What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-06 compared with 2024-08-06 · 90 added, 85 removed, 98 unchanged (64% of the section changed)

18 unchanged sentences

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.

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

In October 2024, the Company announced the discontinuance of the sales of its risk assessment product line which is expected to be completed by end of year.

Sales of its risk assessment products contributed $6.3 million to revenues during the nine months ended September 30, 2024 and contributed $9.7 million to revenues for the full year of 2023.

Results of Operations

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

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

CONSOLIDATED NET REVENUES

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,

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

For the Three Months Ended September 30,

Dollars % Change Percentage of Total Net Revenues

2024 2023 2024 2023

COVID-19 Diagnostics $ 18,934 $ 47,477 (60) % 35 % 56 %

Diagnostics (1)

2 unchanged sentences

12,806 15,238 (16) 32 17

Other products and services (3)

COVID-19 Diagnostics 2,155 50,145 (96) 5 56

Risk assessment testing (3)

1,911 2,554 (25) 5 3

Other products and services 748 638 17 2 1

Molecular Services 9 834 (99) — 1

6 unchanged sentences

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

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

(3) Includes substance abuse testing product revenues.

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

Product and Services Revenues

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 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.

Consolidated net revenues decreased 55% to $39.9 million for the three months ended September 30, 2024 from $89.2 million for the three months ended September 30, 2023.

Sales of the Company's Diagnostics products increased 13% to $22.0 million for the three months ended September 30, 2024 from $19.6 million for the three months ended September 30, 2023.

This increase in revenues is largely due to higher international HIV revenues of approximately $2.4 million primarily driven by customer ordering patterns of sales in Africa.

Molecular Sample Management Solutions revenues decreased 16% to $12.8 million for the three months ended September 30, 2024 from $15.2 million for the three months ended September 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.

COVID-19 Diagnostics revenues decreased by 96% to $2.2 million for the three months ended September 30, 2024 compared to $50.1 million for the three months ended September 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 the remainder of 2024 and for the foreseeable future due to the fulfillment of these contracts and lower overall demand for COVID-19 testing.

Risk assessment revenue decreased 25% due to the loss of customers to competing products.

The Company has announced that it will discontinue this line of business by the end of 2024.

Molecular Services revenues, which are derived from the Company's microbiome molecular sequencing services, decreased 99% to $9 thousand for the three months ended September 30, 2024 from $0.8 million for the three months ended September 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.

We expect minimal molecular services revenues in the remainder of 2024.

Non-Product and Services Revenues

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.

Non-product and services revenues increased 52% to $0.3 million for the three months ended September 30, 2024 from $0.2 million for the three months ended September 30, 2023 due to recognizing royalty income in the third quarter of 2024 and none in the third quarter of 2023.

CONSOLIDATED OPERATING RESULTS

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.

Consolidated gross profit margin decreased to 42.8% for the three months ended September 30, 2024 from 49.7% for the three months ended September 30, 2023.

The largest driver of the margin decline was due to the lower volume in InteliSwab® sales driven by less units produced and sold and a lower average selling price based on contractual pricing.

Furthermore, the lower units produced resulted in lower overhead absorption of fixed costs as compared to the prior year period.

Gross margin was also negatively impacted by the increased sales of international product which generate lower margins coupled with the lower margins contributed by genomics products.

The decline in gross margins was partially offset by the impact of the exit of the Molecular Services business which historically caused a drag on consolidated gross margin.

Consolidated operating loss for the three months ended September 30, 2024 was $6.0 million, a decline from the $10.9 million operating income reported for the three months ended September 30, 2023.

The operating income reported in the third quarter of 2023 was largely a result of higher revenues and gross margins generated by the Company's InteliSwab® product and was partially offset by the inclusion of $6.2 million in impairment loss.

In 2023, the Company began implementing cost cutting measures and has benefited from this in the three months ended September 30, 2024 with a $4.2 million reduction in operating expense compared to the three months ended September 30, 2023.

Research and development expenses decreased 34% to $5.6 million for the three months ended September 30, 2024 from $8.5 million for the three months ended September 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.

Sales and marketing expenses decreased 13% to $7.6 million for the three months ended September 30, 2024 from $8.7 million for the three months ended September 30, 2023 due to lower employee costs associated with a decrease in headcount, decreased bad debt expense and consulting fees and lower amortization expense partially offset by an increase in severance expense due to the third quarter 2024 reduction in workforce.

General and administrative expenses decreased 2% to $9.8 million for the three months ended September 30, 2024 from $10.1 million for the three months ended September 30, 2023 largely due lower employee costs due to a reduction in headcount, partially offset by an increase in legal fees and in non-cash stock compensation expense.

All of the above contributed to the Company's operating loss of $6.0 million for the three months ended September 30, 2024, which included non-cash charges of $3.0 million for depreciation and amortization, and non-cash charges of $2.9 million for stock-based compensation.

The Company's operating income of $10.9 million for the three months ended September 30, 2023 included a non-cash impairment charge of $6.2 million, non-cash charges of $3.4 million for depreciation and amortization, and $2.6 million for stock-based compensation.

Other income for the three months ended September 30, 2024 was $2.8 million compared to $2.6 million for the three months ended September 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.

3 unchanged sentences

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

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.

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

state income tax expense of $18.0 thousand and $1.1 million, respectively and foreign tax expense of $0.7 million and $1.2 million, respectively.

Results of Operations

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

For the nine months ended September 30, 2024 compared to September 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,

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

For the Nine Months Ended September 30,

Dollars % Change Percentage of Total Net Revenues

2024 2023 2024 2023

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

Diagnostics (1)

$ 57,162 $ 56,475 1 % 39 % 17 %

COVID-19 Diagnostics 44,186 215,876 (80) 30 65

Molecular Sample Management Solutions (2)

36,237 41,230 (12) 24 13

Other products and services (3)

Risk assessment testing (3)

6,265 7,540 (17) 4 2

Other products and services 1,802 1,739 4 1 1

Molecular Services 1,692 3,567 (53) 1 1

6 unchanged sentences

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

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

(3) Includes substance abuse testing product 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.

Consolidated net product and services revenues decreased 55% to $148.4 million for the nine months ended September 30, 2024 from $329.6 million for the nine months ended September 30, 2023.

Sales of the Company's Diagnostics products increased 1% to $57.2 million for the nine months ended September 30, 2024 from $56.5 million for the nine months ended September 30, 2023.

This increase in revenue was primarily driven by higher HIV and HCV revenues in international markets of $1.4 million as a result of customer ordering patterns.

Also contributing to the diagnostic revenue increase is a combined increase in HCV domestic and Syphilis revenues of $1.4 million.

A decline in our HIV domestic revenue resulting from funding delays or reductions in funding for HIV products and customer order patterns partially offset the increased revenues from the other product lines.

COVID-19 Diagnostics revenues decreased 80% to $44.2 million for the nine months ended September 30, 2024 compared to $215.9 million for the nine months ended September 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.

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

Molecular Sample Management Solutions revenues decreased 12% to $36.2 million for the nine months ended September 30, 2024 from $41.2 million for the nine months ended September 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.

Risk assessment revenue decreased 17%, due to the loss of customers to competing products.

The Company has announced that it will discontinue this line of business by the end of 2024.

Molecular Services revenues, which are largely derived from the Company's laboratory services, decreased 53% to $1.7 million for the nine months ended September 30, 2024 from $3.6 million for the nine months ended September 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.

We expect minimal molecular services revenues in the remainder 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.

Non-product and services revenues decreased 66% to $1.0 million for the nine months ended September 30, 2024 from $2.9 million for the nine months ended September 30, 2023 as 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.

Further contributing to the decline in non-product revenues is lower royalty income in 2024 as one of the Company's royalty agreements for sample collection kits expired in June 2023.

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.

Consolidated gross profit margin increased to 44.4% for the nine months ended September 30, 2024 from 41.4% for the nine months ended September 30, 2023.

Gross margins in 2023 included $7.0 million of accelerated depreciation associated with the wind-down of InteliSwab® manual assembly in Thailand as the Company began to on-shore and automate manufacturing of this product at its Pennsylvania facilities.

In addition, reduced salary and benefits due to the reduction in workforce experienced in 2023 and 2024 contributed to improved overhead absorption.

Lastly, lower product scrap expense helped to increase margins for the nine months ended September 30, 2024.

These improvement in margins were partially offset by the decline in InteliSwab® revenues and a shift in product mix of increased revenues from lower margin product.

Other non-product revenues which contribute 100% to gross margins also declined for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Consolidated operating loss for the nine months ended September 30, 2024 was $15.8 million, compared to $28.8 million operating income reported for the nine months ended September 30, 2023.

Results for the nine months ended September 30, 2024 were negatively impacted by the decrease in revenues and were positively impacted by reduced operating expense.

Results for the nine months ended September 30, 2024 included $4.4 million of impairment losses compared to $7.5 million for the nine months ended September 30, 2023.

Operating expenses for the nine months ended September 30, 2024, excluding the impairment charge, decreased 22.9% to $77.3 million from $100.2 million for the nine months ended September 30, 2023 reflecting the impact of the Company's cost saving measures and headcount reductions.

Research and development expenses decreased 25% to $20.0 million for the nine months ended September 30, 2024 from $26.7 million for the nine months ended September 30, 2023, largely due to lower staffing costs due to a decrease in headcount and no related project management fees for our $109 million manufacturing expansion contract which ended during the fourth quarter of 2023, and a decrease in spend on COVID-19 product development.

This overall decrease in spend is 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 of operations located in Belgium.

Sales and marketing expenses decreased 18% to $24.0 million for the nine months ended September 30, 2024 from $29.4 million for the nine months ended September 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 25% to $33.3 million for the nine months ended September 30, 2024 from $44.2 million for the nine months ended September 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.

All of the above contributed to the Company's operating loss of $15.8 million for the nine months ended September 30, 2024, which included non-cash impairment charges of $4.4 million, non-cash charges of $8.4 million for depreciation and amortization, and $9.2 million for stock-based compensation.

The Company's operating income of $28.8 million for the nine months ended September 30, 2023 included a non-cash impairment charge of $7.5 million, non-cash charges of $17.4 million for depreciation and amortization, and $7.6 million for stock-based compensation.

Other income for the nine months ended September 30, 2024 was $9.3 million compared to $6.8 million for the nine months ended September 30, 2023.

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

government which ended at the end of 2023.

2 unchanged sentences

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.

For the nine months ended September 30, 2024 and 2023, the Company recorded U.S.

state tax benefit and expense of $0.2 million and $2.4 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.

For the nine months ended September 30, 2024 and 2023, the Company recorded foreign tax expense and benefit of $1.3 million and $0.4 million, respectively.

Liquidity and Capital Resources

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(in thousands)

Cash and cash equivalents $ 278,571 $ 290,407

Short-term investments

Working capital 322,367 346,923

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 $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.

The Company's cash and cash equivalents decreased to $278.6 million at September 30, 2024 from $290.4 million at December 31, 2023.

$93.7 million or 34% of the $278.6 million in cash and cash equivalents is held by DNAG, the Company's Canadian subsidiary.

The Company's working capital decreased to $322.4 million at September 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 $30.0 million during the nine months ended September 30, 2024.

Analysis of the Company's Cash Flows

Operating Activities

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

During the nine months ended September 30, 2024, net cash provided by operating activities was $27.3 million.

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

3 unchanged sentences

Investing Activities

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.

Net cash used in investing activities was $33.5 million for the nine months ended September 30, 2024, which reflects proceeds from the maturities of investments of $53.1 million, offset by $53.2 million in purchases of investments.

Investing activities also include a $30.0 million investment in Sapphiros, and $3.3 million to acquire property and equipment to support the normal operations of the business.

Financing Activities

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.

Net cash used in financing activities was $4.1 million for the nine months ended September 30, 2024, which is largely comprised of $3.5 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.

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.

1 unchanged sentence

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

As of September 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 six months ended June 30, 2024.

No material changes have been made to such critical accounting policies during the nine months ended September 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