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, 2023 , 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 and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023 unless otherwise noted. Unless otherwise indicated or unless the context otherwise requires, all references in this document to “we,” “us,” “our,” the “Company,” “ChromaDex” and similar expressions refer to ChromaDex Corporation, 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, 2023 filed with the Securities and Exchange Commission on March 6, 2024 (Annual Report). Company Overview We are a global bioscience company dedicated to healthy aging. Our team, which includes world-renowned scientists, is pioneering research on nicotinamide adenine dinucleotide (NAD+), an essential coenzyme that is a key regulator of cellular metabolism and is found in every cell of the human body. NAD+ levels in humans have been shown to decline by up to 65% between ages 30 and 70. In addition to age, other factors linked to NAD+ depletion include poor diet, excess alcohol consumption and a number of disease states. NAD+ levels may be increased with administration of NAD+ precursors, calorie restriction and moderate exercise. We are at the forefront of exploring effective methods to increase NAD+ levels and support healthy aging. In 2013, we commercialized food-grade Niagen®, a proprietary form of NRC, a novel form of vitamin B3, as both a dietary and food ingredient. In 2024, we launched Niagen+, a product line for healthcare practitioners and clinics, featuring pharmaceutical-grade Niagen®. We supply pharmaceutical-grade Niagen® to U.S. FDA-registered 503B outsourcing facilities to compound and distribute Niagen® intravenous (Niagen IV) and injectable Niagen®. These pharmaceutical-grade Niagen® products are available exclusively at clinics with a prescription. Food-grade Niagen® is authorized for human consumption as a dietary supplement and generally recognized as safe as a food ingredient. Pharmaceutical-grade Niagen® is authorized by the FDA for compounding by 503B outsourcing facilities. NRC remains one of the most well-studied and efficient NAD+ precursors on the market. Data from numerous preclinical studies and human clinical trials show that orally administered food-grade NRC is a highly efficient NAD+ precursor that significantly raises NAD+ levels in blood and tissue. Food-grade Niagen® has twice been successfully reviewed under the U.S. Food and Drug Administration’s (FDA) new dietary ingredient (NDI) notification program, it has been successfully notified to the FDA as generally recognized as safe (GRAS), and has been approved by Health Canada, the European Commission, the Turkish Ministry of Agriculture and the Therapeutic Goods Administration (TGA) of Australia. Food-grade Niagen® has also been approved for inclusion in medical foods by both the Brazilian Health Regulatory Agency (ANVISA) and the Food Standards Australia New Zealand (FSANZ). Clinical studies of oral, food-grade Niagen® have demonstrated a variety of outcomes including increased NAD+ levels, altered body composition, increased cellular metabolism and increased energy production. Food-grade Niagen®, pharmaceutical-grade Niagen® and other NAD+ precursors are protected by patents to which we are the owner or have exclusive rights. 28 Table of Contents While best known for its role in cellular energy production, NAD+ is also thought to play an important role in healthy aging. Many cellular functions related to health and healthy aging are sensitive to levels of locally available NAD+ and this represents an active area of research in the field of NAD+. To date, there are over 500 published human clinical studies related to NAD+ and its impact on health. These areas of study include understanding NAD+’s role in Alzheimer’s disease, Parkinson’s disease, neuropathy, sarcopenia, liver disease and heart failure. We are among the world leaders in the emerging NAD+ space. Through our ChromaDex External Research Program (CERP®), we have amassed more than 275 research partnerships with leading universities and research institutions around the world including the National Institutes of Health, Cornell, Dartmouth, Harvard, Massachusetts Institute of Technology, University of Cambridge, the Mayo Clinic, Chiba University and Sun Yat-sen University. The results of the 275+ research partnerships have allowed CERP® to help produce the trusted science behind Niagen® and continue to advance the understanding of NAD+ in health, diseases, and aging. We value and encourage strong scientific rigor behind our products and seek to continually develop additional relationships in pursuit of this. CERP® is a vital component of our research and development platform along with our scientific advisory board. Our scientific advisory board supports the technical and intellectual property needs of investigators, presents research at conferences, and helps build and support the NAD+ and healthy aging research community. Our scientific advisory board is led by Chairman Dr. Roger Kornberg, Nobel Laureate and Stanford Professor. Other distinguished members include Dr. Charles Brenner, Alfred E Mann Family Foundation Chair in the Department of Diabetes & Cancer Metabolism at City of Hope and one of the world’s recognized experts in NAD+ and discoverer of NR as a NAD+ precursor; Dr. Rudy Tanzi, co-chair of the department of neurology at Harvard Medical School; Sir John Walker, Nobel Laureate and Emeritus Director of the MRC Mitochondrial Biology Unit in the University of Cambridge, England; Dr. Bruce German, Chairman of Food, Nutrition and Health at the University of California, Davis; Dr. Brunie Felding, Associate Professor in the Department of Molecular Medicine at Scripps Research Institute, California Campus; Dr. David Katz, Founder and former director of Yale University’s Yale-Griffin Prevention Research Center, President and Founder of the non-profit True Health Initiative, and Founder and Chief Executive Officer of Diet ID, Inc.; and Dr. Vilhelm (Will) Bohr, M.D., Ph.D., D.Sc., former Chief of the Laboratory of Molecular Genetics at the National Institute on Aging of the National Institutes of Health. Recent Developments During the third quarter of 2024, we entered into a Tenth Amendment (Tenth Amendment) to the Manufacturing and Supply Agreement (such agreement as amended, the “Grace Manufacturing Agreement” or “Agreement”), effective as of January 1, 2025 and originally effective in January 2016 with W.R. Grace & Co. –Conn. (Grace). In January 2019, Grace was issued patents related to the crystalline form of NR chloride which limit our ability to find alternatives for supply (Grace Patents). Pursuant to the Tenth Amendment, we committed to purchase approximately $4.8 million of total inventory between January 1, 2025 and March 31, 2025. In addition, we have remaining purchase commitments from the Ninth Amendment totaling $5.2 million to be purchased during the three months ended December 31, 2024. The Grace Manufacturing Agreement will expire on March 31, 2025, subject to further renewal of the Agreement to be negotiated by the parties. If we are unable to extend the agreement on satisfactory terms, it could have a material adverse impact to our financial results and strategic position in the market. See Item 1A. Risk Factors, “ We rely on single supplier, W.R. Grace, for NR and a limited number of third-party suppliers for the raw materials required to produce our products.” for more information. As previously disclosed, on October 8, 2024, Marcum LLP (Marcum) notified the Company that it is resigning, effective October 31, 2024, as the independent registered public accounting firm for the Company due to independence concerns relating to Marcum’s impending merger with CBIZ Inc., which provides human resources consulting and health insurance brokerage services to the Company. Marcum is not required to obtain, and did not seek, the Company’s consent to its decision to resign as the Company’s independent registered public accounting firm. 29 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 September 30, 2024, our cash and cash equivalents totaled approximately $32.4 million, of which $32.2 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. We currently have three operating segments that offer differentiated services. Through our Consumer Products segment, we provide finished dietary supplement products containing our proprietary ingredients directly to consumers and distributors, as well as NAD+ test kits exclusively to healthcare practitioners. We deliver food-grade Niagen® as the sole or principal dietary ingredient in our consumer product line Tru Niagen®. Our Ingredients segment develops and commercializes proprietary-based ingredient technologies, including food-grade Niagen® and pharmaceutical-grade Niagen®, and supplies these ingredients as raw materials to the manufacturers of consumer products and U.S. FDA-registered 503B outsourcing facilities, respectively. Our Analytical Reference Standards and Services segment focuses on natural product fine chemicals, known as phytochemicals, and related research and development services. The results of these segments and our consolidated operations are detailed in the discussion that follows. Our consolidated net sales, net income (loss) and earnings (loss) per share for the three and nine months ended September 30, 2024 and 2023 are as follows: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except per share data) 2024 2023 2024 2023 Net sales $ 25,580 $ 19,495 $ 70,472 $ 62,374 Net income (loss) 1,878 (959) 1,371 (5,052) Earnings (Loss) Per Share: Basic net income (loss) per common share $ 0.02 $ (0.01) $ 0.02 $ (0.07) Diluted net income (loss) per common share $ 0.02 $ (0.01) $ 0.02 $ (0.07) 30 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 September 30, Nine Months Ended September 30, (In thousands) 2024 2023 % Change 2024 2023 % Change Net sales: Consumer Products $ 18,123 $ 17,400 4 % $ 54,121 $ 51,924 4 % Ingredients 6,673 1,424 369 % 14,062 8,252 70 % Analytical reference standards and services 784 671 17 % 2,289 2,198 4 % Total net sales $ 25,580 $ 19,495 31 % $ 70,472 $ 62,374 13 % Total net sales increased by approximately $6.1 million and $8.1 million for the three and nine months ended September 30, 2024, compared to the same periods in 2023, respectively. Changes in net sales were driven by the following: • Tru Niagen® sales increased by approximately $0.7 million and $2.2 million for the three and nine months ended September 30, 2024, respectively, compared to the corresponding periods in 2023. For both periods, the growth was primarily driven by higher sales through our e-commerce business. In the three months ended September 30, 2024, e-commerce sales grew by $2.1 million, which was partially offset by lower sales to A.S. Watson, a former related party, and other distributors. Similarly, for the nine months ended September 30, 2024, e-commerce sales contributed $2.8 million to the overall increase, along with $0.5 million in higher sales from other distributor partners, while lower sales to A.S. Watson partially offset these gains. • Total ingredient sales were the largest contributors to our overall net sales growth, increasing by approximately $5.2 million and $5.8 million for the three and nine months ended September 30, 2024, compared to the same periods in 2023. For both periods, this growth was primarily driven by increased sales to key food-grade Niagen® partners and the launch of pharmaceutical-grade Niagen®. For the nine months ended September 30, 2024, these higher sales were partially offset by $0.3 million decline in sales of other ingredients. Additionally, we recognized $0.7 million in revenue from deferred revenue during the three and nine months ended September 30, 2024 due to an updated estimate of the total forecasted deliverables over the contract term. For further discussion of the deferred revenue recognition, see Note 14, Deferred Revenue - NHSc in the Notes to the Unaudited Condensed Consolidated Financial Statements. • Our analytical reference standards and services segment constituted the smallest proportion of total sales, growing $0.1 million for each of the three and nine months ended September 30, 2024 compared to the corresponding periods in 2023. 31 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 September 30, Nine Months Ended September 30, Amount % of net sales Amount % of net sales (In thousands) 2024 2023 2024 2023 2024 2023 2024 2023 Cost of sales: Consumer Products $ 6,512 $ 6,024 36 % 35 % $ 19,451 $ 18,387 36 % 35 % Ingredients 2,176 739 33 52 5,558 3,852 40 47 Analytical reference standards and services 652 763 83 114 2,074 2,292 91 104 Total cost of sales $ 9,340 $ 7,526 37 % 39 % $ 27,083 $ 24,531 38 % 39 % Total cost of sales, as a percentage of net sales, improved a modest 200 basis points and 100 basis points for the three and nine months ended September 30, 2024 compared to the same periods in 2023. Changes in cost of sales were primarily driven by the following: • Cost of sales, as a percentage of net sales, for our consumer products segment can fluctuate due to business mix, product mix, inflationary costs, and optimization efforts in our supply chain, among other factors. For the three and nine months ended September 30, 2024, our consumer products segment maintained relatively stable cost of sales, as a percentage of net sales, increasing a slight 100 basis points compared to the same periods in 2023. • Cost of sales, as a percentage of net sales, in our ingredients segment are influenced by many factors including inventory purchase costs, fixed supply chain overhead costs and transportation and storage costs. For the ingredients segment, cost of sales, as a percentage of net sales, improved 1,900 basis points and 700 basis points for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. For both periods, the improvement is driven by improved labor and overhead utilization rates as sales increased, shifts in product mix with the launch of our pharmaceutical-grade Niagen® and the recognition of deferred revenue which has no corresponding cost of sales. • 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 analytical reference standards and services segment, which experienced relatively stable sales and slightly lower costs of sales for the three and nine months ended September 30, 2024, compared to the same period in 2023, there was an improvement of 3,100 basis points and 1,300 basis points, respectively, in cost of sales as a percentage of net sales. During 2024, we restructured supply chain overhead costs related to reference standards which resulted in modest cost improvements. Gross Profit (Loss) Gross profit (loss) is net sales less the cost of sales and is affected by a number of factors, including business and product mix, competitive pricing and costs of products, labor, overhead, services and delivery. The following table sets forth our total gross profit (loss) by reportable segment: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2024 2023 % Change 2024 2023 % Change Gross profit (loss): Consumer Products $ 11,611 $ 11,376 2 % $ 34,670 $ 33,537 3 % Ingredients 4,497 685 556 8,504 4,400 93 Analytical reference standards and services 132 (92) 243 215 (94) 329 Total gross profit $ 16,240 $ 11,969 36 % $ 43,389 $ 37,843 15 % For details supporting the changes in gross profit (loss), refer to the preceding discussions outlining the changes in both our net sales and cost of sales for each respective segment. 32 Table of Contents Operating Expenses-Sales and Marketing Sales and marketing expenses consist of salaries, advertising, public relations and marketing expenses. Sales and marketing expenses by reportable segment were as follows: Three Months Ended September 30, Nine Months Ended September 30, Amount % of net sales Amount % of net sales (In thousands) 2024 2023 2024 2023 2024 2023 2024 2023 Sales and marketing expenses: Consumer Products $ 6,918 $ 5,934 38 % 34 % $ 20,291 $ 19,599 37 % 38 % Ingredients 6 — — — 84 37 1 — Analytical reference standards and services 120 101 15 15 378 282 17 13 Total sales and marketing expenses $ 7,044 $ 6,035 28 % 31 % $ 20,753 $ 19,918 29 % 32 % • For our consumer products segment, sales and marketing expense, as a percentage of net sales, increased 400 basis points during the three months ended September 30, 2024 and decreased a modest 100 basis points for the nine months ended September 30, 2024 compared to the same periods in 2023. The increase in the three months ended September 30, 2024 is primarily due to our increased efforts in testing new marketing strategies with less direct return than in prior periods, as well as lower sales with A.S. Watson, a former related party whose sales do not affect our sales and marketing expenses. The modest improvement during the nine months ended September 30, 2024 is attributable to shifts in marketing strategies in each period, including a larger brand-building event in the prior year, which was not repeated in the current year. On a full year basis for 2024, we expect our sales and marketing spend to increase with similar efficiencies compared to 2023. • Sales and marketing expense for our ingredients segment remained minimal throughout the three and nine months ended September 30, 2024 and 2023. • For our analytical reference standards and services segment, sales and marketing expense, as a percentage of net sales, remained stable for the three months ended September 30, 2024 and increased 400 basis points for the nine months ended September 30, 2024 compared to the same periods in 2023. The change during the nine months ended September 30, 2024 was driven by increases in employee related expenses. Operating Expenses-Research and Development Research and development (R&D) expenses consist primarily of headcount, clinical trials, product development and process development expenses. Research and development expenses by reportable segment were as follows: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2024 2023 % Change 2024 2023 % Change R&D expenses: Consumer Products $ 901 $ 1,142 (21) % $ 3,731 $ 3,278 14 % Ingredients 389 99 293 970 521 86 Total R&D expenses $ 1,290 $ 1,241 4 % $ 4,701 $ 3,799 24 % We allocate R&D expenses related to our Niagen® branded ingredient to the consumer products and ingredients segment, based on recorded revenues. For the three months ended September 30, 2024, R&D expenses were relatively flat compared to the same period in 2023. During the nine months ended September 30, 2024, we invested in strategic R&D initiatives to support future launches, including Niagen+, leading to a $0.9 million increase in R&D expenses. Our R&D expenses fluctuate based on the timing of projects, clinical trials and headcount. We anticipate increasing our investment in R&D projects, including clinical trials, throughout 2024 compared to 2023. 33 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 September 30, Nine Months Ended September 30, (In thousands) 2024 2023 % Change 2024 2023 % Change General and administrative $ 6,304 $ 5,840 8 % $ 17,320 $ 19,557 (11) % Total general and administrative expense increased by $0.5 million during the three months ended September 30, 2024 and decreased by $2.2 million during the nine months ended September 30, 2024, compared to the corresponding periods in 2023. The increase in expense for the three months ended September 30, 2024 was primarily attributable to higher legal expenses of $0.5 million to help support our Niagen+ launch and litigation matters to protect our patents. The reduction in expense for the three months ended September 30, 2024 was primarily attributable to lower severance and restructuring expense and related bonuses of $0.7 million, lower royalties and commissions expense of $0.7 million and a reduction in provisions for credit losses of $0.8 million. 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. At September 30, 2024 and September 30, 2023, we maintained a full valuation allowance against the entire deferred income tax balance which resulted in an effective tax rate of approximately 0% for the three and nine months ended September 30, 2024 and 2023. As defined in ASC 740, Income Taxes, future realization of the tax benefit will depend on the existence of sufficient taxable income, including the expectation of continued future taxable income. During the first quarter of 2024, the Company was notified that it was selected for examination by the IRS for its federal income tax return for the fiscal year 2021 period. The examination was completed in the third quarter of 2024, with no changes recommended. As of the date of this report, the Company is not under examination by any major income tax jurisdiction. Depreciation and Amortization Depreciation expense was approximately $512,000 and $693,000 for the nine months ended September 30, 2024 and 2023, 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 $113,000 and $119,000 for the nine months ended September 30, 2024 and 2023, 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 lives of subsequent milestone payments that are capitalized are the remaining useful life of the initial licensing payment that was capitalized. Amortization expense of right of use assets for the nine months ended September 30, 2024 was approximately $501,000 compared to $520,000 for the nine months ended September 30, 2023. 34 Table of Contents Liquidity and Capital Resources From inception through September 30, 2024, we have incurred aggregate losses of approximately $189.1 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, these operations have been financed through capital contributions, primarily through the issuance of common stock in private placements, and cash generated from sales. Our board of directors periodically reviews our capital requirements in light of our proposed business plan. Our future capital requirements will be influenced by several factors, including cash flows from operations, sales growth, optimized gross profit margins, reduced selling and marketing expense as a percentage of net sales, continued customer relationship development, and the ability to successfully market new and existing products. However, based on our results from operations, we may determine that we need additional financing to implement our long-term business plan. There can be no assurance that any such financing will be available on terms favorable to us or at all. Without adequate financing we may have to delay or terminate product and service expansion and curtail certain selling, general and administrative expenses. Any inability to raise additional financing would have a material adverse effect on us. As of September 30, 2024, we had cash and cash equivalents of $32.4 million, including $152,000 of restricted cash, no material off-balance sheet arrangements and no outstanding borrowings under our line of credit with Western Alliance Bank. Our cash and cash equivalents as of September 30, 2024 consisted of bank deposits and short-term investments of highly liquid investment-grade debt instruments with an original maturity of three months or less. Additionally, as of September 30, 2024, we had purchase obligations of $5.2 million and $4.8 million related to inventory purchase commitments to be paid during the three months ended December 31, 2024 and March 31, 2025, respectively, as well as future minimum lease obligations of $3.1 million to be paid over approximately four years. 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 and beyond. However, we may seek additional funds to support both our short-term and long-term operating objectives, either through additional equity or debt financings or collaborative agreements or from other sources. Net cash provided by operating activities: Cash provided by operating activities is net loss adjusted for certain non-cash items and changes in operating assets and liabilities. Net cash provided by operating activities was approximately $3.5 million for the nine months ended September 30, 2024 compared to $6.5 million for the nine months ended September 30, 2023. The approximately $2.9 million reduction in cash provided by operating activities was largely driven by a relatively greater increase in trade receivables of $3.8 million, a greater reduction in accounts payable and accrued expenses of $2.8 million and $1.8 million, respectively, and lower provisions for credit losses of $0.9 million, offset by a $6.4 million improvement in net income (loss). We expect our operating cash flows to fluctuate significantly in future periods as a result of fluctuations in our operating results, shipment timetables, trade receivable collections, inventory management and the timing of our payments, among other factors. Cash used in investing activities: Investing cash flows consist primarily of capital expenditures and investment activities. Cash used in investing activities was $74,000 and $122,000 for the nine months ended September 30, 2024 and 2023, respectively. Net cash provided by ( used in) financing activities: Financing cash flows primarily consists of the repayment of short-term and long-term debt and proceeds from the exercise of stock options. For the nine months ended September 30, 2024, cash provided by financing activities was $1.6 million, compared to a use of cash of $14,000 for the same period in 2023. This increase of $1.6 million was driven by proceeds from the exercise of stock options whereas no such exercises occurred in the same period of 2023. Critical Account Estimates There have been no material changes to critical accounting estimates from those disclosed in our 2023 Form 10-K. 35 Table of Contents ITEM 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable.