ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
(in thousands, except per share amounts, unless otherwise indicated)
The overall goal of OraSure Technologies, Inc. (“OraSure” or “the Company”) is to empower the global community to improve health and wellness by providing access to accurate essential information. Our business consists of two segments: our “Diagnostics” segment, and our “Molecular Solutions” segment. Our Diagnostics business primarily consists of the development, manufacture, marketing and sale of oral fluid diagnostic products and specimen collection devices using our proprietary technologies, as well as other diagnostic products including immunoassays and other in vitro diagnostic tests that are used on other specimen types. Our Molecular Solutions business consists of the manufacture and sale of kits that are used to collect, stabilize, transport and store biological samples of genetic material for molecular testing in the consumer genetic, clinical genetic, academic research, infectious disease diagnostics, pharmacogenomics, personalized medicine, microbiome and animal genetics markets. Our collection kits are also used for the collection of first-void urine for liquid biopsy in the prostate and bladder cancer markets and in the sexually transmitted infection screening market. In addition, our Molecular Solutions business provides microbiome laboratory and bioinformatics services.
The Diagnostics business includes tests for diseases including HIV and Hepatitis C that are performed on a rapid basis at the point of care and tests 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. Our HIV product is also sold in a consumer-friendly format in the over-the-counter (“OTC”) market in the U.S. and as a self-test to individuals in a number of other countries. Our Diagnostics business includes the operations of UrSure, Inc. (“UrSure”), which was acquired and merged into OraSure in 2020. This part of the Diagnostics business develops and commercializes products that measure adherence to HIV medications including pre-exposure prophylaxis or PrEP, the daily medication to prevent HIV, and anti-retroviral medications to suppress HIV. These products include laboratory-based tests that can measure levels of the medications in a patient’s urine or blood, as well as point-of-care products currently in development. In 2020, we developed a rapid antigen self-test for COVID-19 and a COVID-19 antibody enzyme-linked immunosorbent assay (“ELISA”) for use in laboratory settings. We are seeking Emergency Use Authorization (“EUA”) from the U.S. Food and Drug Administration “FDA”) for these products.
Our Molecular Solutions business is operated by our subsidiaries, DNA Genotek Inc. (“DNAG”), Diversigen, Inc. (“Diversigen”), and Novosanis NV (“Novosanis”). In this business, we manufacture and sell kits that are used to collect, stabilize, transport and store a biological sample of genetic material for molecular testing. Our products are used for academic research and commercial applications, including ancestry, disease risk management, lifestyle and animal testing. In 2020, three of our collection devices were used in connection with COVID-19 molecular testing. We also sell research-use-only collection products into the microbiome market. We offer our customers a suite of genomics and microbiome services that range from package customization and study design optimization to extraction, analysis and reporting services. The microbiome laboratory and bioinformatics services are provided by Diversigen, which includes the operations of CoreBiome, Inc. (“CoreBiome”), a subsidiary we acquired in early 2019. CoreBiome and Diversigen were merged together in 2020. Novosanis manufactures and sells the Colli-Pee® collection device for the volumetric collection of first-void urine for use in research, screening and diagnostics in the liquid biopsy and sexually transmitted infection markets. Our Molecular Solutions business serves customers in many countries worldwide, including many leading research universities and hospitals.
2.
|
Summary of Significant Accounting Policies
|
Principles of Consolidation and Basis of Presentation. The accompanying interim unaudited consolidated financial statements include the accounts of OraSure and its wholly-owned subsidiaries, DNAG, Diversigen and Novosanis. All intercompany transactions and balances have been eliminated. References herein to “we,” “us,” “our,” or the “Company” mean OraSure and its consolidated subsidiaries, unless otherwise indicated. The unaudited financial statements, in the opinion of management, include all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of our financial position and results of operations for these interim periods. These financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results of operations expected for the full year.
Summary of Significant Accounting Policies. There have been no changes to the Company's significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 that have had a material impact on the consolidated financial statements and related notes except as discussed herein.
Investments. We consider all investments in debt securities to be available-for-sale securities. These securities consist of guaranteed investment certificates and corporate bonds with purchased maturities greater than ninety days. Available-for-sale securities are carried at fair value, based
-7-
upon quoted market prices, with unrealized gains and losses, if any, reported in stockholders’ equity as a component of accumulated other comprehensive loss.
We record an allowance for credit loss for our available-for-sale securities when a decline in investment market value is due to credit-related factors. When evaluating an investment for impairment, we review factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. As of March 31, 2021, we determined that the decline in the market value of our available-for-sale investment was not due to credit-related factors and as such no allowance for credit-loss was necessary.
The following is a summary of our available-for-sale securities as of March 31, 2021 and December 31, 2020:
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed investment certificates
|
|
$
|
25,470
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25,470
|
|
Corporate bonds
|
|
|
37,643
|
|
|
|
48
|
|
|
|
(375
|
)
|
|
|
37,316
|
|
Total available-for-sale securities
|
|
$
|
63,113
|
|
|
$
|
48
|
|
|
$
|
(375
|
)
|
|
$
|
62,786
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed investment certificates
|
|
$
|
25,132
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25,132
|
|
Corporate bonds
|
|
|
71,533
|
|
|
|
135
|
|
|
|
(483
|
)
|
|
|
71,185
|
|
Total available-for-sale securities
|
|
$
|
96,665
|
|
|
$
|
135
|
|
|
$
|
(483
|
)
|
|
$
|
96,317
|
|
At March 31, 2021, maturities of our available-for-sale
securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than one year
|
|
$
|
29,334
|
|
|
$
|
48
|
|
|
$
|
(302
|
)
|
|
$
|
29,080
|
|
Greater than one year
|
|
$
|
33,779
|
|
|
$
|
—
|
|
|
$
|
(73
|
)
|
|
$
|
33,706
|
|
Fair Value of Financial Instruments. As of March 31, 2021 and December 31, 2020, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their respective fair values based on their short-term nature.
Fair value measurements of all financial assets and liabilities that are being measured and reported on a fair value basis are required to be classified and disclosed in one of the following three categories:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
All of our available-for-sale debt securities are measured as Level 2 instruments as of March 31, 2021 and December 31, 2020. Our guaranteed investment certificates are measured as Level 1 instruments as of March 31, 2021 and December 31, 2020.
Included in cash and cash equivalents at March 31, 2021 and December 31, 2020, was $72,979 and $71,489 invested in government money market funds. These funds have investments in government securities and are measured as Level 1 instruments.
We offer a nonqualified deferred compensation plan for certain eligible employees and members of our Board of Directors. The assets of the plan are held in the name of the Company at a third-party financial institution. Separate accounts are maintained for each participant to reflect the amounts deferred by the participant and all earnings and losses on those deferred amounts. The assets of the plan are held in mutual funds. The fair value of the plan assets as of March 31, 2021 and December 31, 2020 was $2,396 and $2,565, respectively, and was calculated using the quoted market prices of the assets as of those dates. All investments in the plan are classified as trading securities and measured as Level 1 instruments. The fair value of plan assets is included in both current assets and noncurrent assets with the same amount included in accrued expenses and other noncurrent liabilities in the accompanying consolidated balance sheets.
Accounts Receivable. Accounts receivable have been reduced by an estimated allowance for amounts that may become uncollectible in the future. This estimated allowance is based primarily on management’s evaluation of specific balances as they become past due, the financial condition of our customers and our historical experience related to write-offs.
-8-
Inventories. Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis, and include the cost of raw materials, labor and overhead. The majority of our inventories are subject to expiration dating, which can be extended in certain circumstances. We continually evaluate quantities on hand and the carrying value of our inventories to determine the need for reserves for excess and obsolete inventories, based on prior experience as well as estimated forecasts of product sales. We reserve for unidentified scrap or spoilage based on historical write-off rates. We also consider items identified through specific identification procedures in assessing the adequacy of our reserve. When factors indicate that impairment has occurred, either a reserve is established against the inventories’ carrying value or the inventories are completely written off, as in the case of lapsing expiration dates.
Property, Plant and Equipment. Property, plant and equipment are stated at cost. Additions or improvements are capitalized, while repairs and maintenance are charged to expense. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets. Buildings are depreciated over twenty to forty years, while computer equipment, machinery and equipment, and furniture and fixtures are depreciated over two to ten years. Building improvements are amortized over their estimated useful lives. When assets are sold, retired, or discarded, the related property amounts are relieved from the accounts, and any gain or loss is recorded in the consolidated statements of operations. Accumulated depreciation of property, plant and equipment as of March 31, 2021 and December 31, 2020 was $55,251 and $53,604, respectively.
Intangible Assets. Intangible assets consist of customer relationships, patents and product rights, acquired technology and tradenames. Patents and product rights consist of costs associated with the acquisition of patents, licenses, and product distribution rights. Intangible assets are amortized using the straight-line method over their estimated useful lives of five to fifteen years. Accumulated amortization of intangible assets as of March 31, 2021 and December 31, 2020 was $28,128 and $27,107, respectively. The decrease in intangibles from $17,904 as of December 31, 2020 to $16,945 as of March 31, 2021 is due to $812 in amortization expense and foreign currency translation losses of $147.
Goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired. Goodwill is not amortized but rather is tested annually for impairment or more frequently if we believe that indicators of impairment exist. Current generally accepted accounting principles (“GAAP”) permit us to make a qualitative evaluation about the likelihood of goodwill impairment. If we conclude that it is more likely than not that the carrying value of a reporting unit is greater than its fair value, then we would be required to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, provided the impairment charge does not exceed the total amount of goodwill allocated to the reporting unit.
The increase in goodwill from $40,351 as of December 31, 2020 to $40,493 as of March 31, 2021 is a result of an adjustment of $124 associated with foreign currency translation and a purchase price adjustment of $18 related to a business acquisition.
Foreign Currency Translation. The assets and liabilities of our foreign operations are translated into U.S. dollars at current exchange rates as of the balance sheet date, and revenues and expenses are translated at average exchange rates for the period. Resulting translation adjustments are reflected in accumulated other comprehensive loss, which is a separate component of stockholders’ equity.
Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than a functional currency are included in our consolidated statements of income in the period in which the change occurs. Net foreign exchange gains (losses) resulting from foreign currency transactions that are included in other income in our consolidated statements of income were $(576) and $693 for the three months ended March 31, 2021 and 2020, respectively.
Accumulated Other Comprehensive Income (Loss). We classify items of other comprehensive income (loss) by their nature and disclose the accumulated balance of other comprehensive loss separately from accumulated deficit and additional paid-in capital in the stockholders’ equity section of our consolidated balance sheets.
We have defined the Canadian dollar as the functional currency of our Canadian subsidiary, DNAG, and we have defined the Euro as the functional currency of our Belgian subsidiary, Novosanis. The results of operations for those subsidiaries are translated into U.S. dollars, which is the reporting currency of the Company. Accumulated other comprehensive loss at March 31, 2021 consists of $7,397 of currency translation adjustments and $327 of net unrealized losses on marketable securities, which represents the fair market value adjustment for our investment portfolio. Accumulated other comprehensive loss at December 31, 2020 consists of $8,749 of currency translation adjustments and $348 of net unrealized losses on marketable securities, which represents the fair market value adjustment for our investments portfolio.
Recent Accounting Pronouncements.
In March 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The purpose of this update is to provide optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are elective and are effective upon issuance for all entities. Management is evaluating the impact of this ASU and does not expect this update to have a material impact on the Company's Consolidated Financial Statements.
-9-
3. Business Combinations
UrSure
On July 22, 2020, the Company acquired all of the outstanding capital stock of UrSure, Inc. (“UrSure”), pursuant to the terms of a merger agreement. The initial aggregate purchase price of this transaction was $3,000, adjusted for certain transaction costs, indebtedness, and holdback amounts, and was funded with cash on hand. A portion of the purchase price was deposited into an escrow account for a limited period after closing, pursuant to indemnification obligations under the merger agreement.
During the three months ended March 31, 2020, we incurred acquisition related costs of $393 including accounting, legal, and other professional fees, all of which were expensed and reported as a component of general and administrative expense in the consolidated statement of operations. No such costs were incurred for the three months ended March 31, 2021.
Pursuant to our merger agreement, we may pay up to an additional $28,000 of contingent consideration over the next four years based on the achievement of certain performance criteria as defined under the agreements, including generating certain revenue dollars, and the achievement of certain clinical milestones associated with the development of certain new technology. The Company, with the assistance of an independent valuation specialist, determined the estimated acquisition-date fair value of the acquisition-related contingent consideration of $3,440. The fair value was determined using a probability-weighted model based on our assessment of the likelihood that the benchmarks will be achieved. The probability-weighted payments were then discounted using a discount rate based on an internal rate of return analysis using the probability-weighted cash flows. The fair value measurement was based on significant inputs, including the likelihood of the achievement of clinical milestones and revenue forecasts, not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy.
The following table represents the change in contingent consideration:
Balance as of December 31, 2020
|
$
|
2,451
|
|
Payments made during the period
|
|
(406
|
)
|
Change in fair value during the period
|
|
(806
|
)
|
Balance as of March 31, 2021
|
$
|
1,239
|
|
Revenues from UrSure primarily consist of grant money received to fund the development of certain new technology. Effective as of July 22, 2020, the financial results of UrSure are included in our Diagnostics segment.
4. Inventories
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Raw materials
|
|
$
|
15,484
|
|
|
$
|
15,425
|
|
Work in process
|
|
|
3,857
|
|
|
|
2,572
|
|
Finished goods
|
|
|
21,009
|
|
|
|
13,866
|
|
|
|
$
|
40,350
|
|
|
$
|
31,863
|
|
The inventory balance of $40,350 as of March 31, 2021 includes $2,722 of pre-launch inventory associated with our COVID products for which an application for regulatory approval has been submitted to the FDA but approval has not yet been received as of March 31, 2021. We expect our COVID products will be granted regulatory approval, however, should this not occur, the pre-launch inventory balance would be written-off through our statement of operations.
5. Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed in a manner similar to basic earnings (loss) per share except that the weighted-average number of shares outstanding is increased to include incremental shares from the assumed vesting or exercise of dilutive securities, such as common stock options, unvested restricted stock or performance stock units, unless the impact is antidilutive. The number of incremental shares is calculated by assuming that outstanding stock options were exercised and unvested restricted shares and performance stock units were vested, and the proceeds from such exercises or vesting were used to acquire shares of common stock at the average market
-10-
price during the reporting period. Basic and dilutive computations of net loss per share are the same in periods in which a net loss exists as the dilutive effects of excluded items would be anti-dilutive.
The computations of basic and diluted earnings (loss) per share are as follows:
|
|
Three Months
|
|
|
|
Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
3,774
|
|
|
$
|
(7,328
|
)
|
Weighted-average shares of common stock outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
71,878
|
|
|
|
61,927
|
|
Dilutive effect of stock options, restricted stock, and performance stock units
|
|
|
888
|
|
|
|
—
|
|
Diluted
|
|
|
72,766
|
|
|
|
61,927
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.05
|
|
|
$
|
(0.12
|
)
|
Diluted
|
|
$
|
0.05
|
|
|
$
|
(0.12
|
)
|
For the three months ended March 31, 2021, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 421 shares were excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive. For the three months ended March 31, 2020, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 312 shares were excluded from the computation of diluted loss per share.
Revenues by product. The following table represents total net revenues by product line:
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Infectious disease testing
|
|
$
|
11,371
|
|
|
$
|
14,664
|
|
Risk assessment testing
|
|
|
1,962
|
|
|
|
3,000
|
|
Genomics
|
|
|
11,064
|
|
|
|
8,393
|
|
Microbiome
|
|
|
2,088
|
|
|
|
1,577
|
|
COVID-19
|
|
|
27,389
|
|
|
|
394
|
|
Laboratory services
|
|
|
2,497
|
|
|
|
2,415
|
|
Other product and service revenues
|
|
|
208
|
|
|
|
443
|
|
Net product and services revenues
|
|
|
56,579
|
|
|
|
30,886
|
|
Royalty income
|
|
|
1,261
|
|
|
|
446
|
|
Other non-product revenues
|
|
|
742
|
|
|
|
264
|
|
Other revenues
|
|
|
2,003
|
|
|
|
710
|
|
Net revenues
|
|
$
|
58,582
|
|
|
$
|
31,596
|
|
Revenues by geographic area. The following table represents total net revenues by geographic area, based on the location of the customer:
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
United States
|
|
$
|
49,100
|
|
|
$
|
21,616
|
|
Europe
|
|
|
4,552
|
|
|
|
2,805
|
|
Other regions
|
|
|
4,930
|
|
|
|
7,175
|
|
|
|
$
|
58,582
|
|
|
$
|
31,596
|
|
Customer and Vendor Concentrations. We had no significant customer concentrations (greater than 10%) in our accounts receivable at March 31, 2021. One of our customers accounted for 11% of our accounts receivable as of December 31, 2020. One customer accounted for 17% of net consolidated revenues for the three months ended March 31, 2021. We had no significant customer concentrations in our net consolidated revenues for the three months ended March 31, 2020.
We currently purchase certain products and critical components of our products from sole-supply vendors. If these vendors are unable or unwilling to supply the required components and products, we could be subject to increased costs and substantial delays in the delivery of our
-11-
products to our customers. Third-party suppliers also manufacture certain products. Our inability to have a timely supply of any of these components and products could have a material adverse effect on our business, as well as our financial condition and results of operations.
Deferred Revenue. We record deferred revenue when funds are received prior to the recognition of the associated revenue. Deferred revenue as of March 31, 2021 and December 31, 2020 includes customer prepayments of $3,000 and $3,216, respectively. Deferred revenue as of March 31, 2021 and December 31, 2020 also includes $1,580 and $1,595, respectively, associated with a long-term contract that has variable pricing based on volume. The average price over the life of the contract was determined and revenue is recognized at that average price.
7.
|
Accrued Expenses and other current liabilities
|
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Payroll and related benefits
|
|
$
|
8,037
|
|
|
$
|
14,769
|
|
Professional fees
|
|
|
1,150
|
|
|
|
978
|
|
Accrued income taxes
|
|
|
2,507
|
|
|
|
—
|
|
Sales tax payable
|
|
|
2,572
|
|
|
|
2,400
|
|
Other
|
|
|
2,737
|
|
|
|
4,080
|
|
|
|
$
|
17,003
|
|
|
$
|
22,227
|
|
We determine whether an arrangement is a lease at inception. We have operating and finance leases for corporate offices, warehouse space and equipment (including vehicles). As of March 31, 2021, we are the lessee in all agreements. Our leases have remaining lease terms of 1 to 7 years, some of which include options to extend the leases based on agreed upon terms, and some of which include options to terminate the leases within 1 year.
As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.
We have lease agreements that contain both lease and non-lease components (e.g., common-area maintenance). For these agreements, we account for lease components separate from non-lease components.
The components of lease expense are as follows:
|
|
Three Months Ended
|
|
|
|
2021
|
|
|
2020
|
|
Operating Lease Cost
|
|
$
|
420
|
|
|
$
|
313
|
|
Finance Lease Cost
|
|
|
|
|
|
|
|
|
Amortization of right-of use assets
|
|
|
127
|
|
|
|
163
|
|
Interest on lease liabilities
|
|
|
14
|
|
|
|
20
|
|
Total Finance Lease Cost
|
|
$
|
141
|
|
|
$
|
183
|
|
Supplemental cash flow information related to leases is as follows:
|
|
Three Months Ended
|
|
|
|
2021
|
|
|
2020
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
408
|
|
|
$
|
316
|
|
Operating cash flows from financing leases
|
|
|
14
|
|
|
|
20
|
|
Financing cash flows from financing leases
|
|
|
282
|
|
|
|
175
|
|
Non-cash activity:
|
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for operating lease obligations
|
|
|
629
|
|
|
|
—
|
|
Right-of-use assets obtained in exchange for finance lease obligations
|
|
|
—
|
|
|
|
—
|
|
-12-
Supplemental balance sheet information related to leases is as follows:
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Operating Leases
|
|
|
|
|
|
|
|
|
Right-of-use assets
|
|
$
|
4,871
|
|
|
$
|
4,461
|
|
|
|
|
|
|
|
|
|
|
Current lease liabilities
|
|
|
1,443
|
|
|
|
1,125
|
|
Non-current lease liabilities
|
|
|
3,557
|
|
|
|
3,591
|
|
Total operating lease liabilities
|
|
$
|
5,000
|
|
|
$
|
4,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance Leases
|
|
|
|
|
|
|
|
|
Right-of-use assets
|
|
$
|
1,184
|
|
|
$
|
1,312
|
|
|
|
|
|
|
|
|
|
|
Current lease liabilities
|
|
|
522
|
|
|
|
517
|
|
Non-current lease liabilities
|
|
|
762
|
|
|
|
895
|
|
Total finance lease liabilities
|
|
$
|
1,284
|
|
|
$
|
1,412
|
|
Weighted Average Remaining Lease Term
|
|
|
|
|
Weighted-average remaining lease term—operating leases
|
|
|
3.99
|
|
Weighted-average remaining lease term—finance leases
|
|
|
2.43
|
|
|
|
|
|
|
Weighted Average Discount Rate
|
|
|
|
|
Weighted-average discount rate—operating leases
|
|
|
4.12
|
%
|
Weighted-average discount rate—finance leases
|
|
|
4.39
|
%
|
As of March 31, 2021, minimum lease payments by period are expected to be as follows:
|
|
|
|
|
|
|
|
|
Finance
|
|
|
Operating
|
|
2021 (excluding the three months ended March 31, 2021)
|
$
|
424
|
|
|
$
|
1,236
|
|
2022
|
|
566
|
|
|
|
1,616
|
|
2023
|
|
336
|
|
|
|
901
|
|
2024
|
|
25
|
|
|
|
909
|
|
2025
|
|
5
|
|
|
|
518
|
|
Thereafter
|
|
—
|
|
|
|
323
|
|
Total Minimum Lease Payments
|
|
1,356
|
|
|
|
5,503
|
|
Less: imputed interest
|
|
(72
|
)
|
|
|
(503
|
)
|
Present Value of Lease Liabilities
|
$
|
1,284
|
|
|
$
|
5,000
|
|
9.Stockholders’ Equity
Reconciliation of the changes in stockholders' equity for the three months ended March 31, 2021 and 2020
|
|
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Total
|
|
Balance at December 31, 2020
|
|
|
71,738
|
|
|
$
|
—
|
|
|
$
|
505,123
|
|
|
$
|
(9,097
|
)
|
|
$
|
(97,455
|
)
|
|
$
|
398,571
|
|
Common stock issued upon exercise of options
|
|
|
11
|
|
|
|
—
|
|
|
|
92
|
|
|
|
—
|
|
|
|
—
|
|
|
|
92
|
|
Vesting of restricted stock and performance stock units
|
|
|
318
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Purchase and retirement of common shares
|
|
|
(111
|
)
|
|
|
—
|
|
|
|
(1,730
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,730
|
)
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,464
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,464
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,774
|
|
|
|
3,774
|
|
Currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,352
|
|
|
|
—
|
|
|
|
1,352
|
|
Unrealized gain on marketable securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21
|
|
|
|
—
|
|
|
|
21
|
|
Balance at March 31, 2021
|
|
|
71,956
|
|
|
$
|
—
|
|
|
$
|
504,949
|
|
|
$
|
(7,724
|
)
|
|
$
|
(93,681
|
)
|
|
$
|
403,544
|
|
-13-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Total
|
|
Balance at December 31, 2019
|
|
|
61,731
|
|
|
$
|
—
|
|
|
$
|
401,814
|
|
|
$
|
(12,136
|
)
|
|
$
|
(82,533
|
)
|
|
$
|
307,145
|
|
Common stock issued upon exercise of options
|
|
|
6
|
|
|
|
—
|
|
|
|
30
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30
|
|
Vesting of restricted stock and performance stock units
|
|
|
486
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Purchase and retirement of common shares
|
|
|
(197
|
)
|
|
|
—
|
|
|
|
(1,408
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,408
|
)
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,376
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,376
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,328
|
)
|
|
|
(7,328
|
)
|
Currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,221
|
)
|
|
|
—
|
|
|
|
(9,221
|
)
|
Unrealized loss on marketable securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(442
|
)
|
|
|
—
|
|
|
|
(442
|
)
|
Balance at March 31, 2020
|
|
|
62,026
|
|
|
$
|
—
|
|
|
$
|
401,812
|
|
|
$
|
(21,799
|
)
|
|
$
|
(89,861
|
)
|
|
$
|
290,152
|
|
Stock-Based Awards
We grant stock-based awards under the OraSure Technologies, Inc. Stock Award Plan, as amended (the “Stock Plan”). The Stock Plan permits stock-based awards to employees, outside directors and consultants or other third-party advisors. Awards which may be granted under the Stock Plan include qualified incentive stock options, nonqualified stock options, stock appreciation rights, restricted awards, performance awards and other stock-based awards. We account for stock-based compensation to employees and directors using the fair value method. We recognize compensation expense for stock option and restricted stock awards issued to employees and directors on a straight-line basis over the requisite service period of the award. We recognize compensation expense related to performance-based restricted stock units based on assumptions as to what percentage of each performance target will be achieved. We evaluate these target assumptions on a quarterly basis and adjust compensation expense related to these awards, as appropriate. To satisfy the exercise of options, issuance of restricted stock, or redemption of performance-based restricted stock units, we issue new shares rather than shares purchased on the open market.
Total compensation cost related to stock options for the three months ended March 31, 2021 and 2020 was $250 and $253 respectively. Net cash proceeds from the exercise of stock options were $92 and $30 for the three months ended March 31, 2021 and 2020, respectively. As a result of our net operating loss carryforward position, no actual income tax benefit was realized from stock option exercises during these periods.
The following table summarizes the stock option activity for the three months ended March 31, 2021:
|
|
Options
|
|
Outstanding on January 1, 2021
|
|
|
1,232
|
|
Granted
|
|
|
252
|
|
Exercised
|
|
|
(11
|
)
|
Forfeited
|
|
|
(23
|
)
|
Outstanding on March 31, 2021
|
|
|
1,450
|
|
Compensation cost of $1,036 and $1,079 related to restricted shares was recognized during the three months ended March 31, 2021 and 2020, respectively.
The following table summarizes time-vested restricted stock award and restricted stock unit activity for the three months ended March 31, 2021:
|
|
Units
|
|
Issued and unvested, January 1, 2021
|
|
|
659
|
|
Granted
|
|
|
275
|
|
Vested
|
|
|
(206
|
)
|
Forfeited
|
|
|
(5
|
)
|
Issued and unvested, March 31, 2021
|
|
|
723
|
|
We grant performance-based restricted stock units (“PSUs”) to certain executives. Vesting of these PSUs is dependent upon achievement of performance-based metrics during a one-year or three-year period from the date of grant. Assuming achievement of each performance-based metric, the executive must also generally remain employed for three years from the grant date. Performance during the one-year period is based on a one-year income before income taxes target. If the one-year target is achieved, the PSUs will then vest three years from grant date.
-14-
Performance during the three-year period will be based on achievement of a three-year compound annual growth rate for consolidated product revenues. If the three-year target is achieved, the corresponding PSUs will then vest three years from grant date. PSUs are converted into shares of our common stock once vested.
Compensation cost of $178 and $44 related to PSUs was recognized during the three months ended March 31, 2021 and 2020, respectively.
The following table summarizes the PSU activity for the three months ended March 31, 2021:
|
|
Units
|
|
Issued and unvested, January 1, 2021
|
|
|
651
|
|
Granted
|
|
|
186
|
|
Performance adjustment
|
|
|
37
|
|
Vested
|
|
|
(112
|
)
|
Forfeited
|
|
|
(49
|
)
|
Issued and unvested, March 31, 2021
|
|
|
713
|
|
Stock Repurchase Program
On August 5, 2008, our Board of Directors approved a share repurchase program pursuant to which we are permitted to acquire up to $25,000 of our outstanding common shares. No shares were purchased and retired during the three months ended March 31, 2021 and 2020.
During the three months ended March 31, 2021 and 2020, we recorded income tax expense of $6.5 million and $712, respectively.
Tax expense reflects taxes due to the taxing authorities and the tax effects of temporary differences between the basis of assets and liabilities recognized for financial reporting and tax purposes, and net operating loss and tax credit carryforwards. The significant components of our total deferred tax liability as of March 31, 2021 and December 31, 2020 relate to the tax effects of the basis difference between the intangible assets acquired in our acquisitions for financial reporting and for tax purposes along with basis differences arising from accelerated tax depreciation of fixed assets.
In 2008, we established a full valuation allowance against our U.S. deferred tax asset. Management believes the full valuation allowance is still appropriate at both March 31, 2021 and December 31, 2020 since the facts and circumstances necessitating the allowance have not changed.
11.
|
Commitments and Contingencies
|
From time to time, we are involved in certain legal actions arising in the ordinary course of business. In management’s opinion, the outcomes of such actions, either individually or in the aggregate, are not expected to have a material adverse effect on our future financial position or results of operations.
12.
|
Business Segment Information
|
Our business consists of two segments: our “Diagnostics” business, which primarily consists of the development, manufacture, marketing and sale of oral fluid diagnostic products and specimen collection devices using our proprietary technologies, other diagnostic products including immunoassays and other in vitro diagnostic tests that are used on other specimen types. Our Diagnostics segment includes the financial results of UrSure. Our “Molecular Solutions” business consists of the development, manufacture, marketing and sale of specimen collection kits that are used to collect, stabilize, transport and store samples of genetic material for molecular testing. Our collection kits are also used for the collection of first-void urine for liquid biopsy in the prostate and bladder cancer markets; and in the sexually transmitted infection screening market. In addition, our Molecular Solutions business provides microbiome laboratory services that accelerate research and discovery for customers in the pharmaceutical, agricultural, and academic research markets. Financial results of Diversigen and Novosanis are included in our Molecular Solutions segment.
We organized our operating segments according to the nature of the products included in those segments. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2). We evaluate performance of our operating segments based on revenue and operating income. We do not allocate interest income, interest expense, other income, other expenses or income taxes to our operating segments. Reportable segments have no inter-segment revenues and inter-segment expenses have been eliminated.
-15-
The following table summarizes operating segment information for the three months ended March 31, 2021 and 2020, and asset information as of March 31, 2021 and December 31, 2020:
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
Diagnostics
|
|
$
|
14,546
|
|
|
$
|
17,792
|
|
Molecular Solutions
|
|
|
44,036
|
|
|
|
13,804
|
|
Total
|
|
$
|
58,582
|
|
|
$
|
31,596
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
Diagnostics
|
|
$
|
(12,193
|
)
|
|
$
|
(7,641
|
)
|
Molecular Solutions
|
|
|
22,615
|
|
|
|
(405
|
)
|
Total
|
|
$
|
10,422
|
|
|
$
|
(8,046
|
)
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
Diagnostics
|
|
$
|
890
|
|
|
$
|
861
|
|
Molecular Solutions
|
|
|
1,599
|
|
|
|
1,336
|
|
Total
|
|
$
|
2,489
|
|
|
$
|
2,197
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
Diagnostics
|
|
$
|
7,637
|
|
|
$
|
818
|
|
Molecular Solutions
|
|
|
3,424
|
|
|
|
1,777
|
|
Total
|
|
$
|
11,061
|
|
|
$
|
2,595
|
|
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Total assets:
|
|
|
|
|
|
|
|
|
Diagnostics
|
|
$
|
221,858
|
|
|
$
|
242,613
|
|
Molecular Solutions
|
|
|
234,638
|
|
|
|
211,859
|
|
Total
|
|
$
|
456,496
|
|
|
$
|
454,472
|
|
-16-