What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-10-31 · 125 added, 96 removed, 135 unchanged (62% of the section changed)

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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.

Growth and percentage comparisons made herein generally refer to the three months ended March 31, 2025 compared with the three months ended March 31, 2024 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

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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®.

In 2013, we commercialized food-grade Niagen®, a proprietary form of nicotinamide riboside chloride (NRC), a novel form of vitamin B3, as both a dietary and food ingredient.

In 2017, we expanded our offerings by launching Tru Niagen®, a finished dietary supplement featuring Niagen® which was made available directly to consumers.

In 2024, we launched Niagen Plus, 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®.

FDA-registered 503B outsourcing facilities who are able to compound and distribute Niagen® intravenous (Niagen IV) and injectable Niagen®.

These pharmaceutical-grade Niagen® products are available exclusively at clinics with a prescription.

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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.

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).

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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;

Bruce German, Chairman of Food, Nutrition and Health at the University of California, Davis;

Pinchas Cohen, MD, Distinguished Professor of Gerontology, Medicine and Biological Sciences and Dean of the USC Leonard Davis School of Gerontology;

Brunie Felding, Associate Professor in the Department of Molecular Medicine at Scripps Research Institute, California Campus;

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.;

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.

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.

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.

Lease Amendment

During the first quarter of 2025, we amended our existing lease in Longmont, Colorado.

In accordance with Accounting Standards Codification (ASC) 842, the amended lease agreement is considered to be modified and subject to lease modification guidance.

The right-of-use (ROU) asset and lease liability related to the agreement were remeasured based on the change in the lease conditions such as rent payment and lease terms.

The fair value of the increase in related lease liability and ROU asset is estimated to be approximately $1.1 million.

The amended lease now extends through October 31, 2030.

Purchase Commitments

Effective January 1, 2025, W.R.

Grace (Grace) and the Company began operating under the Tenth Amendment to the Manufacturing and Supply Agreement (the “Grace Manufacturing Agreement”), initially effective in January 2016.

In January 2019, Grace was issued patents related to the crystalline form of NR chloride which limit the Company’s ability to find alternatives for supply (Grace Patents).

Although the Grace Manufacturing Agreement formally expired on March 31, 2025, the Company and Grace continue to operate under the terms of the Tenth Amendment, including a binding six-month rolling forecast that is updated monthly and remains in effect.

This rolling forecast mechanism has ensured continuity of supply while the parties continue to negotiate a potential longer-term supply agreement.

As of March 31, 2025, the rolling forecast obligates the Company to purchase approximately $16.4 million of inventory between April 1, 2025 and September 30, 2025.

While the Company expects to reach a mutually agreeable long-term arrangement with Grace, there can be no assurance that such an agreement will be finalized.

Any failure to reach a new agreement on acceptable terms could have a material adverse effect on the Company’s operations and financial results, as further described in Item 1A.

Risk Factors in Part II of this Quarterly Report on Form 10-Q, "We rely on a single supplier, W.R.

Grace, for NRC and a limited number of third-party suppliers for the raw materials required to produce our products."

Amended Executive Employment Agreement and Executive Market Performance Stock Unit Grant

As previously disclosed, on February 25, 2025 the Company granted to Robert Fried, our Chief Executive Officer, 1,518,600 market performance stock units (“PSUs”) under the Company’s 2017 Equity Incentive Plan and subject to performance conditions during a seven year performance period.

Additionally, Mr.

Fried’s base salary and target performance bonus opportunity increased to $650,000 and 75% of his base salary, respectively.

Financial Condition and Results of Operations

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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.

As of March 31, 2025, our cash and cash equivalents totaled approximately $55.6 million, of which $55.5 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.

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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,

Our consolidated net sales, net income (loss) and earnings (loss) per share for the three months ended March 31, 2025 and 2024 are as follows:

Three Months Ended March 31,

(In thousands, except per share data) 2025 2024

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Net income (loss) 5,063 (492)

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)

Income (Loss) Per Share:

Basic income (loss) per common share $ 0.07 $ (0.01)

Diluted income (loss) per common share $ 0.06 $ (0.01)

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

Three Months Ended March 31,

(In thousands) 2025 2024 % Change

Consumer Products $ 21,501 $ 17,351 24 %

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Total net sales $ 30,481 $ 22,153 38 %

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.

Total net sales increased by approximately $8.3 million for the three months ended March 31, 2025, compared to the same period in 2024.

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.

• Tru Niagen® sales increased by approximately $4.2 million for the three months ended March 31, 2025, compared to the corresponding period in 2024.

This increase was primarily attributable to a $4.0 million increase in sales through our e-commerce channel, reflecting continued growth in consumer demand and effective digital marketing initiatives.

The remaining increase was driven by higher sales through our distributor partners, including sustained sales with A.S.

• Total ingredient sales increased by approximately $4.1 million for the three months ended March 31, 2025, compared to the same period in 2024.

The increase was primarily driven by higher sales to key food-grade Niagen® partners, which contributed approximately $2.9 million.

These sales can exhibit quarterly variability based on partner ordering patterns and are inherently lumpy in nature.

Additionally, pharmaceutical-grade Niagen® sales contributed $1.0 million during the period.

Pharmaceutical-grade Niagen® was launched in the second half of 2024;

therefore, there were no comparable sales in the prior-year period.

The remaining increase was attributable to growth in sales of other ingredients.

• Our analytical reference standards and services segment constituted the smallest proportion of total sales, growing $0.1 million for the three months ended March 31, 2025 compared to the corresponding period in 2024.

Cost of Sales

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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

Three Months Ended March 31,

Amount % of net sales

(In thousands) 2025 2024 2025 2024

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Total cost of sales $ 11,150 $ 8,697 37 % 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.

Total cost of sales, as a percentage of net sales, improved by 270 basis points for the three months ended March 31, 2025 compared to the same period in 2024 reflecting enhanced operational efficiency and favorable product mix shifts across our segments.

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.

For the three months ended March 31, 2025, our consumer products segment maintained relatively stable cost of sales, as a percentage of net sales, improving a slight 100 basis points compared to the same period in 2024.

• 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.

For the ingredients segment, cost of sales, as a percentage of net sales, improved 700 basis points for the three months ended March 31, 2025, compared to the same period in 2024.

This improvement was primarily driven by better labor and overhead utilization as a result of increased sales volume, as well as favorable shifts in product mix following the launch of our pharmaceutical-grade Niagen®.

• 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):

For the analytical reference standards and services segment, which experienced a slight increase in sales and slightly lower costs of sales for the three months ended March 31, 2025, compared to the same period in 2024, there was an improvement of 2,000 basis points in cost of sales as a percentage of net sales.

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, delivery, among other factors.

The following table sets forth our total gross profit by reportable segment:

Three Months Ended March 31,

(In thousands) 2025 2024 % Change

Gross profit :

Consumer Products $ 14,094 $ 11,197 26 %

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Total gross profit $ 19,331 $ 13,456 44 %

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.

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

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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:

Three Months Ended March 31,

($ In thousands) Amount % of

net sales Amount % of

Advertising expenses:

Consumer Products $ 2,976 14 % $ 2,487 14 %

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Analytical reference standards and services — — — —

Total advertising expenses $ 2,976 10 % $ 2,487 11 %

Marketing expenses:

Consumer Products $ 2,453 11 % $ 1,897 11 %

Ingredients 25 — 12 —

Analytical reference standards and services — — 1 —

Total marketing expenses $ 2,478 8 % $ 1,910 9 %

Selling expenses:

Consumer Products $ 2,507 12 % $ 2,212 13 %

Ingredients 49 1 — —

Analytical reference standards and services 107 13 131 18

Total selling expenses $ 2,663 9 % $ 2,343 11 %

Total sales and marketing expenses:

• 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.

Consumer Products $ 7,936 37 % $ 6,596 38 %

Ingredients 74 1 12 —

Analytical reference standards and services 107 13 132 18

Total sales and marketing expenses $ 8,117 27 % $ 6,740 30 %

Total sales and marketing expenses increased by $1.4 million, or 20%, to $8.1 million for the three months ended March 31, 2025 compared to the same period in 2024.

However, as a percentage of net sales, total sales and marketing expenses improved by 380 basis points to approximately 27% reflecting improved sales efficiency and disciplined investment.

The increase in expenses primarily reflects higher investments in advertising and marketing to support brand growth in our consumer products segment.

Detailed changes in sales and marketing expense were primarily driven by the following:

• For our consumer products segment, sales and marketing expenses increased by $1.3 million to $7.9 million for the three months ended March 31, 2025 compared to $6.6 million for the three months ended March 31, 2024, while slightly improving as a percentage of sales to 37% from 38%.

◦ Advertising expenses increased by $0.5 million to $3.0 million, while remaining stable at 14% of net sales for the three months ended March 31, 2025 compared to the comparable period in 2024

◦ Marketing expenses increased by $0.6 million to $2.5 million also stable at 11% of net sales for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

◦ Selling expenses grew by $0.3 million to $2.5 million, improving slightly as a percentage of net sales by 100 basis points for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

• For our ingredients segment, sales and marketing expense increased to $74,000 for the three months ended March 31, 2025 from $12,000 in the comparable period in 2024 reflecting modest support for growing partner demand.

Expenses remained immaterial as a percentage of net sales.

• For our analytical reference standards and services segment, sales and marketing expense decreased to $107,000 for the three months ended March 31, 2025, or 13% of net sales, down 500 basis points from the comparable period in 2024 primarily due to lower selling costs and more efficient resource allocation.

Operating Expenses-Research and Development

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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

Three Months Ended March 31,

(In thousands) 2025 2024 % Change

R&D expenses:

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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.

For the three months ended March 31, 2025, R&D expenses were $0.8 million lower compared to the same period in 2024.

During the three months ended March 31, 2024, we accelerated R&D spending to support the successful launch of the Niagen Plus product line, including work on pharmaceutical-grade Niagen®.

As anticipated, spending in the current period normalized following the execution of these initiatives.

Our R&D investment levels continue to vary based on project timelines, clinical activity, and resource allocation.

Operating Expenses-General and Administrative

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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

Three Months Ended March 31,

(In thousands) 2025 2024 % Change

General and administrative $ 5,184 $ 5,352 (3) %

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.

Total general and administrative expense were relatively flat, decreasing by $0.2 million during the three months ended March 31, 2025, compared to the corresponding period in 2024.

The decline was driven by a $1.4 million reduction in credit loss expense resulting from a recovery of credit losses compared to provisions in the prior year.

This reduction was partially offset by a $0.7 million increase in professional and consulting service expenses and $0.3 million increase in employee related expenses.

For additional details regarding the recovery of credit losses see Note 10, Commitments and Contingencies , under the heading Legal Proceedings , respectively in the Notes to the Consolidated Financial Statements, included in Part I, Item 1 of this Form 10-Q.

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.

As of March 31, 2025 and December 31, 2024, 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 $168,000 during the three months ended March 31, 2025, representing 3.2% of earnings before income taxes for the period.

During the three months ended March 31, 2024, the Company incurred a net loss and therefore did not record 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, 2025 and December 31, 2024, the Company has not identified any material uncertain tax positions requiring a reserve.

Depreciation and Amortization

Depreciation expense was approximately $512,000 and $693,000 for the nine months ended September 30, 2024 and 2023, respectively.

Depreciation expense was approximately $158,000 and $178,000 for the three months ended March 31, 2025 and 2024, 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.

Amortization expense of intangible assets was approximately $37,000 and $38,000 for the three months ended March 31, 2025 and 2024, respectively.

We amortize intangible assets using a straight-line method, generally over 10 years.

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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.

Noncash lease expense for the three months ended March 31, 2025 was approximately $173,000 compared to $174,000 for the three months ended March 31, 2024.

Liquidity and Capital Resources

From inception through September 30, 2024, we have incurred aggregate losses of approximately $189.1 million.

From inception through March 31, 2025, we have incurred aggregate losses of approximately $176.8 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.

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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.

As of March 31, 2025, we had cash and cash equivalents of $55.6 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 March 31, 2025 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 March 31, 2025, we had purchase obligations of $16.4 million related to inventory purchase commitments to be paid during the six-month period from April 1, 2025 to September 30, 2025, as well as future minimum lease obligations of $4.0 million to be paid over approximately six years.

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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.

For the three months ended March 31, 2025, net cash provided by operating activities was approximately $7.9 million, compared to approximately $0.3 million for the three months ended March 31, 2024.

The increase of approximately $7.6 million was primarily driven by improvements in net income (loss), higher collections on trade receivables relative to the increase in trade receivables, and an increase in accounts payable compared to a reduction in the prior-year period.

These increases were partially offset by a decrease in credit loss expense due to a recovery of previously written-off amounts and higher inventory purchases associated with scaling our inventory reserves.

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 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.

Investing cash flows consist primarily of capital expenditures.

Cash used in investing activities was $32,000 and $41,000 for the three months ended March 31, 2025 and 2024, 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.

For the three months ended March 31, 2025, cash provided by financing activities was $3.1 million, compared to a use of cash of $14,000 for the same period in 2024.

This increase of $3.1 million was driven by proceeds from the exercise of stock options whereas no such exercises occurred in the same period of 2024.

Critical Account Estimates

Critical Accounting Estimates

There have been no material changes to critical accounting estimates from those disclosed in our 2024 Form 10-K.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis