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Item 1. Financial Statements

2023-11-08 compared with 2023-08-04 · 149 added, 86 removed, 338 unchanged (41% of the section changed)

FINANCIAL STATEMENTS

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ORASURE TECHNOLOGIES, INC.

2 unchanged sentences

(in thousands, except per share amounts)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Current Assets:

13 unchanged sentences

Intangible assets, net of accumulated amortization of $ 27,336 and $ 31,077

10,665 11,694

Goodwill 35,033 35,104

30 unchanged sentences

See accompanying notes to the consolidated financial statements.

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ORASURE TECHNOLOGIES, INC.

2 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,

2023 2022 2023 2022

24 unchanged sentences

See accompanying notes to the consolidated financial statements.

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ORASURE TECHNOLOGIES, INC.

2 unchanged sentences

(in thousands)

Three Months Ended June 30, Six Months Ended June 30,

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

2023 2022 2023 2022

5 unchanged sentences

See accompanying notes to the consolidated financial statements.

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ORASURE TECHNOLOGIES, INC.

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

OPERATING ACTIVITIES:

Net income (loss) $ 33,582 $ ( 32,934 )

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

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

Stock-based compensation 7,602 9,100

3 unchanged sentences

Provision for credit losses ( 75 ) 974

Unrealized foreign currency gain (loss) 106 ( 62 )

Unrealized foreign currency gain ( 66 ) ( 396 )

Interest expense on finance leases 42 74

12 unchanged sentences

INVESTING ACTIVITIES:

Proceeds from maturities and redemptions of investments 27,305 23,017

Purchases of short-term investments ( 74,652 ) ( 22,873 )

Proceeds from maturities and redemptions of short-term investments 94,980 47,415

Purchases of property and equipment ( 4,517 ) ( 28,081 )

13 unchanged sentences

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid for income taxes $ 623 $ 9,107

Cash (refunds) paid for income taxes $ ( 5,733 ) $ 9,400

Non-cash investing and financing activities

3 unchanged sentences

See accompanying notes to the consolidated financial statements.

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ORASURE TECHNOLOGIES, INC.

1 unchanged sentence

Notes to the Consolidated Financial Statements

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

Summary of Significant Accounting Policies

8 unchanged sentences

These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Results of operations for the three and six months ended June 30, 2023 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, 2023 are not necessarily indicative of the results of operations expected for the full year.

Summary of Significant Accounting Policies .

1 unchanged sentence

See Note 11 for the discussion regarding the change in business segments.

Cash Equivalents & Investments .

Cash Equivalents & Short-Term Investments .

The Company considers all investments in debt securities to be available-for-sale securities.

These securities consist of guaranteed investment certificates and corporate bonds purchased with maturities greater than ninety days.

Securities with maturities ninety days or less are considered cash equivalents.

Available-for-sale securities are carried at fair value, based upon quoted market prices, with unrealized gains and losses, if any, reported in stockholders’ equity as a component of accumulated other comprehensive loss.

1 unchanged sentence

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

The following is a summary of the Company's available-for-sale securities:

The following is a summary of the Company's available-for-sale securities (in thousands):

Losses Fair Value

September 30, 2023

Guaranteed investment certificates $ 7,358 $ — $ — $ 7,358

Corporate bonds — — — —

Total $ 7,358 $ — $ — $ 7,358

December 31, 2022

2 unchanged sentences

Total $ 27,087 $ — $ ( 220 ) $ 26,867

At September 30, 2023, maturities of the Company's available-for-sale securities were as follows:

Less than one year $ 7,358 $ — $ — $ 7,358

Greater than one year $ — $ — $ — $ —

Fair Value of Financial Instruments .

As of June 30, 2023 and December 31, 2022, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their respective fair values based on their short-term nature.

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

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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 the Company's available-for-sale corporate bonds are measured as Level 2 instruments and the Company's available-for-sale guaranteed investment certificates are measured as Level 1 instruments as of December 31, 2022.

Included in cash and cash equivalents at June 30, 2023 and December 31, 2022, was $ 6,928 and $ 1,730 invested in money market funds.

Included in cash and cash equivalents at September 30, 2023 and December 31, 2022 was $ 37.1 million and $ 1.7 million, respectively, invested in money market funds.

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

Included in cash and cash equivalents at June 30, 2023 was $ 22,642 of guaranteed investment certificates which are also measured as Level 1 instruments.

Included in cash and cash equivalents at September 30, 2023 was $ 14.7 million of guaranteed investment certificates which are also measured as Level 1 instruments.

The Company offers a nonqualified deferred compensation plan for certain eligible employees and members of its Board of Directors.

2 unchanged sentences

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

The fair value of the plan assets as of June 30, 2023 and December 31, 2022 was $ 644 and $ 747 , respectively, and was calculated using the quoted market prices of the assets as of those dates.

The fair value of the plan assets as of September 30, 2023 and December 31, 2022 was $ 0.6 million and $ 0.7 million, 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.

1 unchanged sentence

Foreign Currency Translation .

Net foreign exchange gains and (losses) resulting from foreign currency transactions that are included in other income in the Company's consolidated statements of operations were $( 492 ) and $ 783 for the three months ended June 30, 2023 and 2022, respectively.

Net foreign exchange gains and (losses) resulting from foreign currency transactions for the six months ended June 30, 2023 and 2022 were $( 542 ) and $ 54 , respectively.

Net foreign exchange gains and (losses) resulting from foreign currency transactions that are included in other income in the Company's consolidated statements of operations were $( 0.1 ) million and $ 2.3 million for the three months ended September 30, 2023 and 2022, respectively.

Net foreign exchange gains and (losses) resulting from foreign currency transactions for the nine months ended September 30, 2023 and 2022 were $( 0.7 ) million and $ 2.4 million, respectively.

Impairment of Long-Lived Assets .

Long-lived assets, which include property, plant and equipment and definite-lived intangible assets, are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.

The Company assesses the recoverability of the Company's long-lived assets by determining whether the carrying value of such assets can be recovered through the sum of the undiscounted future cash flows expected to be generated from the use and eventual disposition of the asset.

If indicators of impairment exist, the Company measures the amount of such impairment by comparing the carrying value of the assets to the fair value of these assets, which is generally determined based on the present value of the expected future cash flows associated with the use of the assets.

Expected future cash flows reflect the Company's assumptions about selling prices, volumes, costs and market conditions over a reasonable period of time.

The Company identified a triggering event to test for the recoverability of intangible assets in the third quarter given the decline in the Company's market capitalization leading up to and as of its annual goodwill impairment testing date.

The Company performed an undiscounted cash flow analysis and determined the carrying value of the developed technology, trade names, and customer relationships intangible assets could not be recovered through the sum of the undiscounted future cash flows.

The Company used an income approach to determine the fair value of the developed technology and customer relationship intangible assets and the relief from royalty method for the trade names.

For the three months ended September 30, 2023, the Company determined the developed technology, trade names, and customer relationships intangible assets associated with Diversigen and Novosanis were impaired as the fair value of the intangible assets did not exceed their carrying value.

A full impairment loss of $ 6.2 million is recorded on the consolidated statement of operations for the three months ended September 30, 2023.

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There was no impairment of property, plant and equipment for the three months ended September 30, 2023 related to this triggering event.

See Note 4 for discussion of equipment impairments recorded in the first half of 2023.

Impairment of Goodwill .

During the second quarter of 2022, we determined that a triggering event occurred in relation to the depressed market price of the Company's common stock and corresponding significant decline in our market capitalization.

As a result, we performed an interim goodwill impairment test and concluded that the carrying value of our Diagnostics reporting unit exceeded its estimated fair value and the goodwill balance for that segment was fully impaired.

Thus, we recognized a pre-tax impairment charge of $ 3.6 million during the three months ended June 30, 2022, which is reported in loss on impairments in our condensed consolidated statement of operations.

Accumulated Other Comprehensive Loss .

Changes in accumulated other comprehensive loss by component is listed below.

Changes in accumulated other comprehensive loss by component is listed below (in thousands):

Foreign Currency Marketable Securities Total

1 unchanged sentence

Other comprehensive gain 843 220 1,063

Balance at June 30, 2023 $ ( 14,559 ) $ — $ ( 14,559 )

Balance at September 30, 2023 $ ( 17,372 ) $ — $ ( 17,372 )

Immaterial Correction of Errors.

Inventories, accounts payable and cost of products and services were reduced by $ 528 , $ 1,329 and $ 801 , respectively, as of and for the year ended December 31, 2022 to correct for the accounting of a vendor rebate earned in 2022.

Inventories, accounts payable and cost of products and services were reduced by $ 0.5 million, $ 1.3 million and $ 0.8 million, respectively, as of and for the year ended December 31, 2022 to correct for the accounting of a vendor rebate earned in 2022.

The tax impact of the vendor rebate was negligible.

This correction was deemed to be immaterial to the consolidated financial statements as of and for the year ended December 31, 2022.

For the three and six months ended June 30, 2022, cost of products and services sold was reduced by $ 213 and $ 240 , respectively.

The respective operating activities on the consolidated statement of cash flows for the six months ended June 30, 2022 has also been adjusted.

Furthermore, stockholder's equity at June 30, 2022 has been adjusted to reflect the reduction in cost of products and services sold.

For the three and nine months ended September 30, 2022, cost of products and services sold was reduced by $ 0.3 million and $ 0.6 million, respectively.

The respective operating activities on the consolidated statement of cash flows for the nine months ended September 30, 2022 has also been adjusted.

Furthermore, stockholder's equity at September 30, 2022 has been adjusted to reflect the reduction in cost of products and services sold.

Reclassification .

Certain prior period amounts have been reclassified to conform to current year presentations.

For the three and six months ended June 30, 2022, $ 395 and $ 616 of research and development expenses were reclassified to other income in relation to the U.S.

For the three and nine months ended September 30, 2022, $ 0.3 million and $ 0.9 million of research and development expenses were reclassified to other income in relation to the U.S.

Department of Defense (the “DOD”) engineering consulting costs further described in Note 2.

This reclassification was made to conform to the presentation in our Annual Report on Form 10-K for the year ended December 31, 2022.

This reclassification was made to conform to the presentation in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Change in Accounting Estimate.

During the three months ended June 30, 2023, the Company shortened the useful lives of machinery and equipment utilized for InteliSwab® production in Thailand.

This reduction in useful lives resulted in $ 6,900 of accelerated depreciation during the three months ended June 30, 2023, recorded in cost of products and services sold.

This reduction in useful lives resulted in $ 6.9 million of accelerated depreciation during the three months ended June 30, 2023, recorded in cost of products and services sold.

Government Capital Contracts

In September 2021, the Company entered into an agreement for $ 109,000 in funding from the DOD, in coordination with the Department of Health and Human Services, to build additional manufacturing capacity in the United States for its InteliSwab ® COVID-19 Rapid Tests as part of the nation’s pandemic preparedness plan.

Funding will be paid to the

Company based on achievement of milestones through December 2023 for the design, acquisition, installation, qualification and acceptance of the manufacturing equipment, as set forth in the agreement.

In accordance with the milestone payment schedule, 15 % of the total will not be funded until the completion of the final validation testing, which is scheduled to occur in late 2023.

In September 2021, the Company entered into an agreement for $ 109.0 million in funding from the DOD, in coordination with the Department of Health and Human Services, to build additional manufacturing capacity in the United States for its InteliSwab ® COVID-19 Rapid Tests as part of the nation’s pandemic preparedness plan.

Funding will be paid to the Company based on achievement of milestones through December 2023 for the design, acquisition, installation, qualification and acceptance of the manufacturing equipment, as set forth in the agreement.

In accordance with the milestone payment schedule, 15 % of the total will not be billed and funded until the completion of the final validation testing, which occurred in October 2023.

The Company began making payments to vendors for the capital project during the fourth quarter of 2021.

The Company began receiving funds from the DOD in January 2022 and has received $ 78,124 , as of June 30, 2023.

The remaining $ 30,876 is expected to be collected during the remainder of 2023.

The Company began receiving funds from the DOD in January 2022 and has received $ 84.6 million, as of September 30, 2023.

The remaining $ 24.4 million was received in October 2023.

Activity for these capital contracts is accounted for pursuant to International Accounting Standards ("IAS") 20, Accounting for Government Grants and Disclosure of Government Assistance .

1 unchanged sentence

and associated unpaid liabilities and government proceeds receivable are considered non-cash changes in such balances within the operating section of the consolidated statements of cash flows.

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Amounts earned for the Company's guaranteed profit which covers project management costs are recognized straight-line in other income over the term of the government contract.

Any amount received in excess of the guaranteed profit discussed above will be recorded in other income at time of payment.

The Company recognized $ 561 of such income, which is reported as other income in the Company's consolidated statement of operations for both the three months ended June 30, 2023 and 2022.

The Company recognize $ 1,123 of such income, for both the six months ended June 30, 2023 and 2022.

The Company recognized $ 0.6 million of such income, which is reported as other income in the Company's consolidated statement of operations for both the three months ended September 30, 2023 and 2022.

The Company recognized $ 1.7 million of such income, for both the nine months ended September 30, 2023 and 2022.

The DOD also reimburses the Company for certain engineering consulting costs.

These expenses are reflected in research and development as incurred with the corresponding reimbursement presented in other income.

For the three months ended June 30, 2023 and 2022, $ 537 and $ 395 , respectively, were recorded in research and development and other income.

For the six months ended June 30, 2023 and 2022, $ 1,588 and $ 616 , respectively, were recorded in research and development and other income.

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

2023 December 31,

For the three months ended September 30, 2023 and 2022, $ 0.4 million and $ 0.3 million, respectively, were recorded in research and development and other income.

For the nine months ended September 30, 2023 and 2022, $ 2.0 million and $ 0.9 million, respectively, were recorded in research and development and other income.

The balances corresponding to government contracts included in the Company's consolidated balance sheet are as follows (in thousands):

September 30, December 31,

Other current assets:

3 unchanged sentences

Accrued expenses and other current liabilities $ — $ ( 318 )

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

2023 December 31,

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

September 30, December 31,

Cost of assets, cumulative $ 86,993 $ 83,359

2 unchanged sentences

Total property, plant and equipment, net $ — $ —

June 30, December 31,

Inventories (in thousands)

September 30, December 31,

Raw materials $ 26,115 $ 42,445

2 unchanged sentences

$ 59,264 $ 95,704

Property, Plant and Equipment, net

June 30, December 31,

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Property, Plant and Equipment, net (in thousands)

September 30, December 31,

Land $ 1,118 $ 1,118

7 unchanged sentences

$ 48,027 $ 59,413

During the six months ended June 30, 2023, the Company determined several manufacturing lines will not be utilized due to changes in forecasted demand for the products the equipment is intended to produce.

During the nine months ended September 30, 2023, the Company determined several manufacturing lines will not be utilized due to changes in forecasted demand for the products the equipment is intended to produce.

Additionally, the Company elected not to proceed with certain leasehold improvements to its research and development laboratories.

As a result of these decisions, the Company determined that the carrying values of the equipment and leasehold improvements made to date are not recoverable and recorded an aggregate pre-tax asset impairment charge of $ 1,320 during the six months ended June 30, 2023.

As a result of these decisions, the Company determined that the carrying values of the equipment and leasehold improvements made to date are not recoverable and recorded aggregate pre-tax asset impairment charges of $ 1.3 million during the nine months ended September 30, 2023.

No property, plant and equipment impairment charges were recorded during the three months ended September 30, 2023.

During the three and nine months ended September 30, 2022, the Company determined several manufacturing lines and associated supporting assets would not be utilized due to changes in forecasted demand for the products the lines are intended to produce.

As a result of this decision, the Company determined that the carrying values of the equipment and supporting assets were not recoverable and recorded aggregate pre-tax asset impairment charges during the three and nine months ended September 30, 2022 of $ 6.6 million and $ 13.5 million, respectively.

Due to the extremely specialized nature of the equipment and various market data points, the estimated fair value was zero .

These charges are reported within loss on impairments in the consolidated statement of operations.

Accrued Expenses and other current liabilities

June 30, December 31,

Accrued Expenses and other current liabilities (in thousands)

September 30, December 31,

Payroll and related benefits $ 12,213 $ 14,103

6 unchanged sentences

This was accounted for pursuant to Accounting Standards Codification ("ASC") 420, Exit or Disposal Cost Obligations .

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

Three Months Ended June 30, 2023 Six months ended June 30, 2023

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

Nine Months Ended

September 30, 2023

Cost of products and services sold $ 369

3 unchanged sentences

Total $ 3,265

As of June 30, 2023 the Company had $ 1,591 accrued and had paid $ 1,674 related to the reduction in workforce.

As of September 30, 2023 the Company had $ 0.9 million accrued and had paid $ 2.4 million related to the reduction in workforce.

No additional expense was incurred during the three months ended September 30, 2023.

Revenues by product line .

The following table represents total net revenues by product line:

Three Months Ended June 30, Six Months Ended June 30,

The following table represents total net revenues by product line (in thousands):

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

2023 2022 2023 2022

8 unchanged sentences

Net product and services revenues 89,014 112,821 326,666 257,224

Other non-product revenues (3)

Non-product and services revenues (3)

173 3,642 2,925 7,177

1 unchanged sentence

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

(2) Includes Genomics and Microbiome and Novosanis Products.

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

(2) Includes Genomics, Microbiome and Novosanis product revenues.

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

Revenues by geographic area .

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

Three Months Ended June 30, Six Months Ended June 30,

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

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

2023 2022 2023 2022

4 unchanged sentences

Customer and Vendor Concentrations .

At June 30, 2023, one non-commercial customer accounted for 47 % of the Company's consolidated accounts receivable.

The same non-commercial customer accounted for more than 57 % of the Company's consolidated accounts receivable as of December 31, 2022.

The same non-commercial customer also accounted for 56 % of net consolidated revenues for both the three months ended June 30, 2023 and 2022, respectively.

The same non-commercial customer also accounted for 70 % and 39 % of net consolidated revenues for the six months ended June 30, 2023 and 2022, respectively.

At September 30, 2023, one non-commercial customer accounted for 52 % of the Company's consolidated accounts receivable.

The same non-commercial customer accounted for 57 % of the Company's consolidated accounts receivable as of December 31, 2022.

The same non-commercial customer also accounted for 56 % and 69 % of net consolidated revenues for the three months ended September 30, 2023 and 2022, respectively.

The same non-commercial customer also accounted for 66 % and 53 % of net consolidated revenues for the nine months ended September 30, 2023 and 2022, respectively.

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The Company currently purchases certain products and critical components of its products from sole-supply vendors.

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The Company records deferred revenue when funds are received prior to the recognition of the associated revenue.

Deferred revenue as of June 30, 2023 and December 31, 2022 included customer prepayments of $ 1,285 and $ 1,533 , respectively.

Deferred revenue as of June 30, 2023 and December 31, 2022 also included $ 556 and $ 740 , respectively, associated with a long-term contract that has variable pricing based on volume.

Deferred revenue as of September 30, 2023 and December 31, 2022 included customer prepayments of $ 1.4 million and $ 1.5 million, respectively.

Deferred revenue as of September 30, 2023 and December 31, 2022 also included $ 0.4 million and $ 0.7 million, 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.

The components of income tax expense (benefits) are as follows:

Three Months Ended June 30, Six Months Ended June 30,

The components of income tax expense (benefits) are as follows (in thousands):

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

2023 2022 2023 2022

3 unchanged sentences

$ 2,347 $ ( 1,143 ) $ 1,956 $ 1,624

Income taxes for the first six months of 2022 includes $ 1,702 of Canadian withholding tax on the repatriation of $ 65,000 of unremitted earnings from Canada to the United States.

The increase in state tax expense in 2023 compared to 2022 is a result of the increase in projected income before taxes to be generated by the Company's U.S.

Conversely, the increase in foreign tax benefit in 2023 compared to 2022 is a result of the decrease in projected income before taxes expected to be generated by the Company's Canadian subsidiary.

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

The significant components of the Company's total deferred tax asset as of June 30, 2023 relate to foreign net operating losses.

Income taxes for the nine months ended September 30, 2022 includes $ 1.7 million of Canadian withholding tax on the repatriation of $ 65.0 million of unremitted earnings from Canada to the United States.

The increase in income tax expense for three months ended September 30, 2023 is due to an increase in the income before taxes for both the U.S.

and Canadian entities.

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

The significant components of the Company's total deferred tax asset as of September 30, 2023 relate to foreign net operating losses.

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

1 unchanged sentence

A full valuation allowance was recorded on the Company’s U.S.

deferred tax assets as of June 30, 2023 and December 31, 2022.

deferred tax assets as of September 30, 2023 and December 31, 2022.

Income (Loss) Per Share

3 unchanged sentences

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.

For the three months ended June 30, 2023 outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 966 shares were excluded from the computation of diluted loss per share.

For the six months ended June 30, 2023, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 2,030 shares were excluded from the computation of diluted earnings per share as their inclusion

would have been anti-dilutive.

For the three and six months ended June 30, 2022, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 226 and 381 shares, respectively, were excluded from the computation of diluted loss per share.

For the three and nine months ended September 30, 2023 outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 2,027 shares and 2,048 shares, respectively, 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, 2022 outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 1,734 shares, were excluded from the computation of diluted loss per share as their inclusion would have been

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anti-dilutive.

For the nine months ended September 30, 2022, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing, 383 were excluded from the computation of diluted loss per share.

Stockholders’ Equity

Reconciliation of the changes in stockholder's equity for the three and six months ended June 30, 2023 and 2022.

Reconciliation of the changes in stockholder's equity for the three and nine months ended September 30, 2023 and 2022 (in thousands):

Common Stock Additional

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Balance at June 30, 2023 73,413 $ — $ 523,861 $ ( 14,559 ) $ ( 115,163 ) $ 394,139

Common stock issued upon exercise of options 2 — 10 — — 10

Vesting of restricted stock and performance stock units 99 — — — — —

Purchase and retirement of common shares ( 31 ) — ( 200 ) — — ( 200 )

Stock-based compensation — — 2,590 — — 2,590

Net income — — — — 11,159 11,159

Currency translation adjustments — — — ( 2,813 ) — ( 2,813 )

Balance at September 30, 2023 73,483 $ — $ 526,261 $ ( 17,372 ) $ ( 104,004 ) $ 404,885

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Common Stock Additional

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Balance at March 31, 2022 72,307 $ — $ 513,553 $ ( 8,247 ) $ ( 140,393 ) $ 364,913

Common stock issued upon exercise of options 407 — — — — —

Vesting of restricted stock and performance stock units 407 — — — — —

Purchase and retirement of common shares ( 142 ) — ( 905 ) — — ( 905 )

Stock-based compensation — — 3,280 — — 3,280

3 unchanged sentences

Balance at June 30, 2022 72,572 $ — $ 515,928 $ ( 12,514 ) $ ( 158,982 ) $ 344,432

Vesting of restricted stock and performance stock units 66 — — — — —

Purchase and retirement of common shares ( 19 ) — ( 54 ) — — ( 54 )

Stock-based compensation — — 2,296 — — 2,296

Net income — — — — 5,595 5,595

Currency translation adjustments — — — ( 9,828 ) — ( 9,828 )

Unrealized gain on marketable securities — — — 11 — 11

Balance at September 30, 2022 72,619 $ — $ 518,170 $ ( 22,331 ) $ ( 153,387 ) $ 342,452

Business Segments

3 unchanged sentences

In February 2023, the Company announced a corporate restructuring to combine the commercial and innovation teams across the Diagnostics and Molecular Solutions segments into one operating segment with sales, marketing, product development and research teams covering all product lines and reporting to a Chief Product Officer.

Resources are allocated and performance is assessed on a consolidated basis by our Chief Executive Officer, whom we have determined to be our Chief Operating Decision Maker ("CODM").

Resources are allocated and performance is assessed on a consolidated basis by the Company's Chief Executive Officer, whom the Company has determined to be its Chief Operating Decision Maker ("CODM").

The CODM reviews the business based on individual product success.

Therefore, our historical reportable segments, Diagnostics and Molecular Solutions are now considered one reportable segment and there will no longer be a distinction between Diagnostics and Molecular Solutions, only the Company holistically.

Therefore, the Company's historical reportable segments, Diagnostics and Molecular Solutions are now considered one reportable segment and there will no longer be a distinction between Diagnostics and Molecular Solutions, only the Company holistically.

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Commitments and Contingencies

1 unchanged sentence

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 the Company's future financial position or results of operations.

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

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

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

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

In August 2021, the Company amended its complaint to add a second patent to this litigation.

Spectrum responded to the Company's amended complaint and asserted counterclaims for inequitable conduct and antitrust violations with respect to one of the patents in the litigation and subsequently filed a request for review of the second patent at the Patent and Trademark Office ("PTO"), which was granted by the PTO.

The District Court issued multiple pretrial orders, resolving the infringement, antitrust, and inequitable

conduct claims without trial.

The District Court issued multiple pretrial orders, resolving the infringement, antitrust, and inequitable conduct claims without trial.

First, the District Court granted Spectrum’s motion for summary judgment of noninfringement, holding that Spectrum’s saliva collection devices are not “kits for collecting and preserving a biological sample,” among other rulings.

4 unchanged sentences

Both parties have filed motions seeking sanctions in the District Court.

Those motions remain pending.

DNAG filed its opening appellate brief on September 28, 2023.

Spectrum’s responsive appellate brief is due December 22, 2023.

Oral argument in the appeal has not been scheduled.

An inter partes review is currently pending before the PTO regarding the second asserted patent.

Oral argument in the inter partes review is currently scheduled for November 14, 2023.

On September 15, 2023, Spectrum filed a petition for inter partes review of a third patent, which DNAG did not assert in the District Court.

An optional preliminary patent owner response is due in December 2023.

Table of Content s

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What changed 10-Q

Item 1. Financial Statements