ChromaDex(CDXC) - 2025 Q2 - Quarterly Report

PART I - Financial Information (unaudited) This section presents the company's unaudited interim financial statements, management's discussion and analysis, market risk disclosures, and internal controls Item 1. Financial Statements (unaudited) Niagen Bioscience, Inc. reported significant financial improvements for the three and six months ended June 30, 2025, transitioning from net losses to net income, supported by increased assets and positive cash flow Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at period-end Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | % Change | | :----------------------------------- | :------------ | :---------------- | :----- | :------- | | Cash and cash equivalents | $60,474 | $44,660 | $15,814 | 35.4% | | Total current assets | $86,679 | $64,102 | $22,577 | 35.2% | | Total assets | $91,525 | $68,278 | $23,247 | 34.0% | | Total current liabilities | $22,327 | $17,948 | $4,379 | 24.4% | | Total liabilities | $27,330 | $22,184 | $5,146 | 23.2% | | Total stockholders' equity | $64,195 | $46,094 | $18,101 | 39.3% | Condensed Consolidated Statements of Operations This statement outlines the company's financial performance, presenting net sales, costs, and net income or loss over specific reporting periods Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change (3M) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change (6M) | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------ | :------------------------------- | :------------------------------- | :------------ | | Net Sales | $31,117 | $22,739 | 36.8% | $61,598 | $44,892 | 37.2% | | Cost of Sales | $10,891 | $9,046 | 20.4% | $22,041 | $17,743 | 24.2% | | Gross Profit | $20,226 | $13,693 | 47.7% | $39,557 | $27,149 | 45.7% | | Operating Income (Loss) | $3,185 | $(256) | N/A | $7,957 | $(987) | N/A | | Net Income (Loss) | $3,609 | $(15) | N/A | $8,672 | $(507) | N/A | | Basic EPS | $0.05 | $0.00 | N/A | $0.11 | $(0.01) | N/A | | Diluted EPS | $0.04 | $0.00 | N/A | $0.10 | $(0.01) | N/A | Condensed Consolidated Statements of Stockholders' Equity This statement tracks the changes in the company's equity accounts, including stock issuance, compensation, and net income, over the reporting period Changes in Stockholders' Equity (Six Months Ended June 30, 2025, in thousands) | Item | Amount | | :------------------------------------------------- | :----- | | Balance, January 1, 2025 | $46,094 | | Issuance of common stock from stock option exercise | $6,866 | | Share-based compensation | $2,563 | | Net income | $8,672 | | Balance, June 30, 2025 | $64,195 | Condensed Consolidated Statements of Cash Flows This statement summarizes the cash generated and used by the company across its operating, investing, and financing activities for the reporting periods Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | Change | | :----------------- | :-------- | :------ | :-------- | | Operating | $9,133 | $31 | $9,102 | | Investing | $(167) | $(53) | $(114) | | Financing | $6,848 | $582 | $6,266 | | Net Increase | $15,814 | $560 | $15,254 | | End of Period Cash | $60,474 | $27,885 | $32,589 | Notes to Condensed Consolidated Financial Statements These notes offer essential supplementary information and detailed explanations for the figures presented in the condensed consolidated financial statements Note 1. Nature of Business This note describes Niagen Bioscience, Inc. as a global bioscience company focused on healthy aging through NAD+ research and commercialization - Niagen Bioscience, Inc. is a global bioscience company focused on healthy aging, pioneering research on nicotinamide adenine dinucleotide (NAD+), an essential coenzyme whose levels decline with age[21] - The company is the innovator behind the NAD+ precursor nicotinamide riboside chloride (NRC), commercialized as Niagen® (food and pharmaceutical grades) and its dietary supplement consumer product line, Tru Niagen®[22] - Niagen Bioscience also offers NAD+ test kits to healthcare practitioners, supplies proprietary ingredients as raw materials, and provides natural product fine chemicals and R&D services[22] Note 2. Basis of Presentation and Significant Accounting Policies This note details the preparation of unaudited financial statements in accordance with GAAP and SEC regulations, outlining significant accounting policies - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and SEC regulations, including all necessary adjustments for fair presentation[23] - The financial statements are consolidated, eliminating all significant intercompany balances and transactions[24] - There have been no material changes to the company's significant accounting policies described in its 2024 Annual Report on Form 10-K[25] - The company is evaluating the impact of recently issued accounting standards, including ASU 2023-06 (Disclosure Improvements), ASU 2023-09 (Income Tax Disclosures), ASU 2024-02 (Codification Improvements), and ASU 2024-03 (Expense Disaggregation Disclosures)[26][27][28][29] Note 3. Liquidity This note assesses the company's ability to meet its financial obligations over the next twelve months, considering cash balances and operational cash flow - Management evaluated conditions that raised substantial doubt about the company's ability to meet obligations over the next twelve months, citing a history of recurring operating losses and negative cash flows from operating activities[30] - As of June 30, 2025, the company had unrestricted cash and cash equivalents of $60.3 million[30] - Management anticipates that current unrestricted cash and cash generated from net sales will be sufficient to meet financial obligations for at least the next twelve months, but may seek additional capital for longer-term strategic objectives[31] Note 4. Income (Loss) Per Share Applicable to Common Stockholders This note provides the calculation of basic and diluted income or loss per common share, including the impact of potentially dilutive securities Income (Loss) Per Share (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $3,609 | $(15) | $8,672 | $(507) | | Weighted average common shares (basic) | 79,249 | 75,559 | 78,534 | 75,394 | | Weighted average common shares (diluted) | 86,241 | 75,559 | 84,877 | 75,394 | | Basic income (loss) per common share | $0.05 | $0.00 | $0.11 | $(0.01) | | Diluted income (loss) per common share | $0.04 | $0.00 | $0.10 | $(0.01) | - Options and restricted stock units totaling 478 thousand and 1,805 thousand shares were anti-dilutive for the three and six months ended June 30, 2025, respectively, and thus excluded from diluted EPS calculations[34] Note 5. Business Segments This note presents disaggregated financial information for the company's Consumer Products, Ingredients, and Analytical Reference Standards and Services segments - The company operates in three reportable segments: Consumer Products, Ingredients, and Analytical Reference Standards and Services[35][36] Net Sales by Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Consumer Products | $22,699 | $18,647 | $44,200 | $35,998 | | Ingredients | $7,619 | $3,301 | $15,788 | $7,389 | | Analytical Reference Standards & Services | $799 | $791 | $1,610 | $1,505 | | Total Net Sales | $31,117 | $22,739 | $61,598 | $44,892 | Disaggregated Revenue by Product (Three Months Ended June 30, 2025, in thousands) | Product Category | Consumer Products Segment | Ingredients Segment | Analytical Reference Standards and Services Segment | Total | | :----------------------- | :------------------------ | :------------------ | :-------------------------------------------------- | :---- | | Tru Niagen®, Consumer Product | $22,699 | — | — | $22,699 | | Food-grade Niagen® | — | $5,994 | — | $5,994 | | Pharmaceutical-grade Niagen® | — | $1,390 | — | $1,390 | | Other Ingredients | — | $235 | — | $235 | | Reference Standards | — | — | $772 | $772 | | Consulting and Other | — | — | $27 | $27 | | Total Net Sales | $22,699 | $7,619 | $799 | $31,117 | - As of June 30, 2025, approximately 71.7% of total trade receivables ($9.7 million) were concentrated among four major customers: A.S. Watson Group (24.1%), Amazon Marketplaces (12.2%), Life Extension (22.0%), and Wells Pharma of Houston (13.4%)[43][45] Note 6. Related Party Transactions This note details transactions with related parties, including sales to the A.S. Watson Group before it ceased to be a related party - A.S. Watson Group ceased to be a related party as of August 20, 2024, following a change in ownership[47] Net Sales to A.S. Watson Group (Former Related Party, in millions) | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30, | $0 | $3.7 | | Six Months Ended June 30, | $0 | $6.7 | Note 7. Inventories This note outlines the composition and valuation of the company's inventory, categorized by consumer products, bulk ingredients, and reference standards Inventory Balances (in thousands) | Inventory Class | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Consumer Products - Finished Goods | $4,651 | $5,811 | | Consumer Products - Work in Process | $7,194 | $2,130 | | Bulk ingredients | $2,117 | $757 | | Reference standards | $444 | $494 | | Total Inventory | $14,406 | $9,192 | Note 8. Leases This note describes the company's operating lease arrangements, including right-of-use assets, lease liabilities, and future minimum lease payments - The company amended its Longmont, Colorado lease in Q1 2025, resulting in a remeasurement of ROU assets and lease liabilities, with an estimated fair value increase of approximately $1.1 million[51] Operating Lease Balances and Terms | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Right-of-use assets | $2.5 million | $1.7 million | | Operating lease liabilities | $3.3 million | $2.6 million | | Weighted-average remaining lease term | 3.8 years | N/A | | Weighted-average discount rate | 7.8% | N/A | Future Minimum Lease Payments Under Operating Leases (as of June 30, 2025, in thousands) | Year | Amount | | :-------------------------------- | :----- | | 2025 (Remainder) | $669 | | 2026 | $1,183 | | 2027 | $782 | | 2028 | $657 | | 2029 | $338 | | 2030 | $263 | | Total | $3,892 | | Less present value discount | $(606) | | Present value of total operating lease liabilities | $3,286 | Note 9. Share-Based Compensation This note details the company's share-based compensation plans, including stock options, RSUs, and PSUs, and the associated expense recognition - Stockholders approved an amendment to the 2017 Equity Incentive Plan in June 2025, increasing available shares by 4.75 million, with approximately 6.2 million shares remaining for issuance as of June 30, 2025[56] Total Share-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Cost of sales | $67 | $85 | $126 | $172 | | Sales and marketing | $215 | $248 | $421 | $440 | | Research and development | $149 | $194 | $272 | $436 | | General and administrative | $1,057 | $658 | $1,744 | $1,121 | | Total | $1,488 | $1,185 | $2,563 | $2,169 | - As of June 30, 2025, the company expects to recognize future share-based compensation expense of approximately $8.1 million for unvested stock options, $0.4 million for unvested RSUs, and $4.5 million for unvested PSUs[65] Note 10. Commitments and Contingencies This note outlines the company's significant commitments and contingencies, including legal proceedings and material purchase obligations - The California Action legal dispute with Elysium Health, LLC was resolved through a binding settlement agreement on December 24, 2024, requiring Elysium to pay $2,650,000 to Niagen Bioscience in two equal installments, which were received by March 28, 2025[74][75][76] - In the Delaware Patent Infringement Action against Elysium, the court granted Elysium's motion for attorneys' fees and costs of $9.2 million plus judgment interest on October 28, 2024, with Niagen Bioscience appealing this final judgment on November 25, 2024, and estimating a contingent liability of approximately $10.4 million if the appeal is unsuccessful[83][84] - On July 25, 2025, the company executed a Sales Agreement with W. R. Grace & Co.-Conn for the exclusive supply of Nicotinamide-beta-Riboside Chloride (NRCL) through April 30, 2029, with minimum purchase commitments of approximately $32.6 million in inventory through July 31, 2026[86][87] Note 11. Employee Retention Tax Credit This note provides information on the Employee Retention Tax Credit, including amounts collected and the status of IRS processing - The company collected $0.3 million related to the Employee Retention Tax Credit (ERTC) during the three months ended June 30, 2025[91] - As of June 30, 2025, the Consolidated Balance Sheets include an ERTC benefit of $0.6 million and associated commissions payable of $0.1 million[91] - The IRS halted processing new ERTC claims in September 2023 but continues to process existing claims at a reduced pace with increased scrutiny[92] Note 12. Deferred Revenue - NHSc This note details deferred revenue related to the exclusive supply agreement with Société des Produits Nestlé SA (NHSc) for NRCL - The company has an amended and restated supply agreement with Société des Produits Nestlé SA (NHSc) for the exclusive purchase of NRCL, with a five-year term subject to automatic extensions based on minimum purchases[94] - Deferred revenue is recognized using the output method based on the percentage of NRCL kilograms delivered compared to total forecasted kilograms over the contract term[95] Deferred Revenue (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Revenue (reversed) recognized from deferred revenue (3 months) | $(95) | — | | Deferred revenue balance | $2,674 | $2,579 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial performance, highlighting strong sales growth, improved profitability, and a solid liquidity position for the reporting periods Company Overview This section provides an overview of Niagen Bioscience as a global bioscience company focused on healthy aging through NAD+ research and commercialization - Niagen Bioscience is a global bioscience company dedicated to healthy aging, pioneering research on NAD+, an essential coenzyme whose levels decline with age[99] - The company commercialized food-grade Niagen® in 2013, launched Tru Niagen® in 2017, and introduced Niagen Plus (featuring pharmaceutical-grade Niagen®) for healthcare practitioners in 2024[100] - NRC is a well-studied and efficient NAD+ precursor, protected by patents, with regulatory approvals in multiple regions and over 300 research partnerships through its ChromaDex External Research Program (CERP™)[101][103] Recent Developments This section outlines key recent corporate developments, including a new supply agreement, lease amendments, and executive compensation adjustments - On July 25, 2025, the company executed a Sales Agreement with W. R. Grace & Co.-Conn for the exclusive supply of NRCL through April 30, 2029, with a minimum purchase commitment of approximately $32.6 million in inventory through July 31, 2026[105][106] - During Q1 2025, the company amended its Longmont, Colorado lease, resulting in a remeasurement of ROU assets and lease liabilities, with an estimated fair value increase of approximately $1.1 million[108] - On February 25, 2025, the CEO, Robert Fried, was granted 1,518,600 market performance stock units (PSUs), and his base salary and target performance bonus opportunity increased to $650,000 and 75% of base salary, respectively[109] Financial Condition and Results of Operations This section presents a consolidated overview of the company's financial health and operational results, including cash position and segment performance - As of June 30, 2025, cash and cash equivalents totaled approximately $60.5 million, with $60.3 million unrestricted, anticipated to be sufficient for financial obligations over the next twelve months[111] - The company operates three segments: Consumer Products (dietary supplements, NAD+ test kits), Ingredients (proprietary ingredient technologies like Niagen®), and Analytical Reference Standards and Services (phytochemicals, R&D services)[112] Consolidated Financial Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net sales | $31,117 | $22,739 | $61,598 | $44,892 | | Net income (loss) | $3,609 | $(15) | $8,672 | $(507) | | Basic income (loss) per common share | $0.05 | $0.00 | $0.11 | $(0.01) | | Diluted income (loss) per common share | $0.04 | $0.00 | $0.10 | $(0.01) | Net Sales This section analyzes net sales performance, detailing revenue growth across the Consumer Products, Ingredients, and Analytical Reference Standards segments Net Sales by Reportable Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change (3M) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change (6M) | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------ | :------------------------------- | :------------------------------- | :------------ | | Consumer Products | $22,699 | $18,647 | 22% | $44,200 | $35,998 | 23% | | Ingredients | $7,619 | $3,301 | 131% | $15,788 | $7,389 | 114% | | Analytical reference standards and services | $799 | $791 | 1% | $1,610 | $1,505 | 7% | | Total net sales | $31,117 | $22,739 | 37% | $61,598 | $44,892 | 37% | - Tru Niagen® sales increased by $4.1 million (3 months) and $8.2 million (6 months) due to e-commerce channel performance, reflecting increased customer acquisition and retention[116] - Total ingredient sales increased by $4.3 million (3 months) and $8.4 million (6 months), primarily driven by higher sales to food-grade Niagen® partners and the launch of pharmaceutical-grade Niagen®[116] Cost of Sales This section examines the cost of sales, highlighting improvements in operational efficiency and favorable product mix across segments Cost of Sales by Reportable Segment (in thousands, as % of net sales) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Consumer Products | $7,453 (33%) | $6,785 (36%) | $14,860 (34%) | $12,939 (36%) | | Ingredients | $2,808 (37%) | $1,545 (47%) | $5,909 (37%) | $3,382 (46%) | | Analytical reference standards and services | $630 (79%) | $716 (91%) | $1,272 (79%) | $1,422 (94%) | | Total cost of sales | $10,891 (35%) | $9,046 (40%) | $22,041 (36%) | $17,743 (40%) | - Total cost of sales, as a percentage of net sales, improved by 480 basis points (3 months) and 370 basis points (6 months) due to enhanced operational efficiency and favorable product mix shifts[118] - Ingredients segment cost of sales as a percentage of net sales improved by approximately 1,000 basis points (3 months) and 900 basis points (6 months), driven by enhanced labor/overhead utilization, lower-cost inventory, and favorable product mix from pharmaceutical-grade Niagen® launch[119] Gross Profit This section analyzes the company's gross profit performance, showcasing significant increases across all reportable segments Gross Profit by Reportable Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change (3M) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change (6M) | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------ | :------------------------------- | :------------------------------- | :------------ | | Consumer Products | $15,246 | $11,862 | 29% | $29,340 | $23,059 | 27% | | Ingredients | $4,811 | $1,756 | 174% | $9,879 | $4,007 | 147% | | Analytical reference standards and services | $169 | $75 | 125% | $338 | $83 | 307% | | Total gross profit | $20,226 | $13,693 | 48% | $39,557 | $27,149 | 46% | Operating Expenses - Sales and Marketing This section reviews sales and marketing expenses, noting increases in absolute terms but improvements as a percentage of net sales due to efficiency Total Sales and Marketing Expenses (in thousands, as % of net sales) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Total sales and marketing expenses | $8,207 (26%) | $6,969 (31%) | $16,324 (27%) | $13,709 (31%) | - Total sales and marketing expenses increased by $1.2 million (3 months) and $2.6 million (6 months) but improved as a percentage of net sales by 420 basis points (3 months) and 400 basis points (6 months), reflecting improved sales efficiency and disciplined investment[120] - Consumer products segment sales and marketing expenses increased by $1.3 million (3 months) and $2.6 million (6 months), primarily due to higher advertising, marketing, and selling expenses to support brand growth[120] Operating Expenses - Research and Development This section details research and development expenses, noting fluctuations driven by professional fees, employee wages, and product line investments Research and Development Expenses (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change (3M) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change (6M) | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------ | :------------------------------- | :------------------------------- | :------------ | | Consumer Products | $1,169 | $1,135 | 3% | $2,081 | $2,830 | (26)% | | Ingredients | $398 | $181 | 120% | $744 | $581 | 28% | | Total R&D expenses | $1,567 | $1,316 | 19% | $2,825 | $3,411 | (17)% | - R&D expenses increased by $0.3 million (3 months) due to higher professional/consulting fees and employee wage expenses, but declined by $0.6 million (6 months) due to elevated investments in Q1 2024 for the Niagen Plus product line launch[121] Operating Expenses - General and Administrative This section analyzes general and administrative expenses, attributing changes to employee-related costs, professional fees, and credit loss adjustments General and Administrative Expenses (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change (3M) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change (6M) | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------ | :------------------------------- | :------------------------------- | :------------ | | General and administrative | $7,267 | $5,664 | 28% | $12,451 | $11,016 | 13% | - The increase in G&A expenses for the six months ended June 30, 2025, reflects higher employee-related expenses ($1.1 million) and professional/consulting fees ($1.2 million), partially offset by a $1.3 million reduction in credit loss expense due to a recovery[122] Income Taxes This section outlines the company's income tax expense and the maintenance of a full valuation allowance against deferred tax assets - The company recorded income tax expense of $128,000 (3 months) and $296,000 (6 months) for 2025, representing 3.4% and 3.3% of earnings before income taxes, respectively[125] - A full valuation allowance is maintained against the entire deferred income tax balance, as future realization of deferred tax assets is uncertain[124] - The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, is not anticipated to have a significant impact on the company's consolidated income tax position, effective tax rate, or valuation allowance[127] Depreciation and Amortization This section provides a breakdown of non-cash expenses, including depreciation of assets, amortization of intangibles, and noncash lease expenses Depreciation and Amortization Expenses (Six Months Ended June 30, in thousands) | Expense Type | 2025 | 2024 | | :------------------------------------ | :--- | :--- | | Depreciation of leasehold improvements and equipment | $316 | $348 | | Amortization of intangible assets | $75 | $75 | | Noncash lease expense | $332 | $337 | Liquidity and Capital Resources This section assesses the company's cash position, historical losses, and future capital requirements, including purchase and lease obligations - From inception through June 30, 2025, the company incurred aggregate losses of approximately $173.2 million, primarily due to operational expansion and intellectual property protection costs[131] - As of June 30, 2025, the company had $60.5 million in cash and cash equivalents (including $152,000 restricted cash) and no outstanding borrowings under its line of credit[133] - The company had purchase obligations of $32.6 million for inventory through July 31, 2026, and future minimum lease obligations of $3.9 million over approximately five years[133] Net Cash Flow Activities (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | Change | | :----------------- | :------ | :------ | :-------- | | Operating | $9,133 | $31 | $9,102 | | Investing | $(167) | $(53) | $(114) | | Financing | $6,848 | $582 | $6,266 | Critical Accounting Estimates This section confirms that there have been no material changes to the company's critical accounting estimates from its prior annual report - There have been no material changes to critical accounting estimates from those disclosed in the company's 2024 Form 10-K[139] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states that this item is not applicable for the reporting period - The company states that quantitative and qualitative disclosures about market risk are not applicable[140] Item 4. Controls and Procedures Management, under CEO and CFO supervision, evaluated disclosure controls and procedures, concluding they were effective as of June 30, 2025 - Management, under the supervision of the CEO and CFO, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[141] - There were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the second fiscal quarter[142] PART II - Other Information This section provides disclosures on legal proceedings, comprehensive risk factors, other pertinent information, and a list of filed exhibits Item 1. Legal Proceedings This section refers to Note 10, Commitments and Contingencies, in the Notes to the Unaudited Condensed Consolidated Financial Statements for a detailed description of the company's legal proceedings - For a description of legal proceedings, refer to Note 10, Commitments and Contingencies, Legal Proceedings in the Notes to the Unaudited Condensed Consolidated Financial Statements[144] Item 1A. Risk Factors Investing in Niagen Bioscience's common stock involves substantial risks, including the company's history of operating losses, dependence on key products and customers, intense competition, and reliance on a single supplier for a critical ingredient Summary of Risk Factors This section summarizes the principal risks associated with investing in the company, covering operational, financial, and market-related challenges - The company has a history of operating losses and may need additional financing to meet future long-term capital requirements[151] - Interruptions in relationships or declines in business with major customers could materially harm the business and financial results[151] - Future success largely depends on sales of the Tru Niagen® product[151] - The company relies on a single supplier, W.R. Grace, for NRC and a limited number of third-party suppliers for raw materials[151] - The ability to protect intellectual property and proprietary technology through patents and other means is uncertain and may be inadequate[151] - Changes in government regulation or practices relating to the pharmaceutical, dietary supplement, food, and cosmetic industries could affect compliance and demand for products[152] Risks Related to our Company and our Business This section details risks inherent to the company's business model, including operating losses, customer dependency, competition, and economic conditions - The company has a history of operating losses and an accumulated deficit of approximately $173.2 million as of June 30, 2025, and may need additional financing, which may not be available on favorable terms or at all[154][155] - Interruptions in relationships or declines in business with major customers could materially harm the business and financial results[156] - Global, market, and economic conditions, including inflation, interest rates, and geopolitical issues, may negatively impact the business, financial condition, and share price[157][158] - The company's future success largely depends on sales of its Tru Niagen® product, and market acceptance is critical[159] - The company faces significant competition from larger companies with greater resources, and competitive pricing or misleading marketing practices could harm its business[162][167][168][169] - Substantial, complex, or extended litigation could cause significant costs and distract management, potentially leading to financial exposure beyond recorded reserves[170] Risks Related to our Operations This section outlines operational risks such as fluctuating results, sales and marketing capabilities, cybersecurity threats, and key personnel dependency - Operating results may fluctuate significantly due to factors such as order timing, costs, supply chain disruptions, tariffs, new product introductions, competition, and economic conditions, making future results difficult to predict[171][175] - The inability to maintain or develop adequate sales, marketing, and distribution capabilities, or effective arrangements with third parties, could prevent the company from generating product revenue and achieving profitability[173][174] - Cyber security incidents or threats, including those enhanced by AI, could disrupt operations, lead to data loss, intellectual property theft, financial losses, litigation, and reputational damage[176][177][178][179] - The company's dependence on key personnel means the loss of senior leadership or specialized team members could negatively affect the business[183] - Failure to comply with financial and operating covenants in the Credit Agreement could limit borrowing availability, accelerate debt maturity, and materially adversely impact liquidity[188][189] Risks Related to Our Products This section addresses product-specific risks, including reliance on single suppliers, manufacturing outsourcing, product liability, and development delays - The company relies on a single supplier, W.R. Grace, for NRC and a limited number of third-party suppliers for raw materials, posing risks of supply interruptions, delays, and increased costs[190] - Failure by outsourcing facilities that produce pharmaceutical-grade Niagen® to adequately perform their obligations could harm the business or financial results, including issues with quality control, manufacturing capacity, and regulatory compliance[191][192][193] - Unfavorable publicity or consumer perception regarding the safety, efficacy, or quality of the company's products or dietary supplements generally could materially adversely affect demand and business[196][197] - The company may incur material product liability claims or class action litigation, which could increase costs, damage reputation, and adversely affect revenues and operating income[199] - Delays in the development of additional products or an inability to commercialize them could occur due to regulatory hurdles, clinical trial outcomes, manufacturing challenges, or market acceptance issues[201] Risks Related to our Intellectual Property This section details risks related to the protection and enforcement of the company's intellectual property, including patent challenges and infringement claims - The company's ability to protect its intellectual property and proprietary technology through patents and other means is uncertain and may be inadequate, potentially leading to a material adverse effect on the business[206][208] - Patents and licenses may be subject to challenge on validity grounds, and patent applications may be rejected, reducing or eliminating competitive advantages[209] - The company may become subject to claims of infringement or misappropriation of others' intellectual property rights, which could prohibit product development, require costly licenses, or result in substantial monetary damages[210][211] - The prosecution and enforcement of patents licensed from third parties are not within the company's control, and their failure to maintain these rights could lead to infringement claims or loss of competitive advantage[212] Risks Related to Regulatory Approval of Our Products and Other Government Regulations This section covers risks arising from evolving government regulations, privacy laws, and the need for regulatory approvals in the company's industries - Changes in government regulation, priorities, or practices relating to the pharmaceutical, dietary supplement, food, and cosmetic industries could affect the company's ability to comply and the demand for its products and services[214] - Compliance with stringent and changing global privacy and data security laws and regulations could result in additional costs and liabilities, inhibit global data processing, and lead to government enforcement actions or litigation[215][216][217][218][219][220][221][222][223] - The company is subject to regulation by various federal, state, and foreign agencies; failure to comply could lead to fines, penalties, product recalls, and restrictions on operations[224][225] - Changes in government regulation related to regulatory approvals to market and sell goods could adversely affect the ability to generate revenues, as regulatory clearance is often a prerequisite and can be lengthy and expensive[227][228] Risks Related to the Securities Markets and Ownership of our Equity Securities This section discusses risks pertinent to the company's common stock, including market price volatility, dividend policy, and potential dilution - The market price of the company's common stock may be volatile and adversely affected by various factors, including operating results, new product announcements, media coverage, litigation, and economic conditions[229][230] - The company has not paid cash dividends in the past and does not expect to in the foreseeable future, meaning any return on investment will be limited to the value appreciation of common stock[231] - A significant number of outstanding options, unvested restricted stock units, and market performance stock units could lead to future sales and adversely affect the market price of common stock[232] - The ability to use net operating loss (NOL) carryforwards and certain other tax attributes may be limited due to ownership changes or state-level restrictions, potentially increasing future tax liability[233] - The company's bylaws designate the Court of Chancery of the State of Delaware as the exclusive forum for certain disputes, which could limit stockholders' ability to obtain a favorable judicial forum[234][236] General Risks This section addresses broader risks such as litigation, internal control deficiencies, ESG matters, tax law changes, and market liquidity - The company may become involved in securities class action litigation, which could be expensive, divert management's attention, and harm the business[237][238] - Failure to establish and maintain effective internal control over financial reporting could result in material misstatements, failure to meet reporting obligations, and loss of investor confidence[239] - Environmental, social, and governance (ESG) matters may impact the business and reputation, potentially leading to increased costs, scrutiny, or damage to brand image[240][241] - Changes in tax laws or regulations that are applied adversely to the company or its customers may have a material adverse effect on business, cash flow, financial condition, or results of operations[242] - The company has a limited operating history in China, and its ability to develop successful channels there is subject to legal, political, economic, and social uncertainties[243][244] - The company's common stock may be thinly traded, potentially making it difficult for stockholders to sell shares at or near ask prices or at all[245] Item 5. Other information This section confirms that no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the last fiscal quarter - No director or officer, as defined in Rule 16a-1(f), adopted or terminated a 'Rule 10b5-1 trading arrangement' or a 'non-Rule 10b5-1 trading arrangement' during the last fiscal quarter[247] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, equity incentive plans, a sales agreement, and certifications - The exhibits include the Amended and Restated Certificate of Incorporation, Certificate of Amendment, Amended and Restated Bylaws, and Form of Stock Certificate[248] - Key agreements listed are the Niagen Bioscience, Inc. 2017 Equity Incentive Plan, Employee Stock Purchase Plan, and a Sales Agreement with W. R. Grace & Co.-Conn[248] - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(A) and 18 U.S.C. Section 1350 are included[248] Signatures The report was duly signed on behalf of Niagen Bioscience, Inc. by Ozan Pamir, Chief Financial Officer, on August 6, 2025 - The report was signed by Ozan Pamir, Chief Financial Officer, on August 6, 2025[252]