Niagen Bioscience, Inc. 10-Q

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and accompanying notes, which appear elsewhere in this Quarterly Report on Form 10-Q. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2025 , as well as subsequent reports we may file from time to time on Form 10-Q and Form 8-K, for additional information. All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are approximate. Growth and percentage comparisons made herein generally refer to the three months ended March 31, 2026 compared with the three months ended March 31, 2025 unless otherwise noted. Unless otherwise indicated or unless the context otherwise requires, all references in this document to “we,” “us,” “our,” the “Company,” “Niagen Bioscience” and similar expressions refer to Niagen Bioscience, Inc., and depending on the context, its subsidiaries. Special Note Regarding Forward Looking Statements Certain statements in this MD&A, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “expects,” “anticipates,” “intends,” “estimates,” “plans,” “potential,” “possible,” “probable,” “believes,” “seeks,” “may,” “will,” “should,” “could,” “predicts,” “projects,” “continue,” “would” or the negative of such terms or other similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers should carefully review the risk factors set forth below in Part II, Item 1A, “Risk Factors” and our financial statements and related notes included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission on March 4, 2026 (Annual Report). 21 Table of Contents Company Overview We are a global bioscience company dedicated to promoting healthy aging. Our operations are centered on the research, development and commercialization of nicotinamide adenine dinucleotide (NAD+) precursors and related technologies. NAD+ is an essential coenzyme that regulates cellular metabolism and is present in every cell of the human body. NAD+ levels naturally decline with age and may also be impacted by lifestyle and certain disease states. Increasing NAD+ levels through NAD+ precursors has been shown to support cellular function. Our business and product platform are grounded in a significant and growing body of scientific research related to NAD+ and its role in human health. Nicotinamide riboside chloride (“NRC,” also referred to as “NRCL” or “NR”), the active ingredient in our proprietary Niagen®, is among the most extensively studied NAD+ precursors. Data from preclinical studies and human clinical trials indicate that orally administered NRC can increase NAD+ levels in blood and tissue. Food-grade Niagen® has been reviewed under the U.S. Food and Drug Administration’s (FDA) new dietary ingredient notification program, notified to the FDA as generally recognized as safe (GRAS), and has received approvals or authorizations in multiple international jurisdictions, including Canada, the European Union, Turkey, and Australia. Niagen® and other NAD+ precursors are protected by a portfolio of owned and licensed patents. There are more than 525 published human clinical studies related to NAD+ and its role in health. Areas of study include, but are not limited to, understanding NAD+’s role in rare diseases such as Ataxia-Telangiectasia, neurodegenerative diseases, neuropathy, sarcopenia, liver disease and heart failure. Through our ChromaDex External Research Program (CERP®), we have established research collaborations with universities and research institutions that contribute to peer-reviewed publications advancing the understanding of NAD+ biology and informing the development of our products and technologies. Our business is organized around a platform that spans consumer products, ingredient supply, and pharmaceutical development: Consumer Products We develop and commercialize finished consumer products that incorporate our proprietary ingredient, Niagen®. Our primary consumer offering is Tru Niagen®, a dietary supplement available directly to consumers and through distributors. We have also expanded our Tru Niagen® product line to include additional formulations and formats, as well as stick packs and a recently introduced topical skincare product, each incorporating Niagen®. Ingredients We develop and supply proprietary ingredient technologies, including food-grade and pharmaceutical-grade Niagen®. Food-grade Niagen® is supplied as a dietary and food ingredient to manufacturers of consumer products. Pharmaceutical-grade Niagen® is supplied to U.S. FDA-registered 503B outsourcing facilities and certain international compounding pharmacies for use in compounded intravenous and injectable formulations, subject to applicable regulatory requirements. These formulations are marketed by the compounding pharmacies as Niagen IV and Niagen injectable products, including under the name “Niagen Plus.” Pharmaceutical Development We are pursuing the development of NAD+ precursors for potential therapeutic applications, including in advanced aging-related and rare diseases. To date, these efforts have been limited to research and development activities, including preclinical and clinical studies and regulatory planning, and we do not currently generate revenue from these activities. We may pursue internal development as well as strategic collaborations or licensing arrangements. 22 Table of Contents Recent Developments Disposal of Analytical Reference Standards and Services Segment In February 2026, we completed the sale of substantially all of the assets of our analytical reference standards and services business to a third party for total cash consideration of approximately $6.0 million, subject to customary working capital adjustments of approximately $0.2 million. As part of the transaction, the buyer assumed certain operating liabilities arising after the closing date, while we retained accounts receivable and accounts payable incurred prior to closing. We recognized a gain on the sale of approximately $4.8 million during the three months ended March 31, 2026, which is included in gain on sale of operating segment in the Unaudited Condensed Consolidated Statements of Operations. The transaction provides additional liquidity and allows us to further focus on our core Niagen®-based consumer products, ingredient supply, and pharmaceutical development activities. As a result of the disposition, revenue attributable to analytical reference standards and services is no longer included in our ongoing operating results following the closing date. This change is expected to further concentrate our revenue mix toward higher-growth, consumer-oriented product offerings and ingredient sales. In addition, the analytical reference standards and services business operated with a cost structure and margin profile that differed from our core businesses, including higher fixed operating costs related to specialized personnel, laboratory operations, and quality systems. Following the disposition, certain shared fixed costs that were previously allocated to the analytical reference standards and services segment will be absorbed primarily by our remaining operations, particularly the ingredients segment, until such time as we are able to realign our cost structure. We may also undertake organizational and workforce adjustments in response to the disposition; however, any related cost savings are expected to be realized over time and not immediately. As a result, the full impact of these changes on our cost structure and operating margins may evolve over the course of the year. The exit of this operating segment is expected to reduce ongoing operating complexity and may result in greater margin consistency across our remaining operations over time. However, period-to-period comparability of revenue and margins may be affected due to the absence of revenues previously generated by this operating segment. In connection with the sale, we entered into a transition services agreement under which we will provide certain operational and administrative services to the buyer for a period of up to six months following the closing date. We will receive service fees for these services, which are recognized as the services are performed. During the three months ended March 31, 2026, we recognized $74,000 of transition services revenue, which is included in net sales. The net sales and cost of sales from this TSA are temporary in nature and are not expected to recur beyond the transition period. The results of the analytical reference standards and services business are included in continuing operations for all periods presented. For additional information, refer to Note 4. Business Segments and Concentrations to our Unaudited Condensed Consolidated Financial Statements. Resolution of previously disclosed contingency In April 2026, we reached an agreement in principle with a retail partner in Asia to resolve a previously disclosed dispute related to the recall and withdrawal of certain Tru Niagen® Immune Daily Defense products. As part of the resolution, previously withheld receivables totaling approximately $1.3 million were released, we received these outstanding balances as of the end of April 2026. We expect this to result in improved collections and a reduction in accounts receivable in the near term. The agreement also includes the return of certain unsold inventory and the provision of replacement products. As a result, we expect to recognize costs associated with returned inventory, rework activities, and replacement products, which will be reflected in cost of sales in the period incurred. These costs are expected to impact gross margin in the near term, however, we do not expect these costs to be material. We do not expect the resolution of this matter to have a material adverse impact on our overall financial condition. In addition, while we have agreed to provide replacement products for certain future customer returns of the affected product, such obligations are limited in scope and are not currently expected to be material. 23 Table of Contents Financial Condition and Results of Operations The discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these financial statements requires making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported net sales and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. As of March 31, 2026, our cash and cash equivalents totaled approximately $66.5 million, of which $66.4 million was unrestricted. We anticipate that our current unrestricted cash and cash equivalents and cash to be generated from net sales will be sufficient to meet our financial obligations as they become due over at least the next twelve months. We may, however, seek additional capital in the next twelve months, both to meet our projected operating plans after the next twelve months and/or to fund our longer-term strategic objectives. For the periods presented, we operated our business through four operating segments that offer differentiated products and services. Through our Consumer Products segment, we provide finished consumer products containing our proprietary ingredients directly to consumers and distributors, including dietary supplements and a recently introduced topical skincare product. We deliver food-grade Niagen® as the sole or principal ingredient in our consumer product line, Tru Niagen®. Our Ingredients segment develops and commercializes proprietary ingredient technologies, including food-grade Niagen® and pharmaceutical-grade Niagen®, and supplies these ingredients as raw materials to manufacturers of consumer products and U.S. FDA-registered 503B outsourcing facilities, respectively. Our Pharmaceutical segment is focused on the research and development of NAD+ precursors for potential therapeutic applications, including in advanced aging-related and rare diseases. To date, this segment has been limited to research and development activities, including preclinical and clinical studies and regulatory planning, and does not currently generate revenue. Our Analytical Reference Standards and Services segment focused on natural product fine chemicals, known as phytochemicals, and related research and development services. As discussed in “ Recent Developments ,” we sold this operating segment in February 2026. The results of these segments and our consolidated operations are detailed in the discussion that follows. Our consolidated net sales, net income and income per share for the three months ended March 31, 2026 and 2025 are as follows: Three Months Ended March 31, (In thousands, except per share data) 2026 2025 Net sales $ 31,474 $ 30,481 Net income 6,318 5,063 Income Per Share: Basic income per common share $ 0.08 $ 0.07 Diluted income per common share $ 0.07 $ 0.06 24 Table of Contents Net Sales Net sales consist of gross sales less discounts and returns. The following table sets forth our total net sales by reportable segment: Three Months Ended March 31, ($ In thousands) 2026 2025 % Change Net sales: Consumer Products $ 22,413 $ 21,501 4 % Ingredients 8,564 8,169 5 % Analytical reference standards and services 423 811 (48) % Corporate and other 74 — N/A Total net sales $ 31,474 $ 30,481 3 % Total net sales increased by $1.0 million for the three months ended March 31, 2026, as compared to the same period in 2025. The increase in net sales was attributable to growth within our consumer products and ingredients segments. The pharmaceutical segment did not generate revenue during the period presented. Detailed changes in net sales were driven by the following: • Within our consumer products segment, Tru Niagen® sales increased by $0.9 million for the three months ended March 31, 2026 compared to the corresponding period in 2025. This growth was primarily driven by increased e-commerce channel performance, which grew by approximately $2.4 million, reflecting increased customer demand and acquisition. Sales to A.S. Watson's were lower by $2.4 million compared to the prior year, partially offset by increased sales to other distribution channels by $0.9 million. The decline in sales to A.S. Watson’s reflects variability in ordering patterns and commercial activity during the period. We continue to engage with this partner on marketing and sales initiatives to support the ongoing relationship. • Total ingredient sales increased by $0.4 million for the three months ended March 31, 2026 compared to the same period in 2025. The increase was primarily driven by higher sales to food-grade Niagen® partners, which contributed approximately $0.3 million of growth, as well as an increase in other ingredient sales of approximately $0.2 million. These increases were partially offset by a decrease in pharmaceutical-grade Niagen® sales during the period compared to the prior year. Ingredient partner orders are subject to timing variability and may fluctuate quarter to quarter. • Analytical reference standards and services net sales were $0.4 million lower for the three months ended March 31, 2026 compared to the same period in 2025, due to the periods not being fully comparable, as the prior year period reflects a full quarter of operations, while the current period reflects partial-period activity following the divestiture of the business segment. As a result of the divestiture, we do not expect to generate any additional net sales from this segment in future periods. • Corporate and other net sales represent revenue generated under a transition services agreement (TSA) entered into in connection with the February 2026 disposition of our Analytical Reference Standards and Services operating segment. These services are provided to support the buyer’s transition and are expected to continue for a period of up to six months following the closing date. Accordingly, this revenue is temporary in nature and is not expected to recur beyond the transition period. 25 Table of Contents Cost of Sales Cost of sales include raw materials, labor, overhead, and delivery costs. The following table sets forth our total cost of sales by reportable segment: Three Months Ended March 31, Amount % of net sales ($ In thousands) 2026 2025 2026 2025 Cost of sales: Consumer Products $ 7,595 $ 7,407 33.9 % 34.4 % Ingredients 3,555 3,101 41.5 38.0 Analytical reference standards and services 308 642 72.8 79.2 Corporate and other 40 — 54.1 N/A Total cost of sales $ 11,498 $ 11,150 36.5 % 36.6 % Total cost of sales, as a percentage of net sales, improved by 10 basis points for the three months ended March 31, 2026 compared to the same period in 2025. The overall change reflects the net impact of shifts in product and business mix across our segments, as well as the effects of the February 2026 disposition of our analytical reference standards and services operating segment, which were partially offset by changes in cost structure within certain segments. Changes in cost of sales were primarily driven by the following: • Cost of sales, as a percentage of net sales, within our consumer products segment can fluctuate due to changes in business mix, product mix, inflationary pressures, and optimization efforts in our supply chain, among other factors. For the three months ended March 31, 2026, cost of sales as a percentage of net sales improved by approximately 50 basis points compared to the same period in 2025. The improvement was attributable to a favorable shift in business mix, with e-commerce representing a greater portion of segment net sales, which generally carries higher gross margins, and the use of lower-cost inventory purchases. • Cost of sales, as a percentage of net sales, in our ingredients segment are influenced by several factors including inventory purchase costs, fixed supply chain overhead costs and transportation and storage costs. For the three months ended March 31, 2026, cost of sales as a percentage of net sales increased by approximately 350 basis points, primarily due to a shift in business mix, with food-grade Niagen® representing a greater portion of segment sales and pharmaceutical-grade Niagen® representing a smaller portion of segment sales each of which carries a distinct margin profile. Changes in the relative contribution of these products unfavorably affected the overall margin structure for the period. • Cost of sales, as a percentage of net sales, in our analytical reference standards and services segment are influenced by many factors including inventory purchase costs, fixed supply chain overhead costs and transportation and storage costs. For the three months ended March 31, 2026, cost of sales decreased compared to the prior year period, consistent with the decline in net sales following the sale of the business segment. As a result, cost of sales as a percentage of net sales improved by approximately 640 basis points compared to the same period in 2025, largely reflecting the impact of the disposition and the resulting change in scale and period comparability, rather than underlying operating efficiencies. In addition, given the relatively small scale of this segment, particularly following the divestiture, fixed costs and transitional activities can have a disproportionate impact on margins, and relatively small changes in dollar amounts may result in meaningful fluctuations in cost of sales as a percentage of net sales. • Corporate and other cost of sales represent expenses incurred under a TSA entered into in connection with the February 2026 disposition of our Analytical Reference Standards and Services business. These services are provided to support the buyer’s transition and are expected to continue for a period of up to six months following the closing date. As a result, these cost of sales are temporary in nature and are not expected to recur beyond the transition period. 26 Table of Contents Gross Profit Gross profit is net sales less the cost of sales and is affected by business and product mix, competitive pricing and costs of products, labor, overhead, services, and delivery, among other factors. The following table sets forth our total gross profit by reportable segment: Three Months Ended March 31, ($ In thousands) 2026 2025 % Change Gross profit : Consumer Products $ 14,818 $ 14,094 5 % Ingredients 5,009 5,068 (1) Analytical reference standards and services 115 169 (32) Corporate and other 34 — N/A Total gross profit $ 19,976 $ 19,331 3 % For details supporting the changes in gross profit, refer to the preceding discussions outlining the changes in both our net sales and cost of sales for each respective segment. Operating Expenses-Sales and Marketing Sales and marketing expense consists of salaries, advertising, public relations, marketing expenses and commissions. Sales and marketing expense by reportable segment is as follows: Three Months Ended March 31, 2026 2025 ($ In thousands) Amount % of net sales Amount % of net sales Advertising expenses: Consumer Products $ 3,292 14.7 % $ 2,976 13.8 % Total advertising expenses $ 3,292 10.5 % $ 2,976 9.8 % Marketing expenses: Consumer Products $ 3,422 15.3 % $ 2,453 11.4 % Ingredients 96 1.1 25 0.3 Analytical reference standards and services — — — — Total marketing expenses $ 3,518 11.2 % $ 2,478 8.1 % Sales expenses: Consumer Products $ 2,727 12.2 % $ 2,507 11.7 % Ingredients 94 1.1 49 0.6 Analytical reference standards and services 44 10.4 107 13.2 Total sales expenses $ 2,865 9.1 % $ 2,663 8.7 % Total sales and marketing expenses: Consumer Products $ 9,441 42.1 % $ 7,936 36.9 % Ingredients 190 2.2 74 0.9 Analytical reference standards and services 44 10.4 107 13.2 Total sales and marketing expenses $ 9,675 30.7 % $ 8,117 26.6 % 27 Table of Contents Total sales and marketing expenses increased by $1.6 million during the three months ended March 31, 2026, as compared to the same period in 2025. As a percentage of net sales, total sales and marketing expenses increased by 410 basis points, reflecting increased investments to support brand growth and planned commercial activities, primarily within our consumer products segment, as well as operating deleverage as expense growth outpaced net sales growth. Detailed changes in sales and marketing expense were primarily driven by the following: • For our consumer products segment, sales and marketing expenses increased by $1.5 million during the three months ended March 31, 2026 compared to the same period in 2025 and, as a percentage of net sales, increased to 42.1% from 36.9%. The increase was primarily attributable to higher marketing and advertising expenditures to support brand growth, as well as increased personnel-related costs associated with the expansion of our marketing organization to support anticipated future growth. • For our ingredients segment, sales and marketing expense increased by $116,000 during the three months ended March 31, 2026 compared to the same period in 2025 and, as a percentage of net sales, increased to 2.2% from 0.9%. The increase was primarily attributable to increased marketing and promotional activities to support pharmaceutical-grade Niagen® ingredient initiatives, as well as higher employee-related expenses. • For our analytical reference standards and services segment, sales and marketing expense decreased to $44,000 for the three months ended March 31, 2026, primarily due to the sale of the business segment and the resulting reduction in operating activity following the closing date. Operating Expenses-Research and Development Research and development (R&D) expenses consist primarily of personnel-related costs, clinical trials, product development, and process development expenses. Prior-period amounts have been recast to conform to the current period segment presentation. R&D expenses by reportable segment were as follows: Three Months Ended March 31, ($ In thousands) 2026 2025 % Change R&D expenses: Consumer Products $ 733 $ 645 14 % Ingredients 280 245 14 Pharmaceuticals 468 368 27 Total R&D expenses $ 1,481 $ 1,258 18 % • R&D expenses in our pharmaceuticals segment increased by $0.1 million for the three months ended March 31, 2026 compared to the same period in 2025. This increase primarily reflects continued research and development of an NAD+ precursor-based candidate for potential therapeutic applications in rare diseases. These costs were primarily related to ongoing preclinical activities and supporting research infrastructure and are consistent with the anticipated development of this segment. • The remaining R&D expenses related to our Niagen® branded ingredient are allocated to the consumer products and ingredients segments based on recorded revenues. For the three months ended March 31, 2026, R&D expenses allocated to our consumer products and ingredients segments increased $123,000 compared to the same period in 2025. The increase was primarily driven by higher spending on ongoing Niagen Plus research activities, including increased materials and resources supporting these efforts. R&D expenses in the current period also included costs related to scientific engagement activities, including a research conference. We continue to expect variability in R&D spending based on the timing and scope of specific projects, clinical development activities, and internal resource allocation. 28 Table of Contents Operating Expenses-General and Administrative General and administrative expense consists of general company administration, legal, royalties, IT, accounting and executive management expenses. General and administrative expenses are not allocated by segment and instead are classified under our Corporate and Other category. General and administrative expense for the periods indicated were as follows: Three Months Ended March 31, ($ In thousands) 2026 2025 % Change General and administrative $ 7,244 $ 5,184 40 % Total general and administrative expenses increased by $2.1 million during the three months ended March 31, 2026, compared to the corresponding period in 2025. During the three months ended March 31, 2026, the increase was primarily driven by a $1.4 million increase in provisions for credit losses, reflecting a $1.3 million recovery of credit losses recognized in the prior year quarter that did not occur in 2026, as well as $0.7 million in higher share-based compensation. For additional details regarding the prior year recovery of credit losses, refer to our Form 10-K filing for the year ended December 31, 2025, Note 10, Commitments and Contingencies . Income Taxes Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of March 31, 2026 and December 31, 2025, we maintained a full valuation allowance against the entire deferred income tax balance. In accordance with ASC 740, Income Taxes, future realization of deferred tax assets depends on the existence of sufficient taxable income, including the expectation of future profitability. The Company recorded income tax expense of $417,000 during the three months ended March 31, 2026, representing 6.2% of earnings before income taxes for the period. During the three months ended March 31, 2025, the Company recorded $168,000 of income tax expense. The Company is not currently under examination by the Internal Revenue Service or any other major income tax jurisdiction. As of March 31, 2026 and December 31, 2025, the Company has not identified any material uncertain tax positions requiring a reserve. Depreciation and Amortization Depreciation expense was approximately $116,000 and $158,000 for the three months ended March 31, 2026 and 2025, respectively. We depreciate our assets on a straight-line basis, based on the estimated useful lives of the respective assets. Amortization expense of intangible assets was approximately $175,000 and $37,000 for the three months ended March 31, 2026 and 2025, respectively. We amortize intangible assets using a straight-line method, generally over 10 years. For licensed patent rights, the useful lives are 10 years or the remaining term of the patents underlying licensing rights, whichever is shorter. The useful life of subsequent milestone payments that are capitalized match the remaining useful life of the initial licensing payment that was originally capitalized. Noncash lease expense related to right-of-use assets was approximately $173,000 for both the three months ended March 31, 2026 and March 31, 2025. Liquidity and Capital Resources From inception through March 31, 2026, we have incurred aggregate losses of approximately $158.2 million. These losses are primarily due to expenses associated with the development and expansion of our operations and investments to protect our intellectual property, including litigation-related expenses. Historically, our operations were financed primarily through capital contributions, including the issuance of common stock in private placements, as well as cash generated from sales. As our operating results and cash generation have improved, our liquidity profile has strengthened. 29 Table of Contents Our board of directors periodically reviews our capital requirements in light of our operating performance, growth initiatives, and long-term business objectives. Our future capital requirements will be influenced by several factors, including cash flows from operations, sales growth, gross margin performance, planned investments in research and development and commercialization activities, and the timing and scale of potential strategic initiatives. While we currently expect to fund our operations primarily through existing cash resources and cash generated from operations, we may, from time to time, consider additional financing to support strategic investments or growth opportunities. Any such financing may include equity or debt financings, collaborative arrangements, or other sources of capital. As of March 31, 2026, we had cash and cash equivalents of $66.5 million, including $152,000 of restricted cash. Our cash and cash equivalents as of March 31, 2026 consisted of bank deposits and short-term investments of highly liquid investment-grade debt instruments with an original maturity of three months or less. In addition, as of March 31, 2026, we had purchase obligations of approximately $18.5 million related to inventory purchase commitments and approximately $3.0 million related to future minimum lease obligations to be paid over twelve months and four years, respectively, as well as fixed, unconditional deferred consideration obligations of approximately $9.5 million and £0.4 million payable through 2038 in connection with the assignment of certain patent rights. As of March 31, 2026 and December 31, 2025, we had no material off-balance sheet arrangements and no borrowings outstanding under our line of credit. We believe that our current unrestricted cash and cash equivalents, together with cash expected to be generated from operations will be sufficient to meet our financial obligations as they become due over at least the next twelve months and beyond. Net cash (used in) provided by operating activities: Cash used in or provided by operating activities is net income adjusted for certain non-cash items and changes in operating assets and liabilities. For the three months ended March 31, 2026, net cash used in operating activities was approximately $1.2 million, compared to net cash provided by operating activities of approximately $7.9 million for the same period in 2025, representing a decrease of $9.1 million. Net income for the three months ended March 31, 2026 was $6.3 million, compared to $5.1 million for the same period in 2025. Net income in the current period includes several non-cash items, including $1.7 million of share-based compensation expense and a $4.8 million gain on the sale of the analytical reference standards and services business segment. In addition, the prior year period included the recovery of previously written-off amounts, which did not recur in the current period. Changes in working capital resulted in a net use of cash during the three months ended March 31, 2026, primarily driven by increases in trade receivables and inventory. Inventory increased, resulting in a $3.6 million use of cash during the current period, compared to a $2.0 million use of cash in the prior year period, reflecting higher inventory levels to support business activity. Trade receivables resulted in a $3.4 million use of cash during the three months ended March 31, 2026, compared to a $2.0 million source of cash in the prior year period. The increase in receivables reflects higher sales, timing of customer orders and collections, and the impact of $1.3 million receivable outstanding from an Asian retail partner as of March 31, 2026, which have been subsequently collected by the end of April 2026. In addition, during the quarter Amazon implemented a reserve policy that temporarily withholds approximately seven days of sales proceeds, which had a modest, one-time impact on operating cash flows. We expect operating cash flows to continue to fluctuate significantly from period to period due to a variety of factors, including changes in operating results, shipment timing, the pace of trade receivable collections, inventory management practices, and the timing of payments to vendors, among other factors. Cash provided by (used in) investing activities: Investing cash flows consist primarily of proceeds from the sale of a business segment and related transaction costs as well as capital expenditures. Net cash provided by investing activities was $5.2 million for the three months ended March 31, 2026 compared to a net use of cash of $32,000 for the same period in 2025. The increase of $5.3 million was driven by the sale of the analytical reference standards and services business segment. Net cash (used in) provided by financing activities: Financing cash flows consist primarily of exercise of stock options through employee equity incentive plans, share repurchases, and settlements of deferred consideration. For the three months ended March 31, 2026, net cash used in financing activities was $2.3 million, compared to net cash provided by financing activities of $3.1 million for the same period in 2025. This decrease of $5.4 million was primarily driven by $2.4 million of common stock repurchases in the current year period and lower proceeds from stock option exercises of approximately $3.0 million compared to the prior year period. Critical Accounting Estimates There have been no material changes to critical accounting estimates from those disclosed in our 2025 Form 10-K. 30 Table of Contents