What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-07 · 110 added, 46 removed, 68 unchanged (70% of the section changed)

17 unchanged sentences

Risk Assessment Testing

In the third quarter of 2024, the Company announced the discontinuance of sales of its risk assessment product line which was expected to be completed in the second quarter of 2025.

Sales of its risk assessment products contributed $1.4 million and $2.1 million to revenues during the three months ended March 31, 2025 and 2024, respectively.

In the third quarter of 2024, the Company announced the discontinuance of sales of its risk assessment product line which was completed in the second quarter of 2025.

Sales of its risk assessment products contributed $0.4 million and $2.3 million to revenues during the three months ended June 30, 2025 and 2024, respectively.

Sales of its risk assessment products contributed $1.9 million and $4.4 million to revenues during the six months ended June 30, 2025 and 2024, respectively.

During the first quarter of 2025, the Company sold certain assets that made up the risk assessment product line including certain intellectual property, contracts, permits, and equipment.

Results of Operations

For the three months ended March 31, 2025 compared to March 31, 2024.

For the three months ended June 30, 2025 compared to June 30, 2024.

CONSOLIDATED NET REVENUES

The table below shows total consolidated net revenues (dollars in thousands) for the three months ended March 31, 2025 and 2024:

For the Three Months Ended March 31,

The table below shows total consolidated net revenues (dollars in thousands) for the three months ended June 30, 2025 and 2024:

For the Three Months Ended June 30,

Dollars % Change Percentage of Total Net Revenues

6 unchanged sentences

446 2,308 (81) 1 3

COVID-19 Diagnostics 457 23,097 (98) 2 43

Other products and services (4)

296 542 (45) 1 1

COVID-19 Diagnostics 28 18,934 (100) — 35

Molecular Services — 810 (100) — 1

3 unchanged sentences

Net revenues $ 31,242 $ 54,335 (43) % 100 % 100 %

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

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

(2) Includes Genomics, Microbiome, and Colli-Pee ® product revenues.

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Product and Services Revenues

Consolidated net revenues decreased 45% to $29.9 million for the three months ended March 31, 2025 from $54.1 million for the three months ended March 31, 2024.

Sales of the Company's Diagnostics products increased 8% to $17.7 million for the three months ended March 31, 2025 from $16.4 million for the three months ended March 31, 2024.

This increase in revenues is largely due to higher international HIV and HCV revenues of approximately $1.2 million primarily driven by customer ordering patterns.

Consolidated net revenues decreased 43% to $31.2 million for the three months ended June 30, 2025 from $54.3 million for the three months ended June 30, 2024.

Sales of the Company's Diagnostics products increased 3% to $19.2 million for the three months ended June 30, 2025 from $18.7 million for the three months ended June 30, 2024.

This increase in revenues is largely due to higher international HIV revenues of approximately $1.3 million primarily driven by customer ordering patterns.

Sales of a syphilis product, which were first sold in the second quarter of 2024 are also partially responsible for the increase.

This increase in revenues was offset by decrease in revenues under the CDC "Together Take me Home," HIV self-test program.

Sample Management Solutions revenues decreased 16% to $9.1 million for the three months ended March 31, 2025 from $10.8 million for the three months ended March 31, 2024.

Sales of the Company's genomics products are being impacted by customer bankruptcy and economic pressures.

Risk assessment revenue decreased 32% to $1.4 million for the three months ended March 31, 2025 from $2.1 million for the three months ended March 31, 2024.

This increase in revenues was partially offset by decrease in domestic revenues of the Company's HIV product and a decline in international HCV revenues.

Sample Management Solutions revenues decreased 22% to $9.9 million for the three months ended June 30, 2025 from $12.6 million for the three months ended June 30, 2024.

Sales of the Company's genomics products are being impacted by a large customer's bankruptcy proceedings.

Risk assessment revenue decreased 81% to $0.4 million for the three months ended June 30, 2025 from $2.3 million for the three months ended June 30, 2024.

The Company discontinued this line of business at the end of 2024 and business is winding down in early 2025.

COVID-19 Diagnostics revenues decreased 98% to $0.5 million for the three months ended March 31, 2025 compared to $23.1 million for the three months ended March 31, 2024 due to decreased sales of the Company's InteliSwab ® tests through its U.S.

COVID-19 Diagnostics revenues decreased 100% to $0.03 million for the three months ended June 30, 2025 compared to $18.9 million for the three months ended June 30, 2024 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 2025 and for the foreseeable future due to the fulfillment of these contracts and lower overall demand for COVID-19 testing.

Molecular Services revenues, which are derived from the Company's microbiome molecular sequencing services, were zero during the three months ended March 31, 2025 compared to $0.9 million during the three months ended March 31, 2024.

We expect this level of revenue to continue throughout the remainder of 2025 and for the foreseeable future due to the fulfillment of these contracts and lower overall demand for COVID-19 testing.

Molecular Services revenues, which are derived from the Company's microbiome molecular sequencing services, were zero during the three months ended June 30, 2025 compared to $0.8 million during the three months ended June 30, 2024.

The decrease in services revenues was due to the Company's decision to exit this line of business in 2024.

Non-Product and Services Revenues

Non-product and services revenues increased 165% to $0.9 million for the three months ended March 31, 2025 from $0.4 million for the three months ended March 31, 2024 primarily due to the recognition of revenue under funded R&D contracts that were assumed by the Company as a result of the Sherlock acquisition at the end of 2024.

Non-product and services revenues increased 261% to $1.4 million for the three months ended June 30, 2025 from $0.4 million for the three months ended June 30, 2024 primarily due to the recognition of revenue under funded R&D contracts that were assumed by the Company as a result of the Sherlock acquisition at the end of 2024.

CONSOLIDATED OPERATING RESULTS

Consolidated gross profit margin decreased to 41.1% for the three months ended March 31, 2025 from 44.5% for the three months ended March 31, 2024.

The largest driver of the margin decline was driven by product mix of lower volume InteliSwab® sales that generate higher gross margins.

Gross margin was also negatively impacted by the decrease in genomics sales that also generate higher gross margin coupled with increased international product sales which generate lower margins.

This negative impact to gross margin was offset by improved overhead absorption and the termination of the microbiome molecular sequencing services business which historically dragged down the gross margin rate.

Consolidated operating loss for the three months ended March 31, 2025 was $17.8 million, a $10.7 million decline from the operating loss reported for the three months ended March 31, 2024.

The increase in the operating loss reported in the first quarter of 2025 was largely a result of the lower revenues and lower gross margins generated on sales of the Company's products during the three months ended March 31, 2025.

Research and development expenses increased 24% to $9.6 million for the three months ended March 31, 2025 from $7.7 million for the three months ended March 31, 2024 largely due the additional R&D spend incurred by the newly acquired Sherlock companies.

Sales and marketing expenses decreased 19% to $6.9 million for the three months ended March 31, 2025 from $8.4 million for the three months ended March 31, 2024 due to lower spend on consulting fees and lower employee costs associated with a decrease in headcount.

General and administrative expenses increased 21% to $14.1 million for the three months ended March 31, 2025 from $11.6 million for the three months ended March 31, 2024 largely due an increase in legal fees and the additional general and administrative costs associated with the newly acquired Sherlock companies.

As discussed above in Recent Developments, the Company sold certain assets, including certain intellectual property, contracts, permits and equipment during the first quarter of 2025 related to it risk assessment product line.

The Company recorded a $0.75 million gain on the sales of those assets in addition to the sale of other assets for an approximately $0.2 million gain.

During the first quarter of 2025, the Company recorded a non-cash adjustment of $0.5 million, reflecting the change in the estimated fair value of the Sherlock acquisition-related contingent consideration.

Consolidated gross profit margin decreased to 42.1% for the three months ended June 30, 2025 from 45.4% for the three months ended June 30, 2024.

The largest driver of the margin decline was a negative product mix driven by lower InteliSwab® sales that generate higher gross margins, lower genomics sales that also generate higher gross margins, and higher international product sales which generate lower margins.

The termination of the microbiome molecular sequencing services business which historically dragged down the gross margin rate helped to improve the gross margin rate during the quarter.

Higher scrap expense also contributed to the lower margins in the quarter but was partially offset by improved overhead absorption as the Company brings more production in-house to its Opus Way facility.

Consolidated operating loss for the three months ended June 30, 2025 was $18.0 million, a $15.3 million increase from the operating loss reported for the three months ended June 30, 2024.

The increase in the operating loss reported in the second quarter of 2025 was largely a result of the lower revenues and lower gross margins generated on sales of the Company's products during the three months ended June 30, 2025 coupled with the increase spend on clinical trials.

Results for the three months ended June 30, 2025 included change in the estimated fair value of acquisition-related contingent consideration of $0.7 million.

Research and development expenses increased 73% to $11.4 million for the three months ended June 30, 2025 from $6.6 million for the three months ended June 30, 2024 largely due to higher spend incurred for clinical trials associated with the Chlamydia Trachomatis (CT) and Neisseria Gonorrhoeae (NG) device and additional R&D expense layered in from the newly acquired Sherlock companies.

Sales and marketing expenses decreased 20% to $6.4 million for the three months ended June 30, 2025 from $7.9 million for the three months ended June 30, 2024 due to decreased bad debt expense, lower employee costs associated with a decrease in headcount and a decrease in consulting costs.

General and administrative expenses increased 7% to $12.7 million for the three months ended June 30, 2025 from $11.8 million for the three months ended June 30, 2024 largely due an increase in legal fees and severance expense associated with an executive's departure.

During the three months ended June 30, 2025, the Company recorded a non-cash adjustment of $0.7 million, reflecting the change in the estimated fair value of the Sherlock acquisition-related contingent consideration.

The Sherlock acquisition was completed in December 2024 and there is no comparable amount in the first quarter of 2024.

All of the above contributed to the Company's operating loss of $17.8 million for the three months ended March 31, 2025, which included non-cash charges of $2.8 million for depreciation and amortization, and non-cash charges of $2.7 million for stock-based compensation.

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

Other income for the three months ended March 31, 2025 was $1.8 million compared to $3.5 million for the three months ended March 31, 2024 due to lower interest income and foreign currency gains.

All of the above contributed to the Company's operating loss of $18.0 million for the three months ended June 30, 2025, which included non-cash charges of $3.2 million for stock-based compensation, $2.5 million for depreciation and amortization, and $0.7 million of change in the estimated fair value of acquisition-related contingent consideration.

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

Other income for the three months ended June 30, 2025 was $1.1 million compared to $3.1 million for the three months ended June 30, 2024 due to lower interest income and higher foreign currency losses.

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 three months ended March 31, 2025 and 2024, the Company recorded an income tax benefit of $0.5 million and $0.02 million, respectively.

The increase in the income tax benefit is largely due to a higher foreign income tax benefit as a result of higher projected foreign losses.

For the three months ended June 30, 2025 and 2024, the Company recorded income tax expense of $2.0 million and $0.4 million, respectively.

The increase in the income tax expense is largely due to recording an uncertain tax position for certain tax matters, including penalties and interest.

Results of Operations

For the six months ended June 30, 2025 compared to June 30, 2024.

CONSOLIDATED NET REVENUES

The table below shows an outline of total consolidated net revenues (dollars in thousands) for the six months ended June 30, 2025 and 2024:

For the Six Months Ended June 30,

Dollars % Change Percentage of Total Net Revenues

2025 2024 2025 2024

Diagnostics (1)

$ 36,911 $ 35,139 5 % 60 % 32 %

Sample Management Solutions (2)

18,965 23,431 (19) 31 22

Risk Assessment Testing (3)

1,866 4,352 (57) 3 4

Other products and services (4)

617 1,092 (43) 1 1

COVID-19 Diagnostics 485 42,031 (99) 1 39

Molecular Services — 1,683 (100) — 2

Net product and services revenues 58,844 107,728 (45) 96 99

Non-product and services revenues (5)

2,329 739 215 4 1

Net revenues $ 61,173 $ 108,467 (44) % 100 % 100 %

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

(2) Includes Genomics, Microbiome and Colli-Pee ® product revenues.

(3) Includes substance abuse testing product revenues.

(4) Includes COVID-19 Sample Management Solutions product revenues.

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

Product and Services Revenues

Consolidated net product and services revenues decreased 45% to $58.8 million for the six months ended June 30, 2025 from $107.7 million for the six months ended June 30, 2024.

Sales of the Company's Diagnostics products increased 5% to $36.9 million for the six months ended June 30, 2025 from $35.1 million for the six months ended June 30, 2024.

This increase in revenue was primarily driven by higher HIV and HCV revenues in international markets of $1.9 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 $0.9 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.

Sample Management Solutions revenues decreased 19% to $19.0 million for the six months ended June 30, 2025 from $23.4 million for the six months ended June 30, 2024.

Sales of the Company's Sample Management Solutions Products are being impacted by customer bankruptcy and economic pressures.

Risk assessment revenues decreased 57% to $1.9 million for the six months ended June 30, 2025, compared to $4.4 million for the six months ended June 30, 2024.

The Company discontinued this line of business at the end of 2024 and business is winding down in early 2025.

COVID-19 Diagnostics revenues decreased 99% to $0.5 million for the six months ended June 30, 2025 compared to $42.0 million for the six months ended June 30, 2024 due to decreased sales of the Company's InteliSwab® tests through its U.S.

government procurement contracts.

We expect this level of revenue to continue for the remainder of 2025 and for the foreseeable future due to the fulfillment of these contracts and lower overall demand for COVID-19 testing.

Molecular Services revenues, which were largely derived from the Company's laboratory services, were zero for six months ended June 30, 2025 compared to $1.7 million for the six months ended June 30, 2024.

The decrease in service revenues was due to the Company's decision to exit this line of business in 2024.

Non-Product and Services Revenues

Non-product and services revenues increased 215% to $2.3 million for the six months ended June 30, 2025 from $0.7 million for the six months ended June 30, 2024 primarily due to the recognition of revenue under funded R&D contracts that were assumed by the Company as a result of the Sherlock acquisition at the of 2024.

The increase is also due to funded R&D contracts with BARDA which did not commence until after the first half of 2024.

CONSOLIDATED OPERATING RESULTS

Consolidated gross profit margin decreased to 41.6% for the six months ended June 30, 2025 from 44.9% for the six months ended June 30, 2024.

The termination of the microbiome molecular sequencing services business which historically dragged down the gross margin rate helped to improve the gross margin rate during the period along with the higher non-product revenues which contribute 100% to gross margin.

Lastly, improved overhead absorption helped to offset the negative impact to margins as the Company brings more production in-house to its Opus Way facility.

Consolidated operating loss for the six months ended June 30, 2025 was $35.8 million, compared to $9.8 million operating loss reported for the six months ended June 30, 2024.

Results for the six months ended June 30, 2025 were negatively impacted by the decrease in revenues and lower gross margins generated on sales of the Company's products coupled with higher clinical trial spend.

Results for the six months ended June 30, 2025 included change in the estimated fair value of acquisition-related contingent consideration of $1.2 million offset by gain on sale of assets of $1.0 million.

Research and development expenses increased 47% to $21.0 million for the six months ended June 30, 2025 from $14.3 million for the six months ended June 30, 2024, largely due to higher spend incurred for clinical trials for the Chlamydia Trachomatis (CT) and Neisseria Gonorrhoeae (NG) device and additional R&D expense layered in from the newly acquired Sherlock companies.

Sales and marketing expenses decreased 19% to $13.2 million for the six months ended June 30, 2025 from $16.4 million for the six months ended June 30, 2024 primarily due to decreased employee costs associated with the reduction in headcount, lower consulting spend, and a decrease in bad debt expense.

General and administrative expenses increased 14% to $26.8 million for the six months ended June 30, 2025 from $23.5 million for the six months ended June 30, 2024 largely due an increase in legal and accounting fees and the additional general and administrative costs associated with the newly acquired Sherlock companies.

All of the above contributed to the Company's operating loss of $35.8 million for the six months ended June 30, 2025, which included non-cash charges $5.9 million for stock-based compensation, $5.3 million for depreciation and amortization, and $1.2 million for change in the estimated fair value of acquisition-related contingent consideration.

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

Other income for the six months ended June 30, 2025 was $2.9 million compared to $6.6 million for the six months ended June 30, 2024.

This decrease is largely due to lower interest income and higher foreign currency losses.

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, 2025 and 2024, the Company recorded income expense of $1.5 million and $0.4 million, respectively.

The increase in the income tax expense is largely due to recording an uncertain tax position for certain tax matters, including penalties and interest.

Liquidity and Capital Resources

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

(in thousands)

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Working capital 259,088 299,737

The Company's cash and cash equivalents decreased to $247.6 million at March 31, 2025 from $267.8 million at December 31, 2024.

The Company's cash and cash equivalents decreased to $234.6 million at June 30, 2025 from $267.8 million at December 31, 2024.

The Company's Canadian subsidiary, DNAG, held $85.1 million or 36% of the $234.6 million in cash and cash equivalents.

The Company's working capital decreased to $288.4 million at March 31, 2025 from $299.7 million at December 31, 2024.

The Company's working capital decreased to $259.1 million at June 30, 2025 from $299.7 million at December 31, 2024.

Analysis of the Company's Cash Flows

Operating Activities

During the three months ended March 31, 2025, net cash used in operating activities was $19.7 million.

During the six months ended June 30, 2025, net cash used in operating activities was $30.0 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 $16.0 million included non-cash charges of depreciation and amortization expense of $2.8 million, stock-based compensation expense of $2.7 million, and other non-cash income of $0.3 million mostly consisting of a gain on the sale of assets offset by the non-cash adjustment to the contingent consideration liabilities.

Cash used by the working capital accounts included an increase in inventory of $1.5 million due to the lower revenues and reduced shipments, an increase in prepaid expense and other current assets of $2.1 million due to foreign tax installment payments, and a decrease in accrued expenses of $6.6 million as the Company paid out year-end bonuses in March 2025.

Cash provided by the working capital accounts included an decrease in accounts receivable of $2.4 million largely associated with lower overall sales and collections of balances due.

The Company's net loss of $35.7 million included non-cash charges of stock-based compensation expense of $5.9 million and depreciation and amortization expense of $5.3 million, and other net non-cash losses of $1.0 million mostly consisting of the non-cash adjustment to the contingent consideration liabilities and the loss on equity investment.

Cash used by the working capital accounts included a decrease in accrued expenses of $3.1 million largely consisting of the payment of year-end bonuses in March 2025, an increase in accounts receivable of $1.6 million largely due to timing of shipments at the end of the quarter, and a decrease in accounts payable of $1.5 million.

Cash provided by working capital accounts included a decrease in inventory of $1.0 million due to the lower revenues.

Investing Activities

Net cash provided by investing activities was $0.4 million for the three months ended March 31, 2025, which was due to proceeds from sale of property and equipment offset by the acquisition of new property and equipment.

Net cash used in investing activities was $1.6 million for the six months ended June 30, 2025, associated with proceeds from sale of property and equipment offset by the acquisition of new property and equipment.

Financing Activities

Net cash used in financing activities was $1.0 million for the three months ended March 31, 2025, which was largely comprised of $0.9 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 $6.8 million for the six months ended June 30, 2025, which was largely comprised of $5.0 million of repurchase of common stock and $1.7 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.

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A summary of the Company's obligations to make future payments under contracts existing at December 31, 2024 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, 2024.

As of March 31, 2025, there were no significant changes to this information.

As of June 30, 2025, 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, 2024 filed with the SEC.

No material changes have been made to such critical accounting policies during the three months ended March 31, 2025.

No material changes have been made to such critical accounting policies during the six months ended June 30, 2025.

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