☒ 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~~May 3, ~~2022,~~2023, the registrant had ~~72,622,043~~73,262,370 shares of common stock, $0.000001 par value per share, outstanding.

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

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

These and other factors that could affect our results are discussed more fully under the section titled “Risk Factors,” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q, if any, in Part I, Item 1A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 3, 2023, and in other SEC filings. Although forward-looking statements help to provide information about future prospects, readers should keep in mind that forward-looking statements may not be reliable. Readers are cautioned not to place undue reliance on the forward-looking statements. The forward-looking statements are made as of the date of this report and we undertake no duty to update these statements, unless we are required to do so by law. If we do update one or more forward-looking statements, no inference should be drawn that we will make updates with respect to other forward-looking statements or that we will make any further updates to those forward-looking statements at any future time.

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

1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation. The accompanying interim unaudited consolidated financial statements include the accounts of OraSure Technologies, Inc. (“OraSure”) and its wholly-owned subsidiaries, DNA Genotek Inc. (“DNAG”), Diversigen, Inc. (“Diversigen”), and Novosanis NV (“Novosanis”). All intercompany transactions and balances have been eliminated. References herein to “we,” “us,” “our,” or the “Company” mean OraSure and its consolidated subsidiaries, unless otherwise indicated. The unaudited financial statements, in the opinion of management, include all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of ~~our~~the Company's financial position and results of operations for these interim periods. These financial statements should be read in conjunction with the financial statements and notes thereto included in ~~our~~the Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022. Results of operations for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the results of operations expected for the full year.

Summary of Significant Accounting Policies. There have been no changes to the Company's significant accounting policies described in ~~our~~its Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 that have had a material impact on the consolidated financial statements and related notes except as discussed herein. See Note 11 for the discussion regarding the change in business segments.

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

~~We record~~The Company records an allowance for credit loss for ~~our~~its available-for-sale securities when a decline in investment market value is due to credit-related factors. When evaluating an investment for impairment, ~~we review~~the Company reviews factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. ~~During the nine months ended September 30, 2022, we recognized a provision for expected credit losses for our available-for-sale securities of $~~56.

The following is a summary of ~~our~~the Company's available-for-sale ~~securities as of September 30, 2022 and December 31, 2021:~~securities:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2022
March 31, 2023
Guaranteed investment certificates	$	21,688	$	—	$	—		$	21,688	$	22,178	$	—	$	—		$	22,178
Corporate bonds		5,011		—		(267	)		4,744		—		—		—			—
Total available-for-sale securities	$	26,699	$	—	$	(267	)	$	26,432
December 31, 2021
Total										$	22,178	$	—	$	—		$	22,178
December 31, 2022
Guaranteed investment certificates	$	33,249	$	—	$	—		$	33,249	$	22,109	$	—	$	—		$	22,109
Corporate bonds		20,473		—		(434	)		20,039		4,978		—		(220	)		4,758
Total available-for-sale securities	$	53,722	$	—	$	(434	)	$	53,288
At September 30, 2022, maturities of our available-for-sale securities were as follows:
Total										$	27,087	$	—	$	(220	)	$	26,867
At March 31, 2023, maturities of the Company's available-for-sale securities were as follows:

Less than one year	$	26,699	$	—	$	(267	)	$	26,432	$	22,178	$	—	$	—		$	22,178
Greater than one year	$	—	$	—	$	—		$	—	$	—	$	—	$	—		$	—

Fair Value of Financial Instruments. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their respective fair values based on their short-term nature.

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

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

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

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

All of ~~our~~the Company's available-for-sale ~~debt securities~~corporate bonds are measured as Level 2 instruments as of ~~September 30, 2022 and~~ December 31, ~~2021. Our~~2022. The Company's available-for-sale guaranteed investment certificates are measured as Level 1 instruments as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

Included in cash and cash equivalents at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, was $~~1,717~~6,846 and $~~1,160~~1,730 invested in ~~government~~ money market funds. These money market funds have investments in government securities and are measured as Level 1 instruments.

~~We offer~~The Company offers a nonqualified deferred compensation plan for certain eligible employees and members of ~~our~~its Board of Directors. The assets of the plan are held in the name of the Company at a third-party financial institution. Separate accounts are maintained for each participant to reflect the amounts deferred by the participant and all earnings and losses on those deferred amounts. The assets of the plan are held in mutual funds and company stock. The fair value of the plan assets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was $~~1,599~~678 and $~~1,763~~747, respectively, and was calculated using the quoted market prices of the assets as of those dates. All investments in the plan are classified as trading securities and measured as Level 1 instruments. The fair value of plan assets is included in both current assets and noncurrent assets with the same amount included in accrued expenses and other noncurrent liabilities in the accompanying consolidated balance sheets.

~~Property, Plant and Equipment~~. Property, plant and equipment are stated at cost. Additions or improvements are capitalized, while repairs and maintenance are charged to expense. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets. Buildings are depreciated over ~~twenty years, while computer equipment, machinery and equipment, and furniture and fixtures are depreciated over~~ ~~two~~ to ~~ten years~~. Building improvements are amortized over their estimated useful lives. When assets are sold, retired, or discarded, the related property amounts are relieved from the accounts, and any gain or loss is recorded in the consolidated statements of operations. Accumulated depreciation of property, plant and equipment as of September 30, 2022 and December 31, 2021 was $~~68,626~~ ~~and $61,157, respectively.~~

~~Intangible Assets~~. Intangible assets consist of customer relationships, patents and product rights, acquired technology and tradenames. Patents and product rights consist of costs associated with the acquisition of patents, licenses, and product distribution rights. Intangible assets are amortized using the straight-line method over their estimated useful lives of ~~five~~ to ~~fifteen years. Accumulated amortization of intangible assets as of September 30, 2022 and December 31, 2021 was $29,943~~ ~~and $30,412, respectively. The decrease in intangible assets from $14,343~~ ~~as of December 31, 2021 to $11,919~~ ~~as of September 30, 2022 was due to $1,617~~ ~~in amortization expense and foreign currency translation losses of $807~~.

~~Impairment of Long-Lived Assets~~. Long-lived assets, which include property and equipment and definite-lived intangible assets, are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. We assess the recoverability of our long-lived assets by determining whether the carrying value of such assets can be recovered through the sum of the undiscounted future cash flows generated from the use and eventual disposition of the asset. If indicators of impairment exist, we measure the amount of such impairment by comparing the carrying value of the assets to the fair value of these assets, which is generally determined based on the present value of the expected future cash flows associated with the use of the assets. Expected future cash flows reflect our assumptions about selling prices, volumes, costs and market conditions over a reasonable period of time.

During the three months ended September 30, 2022, management determined several manufacturing lines and associated supporting assets will not be utilized due to changes in forecasted demand for the products the lines are intended to produce. As a result of this decision, we determined that the carrying values of the equipment is not recoverable and recorded an aggregate pre-tax asset impairment charge of $~~6,559~~ ~~during the three months ended September 30, 2022 to write the assets down to their estimated fair values. This charge is reported within loss on impairment in the consolidated statement of operations.~~

We estimated the fair value of the impaired long-lived assets using a market approach, which required us to estimate the value that would be received for the equipment in the most advantageous market for that equipment in an orderly transaction between market participants. Due to the extremely specialized nature of the manufacturing equipment and various market data points, the estimated fair value was not significant. Our fair value estimates were representative of Level 3 measurements within the fair value hierarchy due to the significant level of estimation involved and the lack of transparency as to the inputs used.

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 operations in the period in which the change occurs. Net foreign exchange gains and (losses) resulting from foreign currency transactions that are included in other income in ~~our~~the Company's consolidated statements of operations were $$(~~2,342~~50) and $7729 for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. Net foreign exchange gains (losses) were $2,396~~ ~~and $(371) for the nine months ended September 30, 2022 and 2021,~~ respectively.

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


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

Immaterial Correction of Errors. Inventories, accounts payable and ~~disclose~~cost of products and services were reduced by $528, $1,329 and $801, respectively, as of and for the ~~accumulated balance~~year ended December 31, 2022 to correct for the accounting of ~~other comprehensive loss separately from accumulated deficit and additional paid-in capital~~a vendor rebate earned 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.~~2022. The ~~results of operations for those subsidiaries are translated into U.S. dollars, which is the reporting currency~~tax impact of the ~~Company. Accumulated other comprehensive loss at September 30, 2022 consisted~~vendor rebate was negligible. This correction was deemed to be immaterial to the consolidated financial statements as of $~~22,064~~ ~~of currency translation adjustments~~ and $~~267~~ ~~of net unrealized losses on marketable securities, which represents~~for the ~~fair market value adjustment for our investment portfolio. Accumulated other comprehensive loss at~~year ended December 31, ~~2021 consists~~2022. For the three months ended March 31, 2022, cost of products and services sold was reduced by $~~9,643~~ ~~of currency translation adjustments and $434~~ ~~of net unrealized losses on marketable securities, which represents the fair market value adjustment for our investments portfolio.~~

~~Recent Accounting Pronouncements~~.

~~In March 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-04,~~ ~~Reference Rate Reform~~ ~~(Topic 848)~~ ~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~27. The ~~purpose~~respective operating activities on the consolidated statement of ~~this update is~~cash flows for the three months ended March 31, 2022 has also been adjusted. Furthermore, stockholder's equity at March 31, 2022 has been adjusted to ~~provide optional guidance~~reflect the reduction in cost of products and services sold.

Reclassification. Certain prior period amounts have been reclassified to conform to current year presentations.For the three months ended March 31, 2022, $221 of research and development expenses were reclassed to other income in relation to the U.S. Department of Defense (the “DOD”) engineering consulting costs further described in Note 2. This reclassification was made to conform to the presentation in our Annual Report on Form 10-K for ~~a limited time to ease~~ the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU were effective upon issuance and could be applied prospectively throughyear ended December 31, 2022. The FASB issued a proposed amendment to the ASU in April 2022 which, if approved, will extend the date for prospective application to December 31, 2024. Management has evaluated this ASU and concluded that it will not have a material impact on the Company's Consolidated Financial Statements.

3. ~~Inventories~~

6.Termination Benefits

September 30, 2022

December 31, 2021

Raw materials

$
37,137

$
33,168

Work in process

2,499

2,252

Finished goods

39,169

17,718

$
78,805

$
53,138

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

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


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

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

7. Revenues

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


	Three Months Ended March 31,
	2023		2022

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

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

(2) Includes Genomics and Microbiome and Novosanis Products.

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

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


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

~~4. Earnings~~Customer and Vendor Concentrations. At March 31, 2023, one non-commercial customer accounted for 77% of the Company's consolidated accounts receivable. The same non-commercial customer accounted for more than 57% of the Company's consolidated accounts receivable as of December 31, 2022. The same non-commercial customer also accounted for 78% and 18% of net consolidated revenues for the three months ended March 31, 2023 and 2022, respectively.

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

Deferred Revenue. The Company records deferred revenue when funds are received prior to the recognition of the associated revenue. Deferred revenue as of March 31, 2023 and December 31, 2022 included customer prepayments of $1,358 and $1,180, respectively. Deferred revenue as of March 31, 2023 and December 31, 2022 also included $631 and $1,093, respectively, associated with a long-term contract that has variable pricing based on volume. The average price over the life of the contract was determined and revenue is recognized at that average price.

8.Income Taxes

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

Tax expense reflects taxes due to the taxing authorities and the tax effects of temporary differences between the basis of assets and liabilities recognized for financial reporting and tax purposes, and net operating loss and tax credit carryforwards. The significant components of the Company's total deferred tax liability as of March 31, 2023 and December 31, 2022 relate to the tax effects of the basis difference between the intangible assets acquired in its acquisitions for financial reporting and for tax purposes along with basis differences arising from accelerated tax depreciation of fixed assets.

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

9. Income (Loss) Per Share

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

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Net income (loss)

$
5,273

$
(15,015
)

$
(33,496
)

$
(12,605
)
Weighted-average shares of common stock outstanding:

Basic

72,616

72,023

72,448

71,962

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

169

—

—

—

Diluted

72,785

72,023

72,448

71,962

Earnings (loss) per share:

Basic

$
0.07

$
(0.21
)

$
(0.46
)

$
(0.18
)
Diluted

$
0.07

$
(0.21
)

$
(0.46
)

$
(0.18
)

For the three months ended ~~September 30,2022,~~March 31, 2022, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing ~~1,734~~463 shares, were excluded from the computation of diluted ~~earnings~~loss per ~~share as their inclusion would have been anti-dilutive.~~share. For the ~~nine~~three months ended ~~September 30, 2022, and the three and nine months ended September 30, 2021,~~March 31, 2023, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing ~~383~~, ~~859, and~~ ~~847~~2,237 shares ~~respectively,~~ were excluded from the computation of ~~diluted loss~~dilute earnings per ~~share.~~share as their inclusion would have been anti-dilutive.

10.Stockholders’ Equity


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

Balance at December 31, 2021		72,069				$	511,063		$	(10,077	)	$	(120,453	)	$	380,533
Common stock issued upon exercise of options		2			—		15			—			—			15
Vesting of restricted stock and performance stock units		352			—		—			—			—			—
Purchase and retirement of common shares		(116	)		—		(1,049	)		—			—			(1,049	)
Stock-based compensation		—			—		3,524			—			—			3,524
Net loss		—			—		—			—			(19,940	)		(19,940	)
Currency translation adjustments		—			—		—			1,756			—			1,756
Unrealized gain on marketable securities		—			—		—			74			—			74
Balance at March 31, 2022		72,307		$	—	$	513,553		$	(8,247	)	$	(140,393	)	$	364,913

11. Business Segments

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

~~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,

2022

2021

2022

2021

COVID-19

$
79,920

$
13,930

$
154,331

$
54,147

Genomics

13,980

19,018

44,558

49,333

HIV

9,054

10,022

27,577

29,745

HCV

3,234

2,715

10,182

9,382

Substance abuse

2,595

2,674

7,786

7,265

Microbiome

1,761

1,693

5,583

5,888

Laboratory services

1,957

2,406

4,895

8,017

Other product and service revenues

320

771

2,312

1,772

Net product and services revenues

112,821

53,229

257,224

165,549

Royalty income

409

500

1,735

2,636

Other non-product revenues*

3,233

188

5,442

1,921

Other revenues

3,642

688

7,177

4,557

Net revenues

$
116,463

$
53,917

$
264,401

$
170,106

*Other non-product revenues include funded research and development under our BARDA contracts and other grant revenues.

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

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

United States

$
108,941

$
42,969

$
237,248

$
139,669

Europe

2,207

2,411

8,929

10,288

Other regions

5,315

8,537

18,224

20,149

$
116,463

$
53,917

$
264,401

$
170,106

~~Customer and Vendor Concentrations. At September 30, 2022, one non-commercial customer accounted for~~ 47~~% of our accounts receivable. No customers accounted for more than~~ 10~~% of our accounts receivable as of December 31, 2021. One non-commercial customer accounted for~~ 69~~% and~~ 53~~% of net consolidated revenues for the three and nine months ended September 30, 2022, respectively. One customer accounted for~~ 14~~% of net consolidated revenues for the three months ended September 30, 2021. Another customer accounted for~~ 10~~% of net consolidated revenues for the nine months ended September 30, 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, 2022 and December 31, 2021 includes customer prepayments of $~~1,762~~ ~~and $1,843, respectively. Deferred revenue as of September 30, 2022 and December 31, 2021 also includes $774~~ ~~and $1,093~~, respectively, associated with a long-term contract that has variable pricing based on volume. The average price over the life of the contract was determined and revenue is recognized at that average price.

6.~~Goodwill~~

~~The following table represents the changes in goodwill by operating segment for the nine months ended September 30, 2022:~~

Diagnostics

Molecular Solutions

Balance as of January 1, 2022

$
3,604

$
36,675

Impairment

(3,604
)

—

Change related to foreign currency translation

—

(2,199
)
Balance as of September 30, 2022

$
—

$
34,476

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

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

We perform an annual goodwill impairment assessment as of July 31 each year. Historically this involved a qualitative analysis that resulted in a conclusion that it was more likely than not that the fair value of our reporting units is greater than their carrying value. In 2022, as a result of the depressed market price of the Company's common stock and corresponding significant decline in our market capitalization, we performed a quantitative analysis by comparing the estimated fair values of our reporting units to their respective carrying values. Our quantitative goodwill impairment test assessment as of July 31, 2022 concluded that the carrying value of our Molecular Solutions reporting unit exceeded its estimated fair value and no impairment of the related goodwill exists.

A more frequent evaluation is performed if an event occurs or circumstances change between annual tests that could more likely than not reduce the fair value of a reporting unit below its carrying amount.

7.~~Accrued Expenses and other current liabilities~~

September 30,
2022

December 31,
2021

Payroll and related benefits

$
11,263

$
15,570

Commitment to purchase under government contract

—

8,103

Professional fees

4,771

3,335

Sales tax payable

1,372

2,227

Other

8,006

4,543

$
25,412

$
33,778

~~8. Leases~~

We determine whether an arrangement is a lease at inception. We have operating and finance leases for corporate offices, warehouse space and equipment (including vehicles). As of September 30, 2022, we are the lessee in all agreements. Our leases have remaining lease terms of 1 to ~~11 years, some of which include~~ ~~options to extend~~ ~~the leases based on agreed upon terms, and some of which include~~ ~~options to terminate~~ ~~the leases within~~ ~~1 year~~.

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

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

~~The components of lease expense are as follows:~~

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Operating lease cost

$
842

$
655

$
2,352

$
1,574

Variable and short-term lease cost

332

—

559

—

Finance lease cost:

Amortization of right-of use assets

343

571

1,034

910

Interest on lease liabilities

19

49

74

84

Total finance lease cost

362

620

1,108

994

Total lease cost

$
1,536

$
1,275

$
4,019

$
2,568

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

Nine Months Ended September 30,

2022

2021

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

Operating cash flows from operating leases

$
3,659

$
1,182

Operating cash flows from financing leases

74

84

Financing cash flows from financing leases

826

1,111

Non-cash activity:

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

9,038

45

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

117

2,746

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

September 30, 2022

December 31, 2021

Operating Leases

Right-of-use assets

$
15,769

$
9,056

Lease liabilities:

Current lease liabilities

1,938

2,181

Non-current lease liabilities

14,493

7,202

Total operating lease liabilities

$
16,431

$
9,383

Finance Leases

Right-of-use assets

$
1,590

$
2,493

Lease liabilities:

Current lease liabilities

1,242

939

Non-current lease liabilities

935

1,952

Total finance lease liabilities

$
2,177

$
2,891

Weighted Average Remaining Lease Term

Weighted-average remaining lease term—operating leases

7.46 years

5.26 years

Weighted-average remaining lease term—finance leases

1.59 years

2.21 years

Weighted Average Discount Rate

Weighted-average discount rate—operating leases

4.25
%

3.90
%
Weighted-average discount rate—finance leases

3.45
%

3.57
%

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

Finance

Operating

2022 (excluding the nine months ended September 30, 2022)

$
373

$
795

2023

1,125

2,043

2024

738

2,947

2025

18

2,583

2026

11

2,385

Thereafter

—

8,800

Total minimum lease payments

2,265

19,553

Less: imputed interest

(88
)

(3,122
)
Present value of lease liabilities

$
2,177

$
16,431

~~On October 19, 2022, the Company entered into a termination agreement for a warehouse entered into on January 3, 2022, related to its~~ ~~96,010~~ ~~square foot facility in York, Pennsylvania. Pursuant to the terms of the termination agreement, the lease terminated, effective on~~ ~~October 31, 2022. The Company is not required to pay a termination fee, and has been released from all further rent obligations under the lease, resulting in ongoing annual cash savings of approximately $735. Termination will result in an operating right-of-use assets and lease liabilities reduction of $4,927~~ ~~and $5,146, respectively.~~

9.~~Stockholders’ Equity~~

Reconciliation of the changes in stockholders' equity for the three and nine months ended September 30, 2022 and 2021

Common Stock

Additional
Paid-in

Accumulated
Other
Comprehensive

Accumulated

Shares

Amount

Capital

Loss

Deficit

Total

Balance at December 31, 2021

72,069

$
—

$
511,063

$
(10,077
)

$
(120,453
)

$
380,533

Common stock issued upon exercise of options

2

—

15

—

—

15

Vesting of restricted stock and performance stock units

352

—

—

—

—

—

Purchase and retirement of common shares

(116
)

—

(1,049
)

—

—

(1,049
)
Stock-based compensation

—

—

3,524

—

—

3,524

Net loss

—

—

—

—

(19,967
)

(19,967
)
Currency translation adjustments

—

—

—

1,756

—

1,756

Unrealized gain on marketable securities

—

—

—

74

—

74

Balance at March 31, 2022

72,307

$
—

$
513,553

$
(8,247
)

$
(140,420
)

$
364,886

Common stock issued upon exercise of options

—

—

—

—

—

—

Vesting of restricted stock and performance stock units

407

—

—

—

—

—

Purchase and retirement of common shares

(142
)

—

(905
)

—

—

(905
)
Stock-based compensation

—

—

3,280

—

—

3,280

Net loss

—

—

—

—

(18,802
)

(18,802
)
Currency translation adjustments

—

—

—

(4,349
)

—

(4,349
)
Unrealized gain on marketable securities

—

—

—

82

—

82

Balance at June 30, 2022

72,572

$
—

$
515,928

$
(12,514
)

$
(159,222
)

$
344,192

Common stock issued upon exercise of options

—

—

—

—

—

—

Vesting of restricted stock and performance stock units

66

—

—

—

—

—

Purchase and retirement of common shares

(19
)

—

(54
)

—

—

(54
)
Stock-based compensation

—

—

2,296

—

—

2,296

Net income

—

—

—

—

5,273

5,273

Currency translation adjustments

—

—

—

(9,828
)

—

(9,828
)
Unrealized loss on marketable securities

—

—

—

11

—

11

Balance at September 30, 2022

72,619

$
—

$
518,170

$
(22,331
)

$
(153,949
)

$
341,890

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

~~Stock-Based Awards~~

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

~~Total compensation expense related to stock options for the nine months ended September 30, 2022 and 2021 was $1,213~~ ~~and $793, respectively.~~

~~The following table summarizes the stock option activity for the nine months ended September 30, 2022:~~


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

~~Compensation expense of $7,047and $2,891~~ ~~related to restricted shares was recognized during the nine months ended September 30, 2022 and 2021, respectively.~~

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


	~~Units~~
~~Issued and unvested, January 1, 2022~~		~~701~~
~~Granted~~		~~2,964~~
~~Vested~~		(~~618~~	)
~~Forfeited~~		(~~270~~	)
~~Issued and unvested, September 30, 2022~~		~~2,777~~

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

~~Compensation expense of $840~~ ~~and $1,471~~ ~~related to PSUs was recognized during the nine months ended September 30, 2022 and 2021, respectively.~~

~~The following table summarizes the PSU activity for the nine months ended September 30, 2022:~~


	~~Units~~
~~Issued and unvested, January 1, 2022~~		~~622~~
~~Granted~~ ~~(1)~~		~~532~~
~~Performance adjustment~~ ~~(2)~~		36
~~Vested~~		(~~207~~	)
~~Forfeited~~		(~~200~~	)
~~Issued and unvested, September 30, 2022~~		~~783~~

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

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

~~Stock Repurchase Program~~

~~On August 5, 2008, our Board of Directors approved a share repurchase program pursuant to which we are permitted to acquire up to $25,000~~ ~~of our outstanding common shares.~~ No ~~shares were purchased and retired during the nine months ended September 30, 2022 and 2021.~~

~~10.Transition costs~~

On December 31, 2021, the Company's Board of Directors approved the termination of Stephen S. Tang, the Company’s former President and Chief Executive Officer, without cause under his existing employment agreement with the Company, with such termination effective as of March 31, 2022. On January 2, 2022, Dr. Tang and the Company entered into a transition agreement ("Transition Agreement") providing for the terms of the cessation of Dr. Tang’s employment with the Company, including the cessation of his service as President and Chief Executive Officer of the Company and as a member of the Board. Dr. Tang’s service to the Company in all capacities ended on March 31, 2022.

~~Pursuant to the Transition Agreement, Dr. Tang received severance of $1,569~~, which was accrued in the consolidated financial statements at December 31, 2021 and paid in April 2022. Additionally, in accordance with his Transition Agreement, certain of his unvested time-vesting restricted stock awards and unvested PSUs that were outstanding at March 31, 2022 vested on April 8, 2022. His remaining unvested

time-vesting restricted stock awards and PSUs were forfeited on March 31, 2022. These payments, rights and benefits are substantially similar to the severance benefits contemplated by his previous employment agreement in respect to a termination without cause thereunder. In aggregate, we recognized a net $0 ~~and $1,508~~ ~~of expense in relation to Dr. Tang's stock compensation during the three and nine months ended September 30, 2022, respectively.~~

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

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

~~11.Income Taxes~~

~~During the three and nine months ended September 30, 2022, we recorded an income tax expense (benefit) of $(1,143) and $1,624, respectively. Tax expense for the nine months ended September 30, 2022 includes $1,683~~ ~~of withholding tax paid on the repatriation of $65,000~~ ~~of unremitted earnings from Canada to the United States. The remaining tax expense for the first nine months of 2022 is comprised of U.S. state income taxes of $379~~ ~~and a foreign tax benefit of $438. During the three and nine months ended September 30, 2021, we recorded income tax expense of $2,102~~ ~~and $12,241~~, respectively, which primarily consists of foreign tax expense. The decline in foreign tax expense in both periods of 2022 compared to 2021 is a result of the decrease in income before taxes generated by our Canadian subsidiary.

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

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

12. Commitments and Contingencies

Litigation

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

In March 2021, wethe Company filed a complaint against Spectrum Solutions, LLC ("Spectrum") in the United States District Court for the Southern District of California alleging that certain saliva collection devices manufactured and sold by Spectrum infringe a patent held by DNAG. Spectrum has filed an answer to the initial complaint, asserting that its device does not infringe ~~our~~the Company's patent and that ~~our~~the Company's patent is invalid. In August 2021, wethe Company amended ~~our~~its complaint to add a second patent to this litigation. Spectrum responded to ~~our~~the Company's amended complaint and asserted counterclaims for inequitable conduct and antitrust violations with respect to one of the patents in the litigation and subsequently filed a request for review of the second patent at the Patent and Trademark ~~Office. DNAG filed~~Office ("PTO"), which was granted by the PTO. On May 2, 2023, the District Court issued two orders. First, the District Court granted Spectrum’s motion for summary judgment of noninfringement, holding that Spectrum’s saliva collection devices are not “kits for collecting and preserving a biological sample,” among other rulings. The Company intends to appeal the Court’s grant of summary judgment. Second, the Court denied Spectrum’s motion to ~~dismiss Spectrum’s~~supplement its allegations of alleged antitrust violations. A separate motion by Spectrum to amend its counterclaims ~~in October 2021, which was denied by~~remains pending. An inter partes review is currently pending before the ~~Court on March 30, 2022. Fact discovery is ongoing.~~PTO regarding the second asserted patent. The final pretrial conference in the District Court is set for ~~September 7,~~October 26, 2023.

13.~~Business Segment Information~~ Subsequent Events

~~Our business consists of~~ ~~two~~ segments: our “Diagnostics” business, which primarily consists of the development, manufacture, and sale of rapid diagnostic tests used to determine if a person has a variety of infectious diseases including, HIV, HCV, and COVID-19. The Diagnostic business also manufactures and sells oral fluid substance abuse testing products. Our “Molecular Solutions” business is operated by our wholly-owned subsidiaries DNAG, Diversigen, and Novosanis. This segment of the business consists of the development, manufacture, and sale of kits that are used to collect, stabilize, transport and store a biological sample of genetic material for molecular testing. In addition, our Molecular Solutions business provides microbiome laboratory services.

~~We organized our operating segments according to~~In May 2023, the ~~nature of~~Company announced a reduction in its workforce and estimates the ~~products included in those segments. The accounting policies of the segments are the same as those described~~expense will be in the ~~summary~~range of ~~significant accounting policies (see Note 1)~~$500 to $600. ~~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~~This will be accounted for pursuant to ASC 420, Exit or ~~income taxes to our operating segments. Inter-segment revenues and expenses are eliminated.~~Disposal Cost Obligations

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

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Net revenues:

Diagnostics

$
97,651

$
23,511

$
196,416

$
57,368

Molecular Solutions

18,812

30,406

67,985

112,738

Total

$
116,463

$
53,917

$
264,401

$
170,106

Operating income (loss):

Diagnostics

$
11,289

$
(18,446
)

$
(20,274
)

$
(42,413
)
Molecular Solutions

(10,414
)

5,433

(16,118
)

41,620

Total

$
875

$
(13,013
)

$
(36,392
)

$
(793
)
Depreciation and amortization:

Diagnostics

$
2,112

$
1,136

$
5,742

$
2,965

Molecular Solutions

1,815

2,199

5,649

5,514

Total

$
3,927

$
3,335

$
11,391

$
8,479

Loss on impairment:

Diagnostics

$
—

$
—

$
8,517

$
—

Molecular Solutions

6,559

—

8,584

—

Total

$
6,559

$
—

$
17,101

$
—

Capital expenditures:

Diagnostics(1)

$
2,212

$
3,647

$
25,646

$
19,797

Molecular Solutions

429

932

2,435

7,711

Total

$
2,641

$
4,579

$
28,081

$
27,508

~~(1)Excludes $4,902~~ ~~and $38,705~~ ~~for purchases of property and equipment under government contracts for the three and nine months ended September 30, 2022, respectively.~~

September 30,
2022

December 31,
2021

Total assets:

Diagnostics

$
265,790

$
209,674

Molecular Solutions

166,418

251,316

Total

$
432,208

$
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~~

The following discussion and analysis of ~~the Federal securities laws. These may include statements about~~ our ~~expected revenues, earnings, losses, expenses, or other~~ financial ~~performance, future product performance or development, expected regulatory filings~~condition and ~~approvals, planned business transactions, expected manufacturing performance, views of future industry, competitive or market conditions, and other factors that could affect our future operations,~~ results of operations orshould be read in conjunction with (i) our unaudited condensed consolidated financial ~~position. These~~ statements often include words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “may,” “will,” “should,” “could,” or similar expressions. Forward-looking statements are not guarantees of future performance or results. Known and unknown factors that could cause actual performance or results to be materially different from those expressed or implied in these statements include, but are not limited to:

~~These and other factors that could affect our results are discussed more fully in our Securities and Exchange Commission (“SEC”) filings, including our registration statements,~~ Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022 filed with the Securities and Exchange Commission on March 3, 2023. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and impact and potential impacts on our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including, without limitation, those factors set forth in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2022 and the “Risk Factors” section of subsequent Quarterly Reports on Form 10-Q, ~~and other filings with~~our actual results or timing of certain events could differ materially from the ~~SEC. Although~~results or timing described in, or implied by, these forward-looking statements help to provide information about future prospects, readers should keep in mind that forward-looking statements may not be reliable. Readers are cautioned not to place undue reliance on the forward-looking statements. ~~The forward-looking statements are made as of the date of this Report, and we undertake no duty to update these statements~~.

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

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

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

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

~~In 2020, we expanded the market focus of our Molecular Solutions business by selling existing collection products for use with COVID-19 tests. In 2022, demand for COVID-19 PCR testing~~ The Company has ~~declined driven by the availability of antigen tests and the wider availability of vaccines, thereby negatively impacting the sales of the collection products. We have~~ also developed collection devices for the emerging microbiome market, which focuses on studying microbiomes and their effect on human and animal health.

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

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

Due to COVID-19, we have experienced volatility, including periods of material decline compared to prior year periods in testing volume of our base business (which excludes COVID-19 testing) and periods of significant demand for our COVID-19 testing product, with demand generally fluctuating in line with changes in prevalence of the virus and related variants. While demand for our COVID-19 PCR testing has declined in 2022, it is difficult for us to predict the duration or magnitude of the outbreak’s effects on our business or results of operations.

In September 2022, we entered into an agreement with Biomedical Advanced Research and 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 $8.6 million in funding to us to develop a 2nd generation Ebola test on the OraQuick® testing platform. Our current OraQuick® Ebola Rapid Antigen Test is de novo authorized for use with whole blood or cadaveric oral fluid. The test received de novo authorization from the FDA in 2019, making it the first and only rapid antigen test to receive authorization for the detection of Ebola virus.

In September 2022, we were selected to provide our OraQuick® In-Home HIV tests in support of the Centers for Disease Control and Preventions (CDC) “Together Take Me Home,” HIV self-test program. Under the program, the CDC will provide $41.5 million over a five-year period to support community testing. Emory University will manage the program and closely collaborate with a number of partner organizations, including OraSure, to supply tests to communities not equitably reached by HIV testing services across the United States.
Under the "Together Take Me Home" HIV self-test program, we will provide up to 1 million OraQuick® In-Home HIV tests over a five-year period. Emory University and partner organizations will manage the program and provide logistical and distribution services for the tests. A free HIV self-test will be mailed in discreet packages to people who enroll through its website. The program will target populations that are disproportionately affected by HIV and less likely to have access to key prevention services.

During the nine months ended September 30, 2022, our consolidated net revenues increased 55% to $264.4 million, compared to $170.1 million for the nine months ended September 30, 2021. Net product and services revenues during the nine months ended September 30, 2022 increased 55% when compared to the same period of 2021, largely due to $144.8 million of InteliSwab® COVID-19 rapid test revenues recorded in the first nine months of 2022 compared to $7.9 million of revenue in the comparable period of 2021. We first began selling this product in August of 2021. Also contributing to the increased revenues were higher domestic sales of our HCV product and higher overall sales of our substance abuse testing and Colli-Pee® products. Declines in sales of our molecular sample collection kits for COVID-19 testing, lower laboratory services revenues, and a decline in international sales of our HIV products partially offset these positive drivers of revenue. Other revenues for the nine months ended September 30, 2022 were $7.2 million compared to $4.6 million in the same period of 2021. This increase was largely due to higher research and development funding associated with our InteliSwab® COVID-19 rapid test offset by a decrease in royalty income.

Our consolidated net loss for the nine months ended September 30, 2022 was $33.5 million, or $0.46 per share on a fully diluted basis, compared to a consolidated net loss of $12.6 million, or $0.18 per share on a fully diluted basis, for the nine months ended September 30, 2021. Results for the nine months ended September 30, 2022 were impacted by lower gross margins rates caused by an unfavorable product mix of higher sales of lower margin products, increases in inventory reserves associated with excess inventory levels and manufacturing inefficiencies that occurred in the first quarter of 2022, lower absorption of labor costs that also occurred in the first half of 2022 and the absence of the Gates subsidy which expired in June 2021. Also contributing to our net loss is an increase in operating expense as a result of impairment charges taken on idle manufacturing lines and goodwill, higher legal fees, severance charges and accelerated stock compensation expense associated with our CEO transition and termination of our general counsel, increased staffing costs due to overall higher headcount, and nonrecurring costs associated with our strategic alternatives process.

Cash used in operating activities during the nine months ended September 30, 2022 was $29.2 million compared to cash used in operating activities during the nine months ended September 30, 2021 of $22.6 million. During the first nine months of 2022, our cash flow used in operating activities increased as a result of our net loss and increased working capital requirements as we scaled our InteliSwab® manufacturing capacity to meet higher demand. As of September 30, 2022, we had $101.6 million in cash, cash equivalents and available-for-sale securities.

Three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~September 30, 2021~~March 31, 2022

The table below shows ~~a breakdown~~an outline of total consolidated net revenues (dollars in thousands) ~~generated by each of our business segments during~~for the three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022:

Consolidated net product and services revenues increased ~~112%~~134% to ~~$112.8~~$152.9 million for the three months ended ~~September 30, 2022~~March 31, 2023 from ~~$53.2~~$65.2 million for the three months ended ~~September 30, 2021.~~March 31, 2022. The ~~increase in~~Company expects total net product and services revenues is ~~largely due~~ to ~~$79.6 million of InteliSwab~~®taper off throughout 2023 as demand for its COVID-19 ~~rapid test revenues in the third quarter of 2022 compared to $7.7 million in the third quarter of 2021. We first began selling this~~Diagnostic product ~~in August of 2021. Higher sales of our HCV product also contributed to the increased revenues. Declines in revenues across all other product lines partially~~has declined.

~~offset this positive driver of revenue. Other~~COVID-19 Diagnostics revenues ~~for the three months ended September 30, 2022~~ increased ~~429%~~by 434% to ~~$3.6 million from $688,000 for the three months ended September 30, 2021 due to higher research and development funding associated with the development of our InteliSwab~~® ~~COVID-19 rapid test.~~

Consolidated net revenues derived from products sold to customers outside of the United States were $7.5 million and $10.9 million, or 6% and 20% of total net revenues, for the three months ended September 30, 2022 and 2021, respectively. Because the majority of our international sales are denominated in U.S. dollars, the impact of fluctuating foreign currency exchange rates was not material to our total consolidated net revenues.

~~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, 2022 and 2021.~~

~~COVID-19 revenues were $79.6~~$118.3 million for the three months ended ~~September 30,~~March 31, 2023 compared to $22.1 million in the three months ended March 31, 2022 ~~driven by~~due to increased sales of ~~our~~the Company's InteliSwab® ~~COVID-19 rapid test. We first began selling this product in August of 2021.~~tests through its government procurement contracts.

Sales of the Company's Diagnostics products increased 50% to ~~the other infectious disease testing markets decreased 5% to $12.2~~$17.0 million for the three months ended ~~September 30, 2022~~March 31, 2023 from $11.4 million for the three months ended March 31, 2022. This increase in revenues was primarily driven by higher sales of the Company's OraQuick® In-Home HIV tests in support of the CDC's "Together Take Me Home" HIV self-test program which commenced during the first quarter of 2023 and higher sales of the Company's OraQuick® HIV Self-Test in the international markets due to customer ordering patterns.

Molecular Products revenues decreased 28% to $12.9 million for the three months ended ~~September 30, 2021. This decrease resulted~~March 31, 2023 from ~~lower international sales of our OraQuick~~® ~~HIV product offset by increased domestic sales of the same product and higher world-wide OraQuick~~® ~~HCV product sales.~~

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

~~Domestic OraQuick~~® ~~HIV sales increased 34% to $4.6~~$17.9 million for the three months ended ~~September 30,~~March 31, 2022. Sales of the Company's Molecular Products are being impacted by macro-economic factors in the markets in which its customers operate. One of the Company's largest customer scaled down purchasing after they reorganized their business in the second half of 2022 ~~from $3.4~~and certain other customers placed large orders in Q1 2022 which did not repeat in the first quarter of 2023. Furthermore revenues are impacted by customer ordering patterns whereby customers purchased at the end of 2022 and did not require further inventory in the first quarter of 2023.

Other products and services revenues were largely flat at $3.1 million for the three months ended ~~September 30, 2021, primarily as a result of an increase in new customers driven by our distributor channel~~March 31, 2023 and ~~an increase in sales of our OraQuick® In-Home HIV test sold to public health agencies as demand shifts from in-person testing to in-home testing.~~2022.

~~International sales of our OraQuick~~® ~~HIV tests decreased 32% to $4.4 million for the three months ended September 30, 2022 from $6.6 million for the three months ended September 30, 2021 largely due to customer ordering patterns.~~

~~Domestic OraQuick~~® ~~HCV sales remained~~Molecular Services revenues, which are largely ~~flat at $1.9 million for~~derived from the ~~three months ended September 30, 2022 compared to $1.8 million for the three months ended September 30, 2021.~~

~~International OraQuick~~® ~~HCV sales increased 54 %~~Company's laboratory services, decreased 20% to $1.4 million for the three months ended ~~September 30, 2022 compared to $888,000 for the three months ended September 30, 2021 due to a recovery in ordering by certain countries post the COVID-19 impact.~~

Sales to the substance abuse testing assessment market remained largely flat at $2.6 million for the three months ended September 30, 2022 compared to $2.7 million for the three months ended September 30, 2021.

~~Other revenues for the three months ended September 30, 2022 increased to $3.2 million~~March 31, 2023 from ~~$230,000 for the three months ended September 30, 2021, due to higher research and development funding associated with our InteliSwab~~® ~~COVID-19 rapid test.~~

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

Sales of our genomics products decreased 26% to $14.0 million for the three months ended September 30, 2022, compared to $19.0 million for the three months ended September 30, 2021, as result of customer ordering patterns and a shift in market prioritization at our larger commercial customers.

~~Microbiome kit sales increased 4% to $1.8 million for the three months ended September 30, 2022 compared to~~ $1.7 million for the three months ended ~~September 30, 2021, due to renewal~~March 31, 2022. The decline in services revenues was the direct result of ~~clinical study activities, new~~loss of two large customers in 2022. One customer ~~accounts offset by~~ceased operations in 2022 and the other ~~customer ordering patterns.~~deprioritized microbiome studies.

Sales of ~~our molecular sample~~the Company's COVID-19 Molecular Products collection kits ~~for COVID-19 testing~~ decreased ~~94%~~significantly by 98% to ~~$0.3~~$0.2 million for the three months ended ~~September 30,~~March 31, 2023 from $8.9 million for the three months ended March 31, 2022 ~~compared to $6.3 million during the comparable period in 2021~~ due to ~~lower COVID-19~~decline in demand for COVID PCR testing ~~sales to our core customers, driven by~~given the availability of rapid antigen ~~tests, the wider availability of vaccines and high inventory levels held by some of those customers and the termination of public funding for PCR testing.~~tests.

Non-product and services revenues ~~declined 19%~~decreased 17% to $2.0 million for the three months ended ~~September 30, 2022 compared to $2.4~~March 31, 2023 from $2.5 million for the three months ended ~~September 30, 2021~~March 31, 2022 as a result ~~of a large customer ceasing its operations and a decline in clinical trial work at certain pharmaceutical customers, partially offset by the addition of new customer accounts.~~

~~Other product and service revenues declined 38% to $0.3 million in the third quarter of 2022 compared to $576,000 in the third quarter of 2021 largely due to~~ the timing of ~~customer orders.~~activities under the Company's funded research and development agreements for the development of a second generation Ebola test and to obtain 510(k) clearance and CLIA waiver for our InteliSwab® test coupled with lower royalty income.

Consolidated gross profit margin increased to 42.5% for the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~decreased 14% to $0.4 million~~ from ~~$0.5 million~~36% for the three months ended ~~September 30, 2021, largely as~~March 31, 2022. This improvement in margins was driven by InteliSwab® sales which generated higher margins due to reduced costs associated with the correction of manufacturing inefficiencies which occurred during the first quarter of 2022, a ~~result~~packaging change implemented during the first quarter of 2023, and lower ~~royalty income received under a litigation settlement agreement.~~

~~Consolidated gross profit~~freight charges. These improved margins ~~remained flat at 40% for both~~were partially offset by lower COVID-19 Molecular Products revenue which historically generated higher margins. Lower scrap expense in the ~~three months ended September 30,~~first quarter of 2023 compared to the first quarter of 2022 ~~and 2021.~~also contributed to the improved margins.

Consolidated operating income for the three months ended ~~September 30, 2022~~March 31, 2023 was ~~$875 thousand,~~$24.3 million, a ~~$13.9~~$40.5 million increase from the ~~$13.0~~$16.2 million operating loss reported for the three months ended ~~September 30, 2021.~~March 31, 2022. Results for the three months ended ~~September 30, 2022~~March 31, 2023 were positively impacted by the increase in revenues and gross margins described above and were partially offset by impairment charges of ~~$6.6~~$1.1 million ~~associated with~~taken for idle manufacturing ~~lines associated with our molecular business and by an increase in operating expenses as described below.~~lines.

~~We evaluate performance~~Operating expenses in the first quarter of ~~our operating segments based on revenue and operating income. Reportable segments have inter-segment revenue and expenses that are eliminated in consolidation, including~~2023, excluding the ~~fees associated with an intercompany service agreement between the U.S. and Canadian entities.~~

~~The gross profit margin for the Diagnostics segment was 38% for the three months ended September 30, 2022 compared to 16% for the three months ended September 30, 2021.This increase is due to improved product mix of higher margin product sales and the improved quality-yield experienced as~~impairment charge, remained largely flat compared to the scale-up and production issues experienced in the third quarter of 2021 related to the manufacturing of InteliSwab® tests which caused higher than normal scrap rates. In addition, the third quarter of 2021 included a reserve for COVID-19 antibody inventory that did not recur in the thirdfirst quarter of 2022. ~~Also contributing to the higher margins is the increase in non-product revenues which contributes 100% to the gross margin rate.~~

Research and development expenses increased ~~26%~~22% to ~~$7.4~~$10.6 million for the three months ended ~~September 30, 2022 compared to $5.9~~March 31, 2023 from $8.6 million for the three months ended ~~September 30, 2021~~March 31, 2022 largely due to ~~increased~~an increase in clinical study activities related to obtaining ~~CE mark~~510(k) clearance and CLIA waiver for our ~~InteliSwab~~®InteliSwab® rapid test, ~~and increased staffing~~severance costs associated with our reduction in workforce that occurred during the quarter and higher ~~head count.~~ costs incurred under our DOD expansion contract. Increased spend in research and development was offset by lower sales and marketing and general and administrative costs.

Sales and marketing expenses ~~increased 8%~~decreased 5% to ~~$9.7 million for three months ended September 30, 2022 from $9.0~~$12.1 million for the three months ended September 30, 2021 due to an increase in our reserve for uncollectible accounts, increased staffing costs associated with higher head count and increased travel expenses as travel and in person events have resumed as COVID-19 restrictions have been lifted. These increases in spend were partially offset by a decline in consulting spend associated with business strategy work that occurred in 2021 and did not repeat in 2022 and lower advertising and market research costs associated with our InteliSwab® ~~test. General and administrative expenses increased 5% to $8.9~~March 31, 2023 from $12.7 million for the three months ended ~~September 30,~~March 31, 2022 ~~from $8.1~~due to a decrease in our reserve for expected credit losses and lower consulting fees offset by severance cost related to our reduction in workforce. General and administrative expenses decreased 8% to $17.7 million for the three months ended ~~September 30, 2021~~March 31, 2023 from $19.2 million for the three months ended March 31, 2022 largely due to lower consulting fees, stock compensation expense and recruitment fees. In the first quarter of 2022, the company incurred high stock compensation expense associated with the accelerated vesting of shares under our former CEO's employment agreement and higher recruitment expense associated with the new CEO search. These decreases in expense were partially offset by increased ~~staffing costs.~~legal fees and severance costs associated with the reduction in workforce.

All of the above contributed to the ~~Diagnostics segment’s~~Company's operating income of ~~$11.3~~$24.3 million for the three months ended September 30, 2022, which included the non-cash impairment charges of $8.5 million, non-cash charges of $2.1 million for depreciation and amortization and $1.6 million for stock-based compensation. The Diagnostics segment operating loss in the third quarter of 2021 included a $1.5 million non-cash pre-tax benefit associated with the change in the fair value of acquisition-related contingent consideration. There was no similar benefit recorded in the third quarter of 2022.

The gross profit margin for the Molecular Solutions segment was 49% for the three months ended September 30, 2022 compared to 58% for the three months ended September 30, 2021. This decrease was due to a less favorable product mix.

Research and development expenses decreased 13% to $2.4 million for the three months ended September 30, 2022 from $2.7 million for the three months ended September 30, 2021 largely due to a decline in non-cash stock compensation expense. Sales and marketing expenses decreased 23% to $3.8 million for the three months ended September 30, 2022 from $4.9 million for the three months ended September 30, 2021 largely due to a decline in consulting spend associated with business strategy work that occurred in 2021 and did not repeat in 2022, a decrease in expense related to the cancellation of a marketing loyalty program, and lower amortization expense as related intangibles were fully amortized at the end of 2021. General and administrative expenses increased 58% to $7.0 million for the three months ended September 30, 2022 from $4.4 million for the three months ended September 30, 2021 largely due to higher legal fees, increased non-cash stock compensation costs, and penalties and interest recorded related to a sales tax audit that did not occur in 2021.

Operating expenses for the Molecular segment also include an impairment charge of $6.6 million for the three months ended September 30, 2022 associated with several idle manufacturing lines for which there are no projected cash flow and minimal resale or salvage value.

~~All of the above contributed to the Molecular Solutions segment’s operating loss of $10.4 million for the three months ended September 30, 2022,~~March 31, 2023, which included the non-cash impairment charge of ~~$6.6~~$1.1 million related to equipment that will no longer be used in production, non-cash charges of ~~$1.8~~$3.7 million for depreciation and amortization and ~~$0.7~~$2.7 million for stock-based compensation. The Company's operating loss of $16.2 million for the three months ended March 31, 2022 included non-cash charges of $3.7 million for depreciation and amortization and $3.5 million for stock-based compensation.

Other income for the three months ended March 31, 2023 was $2.7 million compared to $0.2 million for the months ended March 31, 2022. This increase is largely due to the reimbursement of costs incurred under our DOD expansion contract which are presented in research and development expenses as discussed above.

~~We continue~~The Company continues to believe the full valuation allowance established against ~~our~~its total U.S. deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed. For the three months ended ~~September 30, 2022, we~~March 31, 2023, the Company recorded a U.S. state tax benefit of ~~$40,000~~$0.2 million compared to ~~$102,000~~$3.9 million of tax expense for the three months ended ~~September 30, 2021. For the three months ended September 30,~~March 31, 2022. The 2022 ~~we recorded a foreign tax benefit of $1.1 million compared to foreign tax expense of $2.2 million for the three months ended September 30, 2021. This overall decrease in foreign~~ tax expense is ~~largely a result~~comprised 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 during the nine months ended September 30, 2022 and 2021.~~

~~Consolidated net product and services revenues increased 55% to $257.2 million for the nine months ended September 30, 2022 from $165.5 million for the nine months ended September 30, 2021.~~ ~~The increase in revenues is~~ ~~largely due to $144.8 million of InteliSwab~~® COVID-19 rapid test revenues recorded in the first nine months of 2022 compared to $7.9 million of revenue in the comparable period of 2021. We first began selling this product in August of 2021. Also contributing to the increased revenues were higher domestic sales of our HCV product and higher overall sales of our substance abuse testing and Colli-Pee® products. Declines in sales of our molecular sample collection kits for COVID-19 testing, lower laboratory services revenues, and a decline in international sales of our HIV products partially offset these positive drivers of revenue. Other revenues for the nine months ended September 30, 2022 were $7.2 million compared to $4.6 million in the same period of 2021. This increase was largely due to higher research and development funding associated with our InteliSwab® COVID-19 rapid test offset by a decrease in royalty income.

Consolidated net revenues derived from products sold to customers outside of the United States were $27.2 million and $30.4 million, or 10% and 18% of total net revenues, for the nine months ended September 30, 2022 and 2021, respectively. Because the majority of our international sales are denominated in U.S. dollars, the impact of fluctuating foreign currency exchange rates was not material to our total consolidated net revenues.

~~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, 2022 and 2021.~~

COVID-19 revenues were $144.8 million for the nine months ended September 30, 2022, compared to $7.9 million for the nine months ended September 30, 2021. This increase was driven by sales of our InteliSwab® ~~COVID-19 rapid test which we first began selling in August of 2021.~~

Sales to the other infectious disease testing markets decreased 4% to $38.2 million for the nine months ended September 30, 2022 from $39.7 million for the nine months ended September 30, 2021. This decrease resulted from lower world-wide OraQuick® ~~HIV and international OraQuick~~® ~~HCV product sales, partially offset by higher domestic OraQuick~~® ~~HCV sales.~~

~~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, 2022 and 2021.~~

~~Domestic OraQuick~~® HIV sales decreased 3% to $12.1 million for the nine months ended September 30, 2022 from $12.5 million for the nine months ended September 30, 2021, primarily as a result of a large order fulfilled in the first half of 2021 for our OraQuick® In-Home HIV test shipped to the CDC and used in an initiative to drive increased in-home HIV testing. A similar order did not occur during the nine months ended September 30, 2022.

~~International sales of our OraQuick~~® HIV tests decreased 10% to $15.5 million for the nine months ended September 30, 2022 from $17.3 million for the nine months ended September 30, 2021 due to customer ordering patterns and the absence of the Gates Foundation subsidy, which expired in June 2021 and is not included in revenues in 2022.

~~Domestic OraQuick~~® HCV sales increased 15% to $6.4 million for the nine months ended September 30, 2022 from $5.6 million for the nine months ended September 30, 2021, driven by new funding granted by certain state governments, increased legislation regarding drug testing and a rise in drug use requiring more testing.

~~International OraQuick~~® ~~HCV sales remained largely flat at $3.7 million for the nine months ended September 30, 2022 compared to $3.8 million for the nine months ended September 30, 2021.~~

Sales to the substance abuse testing assessment market increased 7% to $7.8 million for the nine months ended September 30, 2022 compared to $7.3 million for the nine months ended September 30, 2021 due to market share gains.

Other revenues for the nine months ended September 30, 2022 increased to $5.6 million from $2.5 million for the nine months ended September 30, 2021, due to higher research and development funding for 510(k) clearance and CLIA waiver of our InteliSwab® ~~COVID-19 rapid test partially offset by lower royalty income.~~

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

Sales of our genomics products decreased 10% to $44.6 million for the nine months ended September 30, 2022, compared to $49.3 million for the nine months ended September 30, 2021 largely as a result of customer ordering patterns and a shift in market prioritization at our larger commercial customers.

~~Microbiome kit sales decreased 5% to $5.6 million for the nine months ended September 30, 2022 compared to $5.9 million for the nine months ended September 30, 2021, due to customer ordering patterns.~~

Sales of our molecular sample collection kits for COVID-19 testing decreased 79% to $9.5 million for the nine months ended September 30, 2022 compared to $46.2 million during the comparable period in 2021 due to lower COVID-19 PCR testing sales to our core customers, driven by the availability of antigen tests, the wider availability of vaccines, lower public funding for PCR testing, and high inventory levels held by some of those customers.

Laboratory services revenues declined 39% to $4.9 million for the nine months ended September 30, 2022 compared to $8.0 million for the nine months ended September 30, 2021 as a result of a large customer ceasing its operations and a slowdown in clinical trials.

Other product and service revenues increased 53% to $1.9 million for the nine months ended September 30, 2022 compared to $1.2 million for the nine months ended September 30, 2021 largely due to increased sales by our Novosanis subsidiary.

Other revenues for the nine months ended September 30, 2022 decreased 25% to $1.5 million from $2.1 million for the nine months ended September 30, 2021, largely as a result of lower royalty income received under a litigation settlement agreement.

Consolidated gross profit margins were 37% for the nine months ended September 30, 2022 compared to 53% for the nine months ended September 30, 2021. The decrease in gross margins rates was caused by an unfavorable product mix of higher sales of lower margin products, increases in inventory reserves associated with excess inventory levels and manufacturing inefficiencies that occurred in the first quarter of 2022, lower absorption of labor costs that also occurred in the first half of 2022 and the absence of the Gates Foundation subsidy which expired in June 2021.

Consolidated operating loss for the nine months ended September 30, 2022 was $36.4 million, a $35.6 million decrease from the $793 thousand recorded for the nine months ended September 30, 2021. Results in 2022 were negatively impacted by the lower gross profit margin described above coupled with an increase in operating expenses as described below, including an aggregate impairment charge of $17.1 million.

We evaluate performance of our operating segments based on revenue and operating income. Reportable segments have inter-segment revenue and expenses that are eliminated in consolidation, including the fees associated with an intercompany service agreement between the U.S. and Canadian entities.

~~The gross profit margin for the Diagnostics segment was 33% for the nine months ended September 30, 2022 compared to 29% for the nine months ended September 30, 2021.~~This improvement in margin is a result of a more favorable product mix, the increase in non-product revenues which contribute 100% to the gross margin rate partially offset by increases in scrap and lower absorption of labor costs associated with the manufacturing inefficiencies that occurred earlier in 2022 that have since been corrected and the June 2021 expiration of subsidies under the support agreement with the Gates Foundation.

Research and development expenses increased 10% to $19.2 million for the nine months ended September 30, 2022 compared to $17.4 million for the nine months ended September 30, 2021 largely due to higher staffing costs associated with increased head count, increased clinical study activities related to obtaining CE mark for our InteliSwab® ~~rapid test, partially offset by lower product development activities related to our InteliSwab~~® rapid test as we received EUA authorization in June 2021. Sales and marketing expenses increased 18% to $25.6 million for the nine months ended September 30, 2022 from $21.7 million for the nine months ended September 30, 2021 due to increased staffing costs associated with higher head count, increased travel and annual meeting expenses as travel and in person events have resumed as COVID-19 restrictions have been lifted, increased consultant costs, and an increase in our reserve for uncollectible accounts, partially offset by a decrease in commission expense. General and administrative expenses increased 55% to $33.6 million for the nine months ended September 30, 2022 from $21.6 million for the nine months ended September 30, 2021 largely due to higher staffing costs associated with increased head count, higher stock compensation expense associated with accelerated vesting of shares under our former CEO's and general counsel's employment agreements, increased consulting costs, increased legal costs, higher severance costs, and increased accounting fees.

Operating expenses for the Diagnostic segment also include an impairment charge of $4.9 million associated with an idle manufacturing line for which it has no projected cash flows and minimal resale or salvage value. Diagnostic operating expenses also included a goodwill impairment charge of $3.6 million. The decline in the Company's stock price was identified as a triggering event which required the Company to perform a quantitative goodwill impairment analysis. The results of this analysis indicated the Diagnostic segment's goodwill was impaired and was written down to $0.

All of the above contributed to the Diagnostics segment’s operating loss of $20.3 million for the nine months ended September 30, 2022, which included the non-cash impairment charge of $8.5 million, non-cash charges of $5.7 million for depreciation and amortization and $7.5 million for stock-based compensation. The Diagnostics segment operating loss also included a non-cash pre-tax benefit of $36,000 associated with the change in the fair value of acquisition-related contingent consideration. This is in comparison to an $1.0 million benefit recorded in the first half of 2021.

The gross profit margin for the Molecular Solutions segment was 47% for the nine months ended September 30, 2022 compared to 66% for the nine months ended September 30, 2021. This decrease was due to an increase in reserves for excess inventory as result of a forecasted decline in demand and a less favorable product mix.

Research and development expenses increased 3% to $8.1 million for the nine months ended September 30, 2022 from $7.9 million for the nine months ended September 30, 2021 due to higher staffing costs. Sales and marketing expenses increased 1% to $12.3 million for the nine months ended September 30, 2022 from $12.1 million for the nine months ended September 30, 2021 due to higher staffing costs related to increased head count, increased consulting expense associated with business strategy planning, and an increase in travel costs as COVID-19 restrictions are lifted. These increases in expenses were partially offset by lower amortization expense associated with an intangible asset that was fully amortized at the end of 2021, lower commission, and a decrease in expense related to the cancellation of a marketing loyalty program.General and administrative expenses increased 53% to $18.6 million for the nine months ended September 30, 2022 from $12.1 million for the nine months ended September 30, 2021 due to increased legal fees, higher non-cash stock compensation expense and increased staffing costs.

Operating expenses for the Molecular Solutions segment also includes impairment charges of $8.6 million for the nine months ended September 30, 2022 associated with several idle manufacturing lines for which there are no projected cash flows and minimal resale or salvage value.

All of the above contributed to the Molecular Solutions segment’s operating loss of $16.1 million for the nine months ended September 30, 2022, which included the non-cash impairment charges of $8.6 million, $5.6 million for depreciation and amortization and $1.6 million 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, 2022, we recorded U.S. state tax expense of ~~$379,000 compared to $13,000 of state income tax expense for the nine months ended September 30, 2021. Additionally, in the first nine months of 2022, we recorded approximately~~$0.2 million, $1.7 million of withholding taxes ~~due to the Canada Revenue Agency~~ associated with our repatriation of $65.0 million of cash from Canada to the United ~~States. For the nine months ended September 30, 2022, we recorded a foreign tax benefit of $438,000 compared to foreign~~States, and Canadian income tax expense of ~~$12.2 million~~$2.0 million. No foreign taxes were recorded for the ~~nine~~three months ended ~~September 30, 2021. This overall decrease in foreign~~March 31, 2023 due to it being more likely than not that the Canadian subsidiary will not produce sufficient income to receive a tax ~~expense is largely a result of~~benefit for the ~~decrease in income before taxes generated by our Canadian subsidiary.~~year to date loss.

~~Our~~The Company's cash and cash equivalents and available-for-sale securities ~~decreased~~increased to ~~$101.6~~$112.4 million at ~~September 30, 2022~~March 31, 2023 from ~~$170.1~~$110.8 million at December 31, ~~2021. Our~~2022. $72.8 million or 65% of the $112.4 million in cash, cash equivalents and available-for-sale securities is held by DNAG, the Company's Canadian subsidiary. In 2022, the Company repatriated $65.0 million of cash into the United States and incurred $1.7 million of Canadian withholding tax. Further repatriation of cash from Canada into the United States could have additional adverse tax consequences. It is still the Company's intention going forward to continue to permanently reinvest the historical undistributed earnings of our foreign subsidiaries.

The Company's working capital ~~decreased~~increased to ~~$208.0~~$288.5 million at ~~September 30, 2022~~March 31, 2023 from ~~$220.4~~$256.1 million at December 31, ~~2021.~~2022. Working capital increased primarily due to increased accounts receivable of $36.6 million. Working capital is primarily a function of sales, purchase volumes, inventory requirements, and vendor payment terms.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net cash ~~used in~~provided by operating activities was ~~$29.2~~$6.0 million. ~~Our~~Cash flows from operations can be significantly impacted by factors such as timing of receipt from customers, inventory purchases, and payments to vendors. The Company's net ~~loss~~income of ~~$33.5~~$27.2 million included non-cash charges of ~~$17.1~~depreciation and amortization expense of $3.7 million, ~~associated with~~stock-based compensation expense of $2.7 million, and impairment charges taken for idle ~~manufacturing lines and goodwill, depreciation and amortization expense~~equipment of ~~$11.4 million, stock-based compensation expense of $9.1 million, an inventory reserve of $977,000, an increase in our reserve for uncollectible accounts of $974,000 and other non-cash expense of $1.3~~$1.1 million. Cash used to fund ~~our~~the working capital accounts included an increase in ~~inventory of $27.6 million to meet anticipated demand to support COVID-19 testing program, an increase in~~ accounts receivable of ~~$19.2~~$36.6 million largely associated with product shipped to the U.S. government at the end of the first quarter 2023, a ~~$6.0~~decreases in accounts payable of $12.1 million ~~increase~~due to reduced inventory purchasing and the timing of payments made and invoices received, and a decrease in ~~prepaid~~accrued expenses ~~and other assets~~of $3.5 million largely associated with ~~tax installments made to~~ the ~~Canadian Revenue Agency.~~payment of the Company's 2022 year-end bonuses. Offsetting these uses of cash was ~~$16.2~~a decrease in inventory of $18.5 million ~~increase~~as demand for the Company's InteliSwab® COVID-19 rapid test is declining, and a $5.3 million decrease in ~~accounts payable due to~~prepaid and other assets as the ~~timing~~Company received payment of ~~invoices received and payments made.~~its Employee Retention Credit filed for in 2021.

Net cash used in investing activities was ~~$4.5~~$1.0 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, which reflects proceeds from the maturities ~~and redemptions~~ of investments of ~~$47.4 million. This was~~$27.3 million offset by ~~$28.1~~$22.3 million used to purchase investments, $2.8 million to build additional manufacturing capacity as required by the $109 million agreement with the DOD and, $1.2 million to acquire property and equipment ~~largely~~ to ~~increase our manufacturing capacity and $22.9 million~~support the normal operations of ~~investment purchases.~~the business.

Net cash used in financing activities was ~~$3.0~~$1.3 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, which is largely comprised of ~~$2.0~~$1.2 million used for the repurchase of common stock to satisfy withholding taxes related to the vesting of restricted shares awarded to ~~our~~the Company's employees.

The Company expects existing cash and cash equivalents and available-for-sale securities towill be sufficient to fund ~~our current~~its operating expenses and capital ~~needs as well as those arising~~expenditure requirements over the next twelve months. ~~Our~~The Company's cash requirements, however, may vary materially from those now planned due to many factors, including, but not limited to, the timing of reimbursement under ~~our~~its $109 million DOD contract, the scope and timing of future strategic acquisitions, the progress of ~~our~~its research and development programs, the scope and results of clinical testing, the cost of any future litigation, the magnitude of capital expenditures, changes in existing and potential relationships with business partners, the timing and cost of obtaining regulatory approvals, the timing and cost of future stock purchases, the costs involved in obtaining and enforcing patents, proprietary rights and any necessary licenses, the cost and timing of expansion of sales and marketing activities, market acceptance of new products, competing technological and market developments, the impact of the current economic environment and other factors. In addition, $75.2 million or 74% of our $101.6 million in cash, cash equivalents and available-for-sale securities belongs to our Canadian subsidiary. In the first quarter of 2022, we repatriated $65.0 million of cash from Canada into the United States and incurred approximately $1.7 million of Canadian withholding tax. Further repatriation of cash from Canada into the United States could have additional adverse tax consequences. It is our intention going forward to continue to permanently reinvest the historical undistributed earnings of our foreign subsidiaries.

A summary of ~~our~~the Company's obligations to make future payments under contracts existing at December 31, ~~2021~~2022 is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of ~~our~~its Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. As of ~~September 30, 2022,~~March 31, 2023, 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~~the Company's critical accounting policies is contained in ~~our~~its Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the SEC. No~~Except as presented below, no~~ material changes have been made to such critical accounting policies during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

~~Goodwill~~This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Some of these statements can be identified by the use of terminology such as “believes,” “expects,” “anticipates,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “projects,” “plans,” “estimates,” or the negative of these words and other comparable terminology. The discussion of financial trends, strategy, plans, assumptions, or intentions may also include forward-looking statements. Readers should not place undue reliance on forward-looking statements, which speak only as of the date such statements were first made. Except to the extent required by law, we undertake no obligation to update or revise our forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated, or implied. Although it is not ~~amortized,~~possible to predict or identify all such risks and uncertainties, they include, but ~~rather is tested annually for impairment or more frequently if we believe that indicators of impairment exist. Current generally accepted accounting principles permit us~~are not limited to, make a qualitative evaluation about the likelihood of goodwill impairment and if it is determined that it is more likely than not that the fair value does not exceed the carrying amount, then a quantitative test is performed. The quantitative goodwill impairment test involves a comparison of the estimated fair value of the reporting unit to the respective carrying amount. An impairment charge is recognizedfactors described in the ~~amount by which the carrying amount exceeds the reporting unit’s fair value, provided the impairment charge does not exceed the total amount~~Risk Factors discussion in Item 1A of ~~goodwill allocated to the reporting unit.~~

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

~~We do not hold any amounts of derivative financial instruments or derivative commodity instruments and, accordingly, we have~~

As of September 30, 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 2.7% of our total revenues for the nine months ended September 30, 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 $117.2 million in U.S. Dollars, which are included in the Company’s consolidated balance sheet as of September 30, 2022. A 10% unfavorable change in the ~~Canadian-to-U.S. dollar~~Company's assessment of its sensitivity to market risk since its presentation set forth in Item 7A, "Quantitative and ~~Euro-to-U.S. dollar exchange rates would have decreased our comprehensive income by approximately $11.7 million~~Qualitative Disclosures About Market Risk," in its Annual Report on Form 10-K for the ~~nine months~~year ended ~~September 30,~~December 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, 2022.~~March 31, 2023. Based on that evaluation, the Company’s management, including such officers, concluded that the Company’s disclosure controls and procedures were effective as of ~~September 30, 2022~~March 31, 2023 to provide reasonable assurance that material information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 was accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure and was recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

(b) Changes in Internal Control Over Financial Reporting. There was no change in the Company’s internal control over financial reporting that occurred during the three months ended ~~September 30, 2022~~March 31, 2023 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~~the Company is involved in certain legal actions arising in the ordinary course of business. In management’s opinion, based upon the advice of counsel, the outcomes of such actions are not expected, individually or in the aggregate, to have a material adverse effect on ~~our~~the Company's future financial position or results of operations.

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

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

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

~~Customer Concentration Creates Risk~~Although we do not maintain any deposit accounts, credit agreements or letters of credit with any financial institution currently in receivership, we are unable to predict the extent or nature of the impacts of these evolving circumstances at this time. If, for ~~Our Business.~~

~~One non-commercial customer accounted for 69%~~example, other banks and ~~53%~~financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened. While it is not possible at this time to predict the extent of ~~net consolidated revenues for~~ the ~~three~~impact that the failure of these financial institutions or the high market volatility and ~~nine months ended September 30, 2022. We expect that sales to~~instability of the ~~large non-commercial customer will continue to be a significant contributor to our net consolidated revenue. Certain parts of~~banking sector could have on economic activity and our business ~~may continue~~in particular, the failure of other banks and financial institutions and the measures taken by governments, businesses and other organizations in response to have a high customer concentration and depend disproportionately on a few large customers. To the extent that such a large customers fail to meet their purchase commitments, change their ordering patterns orthese events could adversely impact our business, ~~strategies, or otherwise reduce their purchases or stop purchasing our products, or if we experience difficulty in meeting the high demand by these larger customers for our products, our revenues~~financial condition and results of ~~operations could be adversely affected.~~

operations.

+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, 2022~~March 31, 2023 and December 31, ~~2021~~2022	3

Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	4

Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	5

Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	6

Notes to the Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1914

Item 3. Quantitative and Qualitative Disclosures About Market Risk	3118

Item 4. Controls and Procedures	3118

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	3219

Item 1A. Risk Factors	3219

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3219

Item 3. Defaults Upon Senior Securities	3220

Item 4. Mine Safety Disclosures	3220

Item 5. Other Information	3320

Item 6. Exhibits	3321

Signatures	3422


	September 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	75,205		$	116,762		$	90,194		$	83,980
Short-term investments		26,432			36,279			22,178			26,867
Accounts receivable, net of allowance for doubtful accounts of $4,176 and $3,418		61,306			45,323
Accounts receivable, net of allowance of $2,297 and $2,365								107,445			70,797
Inventories		78,805			53,138			77,189			95,704
Prepaid expenses		5,844			7,939			6,161			6,273
Other current assets		32,140			28,990			40,428			41,569
Total current assets		279,732			288,431			343,595			325,190
Noncurrent Assets:
Property, plant and equipment, net		85,184			88,164
Property, plant and equipment, net of accumulated depreciation of $72,400 and $69,881								57,343			59,413
Operating right-of-use assets, net		15,769			9,056			9,922			10,399
Finance right-of-use assets, net		1,590			2,493			1,136			1,293
Intangible assets, net		11,919			14,343
Intangible assets, net of accumulated amortization of $31,732 and $31,077								11,184			11,694
Goodwill		34,476			40,279			35,204			35,104
Long-term investments		—			17,009
Other noncurrent assets		3,538			1,215			1,031			1,087
Total noncurrent assets		152,476			172,559			115,820			118,990
TOTAL ASSETS	$	432,208		$	460,990		$	459,415		$	444,180
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	40,370		$	28,024		$	27,396		$	38,020
Deferred revenue		2,536			2,936			1,989			2,273
Accrued expenses and other current liabilities		25,412			33,778			22,673			25,762
Finance lease liabilities		1,242			939
Operating lease liabilities		1,938			2,181
Finance lease liability								1,229			1,179
Operating lease liability								1,761			1,764
Acquisition-related contingent consideration obligation		199			206			75			65
Total current liabilities		71,697			68,064			55,123			69,063
Noncurrent Liabilities:
Finance lease liabilities		935			1,952
Operating lease liabilities		14,493			7,202
Finance lease liability								472			503
Operating lease liability								8,623			9,101
Acquisition-related contingent consideration obligation		117			354			—			99
Other noncurrent liabilities		525			651			609			581
Deferred income taxes		2,551			2,234			409			408
Total noncurrent liabilities		18,621			12,393			10,113			10,692
TOTAL LIABILITIES		90,318			80,457			65,236			79,755
Commitments and contingencies (Note 12)
STOCKHOLDERS' EQUITY
Preferred stock, par value $.000001, 25,000 shares authorized, none issued		—			—			—			—
Common stock, par value $.000001, 120,000 shares authorized, 72,619 and 72,069 shares issued and outstanding		—			—
Common stock, par value $.000001, 120,000 shares authorized, 73,254 and 72,734 shares issued and outstanding								—			—
Additional paid-in capital		518,170			511,063			521,964			520,446
Accumulated other comprehensive loss		(22,331	)		(10,077	)		(17,418	)		(18,435	)
Accumulated deficit		(153,949	)		(120,453	)		(110,367	)		(137,586	)
Total stockholders' equity		341,890			380,533			394,179			364,425
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	432,208		$	460,990		$	459,415		$	444,180


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2022			2021			2022			2021			2023			2022
NET REVENUES:
Products and services	$	112,821		$	53,229		$	257,224		$	165,549		$	152,914		$	65,236
Other		3,642			688			7,177			4,557			2,049			2,471
		116,463			53,917			264,401			170,106			154,963			67,707
COST OF PRODUCTS AND SERVICES SOLD		70,271			32,449			166,353			79,639			89,148			43,408
Gross profit		46,192			21,468			98,048			90,467			65,815			24,299
OPERATING EXPENSES:
Research and development		9,757			8,596			27,238			25,270			10,560			8,634
Sales and marketing		13,474			13,886			37,875			33,836			12,142			12,717
General and administrative		15,527			12,499			52,262			33,680			17,711			19,156
Loss on impairment		6,559			—			17,101			—
Loss on impairments														1,105			—
Change in the estimated fair value of acquisition-related contingent consideration		—			(500	)		(36	)		(1,526	)		(24	)		(36	)
		45,317			34,481			134,440			91,260			41,494			40,471
Operating income (loss)		875			(13,013	)		(36,392	)		(793	)		24,321			(16,172	)
OTHER INCOME		3,255			100			4,520			429			2,673			168
Income (loss) before income taxes		4,130			(12,913	)		(31,872	)		(364	)		26,994			(16,004	)
INCOME TAX EXPENSE (BENEFIT)		(1,143	)		2,102			1,624			12,241
INCOME TAX (BENEFIT) EXPENSE														(225	)		3,936
NET INCOME (LOSS)	$	5,273		$	(15,015	)	$	(33,496	)	$	(12,605	)	$	27,219		$	(19,940	)

INCOME (LOSS) PER SHARE:
BASIC	$	0.07		$	(0.21	)	$	(0.46	)	$	(0.18	)	$	0.37		$	(0.28	)
DILUTED	$	0.07		$	(0.21	)	$	(0.46	)	$	(0.18	)	$	0.37		$	(0.28	)
SHARES USED IN COMPUTING INCOME (LOSS) PER SHARE:
WEIGHTED-AVERAGE SHARES OUTSTANDING:
BASIC		72,616			72,023			72,448			71,962			73,112			72,194
DILUTED		72,785			72,023			72,448			71,962			73,966			72,194



Large accelerated filer		☐		Accelerated filer	☒
	~~Accelerated filer~~		☐

Non-accelerated filer		☐		Smaller reporting company	☐

				Emerging growth company	☐


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

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	(10	)	$	3,570
Non-cash investing activities
Accrued property and equipment purchases	$	733		$	642
Accrued property and equipment purchases under government contracts	$	—		$	1,905


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


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


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



	Diagnostics			Molecular Solutions
Balance as of January 1, 2022	$	3,604		$	36,675
Impairment		(3,604	)		—
Change related to foreign currency translation		—			(2,199	)
Balance as of September 30, 2022	$	—		$	34,476



	September 30, 2022		December 31, 2021
Payroll and related benefits	$	11,263	$	15,570
Commitment to purchase under government contract		—		8,103
Professional fees		4,771		3,335
Sales tax payable		1,372		2,227
Other		8,006		4,543
	$	25,412	$	33,778



	September 30, 2022		December 31, 2021
Operating Leases
Right-of-use assets	$	15,769	$	9,056
Lease liabilities:
Current lease liabilities		1,938		2,181
Non-current lease liabilities		14,493		7,202
Total operating lease liabilities	$	16,431	$	9,383


Finance Leases
Right-of-use assets	$	1,590	$	2,493
Lease liabilities:
Current lease liabilities		1,242		939
Non-current lease liabilities		935		1,952
Total finance lease liabilities	$	2,177	$	2,891


Weighted Average Remaining Lease Term
Weighted-average remaining lease term—operating leases	7.46 years			5.26 years
Weighted-average remaining lease term—finance leases	1.59 years			2.21 years

Weighted Average Discount Rate
Weighted-average discount rate—operating leases		4.25	%		3.90	%
Weighted-average discount rate—finance leases		3.45	%		3.57	%


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


	Finance			Operating
2022 (excluding the nine months ended September 30, 2022)	$	373		$	795
2023		1,125			2,043
2024		738			2,947
2025		18			2,583
2026		11			2,385
Thereafter		—			8,800
Total minimum lease payments		2,265			19,553
Less: imputed interest		(88	)		(3,122	)
Present value of lease liabilities	$	2,177		$	16,431


	September 30, 2022		December 31, 2021
Total assets:
Diagnostics	$	265,790	$	209,674
Molecular Solutions		166,418		251,316
Total	$	432,208	$	460,990


	For the Three Months Ended September 30,
	Dollars								Percentage of Total Net Revenues
	2022		2021		% Change				2022			2021
Diagnostics	$	94,402	$	23,281		305		%		81	%		43	%
Molecular Solutions		18,419		29,948		(38	)			16			56
Net product and services revenues		112,821		53,229		112				97			99
Other		3,642		688		429				3			1
Net revenues	$	116,463	$	53,917		116		%		100	%		100	%


	For the Three Months Ended September 30,
Market	2022		2021		% Change
Domestic HIV	$	4,609	$	3,440		34		%
International HIV	��	4,445		6,582		(32	)
Net HIV revenues		9,054		10,022		(10	)
Domestic HCV		1,866		1,827		2
International HCV		1,368		888		54
Net HCV revenues		3,234		2,715		19
Net OraQuick® revenues	$	12,288	$	12,737		(4	)	%


	For the Nine Months Ended September 30,
	Dollars								Percentage of Total Net Revenues
	2022		2021		% Change				2022			2021
Diagnostics	$	190,774	$	54,867		248		%		72	%		32	%
Molecular Solutions		66,450		110,682		(40	)			26			65
Net product and services revenues		257,224		165,549		55				98			97
Other		7,177		4,557		57				3			4
Net revenues	$	264,401	$	170,106		55		%		101	%		101	%


	September 30,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
	(In thousands)				(In thousands)
Cash and cash equivalents	$	75,205	$	116,762	$	90,194	$	83,980
Available for sale securities		26,432		53,288
Available-for-sale securities						22,178		26,867
Working capital		208,035		220,367		288,472		256,127


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, 2022 - July 31, 2022		19,470	(3)	$	2.78		—		11,984,720
August 1, 2022 - August 31, 2022		—			—		—		11,984,720
September 1, 2022 - September 30, 2022		—			—		—		11,984,720
		19,470					—



Exhibit Number		Exhibit

10.1*3.1		~~Employment Agreement dated August 8, 2022, between~~Second Amended and Restated Bylaws of OraSure Technologies, Inc. ~~and Kenneth J. McGrath is incorporated by reference to Exhibit 10.1 to the Company's Current Report on form 8-K filed August 12, 2022.~~, as of May 9, 2023.

31.1*		Certification of Carrie Eglinton-Manner required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.

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

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

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

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

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


	ORASURE TECHNOLOGIES, INC.

		/s/ Kenneth J. McGrath
Date: ~~November 8, 2022~~May 10, 2023		Kenneth J. McGrath
		Chief Financial Officer
		(Principal Financial Officer)

		/s/Michele M. Anthony
Date: ~~November 8, 2022~~May 10, 2023		Michele M. Anthony
		Senior Vice President, Controller and Chief Accounting Officer
		(Principal Accounting Officer)