What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-06 compared with 2024-05-09 · 123 added, 62 removed, 60 unchanged (76% of the section changed)

5 unchanged sentences

The Company's business consists of the development, manufacture, marketing and sale of simple, easy to use diagnostic products and specimen collection devices using the Company's proprietary technologies, as well as other diagnostic products including immunoassays and other in vitro diagnostic tests that are used on other specimen types.

These products include tests for diseases including COVID-19, HIV and Hepatitis C that are performed on a rapid basis at the point of care, and tests for drugs of abuse that are processed in a laboratory.

These products include tests for diseases including COVID-19, HIV, Hepatitis C, and Syphilis that are performed on a rapid basis at the point of care, and tests for drugs of abuse that are processed in a laboratory.

These products are sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, and other public health organizations, distributors, government agencies, physicians’ offices, and commercial and industrial entities.

7 unchanged sentences

This product is in its early stages, and initial sales are occurring primarily through distributors and collaborations in the liquid biopsy and sexually transmitted disease markets.

Additionally, the Company offers laboratory and bioinformatics services for both genomics and microbiome customers.

These services are primarily provided to pharmaceutical, biotech companies, and research institutions.

Recent Developments

During the three months ended March 31, 2024, the Company made a strategic decision to commence wind-down of its operations at its Novosanis subsidiary located in Belgium.

The Company intends to continue to sell and manufacture its Colli-Pee® product under the DNAG product line of collection devices.

In addition, during the three months ended March 31, 2024, the Company initiated steps to wind down and exit the molecular services business offered by its Diversigen subsidiary while providing transition continuity for clients.

This business contributed $0.9 million to revenues during the three months ended March 31, 2024 and contributed $4.5 million for the full year of 2023.

In January 2024, the Company announced that it is leading the Series B financing and have entered wide-ranging strategic distribution agreements with KKR Sapphiros L.P.

("Sapphiros"), a privately held consumer diagnostics portfolio company based in Boston, and certain of its related entities.

Through this strategic relationship, the Company expects to be able to

offer a more comprehensive range of low-cost diagnostic tests and molecular sample management solutions to the Company's customers globally.

The Company has funded approximately $28.3 million an interest in Sapphiros, with an aggregate commitment of up to $30.0 million to be funded by June 2024, contingent on certain terms and conditions being met.

Additionally, through its Diversigen subsidiary, the Company offered laboratory and bioinformatics services for both genomics and microbiome customers.

These services were primarily provided to pharmaceutical, biotech companies, and research institutions.

During the first quarter of 2024, the Company initiated steps to wind down and exit this line of business.

Diversigen contributed $1.7 million to revenues during the six months ended June 30, 2024 and contributed $4.5 million to revenues for the full year of 2023.

Results of Operations

For the three months ended March 31, 2024 compared to March 31, 2023.

For the three months ended June 30, 2024 compared to June 30, 2023.

CONSOLIDATED NET REVENUES

The table below shows an outline of total consolidated net revenues (dollars in thousands) for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

The table below shows an outline of total consolidated net revenues (dollars in thousands) for the three months ended June 30, 2024 and 2023:

For the Three Months Ended June 30,

Dollars % Change Percentage of Total Net Revenues

13 unchanged sentences

Net revenues $ 54,335 $ 85,441 (36) % 100 % 100 %

(1) Includes HIV and HCV product revenues.

(1) Includes HIV, HCV and Syphilis product revenues.

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

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

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

(4) Includes funded research and development contracts, royalty income and grant revenues.

Product and Services Revenues

Consolidated net revenues decreased 65% to $54.1 million for the three months ended March 31, 2024 from $155.0 million for the three months ended March 31, 2023.

COVID-19 Diagnostics revenues decreased by 80% to $23.1 million for the three months ended March 31, 2024 compared to $118.3 million in three months ended March 31, 2023 due to decreased sales of the Company's InteliSwab ® tests through its U.S.

Consolidated net revenues decreased 36% to $54.3 million for the three months ended June 30, 2024 from $85.4 million for the three months ended June 30, 2023.

COVID-19 Diagnostics revenues decreased by 60% to $18.9 million for the three months ended June 30, 2024 compared to $47.5 million for the three months ended June 30, 2023 due to decreased sales of the Company's InteliSwab ® tests through its U.S.

government procurement contracts.

We expect this decline in revenue to continue throughout 2024 due to the fulfillment of these contracts and lower overall demand for COVID-19 testing.

Sales of the Company's Diagnostics products decreased 4% to $16.4 million for the three months ended March 31, 2024 from $17.1 million for the three months ended March 31, 2023.

This decrease in revenues was primarily driven by customer ordering patterns.

Molecular Sample Management Solutions revenues decreased 16% to $10.8 million for the three months ended March 31, 2024 from $12.9 million for the three months ended March 31, 2023.

Sales of the Company's Molecular Products are being impacted by reduced consumer demand for products in which our genomics collection devices are used, economic pressures and reduction on funding for programs in which our collection devices are used, and the overall decline in the microbiome market.

Other products and services revenues decreased 17% to $2.6 million for the three months ended March 31, 2024 from $3.1 million for the three months ended March 31, 2023.

Molecular Services revenues, which are derived from the Company's microbiome molecular sequencing services, decreased 37% to $0.9 million for the three months ended March 31, 2024 from $1.4 million for the three months ended March 31, 2023.

The decrease in services revenues was largely due to discontinuance of customer's clinical trial projects.

Sales of the Company's Diagnostics products decreased 5% to $18.7 million for the three months ended June 30, 2024 from $19.8 million for the three months ended June 30, 2023.

This decrease in revenues is largely due to lower domestic and international HIV revenues of approximately $2.3 million primarily driven by customer ordering patterns partially offset by a combined increase in global HCV revenues and Syphilis revenues of approximately $1.2 million.

The increase in HCV revenues is primarily due to new customer orders and customer ordering patterns and the Syphilis revenues are generated from the Company's new distribution agreements.

Molecular Sample Management Solutions revenues decreased 3% to $12.6 million for the three months ended June 30, 2024 from $13.1 million for the three months ended June 30, 2023.

Sales of the Company's Molecular Products are being impacted by reduced consumer demand for products in which our genomics collection devices are used, economic pressures, and the overall decline in the microbiome market.

Other products and services revenues decreased 5% to $2.8 million for the three months ended June 30, 2024 from $3.0 million for the three months ended June 30, 2023.

Molecular Services revenues, which are derived from the Company's microbiome molecular sequencing services, decreased 40% to $0.8 million for the three months ended June 30, 2024 from $1.4 million for the three months ended June 30, 2023.

The decrease in services revenues was due to the decision to exit this line of business.

We expect minimal molecular services revenues in the second half of 2024.

Non-Product and Services Revenues

Non-product and services revenues decreased 83% to $0.4 million for the three months ended March 31, 2024 from $2.0 million for the three months ended March 31, 2023 as a result lower funding for research and development activities largely as a result of the end of our agreement with Biomedical Advanced Research Authority ("BARDA") which provided funding to obtain clearance of a premarket notification ("510(k)") and Clinical Laboratory Improvement Amendments of 1988 ("CLIA") waiver of our InteliSwab® tests.

Non-product and services revenues decreased 45% to $0.4 million for the three months ended June 30, 2024 from $0.7 million for the three months ended June 30, 2023 as a result of no royalty income in the second quarter of 2024 as the royalty agreement for sample collection kits expired in June 2023.

Further reducing the Company's non-product and services revenue is lower funding for research and development activities largely as a result of the end of our agreement with Biomedical Advanced Research Authority ("BARDA") which provided funding to obtain clearance of a premarket notification ("510(k)") and Clinical Laboratory Improvement Amendments of 1988 waiver of our InteliSwab® tests.

The Company has communicated to BARDA that it does not intend to pursue further development of this clearance.

CONSOLIDATED OPERATING RESULTS

Consolidated gross profit margin increased to 44.5% for the three months ended March 31, 2024 from 42.5% for the three months ended March 31, 2023.

This increase in margins was driven by increased average selling price on InteliSwab® sales and lower scrap expense .

These improvement in margins were partially offset by a decrease in non-product revenues which contribute 100% to gross margin.

Consolidated operating loss for the three months ended March 31, 2024 was $7.1 million, a $31.4 million decline from the $24.3 million operating income reported for the three months ended March 31, 2023.

Results for the three months ended March 31, 2024 were negatively impacted by lower revenues and higher impairment losses offset by increased gross profit margins and lower operating expense spend.

Results for the three months ended March 31, 2024 included $3.3 million of impairment losses compared to $1.1 million for the three months ended March 31, 2023.

Impairment losses in the first quarter of 2024 were comprised of the impairment of Novosanis and Diversigen property plant and equipment, including leased assets while impairment losses in 2023 were associated with idle manufacturing lines.

Operating expenses in the first quarter of 2024, excluding the impairment charge, decreased $12.6 million compared to the first quarter of 2023 reflecting the impact of the Company's cost saving measures and headcount reductions.

Research and development expenses decreased 27% to $7.7 million for the three months ended March 31, 2024 from $10.6 million for the three months ended March 31, 2023 largely due to a decrease in employee costs associated with a reduction in headcount, decrease in spend on COVID-19 product development, and no related project management fees for our $109 million manufacturing expansion contract which ended during the fourth quarter of 2023.

Sales and marketing expenses decreased 30% to $8.4 million for the three months ended March 31, 2024 from $12.1 million for the three months ended March 31, 2023 due to lower employee costs associated with a decrease in headcount, and decreased spend on advertising and consulting fees.

General and administrative expenses decreased 34% to $11.6 million for the three months ended March 31, 2024 from $17.7 million for the three months ended March 31, 2023 largely due to lower legal fees and lower staffing costs due to a reduction in headcount.

All of the above contributed to the Company's operating loss of $7.1 million for the three months ended March 31, 2024, which included a non-cash impairment charge of $3.3 million, non-cash charges of $2.7 million for depreciation and amortization, and non-cash charges of $3.0 million for stock-based compensation.

The Company's operating income of $24.3 million for the three months ended March 31, 2023 included a non-cash impairment charge of $1.1 million, non-cash charges of $3.7 million for depreciation and amortization, and $2.7 million for stock-based compensation.

Other income for the three months ended March 31, 2024 was $3.5 million compared to $2.7 million for the three months ended March 31, 2023.

This increase is due to higher interest income.

Consolidated gross profit margin increased to 45.4% for the three months ended June 30, 2024 from 30.9% for the three months ended June 30, 2023.

During the second quarter of 2023, the Company recorded $7.0 million of accelerated depreciation associated with the wind-down of InteliSwab® manual assembly in Thailand as the Company made the decision to onshore and automate manufacturing of this product at its Pennsylvania facilities.

In addition, also contributing to the increased margins is improved overhead absorption and lower scrap expense partially offset by a negative impact in product mix caused by a higher volume of sales of lower margin products.

Consolidated operating loss for the three months ended June 30, 2024 was $2.7 million, a 57.4% improvement from the $6.4 million operating loss reported for the three months ended June 30, 2023.

Results for the three months ended June 30, 2024 benefited from a $6.2 million reduction in operating expense offset by lower gross profit dollars driven by the decrease in revenues.

Results for the three months ended June 30, 2024 included $1.1 million of impairment losses compared to $0.2 million for the three months ended June 30, 2023.

Operating expenses in the second quarter of 2024, excluding the impairment charge, decreased 19% to $26.4 million from $32.6 million in the second quarter of 2023 reflecting the impact of the Company's cost saving measures and headcount reductions.

Research and development expenses decreased 14% to $6.6 million for the three months ended June 30, 2024 from $7.7 million for the three months ended June 30, 2023 largely due to a decrease in employee costs associated with a reduction in headcount, decrease in spend on COVID-19 product development, and no related project management fees for our $109 million manufacturing expansion contract which ended during the fourth quarter of 2023, partially offset by an increase in severance costs for those employees impacted by the Company's decisions to exit the molecular services business offered by its Diversigen subsidiary and wind-down operations located in Belgium.

Sales and marketing expenses decreased 7% to $7.9 million for the three months ended June 30, 2024 from $8.5 million for the three months ended June 30, 2023 due to lower employee costs associated with a decrease in headcount, decreased advertising fees and lower amortization expense.

General and administrative expenses decreased 28% to $11.8 million for the three months ended June 30, 2024 from $16.4 million for the three months ended June 30, 2023 largely due to lower legal fees and lower staffing costs due to a reduction in headcount, partially offset by an increase in non-cash stock compensation expense.

All of the above contributed to the Company's operating loss of $2.7 million for the three months ended June 30, 2024, which included a non-cash impairment charge of $1.1 million, non-cash charges of $2.6 million for depreciation and amortization, and non-cash charges of $3.3 million for stock-based compensation.

The Company's operating loss of $6.4 million for the three months ended June 30, 2023 included a non-cash impairment charge of $0.2 million, non-cash charges of $10.3 million for depreciation and amortization, and $2.4 million for stock-based compensation.

Other income for the three months ended June 30, 2024 was $3.1 million compared to $1.5 million for the three months ended June 30, 2023.

This increase is due to higher interest income partially offset by the absence of profit earned under our manufacturing expansion contract with the U.S.

government which ended at the end of 2023.

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 March 31, 2024 and 2023, the Company recorded a U.S.

state income tax benefit of $0.2 million.

For the three months ended March 31, 2024 the state tax benefit was partially offset by foreign tax expense of $0.2 million.

No foreign taxes were recorded for the three months ended March 31, 2023 due to it being more likely than not that the Canadian subsidiary would not produce sufficient income to receive a tax benefit for the year to date loss.

For the three months ended June 30, 2024 and 2023, the Company recorded U.S.

state income tax expense of $3.0 thousand and $1.5 million, respectively.

For the three months ended June 30, 2024 and 2023, the state income tax expense was partially offset by foreign income tax expense and benefit of $0.4 million and $1.6 million, respectively.

Results of Operations

For the six months ended June 30, 2024 compared to June 30, 2023.

CONSOLIDATED NET REVENUES

The table below shows an outline of total consolidated net revenues (dollars in thousands) for the six months ended June 30, 2024 and 2023:

For the Six Months Ended June 30,

Dollars % Change Percentage of Total Net Revenues

2024 2023 2024 2023

COVID-19 Diagnostics $ 42,031 $ 165,731 (75) % 39 % 69 %

Diagnostics (1)

35,139 36,924 (5) 33 15

Molecular Sample Management Solutions (2)

23,431 25,992 (10) 22 11

Other products and services (3)

5,408 6,087 (11) 5 3

Molecular Services 1,683 2,733 (38) 2 1

COVID-19 Molecular Products 36 185 (81) — —

Net product and services revenues 107,728 237,652 (55) 99 99

Non-product and services revenues (4)

739 2,752 (73) 1 1

Net revenues $ 108,467 $ 240,404 (55) % 100 % 100 %

(1) Includes HIV, HCV and Syphilis product revenues.

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

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

(4) Includes funded research and development contracts, royalty income and grant revenues.

Product and Services Revenues

Consolidated net product and services revenues decreased 55% to $108.5 million for the six months ended June 30, 2024 from $240.4 million for the six months ended June 30, 2023.

COVID-19 Diagnostics revenues decreased 75% to $42.0 million for the six months ended June 30, 2024 compared to $165.7 million for the six months ended June 30, 2023 due to decreased sales of the Company's InteliSwab® tests through its U.S.

government procurement contracts.

We expect this decline in revenue to continue throughout 2024 due to the fulfillment of these contracts and lower overall demand for COVID-19 testing.

Sales of the Company's Diagnostics products decreased 5% to $35.1 million for the six months ended June 30, 2024 from $36.9 million for the six months ended June 30, 2023.

This decrease in revenue was primarily driven by lower HIV revenues in both the domestic and international markets of $2.8 million as a result of fluctuations in customer ordering patterns.

The decline in HIV revenue was partially offset by a combined increase in HCV and Syphilis revenues of $1.1 million .

Molecular Sample Management Solutions revenues decreased 10% to $23.4 million for the six months ended June 30, 2024 from $26.0 million for the six months ended June 30, 2023.

Sales of the Company's Molecular Sample Management Solutions Products are being impacted by reduced consumer demand for products in which our genomics collection devices are used, economic pressures and reduction on funding for programs in which our collection devices are used, and the overall decline in the microbiome market.

Other products and services revenues decreased 11% to $5.4 million for the six months ended June 30, 2024 from $6.1 million for the six months ended June 30, 2023.

This decrease is driven by lower Risk Assessment testing revenue due to the loss of customers to competing products.

Molecular Services revenues, which are largely derived from the Company's laboratory services, decreased 38% to $1.7 million for the six months ended June 30, 2024 from $2.7 million for the six months ended June 30, 2023.

The decrease in services revenues was due to the decision to exit this line of business.

We expect minimal molecular services revenues in the second half of 2024.

Non-Product and Services Revenues

Non-product and services revenues decreased 73% to $0.7 million for the six months ended June 30, 2024 from $2.8 million for the six months ended June 30, 2023 as a result of lower royalty income in the first half of 2024 as one of the Company's royalty agreement for sample collection kits expired in June 2023.

Further reducing the Company's non-product and services revenue is a result of lower funding for research and development activities largely as a result of the end of our agreement with Biomedical Advanced Research Authority ("BARDA") which provided funding to obtain clearance of a premarket notification ("510(k)") and Clinical Laboratory Improvement Amendments of 1988 waiver of our InteliSwab® tests.

The Company has communicated to BARDA that it does not intend to pursue further development of this clearance.

CONSOLIDATED OPERATING RESULTS

Consolidated gross profit margin increased to 44.9% for the six months ended June 30, 2024 from 38.3% for the six months ended June 30, 2023.

This improvement in margins was due to $7.0 million of accelerated depreciation recorded in the second quarter of 2023 associated with the wind-down of InteliSwab® manual assembly in Thailand as the Company on-shores and automates the manufacturing of this product at its Pennsylvania facilities.

In addition, reduced salary and benefits due to the reduction in workforce experienced in 2023 contributed to improved overhead absorption and lower product scrap expense also contributed to the increased margins in the first half of 2024.

These improvement in margins were partially offset by the decline in other non-product revenues which contribute 100% to gross margin and a shift in product mix of increased revenues from lower margin products.

Consolidated operating loss for the six months ended June 30, 2024 was $9.8 million, compared to $17.9 million operating income reported for the six months ended June 30, 2023.

Results for the six months ended June 30, 2024 were negatively impacted by the decrease in revenues and were positively impacted by reduced operating expense and negatively impacted by the higher impairment losses.

Results for the six months ended June 30, 2024 included $4.4 million of impairment losses compared to $1.3 million for the six months ended June 30, 2023.

Operating expenses for the six months ended June 30, 2024, excluding the impairment charge, decreased 25.7% to $54.2 million from $73.0 million for the six months ended June 30, 2023 reflecting the impact of the Company's cost saving measures and headcount reductions.

Research and development expenses decreased 21% to $14.3 million for the six months ended June 30, 2024 from $18.2 million for the six months ended June 30, 2023, largely due to lower staffing costs due to a decrease in headcount, decrease in spend on COVID-19 product development, and no related project management fees for our $109 million manufacturing expansion contract which ended during the fourth quarter of 2023, partially offset by an increase in severance costs for those employees impacted by the Company's decisions to exit the molecular services business offered by its Diversigen subsidiary and wind-down operations located in Belgium.

Sales and marketing expenses decreased 21% to $16.4 million for the six months ended June 30, 2024 from $20.7 million for the six months ended June 30, 2023 primarily due to decreased employee costs associated with the reduction in headcount and lower advertising, consulting, and amortization expense.

General and administrative expenses decreased 31% to $23.5 million for the six months ended June 30, 2024 from $34.1 million for the six months ended June 30, 2023 largely due to lower legal fees relating to the Spectrum litigation (discussed further in Part II.

Other Information, Item 1.

Legal Proceedings, below) and lower employee costs associated with reduced headcount partially offset by an increase in non-cash stock compensation expense.

All of the above contributed to the Company's operating loss of $9.8 million for the six months ended June 30, 2024, which included non-cash impairment charges of $4.4 million, non-cash charges of $5.3 million for depreciation and amortization, and $6.3 million for stock-based compensation.

The Company's operating income of $17.9 million for the six months ended June 30, 2023 included a non-cash impairment charge of $1.3 million, non-cash charges of $14.0 million for depreciation and amortization, and $5.0 million for stock-based compensation.

Other income for the six months ended June 30, 2024 was $6.6 million compared to $4.1 million for the six months ended June 30, 2023.

This increase is largely due to higher interest income and offset by absence of profit earned under our manufacturing expansion contract with the U.S.

government which ended at the end of 2023.

CONSOLIDATED INCOME TAXES

The Company continues to believe the full valuation allowance established against its total U.S.

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

For the six months ended June 30, 2024 and 2023, the Company recorded U.S.

state tax benefit and expense of $0.2 million and $1.3 million, respectively.

For the six months ended June 30, 2024 and 2023, the state tax expense was partially offset by foreign tax expense and benefit of $0.6 million and $1.6 million.

Liquidity and Capital Resources

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in thousands)

2 unchanged sentences

Working capital 322,210 346,923

The Company's cash and cash equivalents and short-term investments decreased to $263.8 million at March 31, 2024 from $290.4 million at December 31, 2023.

The Company's cash and cash equivalents and short-term investments decreased to $267.4 million at June 30, 2024 from $290.4 million at December 31, 2023.

$87.1 million or 33% of the $267.4 million in cash and cash equivalents and short-term investments is held by DNAG, the Company's Canadian subsidiary.

The Company's working capital decreased to $319.4 million at March 31, 2024 from $346.9 million at December 31, 2023.

Working capital decreased primarily due to the decrease in cash and cash equivalents.

Working capital is primarily a function of sales, purchase volumes, inventory requirements, and vendor payment terms.

The Company's working capital decreased to $322.2 million at June 30, 2024 from $346.9 million at December 31, 2023.

The decrease in cash and cash equivalents and working capital was primarily due to the investment in Sapphiros of $28.3 million during the six months ended June 30, 2024.

Analysis of the Company's Cash Flows

Operating Activities

During the three months ended March 31, 2024, net cash provided by operating activities was $6.7 million.

During the six months ended June 30, 2024, net cash provided by operating activities was $14.6 million.

Cash flows from operations can be significantly impacted by factors such as timing of receipt from customers, inventory purchases, and payments to vendors.

The Company's net loss of $3.6 million included non-cash charges of depreciation and amortization expense of $2.7 million, stock-based compensation expense of $3.0 million, and impairment losses of $3.3 million.

Cash provided by the working capital accounts included a decrease in accounts receivable of $6.2 million largely associated with lower overall sales and collections of balances due, a decrease in inventory of $4.3 million as the Company fulfilled demand for its InteliSwab® product, and a decrease in accrued expenses of $9.7 million as the Company paid out year end bonuses in March 2024.

The Company's net loss of $4.2 million included non-cash charges of depreciation and amortization expense of $5.3 million, stock-based compensation expense of $6.3 million, impairment losses of $4.4 million, and loss on equity investment of $0.6 million.

Cash provided by the working capital accounts included a decrease in accounts receivable of $1.8 million largely associated with lower overall sales and collections of balances due, a decrease in inventory of $9.2 million as the Company fulfilled demand for its InteliSwab® product, and a decrease in prepaid expense and other current assets of $1.7 million.

Uses of cash included a decrease in accounts payable of $3.5 million due to lower inventory purchases and timing of vendor invoice payments and a decrease in accrued expenses of $7.1 million as the Company paid out year-end bonuses in March 2024.

Investing Activities

Net cash used in investing activities was $46.5 million for the three months ended March 31, 2024, which reflects proceeds from the maturities of investments of $9.2 million, offset by $25.9 million in purchases of investments.

Investing activities also include a $28.3 million investment in Sapphiros, and $1.6 million to acquire property and equipment to support the normal operations of the business.

Net cash used in investing activities was $40.9 million for the six months ended June 30, 2024, which reflects proceeds from the maturities of investments of $43.9 million, offset by $53.2 million in purchases of investments.

activities also include a $28.3 million investment in Sapphiros, and $3.2 million to acquire property and equipment to support the normal operations of the business.

Financing Activities

Net cash used in financing activities was $1.3 million for the three months ended March 31, 2024, which is largely comprised of $1.5 million used for the repurchase of common stock to satisfy withholding taxes related to the vesting of restricted shares awarded to the Company's employees.

Net cash used in financing activities was $3.3 million for the six months ended June 30, 2024, which is largely comprised of $3.4 million used for the repurchase of common stock to satisfy withholding taxes related to the vesting of restricted shares awarded to the Company's employees.

The Company expects existing cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements over the next twelve months.

involved in obtaining and enforcing patents, proprietary rights and any necessary licenses, the cost and timing of expansion of sales and marketing activities, market acceptance of new products, competing technological and market developments, the impact of the current economic environment and other factors.

The Company's cash requirements, however, may vary materially from those now planned due to many factors, including, but not limited to, the scope and timing of future strategic acquisitions, the progress of its research and development programs, the scope and results of clinical testing, the cost of any future litigation, the magnitude of capital expenditures, changes in existing and potential relationships with business partners, the timing and cost of obtaining regulatory approvals, the timing and cost of future stock purchases, the costs involved in obtaining and enforcing patents, proprietary rights and any necessary licenses, the cost and timing of expansion of sales and marketing activities, market acceptance of new products, competing technological and market developments, the impact of the current economic environment and other factors.

A summary of the Company's obligations to make future payments under contracts existing at December 31, 2023 is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of its Annual Report on Form 10-K for the year ended December 31, 2023.

As of March 31, 2024, there were no significant changes to this information.

As of June 30, 2024, there were no significant changes to this information.

Critical Accounting Policies and Estimates

A more detailed review of the Company's critical accounting policies is contained in its Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC.

No material changes have been made to such critical accounting policies during the three months ended March 31, 2024.

No material changes have been made to such critical accounting policies during the six months ended June 30, 2024.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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 2. Management’s Discussion and Analysis