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REVENUE
3 Months Ended
Mar. 31, 2022
Revenue from Contract with Customer [Abstract]  
REVENUE REVENUE
Product Revenue

Disaggregation of the product revenue by type of customer for the three months ended March 31, 2022 and 2021, respectively:
Three Months Ended
March 31,
20222021
Public sector entities$1,610 $62,091 
Private sector customers175,844 2,408 
Total product revenue$177,454 $64,499 
Product revenue for the three months ended March 31, 2022 includes an immaterial amount of service revenue generated from telemedicine and proctoring services provided to customers. Revenue generated from proctoring is recognized over the term of the contracts with customers.
The following table sets forth the Company’s product gross profit and product gross profit margin for the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31,
20222021
Product revenue$177,454$64,499
Cost of product revenue86,69730,035
Product gross profit$90,757$34,464
Product gross profit margin51 %53 %
DoD Agreement

In October 2020, the Company entered into a $480.9 million agreement with the U.S. government for the purchase of its Cue COVID-19 Test to meet the unprecedented demand for rapid and accurate molecular diagnostic testing (the
“U.S. DoD Agreement”). The Company delivered all of the agreed upon products under the agreement prior to its expiration on December 31, 2021. The U.S. DoD Agreement provided for a $184.6 million upfront payment (the “U.S. DoD Advance”) to facilitate the scaling of the Company’s manufacturing capacity, which was received upon signing the contract. The U.S. DoD Agreement did not provide for the funds to be utilized in any specific manner beyond furthering the purposes of the agreement. The Company was not required to segregate, nor was the Company required to obtain the approval of the U.S. government to use the funds advanced to it under the agreement. The remaining $296.3 million of the agreement was due to the Company upon the delivery of Cue Readers, Cue COVID-19 Test Kits and Cue Control Swab Packs. The U.S. DoD Agreement also provided that, as soon as possible after the completion of the initial U.S. DoD Agreement, the Company and the U.S. government would negotiate in good faith to enter into a follow-on supply agreement based on federal acquisition regulations (a FAR-based contract). The U.S. DoD Agreement provides the U.S. DoD with the right to purchase no more than 45% of our quarterly production for the duration of the follow-on contract at a specified discount, subject to a price floor as part of this follow-on contract. The U.S. government is also entitled to certain administrative reporting but does not receive the right to any intellectual property or know-how. The agreement term ended upon completion of the Company’s performance obligations in December 2021.

Refer to the Company’s financial statements included in its 2021 10-K for further information on its revenue arrangements.

Contract Assets and Liabilities

Contract assets primarily relate to the Company’s conditional right to consideration for performance obligations satisfied through direct-to-consumer sales but not billed at the reporting date. Net contract assets were $0.6 million and $1.1 million as of March 31, 2022 and December 31, 2021, respectively, and were recorded in other current assets on the balance sheets.
Contract liabilities primarily relate to the U.S. DoD Advance and payments received from customers in advance of performance under the contracts. Contract liabilities are recorded in current and non-current deferred revenue on the balance sheets. The activity related to contract liabilities for the three months ended March 31, 2022 is as follows:
Amount
Balance at December 31, 2021
$92,448 
Unearned revenue from cash received during the period, excluding amounts recognized as revenue during the period2,464 
Revenue recognized related to contract liability balance at the beginning of the period— 
Balance at March 31, 2022
$94,912 
Grant and Other Revenue

Grant and other revenue relate to a cost reimbursement agreement with the Biomedical Advanced Research and Development Authority (“BARDA”). The Company generated $2.0 million and $0 of revenue related to the agreement with BARDA during the three months ended March 31, 2022 and 2021, respectively.

Accounts Receivable

The allowance for doubtful accounts represents the Company’s estimate of probable credit losses relating to accounts receivable and is determined based on historical experience and other specific account data. Amounts are written off against the allowances for doubtful accounts when the Company determines that a customer account is uncollectible. As of March 31, 2022 and December 31, 2021, the Company’s allowance for doubtful accounts was $0.5 million and $0.3 million, respectively.