What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-05 · 267 added, 219 removed, 646 unchanged (43% of the section changed)

4 unchanged sentences

(in thousands, except per share amounts)

June 30, 2021

September 30, 2021

December 31, 2020

46 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

NET REVENUES:

17 unchanged sentences

(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

NET INCOME (LOSS)

8 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

OPERATING ACTIVITIES:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Stock-based compensation

2 unchanged sentences

Provision for doubtful accounts

Unrealized foreign currency (gain) loss

Unrealized foreign currency gain

Interest expense on finance leases

Deferred income taxes

Loss on sale of fixed assets

Change in the estimated fair value of acquisition-related contingent consideration

6 unchanged sentences

Accrued expenses and other liabilities

Net cash used in operating activities

Net cash (used in) provided by operating activities

INVESTING ACTIVITIES:

3 unchanged sentences

Proceeds from escrow associated with business acquisitions

Acquisition of businesses, net of cash acquired

Purchase price adjustment related to business acquisition

Purchase of patent and product rights

Net cash provided by investing activities

Net cash (used in) provided by investing activities

FINANCING ACTIVITIES:

37 unchanged sentences

In June 2021, we received three Emergency Use Authorizations ("EUA") from the U.S.

Food and Drug Administration ("FDA") for our InteliSwab TM COVID-19 Rapid Antigen Tests for non-prescription over-the-counter ("OTC"), professional point-of-care and prescription use.

Following discussions with the FDA and their de-prioritization of antibody testing in the U.S., we have decided to no longer pursue EUAs for the ELISA test.

We will, however, continue to offer the product for research use only to labs and other parties interested in COVID antibody surveillance and research applications.

Food and Drug Administration ("FDA") for our InteliSwab TM COVID-19 Rapid Antigen Tests for non-prescription OTC, professional point-of-care and prescription use.

We began recording revenues on the sales of our InteliSwab TM COVID-19 Rapid Antigen Tests during the third quarter of 2021.

Following discussions with the FDA and their de-prioritization of antibody testing in the U.S., we decided to no longer pursue EUAs for the ELISA test.

We have, however, continued to offer the product for research use to labs and other parties interested in COVID antibody surveillance and research applications.

Our Molecular Solutions business is operated by our subsidiaries, DNA Genotek Inc.

22 unchanged sentences

These financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results of operations expected for the full year.

Results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results of operations expected for the full year.

Summary of Significant Accounting Policies .

7 unchanged sentences

When evaluating an investment for impairment, we review factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made.

As of June 30, 2021, we determined that the decline in the market value of our available-for-sale investment was not due to credit-related factors and as such no allowance for credit-loss was necessary.

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

June 30, 2021

As of September 30, 2021, we determined that the decline in the market value of our available-for-sale investment was not due to credit-related factors and as such no allowance for credit-loss was necessary.

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

September 30, 2021

Guaranteed investment certificates

5 unchanged sentences

Total available-for-sale securities

At June 30, 2021, maturities of our available-for-sale

At September 30, 2021, maturities of our available-for-sale

securities were as follows:

2 unchanged sentences

Fair Value of Financial Instruments .

As of June 30, 2021 and December 31, 2020, 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.

As of September 30, 2021 and December 31, 2020, 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:

2 unchanged sentences

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

All of our available-for-sale debt securities are measured as Level 2 instruments as of June 30, 2021 and December 31, 2020.

Our available-for-sale guaranteed investment certificates are measured as Level 1 instruments as of June 30, 2021 and December 31, 2020.

Included in cash and cash equivalents at June 30, 2021 and December 31, 2020, was $ 53,590 and $ 71,489 invested in government money market funds.

All of our available-for-sale debt securities are measured as Level 2 instruments as of September 30, 2021 and December 31, 2020.

Our available-for-sale guaranteed investment certificates are measured as Level 1 instruments as of September 30, 2021 and December 31, 2020.

Included in cash and cash equivalents at September 30, 2021 and December 31, 2020, was $ 23,862 and $ 71,489 invested in government money market funds.

These funds have investments in government securities and are measured as Level 1 instruments.

2 unchanged sentences

Separate accounts are maintained for each participant to reflect the amounts deferred by the participant and all earnings and losses on those deferred amounts.

The assets of the plan are held in mutual funds.

The fair value of the plan assets as of June 30, 2021 and December 31, 2020 was $ 2,486 and $ 2,565 , respectively, and was calculated using the quoted market prices of the assets as of those dates.

The assets of the plan are held in mutual funds and company stock.

The fair value of the plan assets as of September 30, 2021 and December 31, 2020 was $ 2,503 and $ 2,565 , 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.

10 unchanged sentences

carrying value or the inventories are completely written off, as in the case of lapsing expiration dates.

During the third quarter of 2021, we reserved $ 1,750 of COVID-19 antibody inventory, which we do not believe we can sell as a result of the decision to no longer pursue EUAs for the ELISA test.

Property, Plant and Equipment .

5 unchanged sentences

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 June 30, 2021 and December 31, 2020 was $ 56,992 and $ 53,604 , respectively.

Accumulated depreciation of property, plant and equipment as of September 30, 2021 and December 31, 2020 was $ 58,755 and $ 53,604 , respectively.

Intangible Assets .

2 unchanged sentences

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 June 30, 2021 and December 31, 2020 was $ 29,237 and $ 27,107 , respectively.

The decrease in intangibles from $ 17,904 as of December 31, 2020 to $ 16,241 as of June 30, 2021 is due to $ 1,643 in amortization expense and foreign currency translation losses of $ 20 .

Accumulated amortization of intangible assets as of September 30, 2021 and December 31, 2020 was $ 29,554 and $ 27,107 , respectively.

The decrease in intangibles from $ 17,904 as of December 31, 2020 to $ 15,221 as of September 30, 2021 was due to $ 2,455 in amortization expense and foreign currency translation losses of $ 228 .

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired.

2 unchanged sentences

If we conclude that it is more likely than not that the carrying value of a reporting unit is greater than its fair value, then we would be required to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, provided the impairment charge does not exceed the total amount of goodwill allocated to the reporting unit.

The increase in goodwill from $ 40,351 as of December 31, 2020 to $ 40,810 as of June 30, 2021 is a result of an adjustment of $ 441 associated with foreign currency translation and a purchase price adjustment of $ 18 related to a business acquisition.

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

Foreign Currency Translation .

3 unchanged sentences

Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than a functional currency are included in our consolidated statements of income in the period in which the change occurs.

Net foreign exchange gains (losses) resulting from foreign currency transactions that are included in other income in our consolidated statements of income were $ 198 and $( 200 ) for the three months ended June 30, 2021 and 2020 , respectively.

Net foreign exchange gains (losses) were $( 379 ) and $ 493 for the six months ended June 30, 2021 and 2020.

Net foreign exchange gains resulting from foreign currency transactions that are included in other income in our consolidated statements of income were $ 7 and $ 70 for the three months ended September 30, 2021 and 2020 , respectively.

Net foreign exchange gains (losses) were $( 371 ) and $ 563 for the nine months ended September 30, 2021 and 2020 .

Accumulated Other Comprehensive Income (Loss) .

4 unchanged sentences

dollars, which is the reporting currency of the Company.

Accumulated other comprehensive loss at June 30, 2021 consists of $ 5,994 of currency translation adjustments and $ 449 of net unrealized losses on marketable securities, which represents the fair market value adjustment for our investment portfolio.

Accumulated other comprehensive loss at September 30, 2021 consisted of $ 10,111 of currency translation adjustments and $ 610 of net unrealized losses on marketable securities, which represents the fair market value adjustment for our

investment portfolio.

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

11 unchanged sentences

A portion of the purchase price was deposited into an escrow account for a limited period after closing, pursuant to indemnification obligations under the merger agreement.

During the six months ended June 30, 2020 , we incurred acquisition related costs of $ 343 including accounting, legal, and other professional fees, all of which were expensed and reported as a component of general and administrative expense in the consolidated statement of operations.

No such costs were incurred for the six months ended June 30, 2021.

Pursuant to our merger agreement, we may pay up to an additional $ 28,000 of contingent consideration over the next three years based on the achievement of certain performance criteria as defined under the agreements, including generating certain revenue dollars, and the achievement of certain clinical milestones associated with the development of certain new technology.

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

No such costs were incurred for the nine months ended September 30, 2021.

Pursuant to our merger agreement, we were to pay up to an additional $ 28,000 of contingent consideration over the three years following the acquisition date based on the achievement of certain performance criteria as defined under the agreements, including generating certain revenue dollars, and the achievement of certain clinical milestones associated with the development of certain new technology.

The Company, with the assistance of an independent valuation specialist, determines the estimated fair value of the contingent consideration.

6 unchanged sentences

Change in fair value during the period

Balance as of June 30, 2021

Balance as of September 30, 2021

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

Revenues from UrSure primarily consist of grant money received to fund the development of certain new technology.

Effective as of July 22, 2020, the financial results of UrSure are included in our Diagnostics segment.

September 30,

Raw materials

4 unchanged sentences

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.

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:

Ended June 30,

Ended September 30,

Net income (loss)

2 unchanged sentences

Earnings (loss) per share:

For the three months ended June 31, 2021 and 2020, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 603 and 1,078 shares, respectively, were excluded from the computation of diluted loss per share.

For the six months ended June 30, 2021, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 604 shares were excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive.

For the six months ended June 30, 2020, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 704 shares were excluded from the computation of diluted loss per share.

Revenues by product .

For the three months ended September 30, 2021 , outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 859 shares were excluded from the computation of diluted loss per share.

For the three months ended September 30, 2020, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 136 shares were excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive.

For the nine months ended September 30, 2021 and 2020, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 847 and 917 shares, respectively, were excluded from the computation of diluted loss per share.

Revenues by product line .

The following table represents total net revenues by product line:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Infectious disease testing

Risk assessment testing

Microbiome (1)

Laboratory services

4 unchanged sentences

Other revenues

(1) 2020 Genomics, Microbiome, and COVID-19 revenues were reclassified to reflect the correct classification of the product line sales.

The reclassification increased (decreased) the product line revenues for the three months ended September 30, 2020 by $( 65 ), $( 298 ), and $ 363 , respectively and increased (decreased) the product line revenue for the nine months ended September 30, 2020 by $( 157 ), $( 390 ), and $ 547 , respectively.

Revenues by geographic area .

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

United States

1 unchanged sentence

Customer and Vendor Concentrations .

We had no significant customer concentrations (greater than 10 %) in our accounts receivable at June 30, 2021.

One of our customers accounted for 11 % of our accounts receivable as of December 31, 2020.

One customer accounted for 14 % of net consolidated revenues for the three months ended June 30, 2021.

Another customer accounted for 10 % and 14 %, respectively, of net consolidated

revenues for the three and six months ended June 30, 2021.

We had no significant customer concentrations (greater than 10 %) in our net consolidated revenues for the three months and six months ended June 30, 2020.

At September 30, 2021, one customer accounted for 13 % of our accounts receivable.

Another customer accounted for 11 % of our accounts receivable as of December 31, 2020 .

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.

One customer accounted for 11 % of net consolidated revenues for the three months ended September 30, 2020.

We currently purchase certain products and critical components of our products from sole-supply vendors.

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We record deferred revenue when funds are received prior to the recognition of the associated revenue.

Deferred revenue as of June 30, 2021 and December 31, 2020 includes customer prepayments of $ 2,884 and $ 3,216 , respectively.

Deferred revenue as of June 30, 2021 and December 31, 2020 also includes $ 1,356 and $ 1,595 , respectively, associated with a long-term contract that has variable pricing based on volume.

Deferred revenue as of September 30, 2021 and December 31, 2020 includes customer prepayments of $ 2,340 and $ 3,216 , respectively.

Deferred revenue as of September 30, 2021 and December 31, 2020 also includes $ 1,148 and $ 1,595 , 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.

Accrued Expenses and other current liabilities

June 30, 2021

September 30, 2021

December 31, 2020

4 unchanged sentences

We have operating and finance leases for corporate offices, warehouse space and equipment (including vehicles).

As of June 30, 2021 , we are the lessee in all agreements.

As of September 30, 2021 , we are the lessee in all agreements.

Our leases have remaining lease terms of 1 to 7 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 .

3 unchanged sentences

The components of lease expense are as follows:

Three Months Ended

Six Months Ended

Three Months Ended September 30,

Nine Months Ended September 30,

Operating Lease Cost

4 unchanged sentences

Supplemental cash flow information related to leases is as follows:

Three Months Ended

Six Months Ended

Nine Months Ended September 30,

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

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Supplemental balance sheet information related to leases is as follows:

June 30, 2021

September 30, 2021

December 31, 2020

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Weighted-average discount rate—finance leases

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

2021 (excluding the six months ended June 30, 2021)

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

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

Total Minimum Lease Payments

2 unchanged sentences

Stockholders’

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

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

Comprehensive

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Balance at June 30, 2021

Common stock issued upon exercise of options

Vesting of restricted stock and performance stock units

Purchase and retirement of common shares

Stock-based compensation

Currency translation adjustments

Unrealized loss on marketable securities

Balance at September 30, 2021

Comprehensive

15 unchanged sentences

Balance at June 30, 2020

Common stock issued upon exercise of options

Vesting of restricted stock and performance stock units

Purchase and retirement of common shares

Stock-based compensation

Currency translation adjustments

Unrealized loss on marketable securities

Balance at September 30, 2020

Stock-Based Awards

8 unchanged sentences

To satisfy the exercise of options, issuance of restricted stock, or redemption of performance-based restricted stock units, we issue new shares rather than shares purchased on the open market.

Total compensation cost related to stock options for the six months ended June 30, 2021 and 2020 was $ 521 and $ 468 respectively.

Compensation cost of $ 2,066 and $ 2,556 related to restricted shares was recognized during the six months ended June 30, 2021 and 2020, respectively.

Total compensation cost related to stock options for the nine months ended September 30, 2021 and 2020 was $ 793 and $ 683 , respectively.

Compensation cost of $ 2,891 and $ 3,329 related to restricted shares was recognized during the nine months ended September 30, 2021 and 2020, respectively.

We grant performance-based restricted stock units (“PSUs”) to certain executives.

Vesting of these PSUs is dependent upon achievement of performance-based metrics during a one-year or three-year period from the date of grant.

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.

Performance during the one-year period is based on a one-year income before income taxes target.

If the one-year target is achieved, the PSUs will then vest three years from grant date.

Performance during the three-year period will be based on achievement of a three-year compound annual growth rate for consolidated product revenues.

If the three-year target is achieved, the corresponding PSUs will then vest three years from grant date.

PSUs are converted into shares of our common stock once vested.

Compensation cost of $ 350 and $ 1,024 related to PSUs was recognized during the six months ended June 30, 2021 and 2020, respectively.

Compensation cost of $ 1,471 and $ 1,901 related to PSUs was recognized during the nine months ended September 30, 2021 and 2020, respectively.

Public Offering

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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 six months ended June 30, 2021 and 2020.

During the three and six months ended June 30, 2021, we recorded income tax expense of $ 3,610 and $ 10,139 which primarily consists of foreign tax expense.

During the three and six months ended June 30, 2020, we recorded income tax expense of $ 1,309 and $ 2,021 , which also primarily consists of a foreign tax expense.

No shares were purchased and retired during the nine months ended September 30, 2021 and 2020.

During the three and nine months ended September 30, 2021 , we recorded income tax expense of $ 2,102 and $ 12,241 , respectively, which primarily consisted of foreign tax expense.

During the three and nine months ended September 30, 2020 , we recorded income tax expense of $ 3,659 and $ 5,680 , respectively, which also primarily consisted of a foreign tax expense.

Tax expense reflects taxes due to the taxing authorities and the tax effects of temporary differences between the basis of assets and liabilities recognized for financial reporting and tax purposes, and net operating loss and tax credit carryforwards.

The significant components of our total deferred tax liability as of June 30, 2021 and December 31, 2020 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.

The significant components of our total deferred tax liability as of September 30, 2021 and December 31, 2020 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 June 30, 2021 and December 31, 2020 since the facts and circumstances necessitating the allowance have not changed.

Management believes the full valuation allowance is still appropriate at both September 30, 2021 and December 31, 2020 since the facts and circumstances necessitating the allowance have not changed.

Commitments and Contingencies

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In management’s opinion, the outcomes of such actions, either individually or in the aggregate, are not expected to have a material adverse effect on our future financial position or results of operations.

In March 2021, we filed a complaint against Spectrum Solutions, LLC ("Spectrum") in the United States District Court for the Southern District of California alleging that certain DNA saliva collection devices manufactured and sold by Spectrum infringe a patent held by DNAG.

In March 2021, we filed a complaint against Spectrum Solutions, LLC ("Spectrum") in the United States District Court for the Southern District of California alleging that certain saliva collection devices manufactured and sold by Spectrum infringe a patent held by DNAG.

Spectrum has filed an answer to the initial complaint, asserting that its device does not infringe our patent and that our patent is invalid.

In August 2021, we amended our complaint to add a second patent to this litigation.

Spectrum responded to our amended complaint and asserted counterclaims for inequitable conduct and antitrust violations with respect to one of the patents in the litigation.

We believe Spectrum's counterclaims are without merit and we filed a motion to dismiss both claims in October 2021.

We are seeking injunctive relief and damages in this matter.

As of June 30, 2021 we entered in several new contracts associated with the manufacture and supply of our COVID-19 antigen product which include certain minimum purchase commitments over the next five years as follows:

As of September 30, 2021 , we have entered in several new contracts associated with the manufacture and supply of our COVID-19 antigen products and our molecular collection solutions products that include unconditional commitments to purchase certain materials through the latest of the first quarter of 2026 in the aggregate amount of $ 126,499 .

Business Segment Information

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Reportable segments have no inter-segment revenues and inter-segment expenses have been eliminated.

The following table summarizes operating segment information for the three and six months ended June 30, 2021 and 2020, and asset information as of June 30, 2021 and December 31, 2020:

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Net revenues:

6 unchanged sentences

Molecular Solutions

June 30, 2021

September 30, 2021

December 31, 2020

18 unchanged sentences

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

ability of the Company to manufacture sufficient quantities of the Inteliswab TM COVID-19 rapid test and resolve manufacturing challenges and the expected time frame for doing so;

ability to successfully manage and integrate acquisitions of other companies in a manner that complements or leverages our existing business, or otherwise expands or enhances our portfolio of products and our end-to-end service offerings, and the diversion of management’s attention from our ongoing business and regular business responsibilities to effect such integration;

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orders and social distancing guidelines issued by federal, state and local governments to contain the spread of the COVID-19 pandemic and we continued to see this impact our business in early 2021.

However, during the second quarter of 2021, we began to see a resumption of HIV and HCV testing in the U.S.

However, during the second and third quarters of 2021, we saw a resumption of HIV and HCV testing in the U.S.

as domestic sales of our non-COVID diagnostic products began returning to pre-pandemic levels.

On the international front, while professional HIV and HCV testing in Europe and Asia also started to pick up, more recently, we have experienced some reduction and stoppages of HIV self-testing in Southern and Eastern African countries due to the COVID-19 pandemic.

In our molecular segment, COVID-related disruption in clinical and research work, particularly in the academic market, had reduced demand for our products in 2020 and early 2021, but demand levels started to return to normal in the second quarter of 2021.

On the international front, professional HIV and HCV testing in Europe and Asia also started to pick up.

However, more recently we have experienced reductions and stoppages of HIV self-testing in Southern and Eastern African countries due to the COVID-19 pandemic.

In our Molecular Solutions segment, COVID-related disruption in clinical and research work, particularly in the academic market, had reduced demand for our products in 2020 and early 2021, but demand levels started to return to normal in the second and third quarters of 2021.

Although the negative trends that materially impacted our results of operations during 2020 and early 2021 are starting to abate, it is impossible to predict if this improvement will continue and these negative trends may adversely impact certain parts of our business in future periods and for an indeterminate time period, depending on the duration and severity of the COVID-19 pandemic, the impact of COVID-19 variants and the scope and success of vaccination programs globally.

1 unchanged sentence

In 2020, we began selling our saliva collection devices for use in molecular COVID-19 testing.

In the first half of 2021, we generated revenues of approximately $38.9 million from sales of our molecular collection devices related to COVID-19 testing.

In the first nine months of 2021, we generated revenues of approximately $46.2 million from sales of our molecular collection devices related to COVID-19 testing.

In the U.S., public health customers purchased increased quantities of our OraQuick ® In-Home HIV Test in order to permit continued HIV testing while allowing clients and patients to adhere to “stay-at-home”

1 unchanged sentence

In addition, we saw increased demand for our molecular collection products from customers who conduct both saliva and blood-based testing.

As it becomes more difficult to collect blood in clinics or healthcare settings, these customers are increasingly relying on the saliva collection alternative.

However, demand for molecular COVID-19 testing during the second quarter of 2021 began to decline primarily due to the availability of vaccines.

This trend is expected to continue in future periods.

As it became more difficult to collect blood in clinics or healthcare settings, these customers increasingly relied on the saliva collection alternative.

However, demand for molecular COVID-19 testing during the second and third quarters of 2021 began to decline primarily due to the availability of vaccines.

We believe this trend will continue in future periods.

In June 2021, we received three Emergency Use Authorizations ("EUAs") from the U.S.

Food and Drug Administration ("FDA") for our InteliSwab TM COVID-19 Rapid Tests for non-prescription over-the-counter ("OTC"), professional point-of-care and prescription use.

lateral flow, rapid diagnostic tests are designed to detect active COVID-19 infection with a simple, easy-to-use workflow, using samples self-collected from the lower nostrils.

Food and Drug Administration ("FDA") for our InteliSwab TM COVID-19 Rapid Tests for non-prescription OTC, professional point-of-care and prescription use.

These lateral flow, rapid antigen

diagnostic tests are designed to detect active COVID-19 infection with a simple, easy-to-use workflow, using samples self-collected from the lower nostrils.

After users swab their lower nostrils, the test stick is swirled in a pre-measured buffer solution.

No instrumentation, batteries, smart phone or laboratory analysis is needed to read the result, which appears on the test stick a short time later.

Because of the timing of EUA receipt and the time needed to implement final labeling for these tests, we did not report any sales of InteliSwab TM in the second quarter of 2021 and expect sales to begin in the third quarter.

Following discussions with the FDA and their de-prioritization of antibody testing in the U.S.

we have decided to no longer pursue EUAs for a COVID-19 antibody enzyme-linked immunosorbent assay ("ELISA") for use in laboratory settings.

We will, however, continue to offer this product for research use only to labs and other parties interested in COVID antibody surveillance and research applications.

During the third quarter of 2021 and for nine-month period ending September 30, 2021, we recorded $7.7 million of InteliSwab TM sales.

Following discussions with the FDA and their de-prioritization of antibody testing in the U.S., we decided to no longer pursue EUAs for a COVID-19 antibody enzyme-linked immunosorbent assay ("ELISA") for use in laboratory settings.

We are, however, continuing to offer this product for research use only to labs and other parties interested in COVID antibody surveillance and research applications.

DLA Procurement Contract

In September 2021, we entered into a contract with the Defense Logistics Agency ("DLA") for the procurement of our InteliSwab COVID-19 Rapid Test for OTC use, which the DLA estimated to have a value of $205 million.

Under the terms of the contract, the Company will provide its InteliSwab COVID-19 Rapid Test to up to 25,000 sites throughout the United States.

The contract will run from October 2021 through September 2022.

BARDA 510(k) funding

In September 2021, we entered into an agreement with the Biomedical Advanced Research Development Authority (“BARDA”), which is part of the office of the Assistant Secretary for Preparedness and Response at the U.S.

Department of Health and Human Services (“HHS”), pursuant to which BARDA will provide up to $13.6 million in funding for us to obtain 510(k) clearance and Clinical Laboratory Improvement Amendments (“CLIA”) waiver of our InteliSwab COVID-19 rapid test from the U.S.

Food and Drug Administration (“FDA”).

DOD Manufacturing Capacity funding

In September 2021, we also entered into an agreement for $109 million in funding from the U.S.

Department of Defense (the “DOD”), in coordination with the Department of Health and Human Services, to build additional manufacturing capacity in the United States for our InteliSwab COVID-19 rapid tests as part of the nation’s pandemic preparedness plan.

Under this agreement, the funding will be used to expand our production capacity by 100 million tests annually.

Funding will be paid to the Company based on achievement of milestones through March 2024 for the design, acquisition, installation, qualification and acceptance of the manufacturing equipment, as set forth in the agreement.

An existing Company location in Bethlehem, PA will be retrofitted to accommodate increased manufacturing and an additional new facility will be added in another U.S.

location to be determined.

Current Consolidated Financial Results

During the six months ended June 30, 2021, our consolidated net revenues increased 91% to $116.2 million, compared to $60.9 million for the six months ended June 30, 2020.

Net product and services revenues during the six months ended June 30, 2021 increased 90% when compared to the same period of 2020, due to higher sales of our molecular sample collection kits for COVID-19 testing, commercial genomics products, microbiome kits, domestic OraQuick ® HIV tests and domestic and international OraQuick ® H VC tests and higher revenues from laboratory services.

Partially offsetting these increases were lower sales of our international OraQuick ® HIV Self-Test s.

Other revenues for the six months ended June 30, 2021 were $3.9 million compared to $1.6 million in the same period of 2020.

This increase was largely due to increased research and development funding for the development of our COVID-19 tests and our HIV medication adherence tests and higher royalty income.

Our consolidated net income for the six months ended June 30, 2021 was $2.4 million, or $0.03 per share on a fully diluted basis, compared to a consolidated net loss of $17.8 million, or $0.28 per share on a fully diluted basis, for the six months ended June 30, 2020.

Results for the six months ended June 30, 2021 included an $1.0 million non-cash pre-tax benefit associated with the change in the fair value of acquisition-related contingent consideration which accounted for approximately $0.01 per share.

Results for the six months ended June 30, 2020 included a $450,000 non-cash pre-tax charge associated with the change in the fair value of acquisition-related contingent consideration and $343,000 of acquisition related transaction costs associated with the UrSure acquisition, which together accounted for approximately $0.01 per share.

Cash used in operating activities during the six months ended June 30, 2021 and 2020 was $3.5 million and $2.2 million, respectively.

As of June 30, 2021, we had $229.4 million in cash, cash equivalents, and available-for-sale securities, compared to $257.1 million at December 31, 2020.

During the nine months ended September 30, 2021, our consolidated net revenues increased 56% to $170.1 million, compared to $108.9 million for the nine months ended September 30, 2020.

Net product and services revenues during the nine months ended September 30, 2021 increased 56% when compared to the same period of 2020, largely due to increased revenues across all products lines, other than our international HIV self-test.

The biggest contributors to the increased revenues for the period were higher sales of our genomics products and our molecular sample collection kits for COVID-19 testing and the first time inclusion of sales of our InteliSwab TM COVID-19 rapid tests.

Other revenues for the nine months ended September 30, 2021 were $4.6 million compared to $2.9 million in the same period of 2020.

This increase was largely due to increased research and development funding for the development of our COVID-19 tests and higher royalty income.

Our consolidated net loss for the nine months ended September 30, 2021 was $12.6 million, or $0.18 per share on a fully diluted basis, compared to a consolidated net loss of $16.8 million, or $0.25 per share on a fully diluted basis, for the nine months ended September 30, 2020.

Results for the nine months ended September 30, 2021 included a $1.5 million non-cash pre-tax benefit associated with the change in the fair value of acquisition-related contingent consideration which accounted for approximately $0.02 per share.

Results for the nine months ended September 30, 2020 included a $390,000 non-cash pre-tax charge associated with the change in the fair value of acquisition-related contingent consideration and $393,000 of acquisition related transaction costs associated with the UrSure acquisition, which together accounted for approximately $0.01 per share.

Cash used in operating activities during the nine months ended September 30, 2021 was $22.6 million.

Cash provided by operating activities during the nine months ended September 30, 2020 was $2.2 million.

As of September 30, 2021, we had $202.3 million in cash, cash equivalents, and available-for-sale securities, compared to $257.1 million at December 31, 2020.

Results of Operations

Three months ended June 30, 2021 compared to June 30, 2020

Three months ended September 30, 2021 compared to September 30, 2020

CONSOLIDATED NET REVENUES

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

Three Months Ended June 30,

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

Three Months Ended September 30,

Percentage of Total Net Revenues

1 unchanged sentence

Net product and services revenues

Consolidated net product and services revenues increased 97% to $55.7 million for the three months ended June 30, 2021 from $28.3 million for the three months ended June 30, 2020.

All net product and service revenues in each of our business segments experienced double digit growth compared to the prior year period.

This growth is a result of sales of all our non-COVID product lines starting to return to pre-pandemic levels .

Other revenues for the three months ended June 30, 2021 increased 102% to $1.9 million from $922,000 for the three months ended June 30, 2020 due to increased research and development funding for the development of our COVID-19 tests and our HIV medication adherence tests and higher royalty income.

Consolidated net revenues derived from products sold to customers outside of the United States were $10.0 million and $7.3 million, or 17% and 25% of total net revenues, in the three months ended June 30, 2021 and 2020, respectively.

Consolidated net product and services revenues increased 14% to $53.2 million for the three months ended September 30, 2021 from $46.7 million for the three months ended September 30, 2020.

The increase in revenues was largely driven by increased genomic product sales and the first time inclusion of s ales of our InteliSwab TM COVID-19 rapid tests , partially offset by a decline in sales of our molecular sample collection kits for COVID-19 testing.

Other revenues for the three months ended September 30, 2021 decreased 45% to $688,000 from $1.3 million for the three months ended September 30, 2020 due to expected lower research and development funding for the development of our COVID-19 tests and our HIV medication adherence tests .

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

Because the majority of our international sales are denominated in U.S.

2 unchanged sentences

Diagnostics Segment

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

Three Months Ended June 30,

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

Three Months Ended September 30,

Percentage of Total Net Revenues

2 unchanged sentences

Net product revenues

NM - not meaningful

Infectious Disease Testing Market

Sales to the infectious disease testing market increased 79% to $15.6 million for the three months ended June 30, 2021 from $8.7 million for the three months ended June 30, 2020.

This increase resulted from higher world-wide OraQuick ® HIV and 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 June 30, 2021 and 2020.

Three Months Ended June 30,

Sales to the infectious disease testing market decreased 2% to $12.9 million for the three months ended September 30, 2021 from $13.2 million for the three months ended September 30, 2020.

This decrease resulted from lower world-wide OraQuick ® HIV and international OraQuick ® HCV product sales, partially offset by higher domestic OraQuick ® HCV product sales.

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

Three Months Ended September 30,

International HIV

3 unchanged sentences

Net OraQuick® revenues

Domestic OraQuick ® HIV sales increased 29% to $4.1 million for the three months ended June 30, 2021 from $3.2 million for the three months ended June 30, 2020.

This increase was primarily the result of higher sales of our OraQuick ® In-Home HIV test as a result of Centers for Disease Control and Prevention (“CDC”) guidance recommending the use of an OTC product for testing in lieu of in-person testing as a result of the COVID-19 pandemic and the re-opening of physician offices and clinics for HIV testing during the current quarter .

International sales of our OraQuick ® HIV tests increased 75% to $6.8 million for the three months ended June 30, 2021 from $3.9 million for the three months ended June 30, 2020.

This increase was primarily due to customer ordering patterns of our HIV Self-Test in Africa.

Domestic OraQuick ® HCV sales increased 240% to $2.6 million for the three months ended June 30, 2021 from $757,000 for the three months ended June 30, 2020, due to the re-opening of testing programs closed as a result of the COVID-19 pandemic and as resources used for COVID-19 testing and vaccinations were redirected back to HCV testing.

International OraQuick ® HCV sales increased 170% to $1.7 million for the three months ended June 30, 2021 from $641,000 for the three months ended June 30, 2020 as sales into certain international markets started to return back to pre-pandemic levels.

Domestic OraQuick ® HIV sales decreased 12% to $3.4 million for the three months ended September 30, 2021 from $3.9 million for the three months ended September 30, 2020, primarily as a result of the timing of orders placed for our OraQuick ® In-Home test.

International sales of our OraQuick ® HIV tests decreased 4% to $6.6 million for the three months ended September 30, 2021 from $6.9 million for the three months ended September 30, 2020.

This decline in revenues was primarily due to lower subsidies for the international sale of our HIV Self-Test under the charitable support agreement with the Gates Foundation.

The Gates agreement and subsidy provided thereunder expired on June 30, 2021.

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

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

COVID-19 Testing Market

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

Risk Assessment Market

Sales to the risk assessment market increased 71% to $2.6 million for the three months ended June 30, 2021 compared to $1.5 million for the three months ended June 30, 2020 due to hiring increases driven by the economic recovery from the COVID-19 pandemic.

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

Other Revenues

Other revenues for the three months ended June 30, 2021 increased to $1.1 million from $157,000 for the three months ended June 30, 2020, largely due to research and development funding for our COVID-19 and HIV medication adherence tests, which was not present in the prior year period, and the inclusion of royalty income under the terms of a new licensing agreement related to our proprietary buffer solution used for the preservation and stabilization of oral fluid specimens.

Other revenues for the three months ended September 30, 2021 decreased to $230,000 from $774,000 for the three months ended September 30, 2020, due to lower research and development funding for the development of our COVID-19 tests and our HIV medication adherence tests .

Molecular Solutions Segment

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

Three Months Ended June 30,

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

Three Months Ended September 30,

Laboratory services

2 unchanged sentences

Net molecular product and services revenues

Sales of our genomics products increased 203% to $19.6 million for the three months ended June 30, 2021 compared to $6.5 million for the three months ended June 30, 2020, as we started to see our customer's businesses recover from the COVID-19 pandemic.

Microbiome kit sales increased 234% to $2.9 million for the three months ended June 30, 2021 compared to $853,000 for the three months ended June 30, 2020, also largely a result of the recovery in the market from the COVID-19 pandemic.

Sales of our molecular sample collection kits for COVID-19 testing increased to $11.5 million for the three months ended June 30, 2021 compared to $8.5 million during the comparable period in 2020 due to increased demand since the pandemic began late in the first quarter of 2020.

However, we are seeing demand for molecular COVID-19 testing during the second quarter of 2021 begin to decline sequentially primarily due to the availability of vaccines and this trend is expected to continue in future periods.

Laboratory services revenues increased 48% to $3.1 million for the three months ended June 30, 2021 compared to $2.1 million for the three months ended June 30, 2020, due to customers resuming activities delayed by the COVID-19 pandemic.

Other revenues for the three months ended June 30, 2021 increased 5% to $807,000 from $765,000 the three months ended June 30, 2020, largely as a result of higher royalty income under a litigation settlement agreement.

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

Microbiome kit sales increased 11% to $1.7 million for the three months ended September 30, 2021 compared to $1.5 million for the three months ended September 30, 2020, due to customer ordering patterns.

Sales of our molecular sample collection kits for COVID-19 testing decreased 67% to $6.3 million for the three months ended September 30, 2021 compared to $18.8 million during the comparable period in 2020 due to lower COVID-19 PCR testing demand and the impact of the wider availability of vaccines.

Laboratory services revenues increased 6% to $2.4 million for the three months ended September 30, 2021 compared to $2.3 million for the three months ended September 30, 2020 due to customers resuming activities delayed by the COVID-19 pandemic .

Other product and service revenues increased 309% to $576,000 for the three months ended September 30, 2021 compared to $141,000 for the three months ended September 30, 2020 due to increased sales of our Colli-Pee® collection device.

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

CONSOLIDATED OPERATING RESULTS

Consolidated gross profit percentage was 53% for the three months ended June 30, 2021 compared to 59% for the three months ended June 30, 2020.

This decrease is due to lower funding that subsidizes the international sale of our HIV Self-Test under the charitable support agreement with the Gates Foundation and higher scrap and manufacturing costs .

The Gates agreement and the subsidy provided thereunder expired on June 30, 2021.

Consolidated operating income for the three months ended June 30, 2021 was $1.8 million, an $11.2 million increase from the $9.4 million operating loss reported for the three months ended June 30, 2020.

Results for the three months ended June 30, 2021 were positively impacted by the increase in revenues dollars partially offset by lower gross profit percentages and an increase spending in operating expenses.

Consolidated gross profit percentage was 40% for the three months ended September 30, 2021 compared to 63% for the three months ended September 30, 2020.

The decrease in gross profit percentage was primarily due to a less favorable product mix, increased scrap expense, lower absorption of labor, and lower subsidies for the international sale of our HIV Self-Test under the charitable support agreement with the Gates Foundation .

Consolidated operating loss for the three months ended September 30, 2021 was $13.0 million, a $17.4 million decrease from the $4.4 million operating income reported for the three months ended September 30, 2020.

Results for the three months ended September 30, 2021 were negatively impacted by the lower gross profit percentage and an increase in operating expenses.

OPERATING INCOME (LOSS) BY SEGMENT

2 unchanged sentences

Diagnostics Segment

The gross profit percentage for the Diagnostics segment was 34% for the three months ended June 30, 2021 compared to 42% for the three months ended June 30, 2020.

This decrease is due to an increase in scrap costs, lower absorption of labor and fixed overhead costs as we built capacity in advance of the sale of our COVID-19 antigen test, and lower funding under the charitable support agreement with the Gates Foundation partially offset by the increase in other revenues which contribute 100% to our gross profit percentage and an improvement in product mix due to increased sales of higher gross profit percentage products.

Research and development expenses increased 16% to $5.0 million for the three months ended June 30, 2021 from $4.3 million for the three months ended June 30, 2020, largely due to higher staffing costs as a result of increased headcount to support COVID product development and the inclusion of employees from the UrSure acquisition which occurred in July 2020.

Sales and marketing expenses were $6.6 million for both the three months ended June 30, 2021 and 2020.

General and administrative expenses increased 2% to $7.1 million for the three months ended June 30, 2021 from $7.0 million for the three months ended June 30, 2020 largely due to higher staffing and consulting costs offset by lower legal and accounting fees.

All of the above contributed to the Diagnostics segment’s operating loss of $11.9 million for the three months ended June 30, 2021, which included non-cash charges of $939,000 for depreciation and amortization and $1.4 million for stock-based compensation.

The Diagnostics segment operating loss also included a non-cash pre-tax benefit of $220,000 associated with the change in the fair value of acquisition-related contingent consideration.

The gross profit percentage for the Diagnostics segment was 16% for the three months ended September 30, 2021 compared to 44% for the three months ended September 30, 2020.

This decrease is due to an increase in scrap costs associated with the production of our InteliSwab TM test, and the recording of a reserve for COVID-19 antibody inventory, lower absorption of labor costs as we have increased headcount in anticipation of higher production demands, and lower subsidies for the international sale of our HIV Self-Test under the charitable support agreement with the Gates Foundation .

Research and development expenses increased 3% to $5.9 million for the three months ended September 30, 2021 compared to $5.7 million for the three months ended September 30, 2020 largely due to higher staffing costs and increased spend to investigate InteliSwab TM manufacturing issues, partially offset by a decline in COVID-19 lab supply costs associated with reduced product development activities from the prior year period.

Sales and marketing expenses increased 83% to $9.0 million for three months ended September 30, 2021 from $4.9 million for the three months ended September 30, 2020 due to an increase in advertising spend associated with the introduction of our InteliSwab TM test into the market, higher commissions associated with the revenue increase, and increased consulting expense associated with business strategy planning .

General and administrative expenses increased 24% to $8.0 million for the three months ended September 30, 2021 from $6.5 million for the three months ended September 30, 2020 largely due to increased business development consulting spend, increased staffing costs associated with increased headcount and higher recruiting expenses.

We are anticipating higher operating expenses in the fourth quarter of 2021 as several of our on-going InteliSwab TM post marketing clinical studies will lead to higher research and development expenses.

In addition, we expect higher sales and marketing and general and administrative costs as we prepare for significant commercial ramp up of our InteliSwab TM business in 2022.

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

The Diagnostics

segment operating loss also included a non-cash pre-tax benefit of $500,000 associated with the change in the fair value of acquisition-related contingent consideration.

Molecular Solutions Segment

The gross profit percentage for the Molecular Solutions segment was 63% for the three months ended June 30, 2021 compared to 68% for the three months ended June 30, 2020.

This decrease is attributable to an increase in third party manufacturing costs at our subcontractors and a change in product mix of increased sales of lower gross profit product.

Research and development expenses increased 3% to $2.7 million for the three months ended June 30, 2021 from $2.6 million for the three months ended June 30, 2020 due to the timing of spending on laboratory services and microbiome projects.

Sales and marketing expenses increased 10% to $3.9 million for the three months ended June 30, 2021 from $3.5 million for the three months ended June 30, 2020 due to higher staffing costs partially offset by a decrease in our reserve for uncollectible accounts .

General and administrative expenses increased 18% to $3.9 million for the three months ended June 30, 2021 from $3.3 million for the three months ended June 30, 2020 due to increased staffing costs and higher legal fees.

All of the above contributed to the Molecular Solutions segment’s operating income of $13.7 million for the three months ended June 30, 2021, which included $1.7 million for depreciation and amortization and $113,000 for stock-based compensation.

The gross profit percentage for the Molecular Solutions segment was 58% for the three months ended September 30, 2021 compared to 73% for the three months ended September 30, 2020.

This decrease was due to a less favorable product mix associated with the higher sales of lower gross profit percentage product and an increase in costs at our third party contract manufacturers resulting from the capacity expansion at those vendors.

Research and development expenses increased 17% to $2.7 million for the three months ended September 30, 2021 from $2.3 million for the three months ended September 30, 2020 due to higher staffing costs.

Sales and marketing expenses increased 67% to $4.9 million for the three months ended September 30, 2021 from $2.9 million for the three months ended September 30, 2020 due to increased consulting expense associated with business strategy planning, an increase in our reserve for uncollectible accounts, and higher staffing costs .

General and administrative expenses increased 23% to $4.4 million for the three months ended September 30, 2021 from $3.6 million for the three months ended September 30, 2020 due to increased legal fees and staffing costs.

All of the above contributed to the Molecular Solutions segment’s operating income of $5.6 million for the three months ended September 30, 2021, which included $2.2 million for depreciation and amortization and $301,000 for stock-based compensation.

CONSOLIDATED INCOME TAXES

1 unchanged sentence

deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed.

For the three months ended June 30, 2021, a U.S.

state tax benefit of $54,000 was recorded compared to $9,000 of state income tax expense recorded for the three months ended June 30, 2020.

For the three months ended June 30, 2021, foreign tax expense of $3.7 million was recorded compared to foreign tax expense of $1.3 million recorded for the three months ended June 30, 2020.

The overall increase in tax expense is largely a result of the increase in income before taxes generated by our Canadian subsidiary.

Six months ended June 30, 2021 compared to June 30, 2020

For the three months ended September 30, 2021, we recorded a U.S.

state tax benefit of $102,000 compared to a $629,000 state income tax benefit for the three months ended September 30, 2020.

For the three months ended September 30, 2021, we recorded foreign tax expense of $2.2 million compared to foreign tax expense of $4.3 million for the three months ended September 30, 2020.

The overall decrease in tax expense is largely a result of the decrease in income before taxes generated by our Canadian subsidiary.

Nine months ended September 30, 2021 compared to September 30, 2020

CONSOLIDATED NET REVENUES

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

Six Months Ended June 30,

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

Nine Months Ended September 30,

Percentage of Total Net Revenues

1 unchanged sentence

Net product and services revenues

Consolidated net product and services revenues increased 90% to $112.3 million for the six months ended June 30, 2021 from $59.2 million for the comparable period of 2020.

Higher sales of our molecular sample collection kits for COVID-19 testing, commercial genomics products, microbiome kits, domestic OraQuick ® HIV tests, and domestic and international OraQuick ® H VC tests and higher revenues from laboratory services were partially offset by lower sales of our international OraQuick ® HIV Self-Test s.

Other revenues for the six months ended June 30, 2021 increased 137% to $3.9 million from $1.6 million for the six months ended June 30, 2020 due to increased research and development funding for the development of our COVID-19 tests and our HIV medication adherence tests and higher royalty income.

Consolidated net revenues derived from products sold to customers outside of the United States were $19.5 million and $17.3 million, or 17% and 28% of total net revenues, in the first six months of 2021 and 2020, respectively.

Consolidated net product and services revenues increased 56% to $165.5 million for the nine months ended September 30, 2021 from $106.0 million for the comparable period of 2020, largely due to increased revenues across all products lines, other than our international HIV self-test.

Other revenues for the nine months ended September 30, 2021 increased 57% to $4.6 million from $2.9 million for the nine months ended September 30, 2020.

This increase was largely due to increased research and development funding for the development of our COVID-19 tests and higher royalty income.

Consolidated net revenues derived from products sold to customers outside of the United States were $30.4 million and $26.7 million, or 18% and 25% of total net revenues, in the first nine months of 2021 and 2020, respectively.

Because the majority of our international sales are denominated in U.S.

2 unchanged sentences

Diagnostics Segment

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

Six Months Ended June 30,

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

Nine Months Ended September 30,

Percentage of Total Net Revenues

2 unchanged sentences

Net product revenues

NM - not meaningful

Infectious Disease Testing Market

Sales to the infectious disease testing market increased 15% to $27.0 million for the six months ended June 30, 2021 from $23.4 million for the six months ended June 30, 2020.

Sales to the infectious disease testing market increased 8% to $39.7 million for the nine months ended September 30, 2021 from $36.6 million for the nine months ended September 30, 2020.

This increase resulted from higher domestic sales of our OraQuick ® HIV and HCV products and higher international OraQuick ® H VC product sales, partially offset by lower sales of our international OraQuick ® HIV Self-Test s.

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

Six Months Ended June 30,

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

Nine Months Ended September 30,

International HIV

3 unchanged sentences

Net OraQuick® revenues

Domestic OraQuick ® HIV sales increased 22% to $9.0 million for the six months ended June 30, 2021 from $7.4 million for the six months ended June 30, 2020.

This increase was primarily the result of higher sales of our OraQuick ® In-Home HIV test as a result of CDC guidance recommending the use of an OTC product for testing in lieu of in-person testing due to the COVID-19 pandemic.

International sales of our OraQuick ® HIV tests decreased 1% to $10.7 million for the six months ended June 30, 2021 from $10.8 million for the six months ended June 30, 2020 largely due to the timing of customer orders.

Domestic OraQuick ® HCV sales increased 67% to $3.8 million for the six months ended June 30, 2021 from $2.3 million for the six months ended June 30, 2020 due to the re-opening of testing programs closed as a result of the COVID-19 pandemic and as resources used for COVID-19 testing and vaccinations were redirected back to HCV testing.

International OraQuick ® HCV sales increased 68% to $2.9 million for the six months ended June 30, 2021 from $1.7 million for the six months ended June 30, 2020 as sales into certain international markets are returning to pre-pandemic levels.

Domestic OraQuick ® HIV sales increased 10% to $12.5 million for the nine months ended September 30, 2021 from $11.3 million for the nine months ended September 30, 2020.

This increase was primarily the result of higher sales of our OraQuick ® In-Home HIV test used in a Centers for Disease Control and Prevention ("CDC") initiative to drive increased in-home HIV testing .

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

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

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

COVID-19 Testing Market

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

Risk Assessment Market

Sales to the risk assessment market increased 1% to $4.6 million for the six months ended June 30, 2021 compared to $4.5 million for the six months ended June 30, 2020 due to hiring increases driven by the economic recovery from the COVID-19 pandemic.

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

Other Revenues

Other revenues for the six months ended June 30, 2021 increased to $2.3 million from $286,000 for the six months ended June 30, 2020, largely due to research and development funding for our COVID-19 and HIV medication adherence tests, which was not present in the prior year period, and the inclusion of royalty income under the terms of a new licensing agreement related to our proprietary buffer solution used for the preservation and stabilization of oral fluid specimens.

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

Molecular Solutions Segment

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

Six Months Ended June 30,

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

Nine Months Ended September 30,

Laboratory services

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Net molecular product and services revenues

Sales of our genomics products increased 106% to $30.6 million for the six months ended June 30, 2021 compared to $14.9 million for the six months ended June 30, 2020 as we start to see our customer's businesses recover from the COVID-19 pandemic and due to strong organic growth from customers in the commercial animal markets.

Microbiome kit sales increased 103% to $4.9 million for the six months ended June 30, 2021 compared to $2.4 million for the six months ended June 30, 2020 due to a recovery in the market from the COVID-19 pandemic.

Sales of our molecular sample collection kits for COVID-19 testing increased to $38.9 million for the six months ended June 30, 2021 compared to $8.9 million during the comparable period in 2020 due to increased demand as the COVID-19 pandemic began late in the first quarter of 2020.

Laboratory services revenues increased 24% to $5.6 million for the six months ended June 30, 2021 compared to $4.5 million for the six months ended June 30, 2020, due to customers resuming activities delayed by the COVID-19 pandemic.

Other revenues for the six months ended June 30, 2021 increased 19% to $1.6 million from $1.3 million for the six months ended June 30, 2020 largely as a result of higher royalty income under a litigation settlement agreement.

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

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

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

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

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

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

CONSOLIDATED OPERATING RESULTS

Consolidated gross profit percentage was 59% for the six months ended June 30, 2021 compared to 55% for the six months ended June 30, 2020.

Gross profit percentage for the six months ended June 30, 2021 benefited from an improved product mix associated with an increase in higher gross profit percentage product sales and the increase in other revenues which contribute 100% to our gross profit percentage partially offset by lower absorption of labor and fixed over-head costs as we build capacity in advance of sales of the COVID-19 antigen test, lower funding under the charitable support agreement with the Gates Foundation, and an increased scrap expense .

Consolidated operating income for the six months ended June 30, 2021 was $12.2 million, a $29.6 million increase from the $17.4 million operating loss reported for the six months ended June 30, 2020.

Results for the six months ended June 30, 2021 were positively impacted by the

increased revenues and the inclusion of an $1.0 million non-cash benefit related to the fair value change in acquisition-related contingent consideration partially offset by the lower gross profit percentage and increased operating expenses.

Consolidated gross profit percentage was 53% for the nine months ended September 30, 2021 compared to 59% for the nine months ended September 30, 2020.

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

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

Results for the nine months ended September 30, 2021 were positively

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

OPERATING INCOME (LOSS) BY SEGMENT

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Diagnostics Segment

The gross profit percentage for the Diagnostics segment was 38% for the six months ended June 30, 2021 compared to 43% for the six months ended June 30, 2020.

This decrease is due lower absorption of labor and fixed overhead costs as we built capacity in advance of sales of the COVID-19 antigen test, lower funding under the charitable support agreement with the Gates Foundation and, increased scrap costs partially offset by an increase in other revenues which contribute 100% to our gross profit percentage and an improvement in product mix due to increased sales of higher gross profit percentage products.

Research and development expenses increased 49% to $11.6 million for the six months ended June 30, 2021 from $7.8 million for the six months ended June 30, 2020, largely due to increased spending associated with COVID-19 product development and higher staffing costs.

Sales and marketing expenses increased 14% to $12.8 million for the six months ended June 30, 2021 from $11.2 million for the six months ended June 30, 2020, due to higher market research, consulting and advertising spending to prepare for the sale of the COVID-19 rapid antigen tests partially offset by a lower reserve adjustment for uncollectible accounts.

General and administrative expenses decreased 5% to $13.6 million for the six months ended June 30, 2021 from $14.3 million for the six months ended June 30, 2020 due to lower legal fees and increased intercompany service fees allocated to the Molecular Solutions segment, partially offset by increased staffing costs.

All of the above contributed to the Diagnostics segment’s operating loss of $24.1 million for the six months ended June 30, 2021, which included non-cash charges of $1.8 million for depreciation and amortization and $2.7 million for stock-based compensation.

The gross profit percentage for the Diagnostics segment was 29% for the nine months ended September 30, 2021 compared to 43% for the nine months ended September 30, 2020.

This decrease was due to an increase in scrap costs associated with the production of our InteliSwab TM test and the recording of a reserve for COVID-19 antibody inventory, and lower absorption of labor costs as we have increased headcount in anticipation of higher production demands .

Research and development expenses increased 29% to $17.4 million for the nine months ended September 30, 2021 from $13.5 million for the nine months ended September 30, 2020, largely due to higher staffing costs and increased COVID-19 product development expenses.

Sales and marketing expenses increased 35% to $21.7 million for the nine months ended September 30, 2021 from $16.1 million for the nine months ended September 30, 2020, due to higher market research and advertising spending associated with the introduction of our InteliSwab TM test into the market , higher commissions directly related to the increase in revenues and increased consulting costs associated with business strategy planning.

General and administrative expenses increased 4% to $21.6 million for the nine months ended September 30, 2021 from $20.7 million for the nine months ended September 30, 2020 due to higher staffing costs associated with increased headcount, and higher business development consulting costs, partially offset by lower legal fees, a lower allocation of building costs as administrative space was repurposed for manufacturing, and increased intercompany service fees allocated to the Molecular Solutions segment.

All of the above contributed to the Diagnostics segment’s operating loss of $42.8 million for the nine months ended September 30, 2021, which included non-cash charges of $3.0 million for depreciation and amortization and $4.7 million for stock-based compensation.

The Diagnostics segment operating loss also included a non-cash pre-tax benefit of $1.5 million associated with the change in the fair value of acquisition-related contingent consideration.

Molecular Solutions Segment

The gross profit percentage for the Molecular Solutions segment was 68% for the six months ended June 30, 2021 compared to 65% for the six months ended June 30, 2020.

This increase is due to higher gross profit percentage product sales partially offset by increased manufacturing costs at our third party contract manufacturers .

Research and development expenses increased 7% to $5.1 million for the six months ended June 30, 2021 from $4.8 million for the six months ended June 30, 2020 due to increased spending associated with projects within our laboratory services business.

Sales and marketing expenses increased 15% to $7.2 million for the six months ended June 30, 2021 from $6.3 million for the six months ended June 30, 2020 due to higher staffing costs .

General and administrative expenses increased 25% to $7.6 million for the six months ended June 30, 2021 from $6.1 million for the six months ended June 30, 2020 due to increased intercompany service fees allocated from the Diagnostics segment, estimated penalties incurred on delinquent sales tax filings that were not incurred in the prior year period, and higher staffing costs.

All of the above contributed to the Molecular Solutions segment’s operating income of $36.3 million for the six months ended June 30, 2021, which included $3.3 million for depreciation and amortization and $195,000 for stock-based compensation.

The gross profit percentage for the Molecular Solutions segment was 66% for the nine months ended September 30, 2021 compared to 69% for the nine months ended September 30, 2020.

This decrease is due a less favorable product mix associated with increased sales of lower gross profit percentage product and increased cost s at our third party contract manufacturers.

Research and development expenses increased 11% to $7.9 million for the nine months ended September 30, 2021 from $7.1 million for the nine months ended September 30, 2020 due to increased staffing and consulting costs.

Sales and marketing expenses increased 31% to $12.1 million for the nine months ended September 30, 2021 from $9.2 million for the nine months ended September 30, 2020 due to higher staffing costs, increased consulting costs associated with business strategy planning, and an increase in our reserve for uncollectible accounts .

General and administrative expenses increased 24% to $12.1 million for the nine months ended September 30, 2021 from $9.7 million for the nine months ended September 30, 2020 due to increased intercompany service fees allocated from the Diagnostics segment, estimated penalties incurred on delinquent sales tax filings that were not recognized in the prior year period, higher staffing costs, and increased legal fees.

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

CONSOLIDATED INCOME TAXES

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deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed.

For the six months ended June 30, 2021, U.S.

state tax expense of $115,000 was recorded compared to $18,000 of state income tax expense recorded for the six months ended June 30, 2020.

For the six months ended June 30, 2021, foreign tax expense of $10.0 million was recorded compared to foreign tax expense of $2.0 million recorded for the six months ended June 30, 2020.

For the nine months ended September 30, 2021, we recorded U.S.

state tax expense of $13,000 compared to $612,000 of state income tax benefit for the nine months ended September 30, 2020.

For the nine months ended September 30, 2021, we recorded foreign tax expense of $12.2 million compared to foreign tax expense of $6.3 million for the nine months ended September 30, 2020.

The overall increase in tax expense is largely a result of the increase in income before taxes generated by our Canadian subsidiary.

Liquidity and Capital Resources

September 30,

(In thousands)

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Working capital

Our cash and cash equivalents and available-for-sale securities decreased to $229.4 million at June 30, 2021 from $257.1 million at December 31, 2020.

Our working capital decreased to $238.5 million at June 30, 2021 from $242.4 million at December 31, 2020.

During the six months ended June 30, 2021, net cash used in operating activities was $3.5 million.

Our net income of $2.4 million included non-cash charges for depreciation and amortization expense of $5.1 million, stock-based compensation expense of $2.9 million, a provision for doubtful accounts of $747,000, and other non-cash benefits of $167,000.

Operating activities also included a benefit for the change in the estimated fair value of acquisition-related contingent consideration of $1.0 million and a $142,000 contingent consideration payment representing the excess of the total contingent consideration payment made during the six months ended June 30, 2021 over the fair value of the liability estimated at the time of acquisition.

Sources of cash generated from our working capital accounts included a $4.4 million increase in accounts payable due to the timing of invoice received and in payments, a $3.7 million decrease in accounts receivable as a result of the collection of large outstanding balances, and a $154,000 decrease in prepaid expenses and other assets.

Offsetting these sources of cash were an increase in inventory of $16.1 million to meet anticipated demand to support COVID-19 testing programs, a decrease in accrued expenses and other liabilities of $4.9 million largely due to payment of our 2020 management incentive bonuses and payment of outstanding sales tax liabilities and a decrease in deferred revenue of $630,000 due to the recognition of customer prepayments.

Net cash provided by investing activities was $10.4 million for the six months ended June 30, 2021, which reflects proceeds from the maturities and redemptions of investments of $43.7 million offset by $22.9 million used to acquire property and equipment largely to increase our manufacturing capacity and $10.4 million used to purchase investments.

Net cash used in financing activities was $2.5 million for the six months ended June 30, 2021, which reflects $1.9 million used for the repurchase of common stock to satisfy withholding taxes related to the vesting of restricted shares awarded to our employees, payments of lease liabilities of $510,000 and $264,000 used for payment of our contingent consideration obligation offset by proceeds from stock option exercises of $121,000.

Our cash and cash equivalents and available-for-sale securities decreased to $202.3 million at September 30, 2021 from $257.1 million at December 31, 2020.

Our working capital decreased to $235.1 million at September 30, 2021 from $242.4 million at December 31, 2020.

During the nine months ended September 30, 2021, net cash used in operating activities was $22.6 million.

Our net loss of $12.6 million included non-cash charges for depreciation and amortization expense of $8.5 million, stock-based compensation expense of $5.2 million, a provision for doubtful accounts of $1.2 million, and other non-cash expense of $105,000.

Operating activities also included a benefit for the change in the estimated fair value of acquisition-related contingent consideration of $1.5 million and a $142,000 contingent consideration payment representing the excess of the total contingent consideration payment made during the nine months ended September 30, 2021 over the fair value of the liability estimated at the time of acquisition.

Sources of cash generated from our working capital accounts included a $2.8 million increase in accounts payable due to the timing of invoices received and payments made and an increase in accrued expenses and other liabilities of $982,000 associated with increased accruals for professional fees and higher sales tax payable .

Offsetting these sources of cash were an increase in inventory of $21.7 million to meet anticipated demand to support COVID-19 testing programs, an increase in accounts receivable of $2.1 million due to orders placed late in the quarter, an increase in prepaid expenses and other assets of $1.9 million due to prepayments made on a manufacturing contract and a decrease in deferred revenue of $1.3 million due to the recognition of revenue from customer prepayments.

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

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

We expect current balances of cash and cash equivalents and available-for-sale securities to be sufficient to fund our current and foreseeable operating and capital needs.

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A summary of our obligations to make future payments under contracts existing at December 31, 2020 is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2020.

As of June 30, 2021, except as described in note 11 within the notes to the consolidated financial statements, there were no significant changes to this information.

As of September 30, 2021, except as described in note 11 within the notes to the consolidated financial statements, there were no significant changes to this information.

Critical Accounting Policies and Estimates

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A more detailed review of our critical accounting policies is contained in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC.

During the first six months of 2021, there were no material changes to our critical accounting policies.

During the first nine months of 2021, there were no material changes to our critical accounting policies.

QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK

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

As of June 30, 2021, we did not have any foreign currency exchange contracts or purchase currency options to hedge local currency cash flows.

Sales denominated in foreign currencies comprised 5.6% of our total revenues for the six months ended June 30, 2021.

As of September 30, 2021, we did not have any foreign currency exchange contracts or purchase currency options to hedge local currency cash flows.

Sales denominated in foreign currencies comprised 5.2% of our total revenues for the nine months ended September 30, 2021.

We do have foreign currency exchange risk related to our operating subsidiaries in Canada and in Belgium.

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Our foreign subsidiaries had net assets, subject to translation, of $194.2 million in U.S.

Dollars, which are included in the Company’s consolidated balance sheet as of June 30, 2021.

Dollars, which are included in the Company’s consolidated balance sheet as of September 30, 2021.

A 10% unfavorable change in the Canadian-to-U.S.

dollar and Euro-to-U.S.

dollar exchange rates would have decreased our comprehensive income by approximately $16.4 million in the six months ended June 30, 2021.

dollar exchange rates would have decreased our comprehensive income by approximately $16.8 million in the nine months ended September 30, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements