ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
(in thousands, except per share amounts, unless otherwise indicated)
Our business consists of two segments: our “OSUR business” 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 molecular products and services business, or “DNAG business” consists of the manufacture and sale of kits that are used to collect, stabilize, transport and store 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 DNAG business provides microbiome laboratory and bioinformatics services.
The OSUR 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, 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 OSUR business includes the operations of UrSure, Inc. (“UrSure”), which was acquired in July 2020. UrSure is developing and commercializing products that measure adherence to HIV medications including pre-exposure prophylaxis or PrEP, the daily medication to prevent HIV. UrSure’s products include laboratory-based tests that can measure levels of the medication in a patient’s urine or blood, as well as several additional point of care products currently in development. We also previously manufactured and sold medical devices used for the removal of benign skin lesions by cryosurgery or freezing. We sold the assets associated with our cryosurgical systems business to a third party in August 2019.
Our DNAG business is operated by our subsidiaries, DNA Genotek Inc. (“DNAG”), Diversigen, Inc. (“Diversigen”), CoreBiome Inc. (“CoreBiome”) and Novosanis NV (“Novosanis”). DNAG’s specimen collection devices provide all-in-one systems for the collection, stabilization, transportation and storage of nucleic acids from human saliva and other sample types for genetic and microbiome applications. CoreBiome and Diversigen provide laboratory and bioinformatics services in the microbiome market. Novosanis’ Colli-Pee collection device is designed for the volumetric collection of first-void urine for use in research, screening and diagnostics for the liquid biopsy and sexually transmitted infection markets. We also sell research use only sample collection products into the microbiome market and we offer our customers a suite of genomics and microbiome services, which range from package customization and study design optimization to extraction, analysis and reporting services. We serve customers worldwide in the research, healthcare, pharmaceutical and agricultural communities.
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 Technologies, Inc. (“OraSure”) and its wholly-owned subsidiaries, DNAG, Diversigen, CoreBiome, Novosanis, and UrSure. 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, 2019. Results of operations for the three and nine months ended September 30, 2020 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, 2019 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 upon quoted market prices, with unrealized gains and losses, if any, reported in stockholders’ equity as a component of accumulated other comprehensive loss.
-7-
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 September 30, 2020, 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 September 30, 2020 and December 31, 2019:
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed investment certificates
|
|
$
|
24,019
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
24,019
|
|
Corporate bonds
|
|
|
76,814
|
|
|
|
269
|
|
|
|
(300
|
)
|
|
|
76,783
|
|
Total available-for-sale securities
|
|
$
|
100,833
|
|
|
$
|
269
|
|
|
$
|
(300
|
)
|
|
$
|
100,802
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed investment certificates
|
|
$
|
24,632
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
24,632
|
|
Corporate bonds
|
|
|
89,525
|
|
|
|
271
|
|
|
|
(385
|
)
|
|
|
89,411
|
|
Total available-for-sale securities
|
|
$
|
114,157
|
|
|
$
|
271
|
|
|
$
|
(385
|
)
|
|
$
|
114,043
|
|
At September 30, 2020, maturities of our available-for-sale
securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than one year
|
|
$
|
72,947
|
|
|
$
|
228
|
|
|
$
|
(214
|
)
|
|
$
|
72,961
|
|
Greater than one year
|
|
$
|
27,886
|
|
|
$
|
41
|
|
|
$
|
(86
|
)
|
|
$
|
27,841
|
|
Fair Value of Financial Instruments. As of September 30, 2020 and December 31, 2019, the carrying values of cash and cash equivalents, accounts receivable, and accounts payable 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 September 30, 2020 and December 31, 2019.
Included in cash and cash equivalents at September 30, 2020 and December 31, 2019, was $95,254 and $1,624 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 September 30, 2020 and December 31, 2019 was $3,360 and $3,519, 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.
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,
-8-
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 September 30, 2020 and December 31, 2019 was $51,807 and $46,882, 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 September 30, 2020 and December 31, 2019 was $25,393 and $23,420, respectively. The increase in intangibles from $14,674 as of December 31, 2019 to $18,111 as of September 30, 2020 is a result of the developed technology acquired in our acquisition of UrSure of $3,400, the acquisition of patent and product rights of $2,250, and foreign currency translation gains of $148 offset by $2,361 in amortization expense.
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 U.S. generally accepted accounting principles 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 $36,201 as of December 31, 2019 to $39,480 as of September 30, 2020 is a result of the additional goodwill associated with our acquisition of UrSure of $3,739 offset by a purchase price adjustment related to our Diversigen acquisition of $(126), and an adjustment of $(334) associated with foreign currency translation.
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 operations in the period in which the change occurs. Net foreign exchange gains resulting from foreign currency transactions that are included in other income in our consolidated statements of income were $70 and $50 for the three months ended September 30, 2020 and 2019, respectively. Net foreign exchange gains (losses) were $563 and $(875) for the nine months ended September 30, 2020 and 2019.
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 September 30, 2020 consists of $15,564 of currency translation adjustments and $31 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, 2019 consists of $12,022 of currency translation adjustments and $114 of net unrealized losses on marketable securities.
Recent Accounting Pronouncements. In June 2016, the FASB issued guidance on the measurement of credit losses, which requires measurement and recognition of expected credit losses for financial assets, including trade receivables and capital lease receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The method to determine a loss requires a credit loss to be recognized when it is probable. We adopted this guidance in the first quarter of 2020 and the impact of the adoption was not material to the Company's consolidated financial statements as credit losses are not expected to be significant based on historical collection trends, the financial condition of payment partners, and external market factors. The Company will continue to actively monitor the impact of the recent coronavirus (COVID-19) pandemic on expected credit losses. In addition, the new guidance requires us to record an allowance for credit loss when a decline in investment market value is due to credit-related factors. As of January 1, 2020, there was no material decline in the market value of available-for-sale investments due to credit-related factors.
In February 2018, the FASB issued guidance allowing a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act. If elected, the reclassification can be applied in either the period of adoption or retrospectively to the period of the enactment of the U.S. Tax Cuts and Jobs Act (i.e., our first quarter of fiscal year 2018). We adopted this guidance in the first quarter of 2020 and the impact of the adoption was not material to the Company's consolidated financial statements.
In August 2018, the FASB issued guidance related to fair value measurement disclosures. This guidance removes the requirement to disclose the amount of and reasons for transfers between Levels 1 and 2 of the fair value hierarchy, the policy for determining that a transfer has occurred, and valuation processes for Level 3 fair value measurements. Additionally, this guidance modifies the disclosures related to the measurement uncertainty for recurring Level 3 fair value measurements (by removing the requirement to disclose sensitivity to future changes) and the timing of liquidation of invested assets (by removing the timing requirement in certain instances). The guidance also requires new disclosures for Level
-9-
3 financial assets and liabilities, including the amount and location of unrealized gains and losses recognized in other comprehensive income(loss) and additional information related to significant unobservable inputs used in determining Level 3 fair value measurements. We adopted this guidance in the first quarter of 2020 and the impact of the adoption was not material to the Company's consolidated financial statements.
3. Business Combinations
UrSure
On July 22, 2020, the Company acquired all of the outstanding 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.
Pursuant to our acquisition agreements, 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 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 simulation calculated the probability-weighted payments 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 revenue forecasts, not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. There has been no material change in the fair value of the contingent consideration obligation changed from the acquisition date to September 30, 2020.
During the nine months ended September 30, 2020, we incurred a total of $393 of acquisition related costs, 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 income for the nine months ended September 30, 2020.
The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date:
Assets Acquired
|
|
|
|
|
Accounts receivable
|
|
$
|
285
|
|
Other current assets
|
|
|
24
|
|
Other assets
|
|
|
6
|
|
Intangibles
|
|
|
3,400
|
|
Goodwill
|
|
|
3,739
|
|
Total assets acquired
|
|
|
7,454
|
|
Liabilities Assumed
|
|
|
|
|
Current liabilities
|
|
|
212
|
|
Deferred tax liability
|
|
|
642
|
|
Deferred revenue
|
|
|
123
|
|
Total liabilities assumed
|
|
|
977
|
|
Net Assets Acquired
|
|
$
|
6,477
|
|
Estimated fair value of contingent consideration
|
|
|
(3,440
|
)
|
Net Cash Paid (net of cash acquired of $111)
|
|
$
|
3,037
|
|
The purchase price was allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based on their acquisition-date estimate fair values. The identifiable intangible assets principally included developed technology, which is subject to amortization on a straight-line basis and is being amortized over a ten year estimated useful life.
The Company, with the assistance of an independent valuation specialist, assessed the fair value of the assets of UrSure. The income approach was used to value the acquired intangibles and the fair value measurements were primarily based on significant inputs that are not observable in the market and are considered Level 3 fair value measurements. The income approach estimates fair value for an asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a required rate of return that reflects the relative risk of achieving the cash flows and the time value of money.
The useful lives of the intangible assets were estimated based on the expected future economic benefit of the assets and are being amortized over the estimated useful life in proportion to the economic benefits consumed using the straight-line method.
The amortization of intangible assets is not deductible for income tax purposes.
-10-
Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the fair value of the net assets acquired, and represents the future economic benefits that we expect to achieve as a result of the acquisition. We believe the goodwill related to the acquisition was a result of gaining a complementary service and product offering that will enable us to leverage those services and products with existing and new customers. The goodwill is not deductible for income tax purposes. All of the goodwill identified above has been allocated to our OSUR segment.
We continue to evaluate the fair value of certain assets acquired and liabilities assumed, related to the acquisition. Additional information that existed as of the acquisition date, but was at that time unknown to us, may become known during the remainder of the measurement period. Changes to amounts recorded as a result of the final determination may result in a corresponding adjustment to these assets and liabilities, including goodwill. The determination of the estimated fair values of all assets acquired is expected to be completed within one year from the date of acquisition.
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 OSUR segment.
CoreBiome and Novosanis
On January 4, 2019, the Company acquired all of the outstanding stock of CoreBiome, pursuant to the terms of a merger agreement. Also on January 4, 2019, the Company, through a wholly-owned subsidiary, acquired all of the outstanding stock of Novosanis, pursuant to a share purchase agreement. The aggregate purchase price for both of these transactions was $13,320 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 escrow accounts for a limited period after closing, in order to secure the potential payment of certain indemnification obligations of the selling stockholders under each agreement noted above. See Note 3 set forth in the Company’s audited financial statements included as part of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for additional information on the CoreBiome and Novosanis acquisitions.
During the nine months ended September 30, 2019, we incurred a total of $597 of acquisition-related costs in connection with these acquisitions, including success-based investment banking fees and accounting, legal and other professional fees, related to both acquisitions, all of which were expensed and reported as a component of general and administrative expenses in the consolidated statement of operations for the nine months ended September 30, 2019.
Pursuant to our acquisition agreements, we were to pay up to an additional $32,400 of contingent consideration over three years based on the achievement of certain performance criteria as defined under the agreements, including generating certain revenue dollars, the achievement of a large customer contract, and the development of certain new technology. The Company, with the assistance of an independent valuation specialist, utilized a Monte Carlo simulation to determine the estimated acquisition-date fair value of the acquisition-related contingent consideration of $4,350. The simulation calculated the probability-weighted payments 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 revenue forecasts, not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration obligation changed from $4,350 as of the acquisition date to $3,424 as of September 30, 2019 as a result of changes in our estimated revenue forecasts. The fair value of the contingent consideration obligation changed from $3,612 as of December 31, 2019 to $500 as of September 30, 2020. This change is a result of a $3,500 payment made in the first quarter of 2020, changes in our estimated revenue forecasts and an amendment to one of the agreements. Pursuant to the amendment, which was entered into in March 2020, the terms of the contingent consideration provisions associated with one of the acquisitions were modified and are expected to be paid during the first quarter of 2021. As of September 30, 2020, we may pay up to an additional $22,500 of contingent consideration through July 2021.
Revenues from CoreBiome primarily consist of fees paid for microbiome laboratory services that utilize optimal analytical algorithms to deliver speed and scalability in the lab with precise analytics. Revenues from Novosanis primarily consist of the sale of its Colli-Pee collection device which was designed for the standard collection of first-void urine used in the liquid biopsy and sexually transmitted infection screening market. Effective as of January 4, 2019, the financial results of CoreBiome and Novosanis are included in our DNAG segment.
Diversigen
On November 8, 2019, the Company acquired all of the outstanding stock of Diversigen pursuant to the terms of a merger agreement. The aggregate purchase price for this transaction was $12,000, 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 noted above. See Note 3 set forth in the Company’s audited financial statements included as part of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for additional information on the Diversigen acquisition.
During the nine months ended September 30, 2019, we did not incur any acquisition related costs associated with this transaction.
-11-
Pursuant to the merger agreement, we were to pay up to an additional $1,500 of contingent consideration in 2020 based on the achievement of certain 2019 revenue metrics as defined under the agreements which did not occur.
Revenues from Diversigen primarily consist of fees paid for microbiome laboratory services that provide metagenomics sequencing, bioinformatics and statistical analysis for the study of the microbiome. Effective as of November 8, 2019, the financial results of Diversigen are included in our DNAG segment.
Unaudited Pro Forma Financial Information
The unaudited pro forma results presented below include the results of the CoreBiome, Diversigen, Novosanis and UrSure acquisitions as if they had been consummated as of January 1, 2019. The unaudited pro forma results include the amortization associated with acquired intangible assets and the estimated tax effect of adjustments to income before income taxes but do not include changes in the fair value of our contingent consideration obligations. Material nonrecurring charges, directly attributable to the transactions, including direct acquisition costs, are also excluded. In addition, the unaudited pro forma results do not include any expected benefits of the acquisitions. Accordingly, the unaudited pro forma results are not necessarily indicative of either future results of operations or results that might have been achieved had the acquisitions been consummated as of January 1, 2019.
|
|
Three Months ended September 30,
|
|
|
Nine Months ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
48,073
|
|
|
$
|
37,695
|
|
|
$
|
109,708
|
|
|
$
|
105,703
|
|
Net income (loss)
|
|
|
1,009
|
|
|
|
12,340
|
|
|
|
(17,179
|
)
|
|
|
12,531
|
|
Net income (loss) per share, basic and diluted
|
|
|
0.01
|
|
|
|
0.20
|
|
|
|
(0.27
|
)
|
|
|
0.20
|
|
4. Inventories
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Raw materials
|
|
$
|
15,913
|
|
|
$
|
14,168
|
|
Work in process
|
|
|
1,277
|
|
|
|
643
|
|
Finished goods
|
|
|
13,298
|
|
|
|
8,344
|
|
|
|
$
|
30,488
|
|
|
$
|
23,155
|
|
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 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:
-12-
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
Ended September 30,
|
|
|
Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,040
|
|
|
$
|
13,078
|
|
|
$
|
(16,782
|
)
|
|
$
|
14,218
|
|
Weighted-average shares of common stock outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
71,537
|
|
|
|
61,726
|
|
|
|
66,088
|
|
|
|
61,656
|
|
Dilutive effect of stock options, restricted stock, and performance stock units
|
|
|
1,125
|
|
|
|
417
|
|
|
|
—
|
|
|
|
516
|
|
Diluted
|
|
|
72,662
|
|
|
|
62,143
|
|
|
|
66,088
|
|
|
|
62,172
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.01
|
|
|
$
|
0.21
|
|
|
$
|
(0.25
|
)
|
|
$
|
0.23
|
|
Diluted
|
|
$
|
0.01
|
|
|
$
|
0.21
|
|
|
$
|
(0.25
|
)
|
|
$
|
0.23
|
|
For the nine months ended September 30, 2020, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 917 shares were excluded from the computation of diluted loss per share as their inclusion would have been anti-dilutive. For the three months ended September 30, 2020 and 2019, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 136 and 909 shares, respectively, were excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive. For the nine months ended September 30, 2019, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 709 shares were excluded from the computation of diluted earnings per share.
Revenues by product. The following table represents total net revenues by product line:
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Infectious disease testing
|
|
$
|
13,224
|
|
|
$
|
13,588
|
|
|
$
|
36,625
|
|
|
$
|
39,284
|
|
|
Risk assessment testing
|
|
|
2,316
|
|
|
|
3,312
|
|
|
|
6,848
|
|
|
|
9,246
|
|
|
Cryosurgical systems
|
|
|
—
|
|
|
|
961
|
|
|
|
—
|
|
|
|
7,054
|
|
|
Genomics
|
|
|
8,519
|
|
|
|
13,647
|
|
|
|
23,381
|
|
|
|
35,438
|
|
|
Microbiome
|
|
|
1,828
|
|
|
|
1,878
|
|
|
|
4,259
|
|
|
|
5,325
|
|
|
COVID-19
|
|
|
18,441
|
|
|
|
—
|
|
|
|
27,307
|
|
|
|
—
|
|
|
Laboratory services
|
|
|
2,418
|
|
|
|
1,617
|
|
|
|
7,472
|
|
|
|
3,947
|
|
|
Other product revenue
|
|
|
3
|
|
|
|
296
|
|
|
|
80
|
|
|
|
604
|
|
|
Net product and services revenues
|
|
|
46,749
|
|
|
|
35,299
|
|
|
|
105,972
|
|
|
|
100,898
|
|
|
Royalty income
|
|
|
450
|
|
|
|
758
|
|
|
|
1,623
|
|
|
|
2,956
|
|
|
Other non product revenues
|
|
|
812
|
|
|
|
(68
|
)
|
|
|
1,271
|
|
|
|
1,083
|
|
|
Other revenues
|
|
|
1,262
|
|
|
|
690
|
|
|
|
2,894
|
|
|
|
4,039
|
|
|
Net revenues
|
|
$
|
48,011
|
|
|
$
|
35,989
|
|
|
$
|
108,866
|
|
|
$
|
104,937
|
|
|
Revenues by geographic area. The following table represents total net revenues by geographic area, based on the location of the customer:
|
|
Three Months Ended September 30,
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
2020
|
|
|
2019
|
|
United States
|
|
$
|
38,594
|
|
|
$
|
26,245
|
|
|
|
$
|
82,125
|
|
|
$
|
74,712
|
|
Europe
|
|
|
2,789
|
|
|
|
2,767
|
|
|
|
|
8,663
|
|
|
|
8,188
|
|
Other regions
|
|
|
6,628
|
|
|
|
6,977
|
|
|
|
|
18,078
|
|
|
|
22,037
|
|
|
|
$
|
48,011
|
|
|
$
|
35,989
|
|
|
|
$
|
108,866
|
|
|
$
|
104,937
|
|
Customer and Vendor Concentrations. We had no significant customer concentrations (greater than 10%) in our accounts receivable at September 30, 2020. One of our customers accounted for 19% of our accounts receivable as of December 31, 2019. One customer accounted for 11% of net consolidated revenues for the three months ended September 30, 2020. Another customer accounted for approximately 17% and 11% of our net consolidated revenues for the three and nine months ended September 30, 2019.
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
-13-
products to our customers. Also, our subsidiary, DNAG, uses two third-party suppliers to manufacture its product. 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 September 30, 2020 and December 31, 2019 includes customer prepayments of $3,525 and $1,904, respectively. Deferred revenue as of September 30, 2020 and December 31, 2019 also includes $1,786 and $1,809, 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
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Payroll and related benefits
|
|
$
|
8,553
|
|
|
$
|
6,088
|
|
Professional fees
|
|
|
1,293
|
|
|
|
2,769
|
|
Other
|
|
|
5,301
|
|
|
|
5,431
|
|
|
|
$
|
15,147
|
|
|
$
|
14,288
|
|
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 September 30, 2020, 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
|
|
|
Nine Months Ended
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Operating Lease Cost
|
|
$
|
330
|
|
|
$
|
232
|
|
|
$
|
964
|
|
|
$
|
695
|
|
Finance Lease Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of right-of use assets
|
|
|
150
|
|
|
|
112
|
|
|
|
476
|
|
|
|
264
|
|
Interest on lease liabilities
|
|
|
17
|
|
|
|
10
|
|
|
|
56
|
|
|
|
23
|
|
Total Finance Lease Cost
|
|
$
|
167
|
|
|
$
|
122
|
|
|
$
|
532
|
|
|
$
|
287
|
|
Supplemental cash flow information related to leases is as follows:
|
|
Nine Months Ended
|
|
|
|
2020
|
|
|
2019
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
965
|
|
|
$
|
690
|
|
Operating cash flows from financing leases
|
|
|
56
|
|
|
|
23
|
|
Financing cash flows from financing leases
|
|
|
521
|
|
|
|
253
|
|
Non-cash activity:
|
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for operating lease obligations
|
|
|
498
|
|
|
|
240
|
|
Right-of-use assets obtained in exchange for finance lease obligations
|
|
|
46
|
|
|
|
1,249
|
|
-14-
Supplemental balance sheet information related to leases is as follows:
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Operating Leases
|
|
|
|
|
|
|
|
|
Right-of-use assets
|
|
$
|
4,682
|
|
|
$
|
4,996
|
|
|
|
|
|
|
|
|
|
|
Current lease liabilities
|
|
|
1,092
|
|
|
|
1,032
|
|
Non-current lease liabilities
|
|
|
3,848
|
|
|
|
4,206
|
|
Total operating lease liabilities
|
|
$
|
4,940
|
|
|
$
|
5,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance Leases
|
|
|
|
|
|
|
|
|
Right-of-use assets
|
|
$
|
1,462
|
|
|
$
|
1,951
|
|
|
|
|
|
|
|
|
|
|
Current lease liabilities
|
|
|
536
|
|
|
|
613
|
|
Non-current lease liabilities
|
|
|
1,025
|
|
|
|
1,372
|
|
Total finance lease liabilities
|
|
$
|
1,561
|
|
|
$
|
1,985
|
|
Weighted Average Remaining Lease Term
|
|
|
|
|
Weighted-average remaining lease term—operating leases
|
|
|
4.66
|
|
Weighted-average remaining lease term—finance leases
|
|
|
2.87
|
|
|
|
|
|
|
Weighted Average Discount Rate
|
|
|
|
|
Weighted-average discount rate—operating leases
|
|
|
4.25
|
%
|
Weighted-average discount rate—finance leases
|
|
|
4.34
|
%
|
As of September 30, 2020, minimum lease payments by period are expected to be as follows:
|
|
|
|
|
|
|
|
|
Finance
|
|
|
Operating
|
|
2020 (excluding the nine months ended September 30, 2020)
|
$
|
166
|
|
|
$
|
330
|
|
2021
|
|
566
|
|
|
|
1,311
|
|
2022
|
|
566
|
|
|
|
1,294
|
|
2023
|
|
336
|
|
|
|
872
|
|
2024
|
|
25
|
|
|
|
893
|
|
Thereafter
|
|
4
|
|
|
|
841
|
|
Total Minimum Lease Payments
|
|
1,663
|
|
|
|
5,541
|
|
Less: imputed interest
|
|
(102
|
)
|
|
|
(601
|
)
|
Present Value of Lease Liabilities
|
$
|
1,561
|
|
|
$
|
4,940
|
|
-15-
9.Stockholders’ Equity
Reconciliation of the changes in stockholders' equity for the three and nine months ended September 30, 2020 and 2019
|
|
|
|
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
|
|
Common stock issued upon exercise of options
|
|
|
71
|
|
|
|
—
|
|
|
|
530
|
|
|
|
—
|
|
|
|
—
|
|
|
|
530
|
|
Vesting of restricted stock and performance stock units
|
|
|
161
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Purchase and retirement of common shares
|
|
|
(50
|
)
|
|
|
—
|
|
|
|
(656
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(656
|
)
|
Issuance of common stock in connection with public offering, net of commissions and expenses of $6,200
|
|
|
9,200
|
|
|
|
—
|
|
|
|
95,036
|
|
|
|
—
|
|
|
|
—
|
|
|
|
95,036
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
2,672
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,672
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,494
|
)
|
|
|
(10,494
|
)
|
Currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,726
|
|
|
|
—
|
|
|
|
3,726
|
|
Unrealized gain on marketable securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
791
|
|
|
|
—
|
|
|
|
791
|
|
Balance at June 30, 2020
|
|
|
71,408
|
|
|
$
|
—
|
|
|
$
|
499,394
|
|
|
$
|
(17,282
|
)
|
|
$
|
(100,355
|
)
|
|
$
|
381,757
|
|
Common stock issued upon exercise of options
|
|
|
202
|
|
|
|
—
|
|
|
|
1,555
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,555
|
|
Vesting of restricted stock and performance stock units
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Purchase and retirement of common shares
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(12
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(12
|
)
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,865
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,865
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,040
|
|
|
|
1,040
|
|
Currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,953
|
|
|
|
—
|
|
|
|
1,953
|
|
Unrealized loss on marketable securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(266
|
)
|
|
|
—
|
|
|
|
(266
|
)
|
Balance at September 30, 2020
|
|
|
71,611
|
|
|
$
|
—
|
|
|
$
|
502,802
|
|
|
$
|
(15,595
|
)
|
|
$
|
(99,315
|
)
|
|
$
|
387,892
|
|
-16-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Total
|
|
Balance at December 31, 2018
|
|
|
61,276
|
|
|
$
|
—
|
|
|
$
|
401,273
|
|
|
$
|
(18,706
|
)
|
|
$
|
(99,189
|
)
|
|
$
|
283,378
|
|
Common stock issued upon exercise of options
|
|
|
4
|
|
|
|
—
|
|
|
|
22
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22
|
|
Vesting of restricted stock and performance stock units
|
|
|
664
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Purchase and retirement of common shares
|
|
|
(277
|
)
|
|
|
—
|
|
|
|
(3,595
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,595
|
)
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,231
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,231
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,258
|
)
|
|
|
(3,258
|
)
|
Currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,232
|
|
|
|
—
|
|
|
|
2,232
|
|
Unrealized gain on marketable securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
497
|
|
|
|
—
|
|
|
|
497
|
|
Balance at March 31, 2019
|
|
|
61,667
|
|
|
$
|
—
|
|
|
$
|
398,931
|
|
|
$
|
(15,977
|
)
|
|
$
|
(102,447
|
)
|
|
$
|
280,507
|
|
Common stock issued upon exercise of options
|
|
|
18
|
|
|
|
—
|
|
|
|
147
|
|
|
|
—
|
|
|
|
—
|
|
|
|
147
|
|
Vesting of restricted stock and performance
stock units
|
|
|
51
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Purchase and retirement of common shares
|
|
|
(11
|
)
|
|
|
—
|
|
|
|
(109
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(109
|
)
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
616
|
|
|
|
—
|
|
|
|
—
|
|
|
|
616
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,398
|
|
|
|
4,398
|
|
Currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,476
|
|
|
|
—
|
|
|
|
2,476
|
|
Unrealized gain on marketable securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
186
|
|
|
|
—
|
|
|
|
186
|
|
Balance at June 30, 2019
|
|
|
61,725
|
|
|
$
|
—
|
|
|
$
|
399,585
|
|
|
$
|
(13,315
|
)
|
|
$
|
(98,049
|
)
|
|
$
|
288,221
|
|
Common stock issued upon exercise of options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Vesting of restricted stock and performance stock units
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Purchase and retirement of common shares
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(7
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(7
|
)
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,436
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,436
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,078
|
|
|
|
13,078
|
|
Currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,557
|
)
|
|
|
—
|
|
|
|
(1,557
|
)
|
Unrealized gain on marketable securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
194
|
|
|
|
—
|
|
|
|
194
|
|
Balance at September 30, 2019
|
|
|
61,726
|
|
|
$
|
—
|
|
|
$
|
401,014
|
|
|
$
|
(14,678
|
)
|
|
$
|
(84,971
|
)
|
|
$
|
301,365
|
|
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 nine months ended September 30, 2020 and 2019 was $683 and $894 respectively.
Compensation cost of $3,329 and $2,385 related to restricted shares was recognized during the nine months ended September 30, 2020 and 2019, respectively.
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
-17-
on a one-year earnings per share or income before income taxes target. If the one-year target is achieved, the PSUs will then vest three years from grant date. 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 $1,901 and $4 related to PSUs was recognized during the nine months ended September 30, 2020 and 2019, respectively.
In connection with the vesting of restricted shares and PSU’s during the nine months ended September 30, 2020 and 2019, we purchased and immediately retired 248 and 289 shares with aggregate values of $2,076 and $3,711, respectively, in satisfaction of minimum tax withholding obligations.
Public Offering
On June 1, 2020, we entered into an underwriting agreement with J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Evercore Group LLC, as representatives of several underwriters, relating to the issuance and sale of 8,000 shares of our common stock. The price to the public in the offering was $11.00 per share. Under the terms of the underwriting agreement, we also granted the underwriters an option, exercisable for 30 days, to purchase up to an additional 1,200 shares of common stock. On June 3, 2020, we announced the full exercise by the underwriters of their option to purchase these additional shares.
The offering was made pursuant to an effective registration statement on Form S-3 (File No. 333-228877) we had previously filed with the SEC, and a prospectus supplement thereunder. The net proceeds from the offering were approximately $95,000 after deducting underwriting discounts and offering expenses paid by the Company.
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 nine months ended September 30, 2020 and 2019.
During the three and nine months ended September 30, 2020, we recorded income tax expense of $3,659 and $5,680, respectively, which primarily consists of foreign tax expense. During the three and nine months ended September 30, 2019, we recorded income tax expense of $1,169 and $2,551, which also primarily consists of a foreign tax expense.
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 September 30, 2020 and December 31, 2019 relate to the tax effects of the basis difference between the intangible assets acquired in our acquisitions for financial reporting and for tax purposes.
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 September 30,2020 and December 31, 2019 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 “OSUR” business 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 OSUR segment includes the financial results of UrSure. Our “DNAG” 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 DNAG business provides microbiome laboratory services that accelerate research and discovery for customers in the pharmaceutical, agricultural, and academic research markets. Financial results of Diversigen, CoreBiome and Novosanis are included in our DNAG segment. Our cryosurgical systems business was included in our OSUR segment and the impact of the sale of that business in August 2019 is reflected in the results presented below.
-18-
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.
The following table summarizes operating segment information for the three and nine months ended September 30, 2020 and 2019, and asset information as of September 30, 2020 and December 31, 2019:
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OSUR
|
|
$
|
16,314
|
|
|
$
|
17,730
|
|
|
$
|
44,533
|
|
|
$
|
56,335
|
|
DNAG
|
|
|
31,697
|
|
|
|
18,259
|
|
|
|
64,333
|
|
|
|
48,602
|
|
Total
|
|
$
|
48,011
|
|
|
$
|
35,989
|
|
|
$
|
108,866
|
|
|
$
|
104,937
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OSUR
|
|
$
|
(9,951
|
)
|
|
$
|
8,080
|
|
|
$
|
(31,116
|
)
|
|
$
|
4,595
|
|
DNAG
|
|
|
14,336
|
|
|
|
4,972
|
|
|
|
18,054
|
|
|
|
9,931
|
|
Total
|
|
$
|
4,385
|
|
|
$
|
13,052
|
|
|
$
|
(13,062
|
)
|
|
$
|
14,526
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OSUR
|
|
$
|
934
|
|
|
$
|
889
|
|
|
$
|
2,681
|
|
|
$
|
2,555
|
|
DNAG
|
|
|
1,517
|
|
|
|
1,033
|
|
|
|
4,370
|
|
|
|
2,977
|
|
Total
|
|
$
|
2,451
|
|
|
$
|
1,922
|
|
|
$
|
7,051
|
|
|
$
|
5,532
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OSUR
|
|
$
|
2,186
|
|
|
$
|
1,796
|
|
|
$
|
5,634
|
|
|
$
|
5,341
|
|
DNAG
|
|
|
3,011
|
|
|
|
652
|
|
|
|
5,600
|
|
|
|
2,620
|
|
Total
|
|
$
|
5,197
|
|
|
$
|
2,448
|
|
|
$
|
11,234
|
|
|
$
|
7,961
|
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Total assets:
|
|
|
|
|
|
|
|
|
OSUR
|
|
$
|
260,167
|
|
|
$
|
163,943
|
|
DNAG
|
|
|
176,243
|
|
|
|
185,352
|
|
Total
|
|
$
|
436,410
|
|
|
$
|
349,295
|
|
-19-