What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-09 compared with 2023-11-08 · 66 added, 141 removed, 56 unchanged (79% of the section changed)

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Business Overview

OraSure Technologies transforms health through powerful insight by providing access to accurate, essential information.

In 2022, the Company's business consisted of two segments:

its “Diagnostics” segment, and its “Molecular Solutions” segment.

In February 2023, the Company announced a corporate restructuring to combine the commercial and innovation teams across the two segments into one business unit with sales, marketing, product development, and research teams covering multiple product lines.

This change is intended to accelerate innovation, enhance customer experience and result in operational synergies.

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.

The Company's diagnostic products includes tests for diseases including COVID-19, HIV, and Hepatitis C that are performed on a rapid basis at the point of care, and tests for drugs of abuse that are processed in a laboratory.

These products 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 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.

The Company's COVID-19 and HIV products are also sold in a consumer-friendly format in the over-the-counter market in the U.S.

and, in the case of the HIV product, as a self-test to individuals in a number of other countries.

The Company's business also includes molecular collection kits and services used by clinical laboratories, direct-to-consumer laboratories, researchers, pharmaceutical companies, and animal health service and product providers.

These revenues are derived from product sales to commercial customers and sales into the academic and research markets.

The Company's COVID-19 and HIV products are also sold in a consumer-friendly format in the over-the-counter (“OTC”) market in the U.S.

and, in the case of the HIV product, as a self-test to individuals in a number of other countries, including as an oral swab in-home test for HIV-1 and HIV-2 in Europe.

The Company's business also includes molecular sample management solutions and services that are used by clinical laboratories, direct-to-consumer laboratories, researchers, pharmaceutical companies, and animal health service and product providers.

The revenues from sample management solutions are derived from product sales to commercial customers and sales into the academic and research markets.

Customers span the disease risk management, diagnostics, pharmaceutical, biotech, companion animal and environmental markets.

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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 analytical services for both genomics and microbiome customers to more fully meet their needs.

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.

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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.

Results of Operations

Three months ended September 30, 2023 compared to September 30, 2022.

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

CONSOLIDATED NET REVENUES

The table below shows an outline of total consolidated net revenues (dollars in thousands) for the three months ended September 30, 2023 and 2022:

Three Months Ended September 30,

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,

Dollars % Change Percentage of Total Net Revenues

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16,380 17,090 (4) 30 11

Molecular Products (2)

Molecular Sample Management Solutions (2)

10,822 12,942 (16) 20 8

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Product and Services Revenues

Consolidated net revenues decreased 23% to $89.2 million for the three months ended September 30, 2023 from $116.5 million for the three months ended September 30, 2022.

COVID-19 Diagnostics revenues decreased by 37% to $50.1 million for the three months ended September 30, 2023 compared to $79.6 million in three months ended September 30, 2022 due to decreased sales of the Company's InteliSwab ® tests through its U.S.

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.

government procurement contracts.

We expect this decline in revenue to continue in the fourth quarter but at a lower rate.

Sales of the Company's Diagnostics products increased 59% to $19.6 million for the three months ended September 30, 2023 from $12.3 million for the three months ended September 30, 2022.

This increase in revenues was primarily driven by higher sales of the Company's OraQuick® In-Home HIV tests in support of the CDC's "Together Take Me Home" HIV self-test program which commenced during the first quarter of 2023, and higher sales of the Company's OraQuick® HIV Self-Test in international markets due to customer ordering patterns.

Molecular Products revenues decreased 4% to $15.2 million for the three months ended September 30, 2023 from $15.8 million for the three months ended September 30, 2022.

Sales of the Company's Molecular Products are being impacted by macro-economic factors in the markets in which its customers operate and as a result, one of the Company's larger customers scaled down purchasing after they reorganized their business.

These declines in revenues were partially offset by new customer sales in the animal and genetic testing markets.

Other products and services revenues increased 13% to $3.2 million for the three months ended September 30, 2023 from $2.8 million for the three months ended September 30, 2022.

Molecular Services revenues, which are largely derived from the Company's laboratory services, decreased 57% to $0.8 million for the three months ended September 30, 2023 from $2.0 million for the three months ended September 30, 2022.

The decrease in services revenues was largely due to completion of a large customer's clinical trial project and increased competition.

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Sales of the Company's COVID-19 Molecular Products collection kits decreased by 85% to $0.05 million for the three months ended September 30, 2023 from $0.4 million for the three months ended September 30, 2022 due to decline in demand for COVID PCR testing given the availability of rapid antigen tests.

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.

Non-Product and Services Revenues

Non-product and services revenues decreased 95% to $0.2 million for the three months ended September 30, 2023 from $3.6 million for the three months ended September 30, 2022 as a result lower funding for research and development activities and lower royalty income.

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.

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 49.7% for the three months ended September 30, 2023 from 39.9% for the three months ended September 30, 2022.

This increase in margins was driven by InteliSwab® sales which generated higher margins due to reduced costs associated with manufacturing efficiencies and a packaging change implemented during the first quarter of 2023 .

Also contributing to improved margins is lower product scrap expense, and improved overhead absorption.

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.

Gross margins in the fourth quarter to are expected to moderate and not remain at this level due to product mix shifts, including the anticipated reduction in InteliSwab volume

Consolidated operating income for the three months ended September 30, 2023 was $10.9 million, a $10.0 million improvement from the $0.9 million operating income reported for the three months ended September 30, 2022.

Results for the three months ended September 30, 2023 were positively impacted by lower operating expense and impairment losses.

Results for the three months ended September 30, 2022 included $6.6 million of impairment losses compared to $6.2 million for the three months ended September 30, 2023.

Impairment losses in the third quarter of 2023 were comprised of intangible impairments whereas impairment in the third quarter of 2022 was associated with idle manufacturing equipment.

Operating expenses in the third quarter of 2023, excluding the impairment charge, decreased $11.8 million compared to the third quarter of 2022 reflecting the impact of the Company's cost saving measures and headcount reductions.

Research and development expenses decreased 16% to $8.5 million for the three months ended September 30, 2023 from $10.1 million for the three months ended September 30, 2022 largely due a decrease in spend on COVID-19 product development, a decrease in employee costs associated with a reduction in headcount, and lower spending on lab supplies.

Sales and marketing expenses decreased 35% to $8.7 million for the three months ended September 30, 2023 from $13.5 million for the three months ended September 30, 2022 due to lower employee costs associated with a decrease in headcount, decreased spend on advertising and consulting fees and a decrease in our provision for uncollectible accounts.

General and administrative expenses decreased 35% to $10.1 million for the three months ended September 30, 2023 from $15.5 million for the three months ended September 30, 2022 largely due to a decrease in legal fees as well as lower sales tax penalties, lower staffing costs due to a reduction in headcount, and lower project management fees related to our $109 million manufacturing expansion contract.

All of the above contributed to the Company's operating income of $10.9 million for the three months ended September 30, 2023, which 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.

The Company's operating income of $0.9 million for the three months ended September 30, 2022 included a non-cash impairment charge of $6.6 million, non-cash charges of $3.9 million for depreciation and amortization, and $2.3 million for stock-based compensation.

Other income for the three months ended September 30, 2023 was $2.6 million compared to $3.6 million for the three months ended September 30, 2022.

This decrease is largely due to lower foreign currency gains offset by higher interest income.

CONSOLIDATED INCOME TAXES

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

state income tax expense of $1.1 million compared to $40.0 thousand benefit for the three months ended September 30, 2022 and a foreign tax expense of $1.2 million for the three months ended September 30, 2023 compared to $1.1 million benefit for the three months ended September 30, 2022.

The overall increase in tax expense is associated with a projected increase in earnings in both the U.S.

and in Canada.

Results of Operations

Nine months ended September 30, 2023 compared to September 30, 2022.

CONSOLIDATED NET REVENUES

The table below shows an outline of total consolidated net revenues (dollars in thousands) for the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30,

Dollars % Change Percentage of Total Net Revenues

2023 2022 2023 2022

COVID-19 Diagnostics $ 215,876 $ 144,809 49 % 65 % 55 %

Diagnostics (1)

56,475 37,759 50 18 14

Molecular Products (2)

41,230 51,344 (20) 13 19

Other products and services (3)

9,279 8,895 4 3 3

Molecular Services 3,567 4,895 (27) 1 2

COVID-19 Molecular Products 239 9,522 (97) — 4

Net product and services revenues 326,666 257,224 27 99 97

Non-product and services revenues (4)

2,925 7,177 (59) 1 3

Net revenues $ 329,591 $ 264,401 25 % 100 % 100 %

(1) Includes HIV and HCV 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.

Product and Services Revenues

Consolidated net product and services revenues increased 25% to $329.6 million for the nine months ended September 30, 2023 from $264.4 million for the nine months ended September 30, 2022.

COVID-19 Diagnostics revenues increased 49% to $215.9 million for the nine months ended September 30, 2023 compared to $144.8 million for the nine months ended September 30, 2022 due to increased sales of the Company's InteliSwab® tests through its government procurement contracts.

Sales of the Company's Diagnostics products increased 50% to $56.5 million for the nine months ended September 30, 2023 from $37.8 million for the nine months ended September 30, 2022.

Molecular Products revenues decreased 20% to $41.2 million for the nine months ended September 30, 2023 from $51.3 million for the nine months ended September 30, 2022.

Sales of the Company's Molecular Products are being impacted by macro-economic factors in the markets in which its customers operate and customer ordering patterns.

These declines in revenue are being partially offset by new customer revenues in the animal, pharma, and genetic testing markets.

Other products and services revenues increased 4% to $9.3 million for the nine months ended September 30, 2023 from $8.9 million for the nine months ended September 30, 2022.

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Molecular Services revenues, which are largely derived from the Company's laboratory services, decreased 27% to $3.6 million for the nine months ended September 30, 2023 from $4.9 million for the nine months ended September 30, 2022.

The decline in services revenues was the result of the loss of two customers in 2022 :

one customer ceased operations in 2022 and the other deprioritized microbiome studies coupled with the completion of certain large clinical trial studies and timing of research studies.

Sales of the Company's COVID-19 Molecular Products collection kits decreased significantly by 97% to $0.2 million for the nine months ended September 30, 2023 from $9.5 million for the nine months ended September 30, 2022 due to decline in demand for COVID PCR testing given the availability of rapid antigen tests.

Non-Product and Services Revenues

Non-product and services revenues decreased 59% to $2.9 million for the nine months ended September 30, 2023 from $7.2 million for the nine months ended September 30, 2022 as a result of lower funding received on research and development activities and lower royalty income.

CONSOLIDATED OPERATING RESULTS

Consolidated gross profit margin increased to 41.4% for the nine months ended September 30, 2023 from 37.3% for the nine months ended September 30, 2022.

This improvement in margins was driven by InteliSwab® sales which generated higher margins due to reduced costs associated with improved manufacturing efficiencies and a packaging change implemented during the first quarter of 2023, and lower freight charges.

Lower product scrap expense in 2023 compared to 2022 also contributed to the margins improvement.

These improved margins were partially offset by $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 and lower COVID-19 Molecular Products revenue which historically generated higher margins.

Consolidated operating income for the nine months ended September 30, 2023 was $28.8 million, a $65.6 million improvement from the $36.8 million operating loss reported for the nine months ended September 30, 2022.

Results for the nine months ended September 30, 2023 were positively impacted by the increase in revenues and gross margins described above and were positively impacted by reduced operating expense and lower impairment losses.

Results for the nine months ended September 30, 2022 included $17.1 million of impairment losses compared to $7.5 million for the nine months ended September 30, 2023.

Operating expenses in the nine months ended September 30, 2023, excluding the impairment charges, decreased $18.0 million compared to the nine months ended September 30, 2022.

Research and development expenses decreased to $26.7 million for the nine months ended September 30, 2023 from $28.2 million for the nine months ended September 30, 2022, largely due to a decline in spend on COVID-19 development and lower staffing costs due to a decrease in headcount, partially offset by increased engineering consulting spend associated with our $109 million manufacturing expansion contract.

Sales and marketing expenses decreased 22% to $29.4 million for the nine months ended September 30, 2023 from $37.9 million for the nine months ended September 30, 2022 due to decreased employee costs associated with the reduction in headcount, a decrease in the Company's reserve for expected credit losses and lower advertising, marketing, sales meeting, and consulting spend.

General and administrative expenses decreased 15% to $44.2 million for the nine months ended September 30, 2023 from $52.3 million for the nine months ended September 30, 2022 largely due a decrease in consulting fees, lower project management fees associated with the $109 million DOD manufacturing expansion contract, lower employee costs associated with lower headcount, severance, stock compensation expense and recruitment fees.

In the first nine months of 2022, the Company incurred high severance and stock compensation expense associated with the accelerated vesting of shares under the Company's former CEO's and general counsel's employment agreements and higher recruitment expense associated with the new CEO search.

Also contributing to the decrease in expense was lower consulting fees, lower board of director fees, due to fewer board members, and lower sales tax penalties.

These decreases in expense were partially offset by increased legal fees.

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All of the above contributed to the Company's operating income of $28.8 million for the nine months ended September 30, 2023, which included non-cash impairment charges of $7.5 million largely related to equipment that will no longer be used in production and intangible asset impairment, non-cash charges of $17.4 million for depreciation and amortization, and $7.6 million for stock-based compensation.

The Company's operating loss of $36.8 million for the nine months ended September 30, 2022 included a non-cash impairment charge of $17.1 million, non-cash charges of $11.4 million for depreciation and amortization, and $9.1 million for stock-based compensation.

Other income for the nine months ended September 30, 2023 was $6.8 million compared to $5.5 million for the nine months ended September 30, 2022.

This increase is largely due to higher interest income and higher reimbursement of costs incurred under the Company's DOD expansion contract which are presented in research and development expenses offset by lower foreign currency gains.

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 INCOME TAXES

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

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

state tax expense of $2.4 million, and a foreign tax benefit of $0.4 million.

For the the nine months ended September 30, 2022, the Company recorded U.S.

state tax expense of $0.4 million, a foreign tax benefit of $0.4 million, and foreign withholding tax of $1.7 million associated with the Company's repatriation of $65.0 million of cash from Canada to the United States.

The 2023 U.S.

state tax expense is higher due to higher expected US earnings.

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.

Liquidity and Capital Resources

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in thousands)

Cash and cash equivalents $ 247,145 $ 290,407

Available-for-sale securities 7,358 26,867

Short-term investments

Working capital 319,400 346,923

The Company's cash and cash equivalents and available-for-sale securities increased to $224.9 million at September 30, 2023 from $110.8 million at December 31, 2022.

$78.9 million or 35% of the $224.9 million in cash and cash equivalents is held by DNAG, the Company's Canadian subsidiary.

In 2022, the Company repatriated $65.0 million of cash into the United States and incurred $1.7 million of Canadian withholding tax.

Further repatriation of cash from Canada into the United States could have additional adverse tax consequences.

It is still the Company's intention going forward to continue to permanently reinvest the historical undistributed earnings of the Company's foreign subsidiaries.

The Company's working capital increased to $315.5 million at September 30, 2023 from $256.1 million at December 31, 2022.

Working capital increased primarily due to the increase in cash and cash equivalents and lower accounts payable balances.

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.

$84.5 million or 32% of the $263.8 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.

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Operating Activities

During the nine months ended September 30, 2023, net cash provided by operating activities was $100.2 million.

During the three months ended March 31, 2024, net cash provided by operating activities was $6.7 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 income of $33.6 million included non-cash charges of depreciation and amortization expense of $17.4 million, stock-based compensation expense of $7.6 million, impairment charges taken for idle equipment and intangible assets of $7.5 million and a non-cash deferred tax benefit of $0.5 million.

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Cash provided by the working capital accounts included a decrease in inventory of $36.4 million as the Company fulfilled demand for its InteliSwab® product, a decrease in accounts receivable of $17.5 million largely associated with collections of monies due from the U.S.

government for InteliSwab ® shipments, a $10.5 million decrease in prepaid and other assets as the Company received payment of its Employee Retention Credit filed for in 2021 and taxes refunds associated with Canadian income tax returns.

Offsetting these increases in cash is a decrease in accounts payable of $25.1 million associated with the timing of payment of vendor invoices and a decrease in accrued expenses of $4.0 million.

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.

Investing Activities

Net cash provided by investing activities was $35.6 million for the nine months ended September 30, 2023, which reflects proceeds from the maturities of investments of $95.0 million, $24.3 million in reimbursement received under the Company's $109 million contract with the U.S.

government offset by $74.7 in purchases of investments, $4.5 million to build additional manufacturing capacity as required by the contract, and $4.5 million to acquire property and equipment to support the normal operations of the business.

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.

Financing Activities

Net cash used in financing activities was $2.7 million for the nine months ended September 30, 2023, which is largely comprised of $1.9 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 $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.

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.

The Company's cash requirements, however, may vary materially from those now planned due to many factors, including, but not limited to, the timing of reimbursement under its $109 million DOD contract, 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.

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 September 30, 2023, there were no significant changes to this information.

As of March 31, 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 nine months ended September 30, 2023.

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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