~ ~~a $390,000 non-cash pre-tax charge associated with the change in the fair value of acquisition-related contingent consideration~~March 31, 2022 were impacted by lower gross margins rates caused by manufacturing inefficiencies and ~~$393,000 of acquisition related transaction~~nonrecurring costs associated with ~~the UrSure acquisition, which together accounted for approximately $0.01 per share.~~our strategic alternatives process and our CEO transition.

Cash used in operating activities during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$22.6~~$35.8 million. Cash ~~provided by~~used in operating activities during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~$2.2~~$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 ~~September 30, 2021,~~March 31, 2022, we had ~~$202.3~~$112.2 million in cash, cash equivalents and available-for-sale ~~securities, compared to $257.1 million at December 31, 2020.~~

Three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~September 30, 2020~~March 31, 2021

The table below shows a breakdown of total consolidated net revenues (dollars in thousands) generated by each of our business segments during the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Consolidated net product and services revenues increased ~~14%~~15% to ~~$53.2~~$65.2 million for the three months ended ~~September 30, 2021~~March 31, 2022 from ~~$46.7~~$56.6 million for the three months ended ~~September 30, 2020.~~March 31, 2021. The increase in revenues ~~was~~ is largely ~~driven by increased genomic product sales and~~due to the ~~first time~~ inclusion of s~~ales~~$22.1 million of ~~our~~ InteliSwabTM® COVID-19 rapid ~~tests, partially offset by a decline~~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 ourmolecular sample collection kits for COVID-19 ~~testing.~~testing and in domestic sales of our HIV products partially offset these positive drivers of revenue. Other revenues for the three months ended ~~September 30, 2021 decreased 45%~~March 31, 2022 increased 23% to ~~$688,000~~$2.5 million from ~~$1.3~~$2.0 million for the three months ended ~~September 30, 2020~~March 31, 2021 due to ~~expected lower~~ research and development funding for ~~the development~~510(k) clearance and CLIA waiver of our InteliSwab®COVID-19 ~~tests and our HIV medication adherence tests~~rapid test partially offset by lower royalty income..

Consolidated net revenues derived from products sold to customers outside of the United States were ~~$10.9~~$9.7 million and ~~$9.4~~$9.5 million, or ~~20%~~14% and 16% of total net revenues, ~~in each period,~~ for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Because the majority of our international sales are denominated in U.S. dollars, the impact of fluctuating foreign currency exchange rates was not material to our total consolidated net revenues.

The table below shows a breakdown of total net revenues (dollars in thousands) generated by our Diagnostics segment during the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

~~Sales to the infectious disease testing market decreased 2% to $12.9~~COVID-19 revenues were $22.1 million for the three months ended ~~September 30,~~March 31, 2022, driven by sales of our InteliSwab® COVID-19 rapid test. We first began selling this product in August of 2021 ~~from $13.2~~and there are no comparable sales in the first quarter of 2021.

Sales to the other infectious disease testing markets increased 3% to $11.7 million for the three months ended ~~September 30, 2020.~~March 31, 2022 from $11.4 million for the three months ended March 31, 2021. This ~~decrease~~increase resulted from ~~lower world-wide~~higher international OraQuick® HIV and ~~international~~world-wide OraQuick® HCV product sales, partially offset by ~~higher~~lower domestic OraQuick® ~~HCV product~~HIV sales.

The table below shows a breakdown of our total net OraQuick® HIV and HCV product revenues (dollars in thousands) during the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Domestic OraQuick® HIV sales decreased ~~12%~~29% to ~~$3.4~~$3.8 million for the three months ended ~~September 30, 2021~~March 31, 2022 from ~~$3.9~~$5.3 million for the three months ended ~~September 30, 2020,~~March 31, 2021, primarily as a result of a large first quarter 2021 order of our OraQuick® In-Home HIV test shipped to the ~~timing~~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 ~~orders placed for our~~ ~~OraQuick~~® ~~In-Home test.~~2022.

International sales of our OraQuick® HIV tests ~~decreased 4%~~increased 26% to ~~$6.6~~$4.4 million for the three months ended ~~September 30, 2021~~March 31, 2022 from ~~$6.9~~$3.5 million for the three months ended ~~September 30, 2020.~~ ~~This decline~~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 ~~was primarily due to lower subsidies for~~in the ~~international sale~~first quarter of ~~our HIV Self-Test under the charitable support agreement with the Gates Foundation. The Gates agreement and subsidy provided thereunder expired on June 30, 2021.~~2022.

Domestic OraQuick® HCV sales increased ~~54%~~72% to ~~$1.8~~$2.0 million for the three months ended ~~September 30, 2021~~March 31, 2022 from $1.2 million for the three months ended ~~September 30, 2020, due~~March 31, 2021, driven by the timing of certain orders which occurred in the first quarter of 2022, compared to the ~~re-opening~~second quarter of ~~testing programs previously closed as a result of the COVID-19 pandemic and as resources used for COVID-19 testing and vaccinations were redirected back to HCV testing.~~2021.

International OraQuick® HCV sales ~~decreased 14% to $888,000~~remained largely flat at $1.2 million for both the three months ended ~~September 30, 2021 from $1.0~~March 31, 2022 and 2021.

Sales to the substance abuse testing assessment market increased 30% to $2.6 million for the three months ended ~~September 30, 2020 due~~March 31, 2022 compared to ~~customer ordering patterns.~~

~~During the three months ended September 30, 2021, COVID-19 revenues were $7.7 million, driven by the first time sales of our InteliSwab~~TM ~~COVID-19 rapid test which were limited by manufacturing constraints in the quarter.~~

~~Sales to the risk assessment market increased 19% to $2.7~~$2.0 million for the three months ended ~~September 30,~~March 31, 2021 ~~compared to $2.3 million for the three months ended September 30, 2020~~ due to ~~hiring increases driven by the economic recovery from the COVID-19 pandemic.~~market share gains.

Other revenues for the three months ended ~~September 30, 2021 decreased~~March 31, 2022 increased to ~~$230,000~~$1.9 million from ~~$774,000~~$1.2 million for the three months ended ~~September 30, 2020,~~March 31, 2021, due to ~~lower~~ research and development funding for ~~the development~~510(k) clearance and CLIA waiver of our InteliSwab®COVID-19 ~~tests and our HIV medication adherence tests~~.rapid test partially offset by lower royalty income.

The table below shows a breakdown of our total net revenues (dollars in thousands) during the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Sales of our genomics products increased ~~125%~~40% to ~~$19.0~~$15.1 million for the three months ended ~~September 30, 2021~~March 31, 2022, compared to ~~$8.5~~$10.8 million for the three months ended ~~September 30, 2020,~~March 31, 2021, as ~~this product line experienced a strong rebound from the impact~~result of ~~the COVID-19 pandemic in the prior period and benefited from~~increased sales to several commercial customers due to customer ordering patterns, ~~of our larger customers.~~organic growth, and a return to pre-COVID-19 ordering levels.

Microbiome kit sales increased ~~11%~~14% to ~~$1.7~~$2.0 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$1.5~~$1.8 million for the three months ended ~~September 30, 2020, due to customer ordering patterns.~~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 ~~67%~~68% to ~~$6.3~~$8.9 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$18.8~~$28.0 million during the comparable period in ~~2020~~2021 due to lower COVID-19 PCR testing ~~demand and~~sales to our core customers, driven by the ~~impact~~availability of antigen tests, the wider availability of ~~vaccines.~~vaccines and high inventory levels held by some of those customers.

Laboratory services revenues ~~increased 6%~~declined 31% to ~~$2.4~~$1.7 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$2.3~~$2.5 million for the three months ended ~~September 30, 2020~~ March 31, 2021 as the business continues to be impacted by delays in customer clinical trials due to ~~customers resuming activities delayed by the COVID-19 pandemic~~.COVID-19.

Other product and service revenues increased ~~309%~~442% to ~~$576,000~~$1.1 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$141,000~~$208,000 for the three months ended ~~September 30, 2020~~March 31, 2021 largely due to increased sales ofby our ~~Colli-Pee® collection device.~~Novosanis subsidiary.

Other revenues for the three months ended ~~September 30, 2021~~March 31, 2022 decreased 6%29% to ~~$458,000~~$557,000 from ~~$488,000~~$790,000 for the three months ended ~~September 30, 2020,~~March 31, 2021, largely as a result of lower royalty income received under a litigation settlement agreement.

Consolidated gross profit ~~percentage was 40%~~margins were 36% for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~63%~~65% for the three months ended ~~September 30, 2020.~~March 31, 2021. The decrease in gross profit ~~percentage~~margins was primarily due to a less favorable product mix, increased scrap expense, lower absorption of labor, and ~~lower~~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 ~~September 30, 2021~~March 31, 2022 was ~~$13.0~~$16.0 million, a ~~$17.4~~$26.4 million decrease from the ~~$4.4~~$10.4 million operating income reported for the three months ended ~~September 30, 2020.~~March 31, 2021. Results for the three months ended ~~September 30, 2021~~March 31, 2022 were negatively impacted by the lower gross profit ~~percentage and~~margin described above coupled with an increase in operating ~~expenses.~~expenses as described below.

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

The gross profit ~~percentage~~margin for the Diagnostics segment was ~~16%~~19% for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~44%~~43% for the three months ended ~~September 30, 2020.~~March 31, 2021. This decrease is due to ~~an increase~~inefficiencies in ~~scrap costs associated with the production of~~ our InteliSwabTM ®~~test,~~ manufacturing process including high scrap rates at the beginning of 2022 and ~~the recording of a reserve for COVID-19 antibody inventory, lower absorption~~under-absorption of labor costs as ~~we have increased headcount in anticipation~~well a less favorable product mix and the June 2021 expiration of ~~higher production demands, and~~ ~~lower~~ subsidies ~~for the international sale of our HIV Self-Test~~ under the ~~charitable~~ support agreement with the Gates ~~Foundation~~Foundation. The inefficiencies in our InteliSwab.® manufacturing process were largely corrected by the end of the first quarter of 2022.

Research and development expenses ~~increased 3%~~decreased 16% to ~~$5.9~~$5.5 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$5.7~~$6.6 million for the three months ended ~~September 30, 2020~~March 31, 2021 largely due to ~~higher~~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, 2022 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 ~~to investigate InteliSwab~~TM ~~manufacturing issues,~~were partially offset by a decline in ~~COVID-19 lab supply costs associated with reduced product development activities from the prior year period. Sales and marketing expenses increased 83% to $9.0 million~~reserves for ~~three months ended September 30, 2021 from $4.9 million for the three months ended September 30, 2020~~ ~~due to an increase in advertising spend associated with the introduction of our InteliSwab~~TM ~~test into the market, higher commissions associated with the revenue increase, and increased consulting expense associated with business strategy planning~~uncollectible accounts. General and administrative expenses increased ~~24%~~112% to ~~$8.0~~$13.7 million for the three months ended ~~September 30, 2021~~March 31, 2022 from ~~$6.5~~$6.4 million for the three months ended ~~September 30, 2020~~March 31, 2021 largely due to increased ~~business development~~ consulting ~~spend,~~costs, higher stock compensation expense associated with accelerated vesting of shares under our former CEO's employment agreement, increased legal costs, higher staffing costs associated with increased ~~headcount~~head count, and higher ~~recruiting expenses. We are anticipating higher operating expenses in the fourth quarter of 2021 as several of~~recruitment expense largely associated with our ~~on-going InteliSwab~~TM post marketing clinical studies will lead to higher research and development expenses. In addition, we expect higher sales and marketing and general and administrative costs as we prepare for significant commercial ramp up of our InteliSwabTM ~~business in 2022.~~CEO search.

All of the above contributed to the Diagnostics segment’s operating loss of ~~$18.6~~$19.8 million for the three months ended ~~September 30, 2021,~~March 31, 2022, which included non-cash charges of ~~$1.1~~$1.7 million for depreciation and amortization and ~~$1.9~~$3.1 million for stock-based compensation. The Diagnostics

segment operating loss also included a non-cash pre-tax benefit of ~~$500,000~~$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.

The gross profit ~~percentage~~margins for the Molecular Solutions segment was 58% for the three months ended ~~September 30, 2021~~March 31, 2022 compared to 73% for the three months ended ~~September 30, 2020.~~March 31, 2021. This decrease was due to a less favorable product ~~mix associated with the higher sales of lower gross profit percentage product and an increase in costs at our third party contract manufacturers resulting from the capacity expansion at those vendors.~~mix.

Research and development expenses increased ~~17%~~20% to ~~$2.7~~$2.9 million for the three months ended ~~September 30, 2021~~March 31, 2022 from ~~$2.3~~$2.4 million for the three months ended ~~September 30, 2020~~March 31, 2021 due to higher staffing costs. Sales and marketing expenses increased ~~67%~~39% to ~~$4.9~~$4.6 million for the three months ended ~~September 30, 2021~~March 31, 2022 from ~~$2.9~~$3.3 million for the three months ended ~~September 30, 2020~~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, and higher staffing costs~~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 ~~23%~~47% to ~~$4.4~~$5.5 million for the three months ended ~~September 30, 2021~~March 31, 2022 from ~~$3.6~~$3.7 million for the three months ended ~~September 30, 2020~~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 ~~$5.6~~$3.8 million for the three months ended ~~September 30, 2021,~~March 31, 2022, which included ~~$2.2~~$2.0 million for depreciation and amortization and ~~$301,000~~$396,000 for stock-based compensation.

We continue to believe the full valuation allowance established against our total U.S. deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed. For the three months ended ~~September 30, 2021,~~March 31, 2022, we recorded a U.S. state tax ~~benefit~~expense of ~~$102,000~~$216,000 compared to ~~a $629,000~~$169,000 of state income tax ~~benefit~~expense for the three months ended ~~September 30, 2020.~~March 31, 2021. Additionally, in the first quarter of 2022, we recorded approximately $1.7 million of withholding taxes due to the Canada Revenue Agency associated with our repatriation of $65.0 million of cash from Canada to the United States. For the three months ended ~~September 30, 2021,~~March 31, 2022, we recorded foreign tax expense of ~~$2.2~~$2.0 million compared to foreign tax expense of ~~$4.3~~$6.4 million for the three months ended ~~September 30, 2020. The~~March 31, 2021. This overall decrease in foreign tax expense is largely a result of the decrease in income before taxes generated by our Canadian subsidiary.

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

Consolidated net product and services revenues increased 56% to $165.5 million for the nine months ended September 30, 2021 from $106.0 million for the comparable period of 2020, largely due to increased revenues across all products lines, other than our international HIV self-test. The biggest contributors to the increased revenues for the period were higher sales of our genomics products and our molecular sample collection kits for COVID-19 testing and the first time inclusion of sales of our InteliSwabTM COVID-19 rapid tests. Other revenues for the nine months ended September 30, 2021 increased 57% to $4.6 million from $2.9 million for the nine months ended September 30, 2020. This increase was largely due to increased research and development funding for the development of our COVID-19 tests and higher royalty income.

Consolidated net revenues derived from products sold to customers outside of the United States were $30.4 million and $26.7 million, or 18% and 25% of total net revenues, in the first nine months of 2021 and 2020, respectively. Because the majority of our international sales are denominated in U.S. dollars, the impact of fluctuating foreign currency exchange rates was not material to our total consolidated net revenues.

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

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

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

~~Domestic OraQuick~~® ~~HIV sales increased 10% to $12.5 million for the nine months ended September 30, 2021 from $11.3 million for the nine months ended September 30, 2020. This increase was primarily the result of higher~~ ~~sales of our OraQuick~~® ~~In-Home HIV test used in a Centers for Disease Control and Prevention ("CDC") initiative to drive increased in-home HIV testing~~.

~~International sales of our OraQuick~~® HIV tests decreased 2% to $17.3 million for the nine months ended September 30, 2021 from $17.7 million for the nine months ended September 30, 2020 largely due to pricing associated with the expiration of the Gates Foundation subsidy for certain international tests.

~~Domestic OraQuick~~® HCV sales increased 62% to $5.6 million for the nine months ended September 30, 2021 from $3.4 million for the nine months ended September 30, 2020 due to the re-opening of testing programs previously closed as a result of the COVID-19 pandemic and as resources used for COVID-19 testing and vaccinations were redirected back to HCV testing.

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

~~During the nine months ended September 30, 2021, COVID-19 revenues were $7.9 million, driven by the first time sales of our InteliSwab~~TM ~~COVID-19 rapid antigen test which began in the third quarter of 2021.~~

Sales to the risk assessment market increased 7% to $7.3 million for the nine months ended September 30, 2021 compared to $6.8 million for the nine months ended September 30, 2020 due to hiring increases driven by the economic recovery from the COVID-19 pandemic.

Other revenues for the nine months ended September 30, 2021 increased to $2.5 million from $1.1 million for the nine months ended September 30, 2020, largely due higher research and development funding for our COVID-19 tests and the inclusion of royalty income under the terms of a new licensing agreement related to our proprietary buffer solution used for the preservation and stabilization of oral fluid specimens.

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

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

Microbiome kit sales increased 52% to $5.9 million for the nine months ended September 30, 2021 compared to $3.9 million for the nine months ended September 30, 2020 due to a recovery in the market from the COVID-19 pandemic.

Sales of our molecular sample collection kits for COVID-19 testing increased 66% to $46.2 million for the nine months ended September 30, 2021 compared to $27.9 million during the comparable period in 2020 due to increased demand as the COVID-19 pandemic began late in the first quarter of 2020 and testing ramped up in the second and third quarters of 2020 and continued into the first half of 2021 contributing to the revenue growth for the nine month period.

Laboratory services revenues increased 18% to $8.0 million for the nine months ended September 30, 2021 compared to $6.8 million for the nine months ended September 30, 2020, due to customers resuming activities delayed by the COVID-19 pandemic.

Other product and service revenues increased 64% to $1.2 million for the nine months ended September 30, 2021 compared to $752,000 for the nine months ended September 30, 2020 due to increased sales of our Colli-Pee® collection device.

Other revenues for the nine months ended September 30, 2021 increased 12% to $2.1 million from $1.8 million for the nine months ended September 30, 2020 largely as a result of higher royalty income received under a litigation settlement agreement.

Consolidated gross profit percentage was 53% for the nine months ended September 30, 2021 compared to 59% for the nine months ended September 30, 2020. Gross profit percentage for the nine months ended September 30, 2021 declined as a result of increased scrap expense, lower absorption of labor costs, and lower subsidies under the charitable support agreement with the Gates Foundation, partially offset by ~~an improved product mix associated with an increase in higher gross profit percentage product sales.~~

Consolidated operating loss for the nine months ended September 30, 2021 was $793,000 a $12.3 million improvement from the $13.1 million operating loss reported for the nine months ended September 30, 2020. ~~Results~~ ~~for the nine months ended September 30, 2021were positively~~

~~impacted by the increased revenues and the inclusion of an $1.5 million non-cash benefit relatedto the fair value change in acquisition-related contingent consideration partially offset by the lower gross profit percentage and increased operating expenses.~~

~~The gross profit percentage for the Diagnostics segment was 29% for the nine months ended September 30, 2021 compared to 43% for the nine months ended September 30, 2020.This decrease was due to an increase in scrap costs associated with the production of our InteliSwab~~TM ~~test and the recording of a reserve for COVID-19 antibody inventory, and lower absorption of labor costs as we have increased headcount in anticipation of higher production demands~~.

Research and development expenses increased 29% to $17.4 million for the nine months ended September 30, 2021 from $13.5 million for the nine months ended September 30, 2020, largely due to higher staffing costs and increased COVID-19 product development expenses. Sales and marketing expenses increased 35% to $21.7 million for the nine months ended September 30, 2021 from $16.1 million for the nine months ended September 30, 2020, due to higher market research and advertising spending associated with the ~~introduction of our InteliSwab~~TM ~~test into the market~~, higher commissions directly related to the increase in revenues and increased consulting costs associated with business strategy planning. General and administrative expenses increased 4% to $21.6 million for the nine months ended September 30, 2021 from $20.7 million for the nine months ended September 30, 2020 due to higher staffing costs associated with increased headcount, and higher business development consulting costs, partially offset by lower legal fees, a lower allocation of building costs as administrative space was repurposed for manufacturing, and increased intercompany service fees allocated to the Molecular Solutions segment.

All of the above contributed to the Diagnostics segment’s operating loss of $42.8 million for the nine months ended September 30, 2021, which included non-cash charges of $3.0 million for depreciation and amortization and $4.7 million for stock-based compensation. The Diagnostics segment operating loss also included a non-cash pre-tax benefit of $1.5 million associated with the change in the fair value of acquisition-related contingent consideration.

~~The gross profit percentage for the Molecular Solutions segment was 66% for the nine months ended September 30, 2021 compared to 69% for the nine months ended September 30, 2020. This decrease is due~~ ~~a less favorable product mix associated with increased sales of lower gross profit percentage product and increased costs at our third party contract manufacturers.~~

Research and development expenses increased 11% to $7.9 million for the nine months ended September 30, 2021 from $7.1 million for the nine months ended September 30, 2020 due to increased staffing and consulting costs. Sales and marketing expenses increased 31% to $12.1 million for the nine months ended September 30, 2021 from $9.2 million for the nine months ended September 30, 2020 due to higher staffing costs, increased consulting costs associated with business strategy planning, and an increase in our reserve for uncollectible accounts. General and administrative expenses increased 24% to $12.1 million for the nine months ended September 30, 2021 from $9.7 million for the nine months ended September 30, 2020 due to increased intercompany service fees allocated from the Diagnostics segment, estimated penalties incurred on delinquent sales tax filings that were not recognized in the prior year period, higher staffing costs, and increased legal fees.

All of the above contributed to the Molecular Solutions segment’s operating income of $42.0 million for the nine months ended September 30, 2021, which included $5.5 million for depreciation and amortization and $496,000 for stock-based compensation.

We continue to believe the full valuation allowance established against our total U.S. deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed. For the nine months ended September 30, 2021, we recorded U.S. state tax expense of $13,000 compared to $612,000 of state income tax benefit for the nine months ended September 30, 2020. For the nine months ended September 30, 2021, we recorded foreign tax expense of $12.2 million compared to foreign tax expense of $6.3 million for the nine months ended September 30, 2020. The overall increase in tax expense is largely a result of the increase in income before taxes generated by our Canadian subsidiary.

Our cash and cash equivalents and available-for-sale securities decreased to ~~$202.3~~$112.2 million at ~~September 30, 2021~~March 31, 2022 from ~~$257.1~~$170.1 million at December 31, ~~2020.~~2021. Our working capital decreased to ~~$235.1~~$212.8 million at ~~September 30, 2021~~March 31, 2022 from ~~$242.4~~$220.4 million at December 31, ~~2020.~~2021.

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, net cash used in operating activities was ~~$22.6~~$35.8 million. Our net loss of ~~$12.6~~$20.0 million included non-cash charges for depreciation and amortization expense of ~~$8.5~~$3.7 million, stock-based compensation expense of ~~$5.2~~$3.5 million, ~~a provision for doubtful accounts~~an inventory reserve of ~~$1.2~~$1.1 million, and other non-cash expense of ~~$105,000. Operating activities also included a benefit for the change in the estimated fair value of acquisition-related contingent consideration of~~ $1.5 million and a $142,000 contingent consideration payment representing the excess of the total contingent consideration payment made during the nine months ended September 30, 2021 over the fair value of the liability estimated at the time of acquisition. Sources of cash generated frommillion. Cash used to fund our working capital accounts included an increase in accounts receivable of $15.3 million largely associated with end of the quarter shipments of product to the U.S. government, an increase in inventory of $9.4 million to meet anticipated demand to support COVD-19 testing programs, and a ~~$2.8~~$4.6 million decrease in accrued expenses and other liabilities largely due to payment of our 2021 bonuses. Offsetting these uses of cash was a $4.4 million increase in accounts payable due to the timing of invoices received and payments ~~made and an increase in accrued expenses and other liabilities of $982,000~~ made.~~associated with increased accruals for professional fees and higher sales tax payable~~. Offsetting these sources of cash were an increase in inventory of $21.7 million to meet anticipated demand to support COVID-19 testing programs, an increase in accounts receivable of $2.1 million due to orders placed late in the quarter, an increase in prepaid expenses and other assets of $1.9 million ~~due to prepayments made on a manufacturing contract~~ ~~and~~ ~~a decrease in deferred revenue of $1.3 million due to the recognition of revenue from customer prepayments.~~

Net cash ~~provided by~~used in investing activities was ~~$776,000~~$9.9 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, which reflects proceeds from the maturities and redemptions of investments of ~~$53.8 million~~$12.1 million. This was offset by ~~$27.5~~$20.2 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 million to build additional manufacturing capacity ~~and $25.5~~as required by our $109 million ~~used~~agreement with the U.S. Department of Defense (the “DOD”), which is expected to ~~purchase investments.~~be reimbursed in the second quarter of 2022.

Net cash used in financing activities was ~~$3.1~~$1.4 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, which ~~reflects $1.9~~is largely comprised of $1.0 million used for the repurchase of common stock to satisfy withholding taxes related to the vesting of restricted shares awarded to our ~~employees, payments of lease liabilities of $1.1 million and $264,000 used for payment of our contingent consideration obligation, partially offset by proceeds from stock option exercises of $247,000.~~employees.

We expect current balances of cash and cash equivalents and available-for-sale securities to be sufficient to fund our current and foreseeable operating and capital needs. Our cash requirements, however, may vary materially from those now planned due to many factors, including, but not limited to, the timing of reimbursement under our $109 million DOD contract, the scope and timing of future strategic acquisitions, the progress of our research and development programs, the scope and results of clinical testing, the cost of any future litigation, the magnitude of capital expenditures, ~~including continued investment to expand our capacity to manufacture products for COVID-19 testing,~~ changes in existing and potential relationships with business partners, the timing and cost of obtaining regulatory approvals, the timing and cost of future stock purchases, the costs involved in obtaining and enforcing patents, proprietary rights and any necessary licenses, the cost and timing of expansion of sales and marketing activities, market acceptance of new products, competing technological and market developments, the impact of the current economic environment and other factors. In addition, ~~$129.2~~$72.7 million or ~~64%~~65% of our ~~$202.3~~$112.2 million in cash, cash equivalents and available-for-sale securities belongs to our Canadian subsidiary. ~~Repatriation~~In the first quarter of ~~such~~2022, we repatriated $65.0 million of cash from Canada into the United States ~~exceeding certain levels~~and incurred approximately $1.7 million of Canadian withholding tax. Further repatriation of cash from Canada into the United States could have additional adverse tax consequences. It is our intention going forward to continue to permanently reinvest the historical undistributed earnings of our foreign subsidiaries.

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our judgments and estimates, including those related to the bad debts, customer sales returns, inventories, intangible assets, income taxes, revenue recognition, performance-based compensation, contingencies and litigation. We base our judgments and estimates on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

A more detailed review of our critical accounting policies is contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed with the SEC. During the first ~~nine~~three months of ~~2021,~~2022, there were no material changes to our critical accounting policies.

We do not hold any amounts of derivative financial instruments or derivative commodity instruments and, accordingly, we have no material derivative risk to report under this Item.

As of ~~September 30, 2021,~~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 ~~5.2%~~5.1% of our total revenues for the ~~nine~~three months ended ~~September 30, 2021.~~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 ~~$194.2~~$139.4 million in U.S. Dollars, which are included in the Company’s consolidated balance sheet as of ~~September 30, 2021.~~March 31, 2022. A 10% unfavorable change in the Canadian-to-U.S. dollar and Euro-to-U.S. dollar exchange rates would have decreased our comprehensive income by approximately ~~$16.8~~$13.9 million in the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

(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 ~~September 30, 2021.~~March 31, 2022. Based on that evaluation, the Company’s management, including such officers, concluded that the Company’s disclosure controls and procedures were effective as of ~~September 30, 2021~~March 31, 2022 to provide reasonable assurance that material information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 was accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure and was recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

(b) Changes in Internal Control Over Financial Reporting. There was no change in the Company’s internal control over financial reporting that occurred during the three months ended ~~September 30, 2021~~March 31, 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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

In March 2021, we filed a complaint against Spectrum Solutions, LLC ("Spectrum") in the United States District Court for the Southern District of California alleging that certain saliva collection devices manufactured and sold by Spectrum infringe a patent held by DNAG. Spectrum has filed an answer to the initial complaint, asserting that its device does not infringe our patent and that our patent is invalid. In August 2021, we amended our complaint to add a second patent to this litigation. Spectrum responded to our amended complaint and asserted counterclaims for inequitable conduct and antitrust violations with respect to one of the patents in the litigation. ~~We believe Spectrum's counterclaims are without merit and we~~DNAG filed a motion to dismiss ~~both claims~~Spectrum’s counterclaims in October ~~2021.~~2021, which was denied by the Court on March 30, 2022. On April 8, 2022, the Court assigned a new judge to preside over the matter, which vacated all dates for the trial. We ~~are seeking injunctive relief and damages in this matter.~~await new dates to be set by the Court.

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

~~Our U.S. Government Contracts Require Compliance With Numerous Laws and Increases Our Risk and Liability.~~2021.

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

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

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

As a U.S. government contractor, we are subject to increased risks of investigation, criminal prosecution and other legal actions and liabilities to which purely private sector companies are not. The results of any such actions could adversely impact our business and have an adverse effect on our consolidated financial performance. The U.S. government recently announced that federal contractors who are party to a broad range of contracts with the government must require their employees to be vaccinated against the COVID-19 virus and comply with current masking and social distancing safety procedures. If we become subject to these requirements, we could experience a loss of personnel and difficulty in recruiting new employees, each of which could adversely affect our business.

A violation of specific laws and regulations could result in the imposition of fines and penalties or the termination of our contracts, as well as suspension or debarment. The suspension or debarment in any particular case may be limited to the facility, contract or subsidiary involved in the violation or could be applied to our entire enterprise in certain severe circumstances. Even a narrow scope suspension or debarment could result in negative publicity that could adversely affect our ability to renew contracts and to secure new contracts, both with the U.S. government and private customers, which could materially and adversely affect our business and results of operations. Fines and penalties could be imposed for failing to follow procurement integrity and bidding rules, employing improper billing practices or otherwise failing to follow rules relating to billing on cost-plus contracts, receiving or paying kickbacks, or filing false claims, among other potential violations. In addition, we could suffer serious reputational harm and the value of our common stock could be negatively affected if allegations of impropriety related to such contracts are made against us.

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

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

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

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

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

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

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

+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.

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.



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)



	Page No.

Item 1. Financial Statements (Unaudited)

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

Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	4

Consolidated Statements of Comprehensive Income (Loss) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	5

Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	6

Notes to the Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1817

Item 3. Quantitative and Qualitative Disclosures About Market Risk	2925

Item 4. Controls and Procedures	2925

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	2925

Item 1A. Risk Factors	2925

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3126

Item 3. Defaults Upon Senior Securities	3126

Item 4. Mine Safety Disclosures	3126

Item 5. Other Information	3126

Item 6. Exhibits	3227

Signatures	3328


	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	)


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



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐


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


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



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


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


	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


	Three Months Ended September 30,
	Dollars								Percentage of Total Net Revenues
	2021		2020		% Change				2021			2020
Diagnostics	$	23,281	$	15,540		50		%		43	%		32	%
Molecular Solutions		29,948		31,209		(4	)			56			65
Net product and services revenues		53,229		46,749		14				99			97
Other		688		1,262		(45	)			1			3
Net revenues	$	53,917	$	48,011		12		%		100	%		100	%


	For the Three Months Ended 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 September 30,
Market	2021		2020		% Change
Domestic HIV	$	3,440	$	3,909		(12	)	%
International HIV		6,582		6,865		(4	)
Net HIV revenues		10,022		10,774		(7	)
Domestic HCV		1,827		1,186		54
International HCV		888		1,033		(14	)
Net HCV revenues		2,715		2,219		22
Net OraQuick® revenues	$	12,737	$	12,993		(2	)	%


	September 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
	(In thousands)				(In thousands)
Cash and cash equivalents	$	134,962	$	160,802	$	70,721	$	116,762
Available for sale securities		67,336		96,317		41,503		53,288
Working capital		235,060		242,404		212,777		220,367


Period	Total number of shares purchased			Average price paid per Share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number (or approximate dollar value) of shares that may yet be repurchased under the plans or programs (1, 2)
July 1, 2021 - July 31, 2021		594	(3)	$	10.40		—		11,984,720
August 1, 2021 - August 31, 2021		3,673	(3)		11.15		—		11,984,720
September 1, 2021 - September 30, 2021		—			—		—		11,984,720
		4,267					—



Exhibit Number		Exhibit

10.1* ***		~~Change~~Transition Agreement dated as of ~~Control Severance Letter of Michele Miller, Vice President, Finance~~January 2, 2022, between OraSure Technologies, Inc. and ~~Controller.~~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**		~~$109 million Capital Funding~~Employment Agreement ~~With~~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 ~~U.S. Department of Defense, in coordination with the Department of Health and Human Services~~Company's Current Report on Form 8-K Filed on March 23, 2022..

10.3**10.3		~~Description of~~Industrial Lease between Core5 at Laughman Farms Phase 1, LLC as Landlord and OraSure Technologies, Inc. ~~2021 Incentive Plan~~as Tenant, dated January 3, 2022, is incorporated by reference to ~~Item 5.02~~Exhibit 10.30 to the Company's ~~Current~~Annual Report on ~~Form 8-k~~form 10-K filed ~~August 13, 2021~~March 1, 2022..

10.4**		~~Description of Long Term Incentive Policy and 2021 Award Performance Measures is incorporated by reference to Item 5.02 to the Company's Current Report on Form 8-k filed August 13, 2021~~.

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

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

32.1*+		Certification of ~~Stephen S. Tang~~Nancy J. Gagliano, M.D., M.B.A. required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*+		Certification of Scott Gleason a required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Inline XBRL Instance Document – the Instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

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


	ORASURE TECHNOLOGIES, INC.

		/s/ Scott Gleason
Date: ~~November 4, 2021~~May 10, 2022		Scott Gleason
		Interim Chief Financial Officer
		(Principal Financial Officer)

		/s/Michele M. Miller
Date: ~~November 4, 2021~~May 10, 2022		Michele M. Miller
		Senior Vice President, ~~Finance~~Controller and ~~Controller~~Chief Accounting Officer
		(Principal Accounting Officer)