CERUS CORP

Previous wording

This discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2025. Operating results for the three months ended March 31, 2026, are not necessarily indicative of results that may occur in future periods.

Current wording

This discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2025. Operating results for the three and six months ended June 30, 2026, are not necessarily indicative of results that may occur in future periods.

Previous wording

We have two agreements with Biomedical Advanced Research and Development Authority, or BARDA, part of the U.S. Department of Health and Human Services’ Office of the Assistant Secretary for Preparedness and Response, under which we receive funding from BARDA to support the development of our red blood cell system, including clinical and regulatory development programs in support of potential licensure, and development, manufacturing and scale-up activities, as well as activities related to broader implementation of all three INTERCEPT systems in areas of emerging pathogens. The agreement entered in June 2016, or the 2016 BARDA Agreement, currently expires in September 2026 and the agreement entered in September 2024, or the 2024 BARDA Agreement, currently expires in September 2030. The ReCePI study was funded and the RedeS and other studies are being funded as part of our 2016 BARDA Agreement and BARDA reimburses us for allowable direct contract costs, as such costs are incurred, and for allowable indirect costs under both agreements. If we are unable to access all of the activities and associated reimbursement amounts for the remaining options available under our 2024 BARDA Agreement or if we are unable to add additional options and respective reimbursement amounts to fund further activities that may be required to meet licensure requirements, we will need to self-fund the activities required to satisfy the requirements for PMA licensure in the U.S. See the discussion under “Government contracts” below for more information. Should those amounts be inaccessible and should we be unable to self-fund the remaining initiatives, successful completion of the development of the red blood cell system may require us to obtain additional capital in order to obtain any regulatory approvals for and commercialize this product. In addition, if we are unable to obtain from our suppliers sufficient clinical quantities of the active compounds for our red blood cell system meeting defined quality and regulatory specifications, if our suppliers are not able to maintain regulatory compliance or if we experience additional delays in enrollment or completion of the RedeS study, our product development costs would likely increase.

Current wording

We have two agreements with Biomedical Advanced Research and Development Authority, or BARDA, part of the U.S. Department of Health and Human Services’ Office of the Assistant Secretary for Preparedness and Response, under which we receive funding from BARDA to support the development of our red blood cell system, including clinical and regulatory development programs in support of potential licensure, and development, manufacturing and scale-up activities, as well as activities related to broader implementation of all three INTERCEPT systems in areas of emerging pathogens. The agreement entered in June 2016, or the 2016 BARDA Agreement, was due to expire in September 2026. In July 2026, we entered into an amendment with BARDA to extend the 2016 BARDA Agreement through March 2027. The agreement entered in September 2024, or the 2024 BARDA Agreement, was set to expire in September 2030. In July 2026, we entered into a modification with BARDA to extend the 2024 BARDA Agreement through September 2031. The ReCePI study was funded and the RedeS and other studies are being funded as part of our 2016 BARDA Agreement and BARDA reimburses us for allowable direct contract costs, as such costs are incurred, and for allowable indirect costs under both agreements. If we are unable to access all of the activities and associated reimbursement amounts for the remaining options available under our 2024 BARDA Agreement or if we are unable to add additional options and respective reimbursement amounts to fund further activities that may be required to meet licensure requirements, we will need to self-fund the activities required to satisfy the requirements for PMA licensure in the U.S. See the discussion under “Government contracts” below for more information. Should those amounts be inaccessible and should we be unable to self-fund the remaining initiatives, successful completion of the development of the red blood cell system may require us to obtain additional capital in order to obtain any regulatory approvals for and commercialize this product. In addition, if we are unable to obtain from our suppliers sufficient clinical quantities of the active compounds for our red blood cell system meeting defined quality and regulatory specifications, if our suppliers are not able to maintain regulatory compliance or if we experience additional delays in enrollment or completion of the RedeS study, our product development costs would likely increase.

Previous wording

In November 2020, we received FDA approval for the INTERCEPT Blood System for Cryoprecipitation. We commercialize and sell finished IFC made by our manufacturing blood center partners and other blood centers directly to hospitals and indirectly through certain blood centers. Similar to our platelet and plasma products, any blood center manufacturing IFC will need to complete its process validations and obtain site-specific licenses from the FDA Center for Biologics Evaluation and Research, or CBER, before we or they can sell finished IFC in interstate commerce. While all of our manufacturing partners have now received their Biologics License Application, or BLAs, from CBER, we plan to continue working with any other U.S.-based blood centers producing IFC to support their licensure applications. Delays in obtaining these licenses have adversely impacted and additional delays will adversely impact the nationwide availability of IFC in the U.S. In addition, we have also entered into certain agreements with blood centers who will purchase the finished IFC from us to sell to their hospital customers, and with blood center and blood center affiliate organizations to sell INTERCEPT Blood System for Cryoprecipitation kits to produce finished IFC for their own sales efforts to hospitals. Furthermore, most of our agreements with blood center manufacturing partners do not contain minimum production requirements. If our blood center manufacturing partners do not produce sufficient quantities of IFC, or at all, our commercialization efforts will be negatively impacted. However, until we sell sufficient INTERCEPT Blood System for Cryoprecipitation kits to blood center affiliate organizations, expand the number of manufacturing partners producing IFC for us, or more blood centers producing IFC receive approval of their BLAs, our IFC sales will be limited. We have experienced an acceleration in IFC kit sales to blood centers and a shift away from direct sales to hospitals. We expect this trend to continue and that our IFC sales will continue to predominately be kit sales to blood centers.

Current wording

In November 2020, we received FDA approval for the INTERCEPT Blood System for Cryoprecipitation. We sell kits to produce IFC to blood centers and in certain instances, procure finished IFC and sell to other blood centers for their hospital accounts. Similar to our platelet and plasma products, any blood center manufacturing IFC will need to complete its process validations and obtain Biologics License Applications, or BLAs, from the FDA Center for Biologics Evaluation and Research, or CBER, before we or they can sell finished IFC in interstate commerce. Delays in obtaining these licenses have adversely impacted and additional delays will adversely impact the nationwide availability of IFC in the U.S. In addition, we have also entered into certain agreements with blood centers who will purchase the finished IFC from us to sell to their hospital customers, and with blood center and blood center affiliate organizations to sell INTERCEPT Blood System for Cryoprecipitation kits to produce finished IFC for their own sales efforts to hospitals. Until we sell sufficient INTERCEPT Blood System for Cryoprecipitation kits to blood center affiliate organizations, or more blood centers producing IFC receive approval of their BLAs, our IFC sales will be limited. We have experienced an acceleration in IFC kit sales to blood centers and a shift away from direct sales to hospitals. We expect this trend to continue and that our IFC sales will continue to predominately be kit sales to blood centers, which we expect to favorably impact our gross margins.

Previous wording

We have borrowed and, in the future, may borrow additional capital from institutional and commercial banking sources to fund future growth, including pursuant to the Amended and Restated Credit, Security and Guaranty Agreement (Term Loan), or the Term Loan Credit Agreement, and Amended and Restated Credit, Security and Guaranty Agreement (Revolving Loan), or the Revolving Loan Credit Agreement, as described below, or potentially pursuant to new arrangements with different lenders. We have borrowed and may in the future borrow funds on terms that may include restrictive covenants, including covenants that restrict the operation of our business, liens on assets, high effective interest rates, financial performance covenants and repayment provisions that reduce cash resources and limit future access to capital markets. In addition, the principal amounts outstanding under our Term Loan Credit Agreement began amortizing on April 1, 2026 and will require us to pay amounts as they come due in cash, which would negatively impact our available working capital. Should interest rates increase, the rates that we are obligated to pay under our credit agreements would increase, leading to higher interest expense. In addition, we may opportunistically seek access to the equity capital markets to support our development efforts and operations, including through the Controlled Equity Offering SM Sales Agreement, as amended, or the Sales Agreement. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. To the extent that we raise additional funds through collaboration or partnering arrangements, we may be required to relinquish some of our rights to our technologies or rights to market and sell our products in certain geographies, grant licenses on terms that are not favorable to us, or issue equity that may be substantially dilutive to our stockholders.

Current wording

We have borrowed and, in the future, may borrow additional capital from institutional and commercial banking sources to fund future growth, including pursuant to the Second Amended and Restated Credit, Security and Guaranty Agreement (Term Loan), or the Term Loan Credit Agreement, and the Second Amended and Restated Credit, Security and Guaranty Agreement (Revolving Loan), or the Revolving Loan Credit Agreement, as described below, or potentially pursuant to new arrangements with different lenders. We have borrowed and may in the future borrow funds on terms that may include restrictive covenants, including covenants that restrict the operation of our business, liens on assets, high effective interest rates, financial performance covenants and repayment provisions that reduce cash resources and limit future access to capital markets. Should interest rates increase, the rates that we are obligated to pay under our credit agreements would increase, leading to higher interest expense. In addition, we may opportunistically seek access to the equity capital markets to support our development efforts and operations, including through the Controlled Equity Offering SM Sales Agreement, as amended, or the Sales Agreement. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. To the extent that we raise additional funds through collaboration or partnering arrangements, we may be required to relinquish some of our rights to our technologies or rights to market and sell our products in certain geographies, grant licenses on terms that are not favorable to us, or issue equity that may be substantially dilutive to our stockholders.

Previous wording

Although we received FDA approval of our platelet and plasma systems in December 2014, our U.S. commercial efforts continue to be largely focused on enabling blood centers that are using INTERCEPT to optimize production and increase the number of platelet units produced and made available to patients and continuing to develop awareness of INTERCEPT’s product profile relative to other platelet and plasma products, including conventional, un-treated components. In addition, to address the entire market in the U.S., customers will need to modify their operating practices, or we will need to develop, test and obtain FDA approval of additional configurations of the platelet system. All U.S. blood centers must be compliant with the FDA guidance document, “Bacterial Risk Control Strategies for Blood Collection Establishments and Transfusion Services to Enhance the Safety and Availability of Platelets for Transfusion,” or the

Current wording

Although we received FDA approval of our platelet and plasma systems in December 2014, our U.S. commercial efforts continue to be largely focused on enabling blood centers that are using INTERCEPT to optimize production and increase the number of platelet units produced and made available to patients and continuing to develop awareness of INTERCEPT’s product profile relative to other platelet and plasma products, including conventional, un-treated components. In addition, to address the entire market in the U.S., customers will need to modify their operating practices, or we will need to develop, test and obtain FDA approval of additional configurations of the platelet system. All U.S. blood centers must be compliant with the FDA guidance document, “Bacterial Risk Control Strategies for Blood Collection Establishments and Transfusion Services to Enhance the Safety and Availability of Platelets for Transfusion,” or the Final Guidance Document. Although the INTERCEPT Blood System is one of the options available to U.S. blood centers for compliance, we cannot predict if U.S. customers will continue to adopt INTERCEPT over other options or at what levels. Should we be unable to manufacture INTERCEPT in sufficient quantities in a timely manner, have adequate resources to assist customers with implementing the INTERCEPT Blood System, or need to increase prices to address existing and potential new or increased tariffs, U.S.

Previous wording

Final Guidance Document. Although the INTERCEPT Blood System is one of the options available to U.S. blood centers for compliance, we cannot predict if U.S. customers will continue to adopt INTERCEPT over other options or at what levels. Should we be unable to manufacture INTERCEPT in sufficient quantities in a timely manner, have adequate resources to assist customers with implementing the INTERCEPT Blood System, or need to increase prices to address existing and potential new or increased tariffs, U.S. blood centers may be forced to use alternate options allowed by the guidance document, which could permanently impact our ability to convert those blood centers to INTERCEPT users.

Current wording

blood centers may be forced to use alternate options allowed by the guidance document, which could permanently impact our ability to convert those blood centers to INTERCEPT users.

Previous wording

We understand that we will be required to obtain new PMAs and certain in-country approvals for our INTERCEPT Blood System for Platelets and for Plasma with our new LED-based illuminator. We are currently working with the FDA to understand the data requirements for those PMAs. If we are unable to generate the required data for new PMAs, use of INTERCEPT in the United States will be limited to continued use with the existing illuminator, of which we have a limited number of devices available. Due to obsolescence of components of the existing illuminator, there is also a limited period of time during which we can continue to support and maintain the devices.

Current wording

We understand that we will be required to obtain new PMAs in the U.S. and certain in-country approvals for our INTERCEPT Blood System for Platelets and for Plasma with our new LED-based illuminator. We have filed a new PMA application for our INTERCEPT Blood System for Platelets and studies are underway to support the filing of a new PMA application for our INTERCEPT Blood System for Plasma. If we are unable to generate the required data for new PMAs, use of INTERCEPT in the United States will be limited to continued use with the existing illuminator, of which we have a limited number of devices available. Furthermore, although we have received CE Mark approval for the LED-based illuminator with the platelet and plasma systems, we understand that a number of country-specific approvals are required before we can commercialize the LED-based illuminator in those countries. Due to obsolescence of components of the existing illuminator, there is also a limited period of time during which we can continue to support and maintain the devices.

Previous wording

Outside of the U.S., we recognize product revenues from the sale of our platelet and plasma systems in a number of countries around the world including those in Europe, the CIS, and the Middle East. We utilize both our direct sales organization and regional distributors to market and sell our platelet and plasma systems in these international markets. Our commercial efforts outside the U.S. are focused on increasing market adoption with our existing customer relationships and building demand in new geographies.

Current wording

Outside of the U.S., we recognize product revenues from the sale of our platelet and plasma systems in a number of countries around the world including those in Europe, the CIS, and the Middle East. We utilize both our direct sales organization and regional distributors to market and sell our platelet and plasma systems in these international markets. Our commercial efforts outside the U.S. are focused on increasing market adoption with our existing customer relationships and building demand in new geographies. The introduction of the LED-based illuminator, including our direct and indirect markets outside of the United States, may face capital purchase budget constraints which would require us to continue to support the existing version of the illuminator or enter into financing agreements with customers.

Previous wording

The 2016 BARDA Agreement provides for the reimbursement of certain amounts incurred by us in connection with our satisfaction of certain contractual milestones. Under this agreement, we are reimbursed and recognize revenue as qualified direct contract costs are incurred plus allowable indirect costs, based on approved provisional indirect billing rates, which permit recovery of fringe benefits, overhead and general and administrative expenses. As of March 31, 2026, BARDA has committed to reimburse certain of our expenses related to the clinical development of the red blood cell system during a base period and under exercised option periods, in an aggregate amount of up to $185.5 million. BARDA will no longer exercise any unexercised options under the 2016 BARDA Agreement. See Note 11, Development and License Agreements, in Part I, Item 1—Financial Statementsof this Quarterly Report on Form 10-Q for further information regarding our agreements with BARDA.

Current wording

The 2016 BARDA Agreement provides for the reimbursement of certain amounts incurred by us in connection with our satisfaction of certain contractual milestones. Under this agreement, we are reimbursed and recognize revenue as qualified direct contract costs are incurred plus allowable indirect costs, based on approved provisional indirect billing rates, which permit recovery of fringe benefits, overhead and general and administrative expenses. As of June 30, 2026, BARDA has committed to reimburse certain of our expenses related to the clinical development of the red blood cell system during a base period and under exercised option periods, in an aggregate amount of up to $185.2 million. BARDA will no longer exercise any unexercised options under the 2016 BARDA Agreement. See Note 11, Development and License Agreements, in Part I, Item 1—Financial Statementsof this Quarterly Report on Form 10-Q for further information regarding our agreements with BARDA.

Previous wording

In September 2024, we entered into the 2024 BARDA Agreement. The 2024 BARDA Agreement builds on the 2016 BARDA Agreement and aims to further advance the development of the red blood cell system. The 2024 BARDA Agreement includes access to funding that is intended to support a planned FDA modular premarket approval application and potential post-approval studies, accelerate development of an improved version of the red blood cell system, and scale up chemistry, manufacturing, and controls activities to enable a broad product launch, if approved. The six-year agreement with BARDA includes a base period, or the 2024 Base Period, with committed funding of up to $32.1 million, and subsequent option periods, or 2024 Option Periods, that, if exercised by BARDA and completed, would bring the total funding opportunity to $188.4 million as of March 31, 2026. We could be responsible for cost sharing of up to $60.1 million which we would satisfy by agreeing to utilize lower fringe, overhead, and G&A rates for select options than we are otherwise allowed to use as supported by audited indirect cost submissions. BARDA will make periodic assessments of our progress, and the continuation of the 2024 BARDA Agreement is based on our success in completing the required tasks under the 2024 Base Period and each 2024 Option Period (if and to the extent any 2024 Option Periods are exercised by BARDA). BARDA has rights under certain contract clauses to terminate the 2024 BARDA Agreement, including the ability to terminate for convenience at any time. Under the contract, we will be reimbursed and recognize revenue as qualified direct contract costs are incurred plus allowable indirect costs, based on approved provisional indirect billing rates, which permit recovery of fringe benefits, overhead and general and administrative expenses. The U.S. Federal Government has imposed a standardized indirect cost rate on grants administered by the National Institutes of Health. The standardized rates are significantly lower than our current audited indirect rates. While our contracts with BARDA are not currently impacted by these standardized indirect rates, should the U.S. Federal Government impose similar rate restrictions, we would have to absorb many of our indirect costs which would adversely affect our operating results. See Note 11, Development and License Agreements, in Part I, Item 1—Financial Statementsof this Quarterly Report on Form 10-Q for further information regarding our agreements with BARDA.

Current wording

We could be responsible for cost sharing of up to $61.5 million which we would satisfy by agreeing to utilize lower fringe, overhead, and G&A rates for select options than we are otherwise allowed to use as supported by audited indirect cost submissions. BARDA will make periodic assessments of our progress, and the continuation of the 2024 BARDA Agreement is based on our success in completing the required tasks under the 2024 Base Period and each 2024 Option Period (if and to the extent any 2024 Option Periods are exercised by BARDA). BARDA has rights under certain contract clauses to terminate the 2024 BARDA Agreement, including the ability to terminate for convenience at any time. Under the contract, we will be reimbursed and recognize revenue as qualified direct contract costs are incurred plus allowable indirect costs, based on approved provisional indirect billing rates, which permit recovery of fringe benefits, overhead and general and administrative expenses. The U.S. Federal Government has imposed a standardized indirect cost rate on grants administered by the National Institutes of Health. The standardized rates are significantly lower than our current audited indirect rates. While our contracts with BARDA are not currently impacted by these standardized indirect rates, should the U.S. Federal Government impose similar rate restrictions, we would have to absorb many of our indirect costs which would adversely affect our operating results. See Note 11, Development and License Agreements, in Part I, Item 1—Financial Statementsof this Quarterly Report on Form 10-Q for further information regarding our agreements with BARDA.

Previous wording

In September 2020, we entered into a five-year agreement with the FDA for the development of next-generation compounds to optimize pathogen reduction treatment of whole blood to reduce the risk of transfusion-transmitted infections. Under the agreement, we were reimbursed and would recognize revenue as qualified direct contract costs were incurred plus allowable indirect costs, based on approved provisional indirect billing rates, which permitted recovery of fringe benefits, overhead and general and administrative expenses. The agreement, which ended in September 2025, had a total contract value of $11.1 million. See Note 11, Development and License Agreements, in Part I, Item 1—Financial Statements of this Quarterly Report on Form 10-Q for further information regarding the agreement with the FDA.

Current wording

In September 2020, we entered into a five-year agreement with the FDA for the development of next-generation compounds to optimize pathogen reduction treatment of whole blood to reduce the risk of transfusion-transmitted infections. Under the agreement, we were reimbursed and would recognize revenue as qualified direct contract costs were incurred plus allowable indirect costs, based on approved provisional indirect billing rates, which permitted recovery of fringe benefits, overhead and general and administrative expenses. The agreement, which ended in September 2025, had a total contract value of $11.1 million.

Previous wording

Product revenue increased during the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase in product revenue during the three months ended March 31, 2026 was primarily due to sales volume growth in disposable platelet kit sales and IFC sales to U.S. customers. We expect product revenue for INTERCEPT disposable kits to increase in future periods driven by growth in our global platelet business due in part to increased market acceptance of the INTERCEPT Blood System and adoption of the INTERCEPT Blood System in geographies where commercialization efforts are underway.

Current wording

Product revenue increased during the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025. The increase in product revenue during the three months ended June 30, 2026 was primarily due to sales volume growth in disposable platelet and plasma kit sales and IFC sales to U.S. customers. The increase in product revenue during the six months ended June 30, 2026 was primarily due to sales volume growth in disposable platelet kits sales and IFC sales to U.S. customers. We expect product revenue for INTERCEPT disposable kits to increase in future periods driven by growth in our global platelet and plasma business and U.S. IFC business, due in part to increased market acceptance of the INTERCEPT Blood System and adoption of the INTERCEPT Blood System in geographies where commercialization efforts are underway.

Previous wording

Government contract revenue increased during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to increased activities under the 2024 BARDA Agreement executed in the fourth quarter of 2024 and with the DoD relative to the same period in the prior year, partially offset by the completion of our FDA agreement in September 2025. We anticipate that government contract revenue will decrease in future periods due to the 2016 BARDA Agreement ending in September 2026.

Current wording

Government contract revenue decreased during the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025, primarily due to the completion of our FDA agreement in September 2025, decreased activities under the 2024 BARDA Agreement relative to the same period last year, and decreased activities under the 2016 BARDA Agreement. We anticipate that government contract revenue will increase in future periods as multiple contracts are active and as activities supporting those contracts ramp up.

Previous wording

Cost of product revenue increased during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to the increase in product revenue compared to the same period, tariffs, and higher freight charges.

Current wording

Cost of product revenue increased during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025, primarily due to the increase in product revenue compared to the same period, tariffs, and higher freight charges.

Previous wording

Our gross margin on product sales was 52% during the three months ended March 31, 2026 compared to 59% during the three months ended March 31, 2025. The decrease was primarily due to the favorable effects of the capitalization of inventoriable charges during the first quarter of 2025 and current period inflationary pressures. Margins were impacted by the mix of geographies into which products were sold, with higher U.S. kit sales over sales in other regions and, to a lesser extent product mix. Geographic mix and by extension foreign exchange rates along with the impact of enacted import tariffs had an adverse effect on our gross margins. Changes in our gross margin on product sales are affected by various factors, including prices of products sold, the volume of product manufactured, pricing with suppliers, the timing of inventory purchases related to the underlying exchange rate of the Euro relative to the U.S. dollar, manufacturing and supply chain costs, including transportation costs, import tariffs, the mix of product sold, the mix of customers to which products are sold, and the reserves for excess and obsolete inventory. Furthermore, we may experience cost pressures due to the current inflationary environment, tariffs and escalating trade tensions, the global economic impacts of the ongoing military conflict involving the U.S., Israel, and Iran, including disruptions of the global supply chain and energy markets, increased transportation costs and adverse impacts on the efficiency of our supply chain. Additionally, we may encounter unforeseen manufacturing difficulties, which, at a minimum, may lead to higher than anticipated costs, scrap rates, delays in manufacturing products, or lower production levels of manufacturing than would be needed to meet demand. We may also decide to make investments with our manufacturing partners to identify longer-term efficiencies, but result in near-term increased costs. To meet the growing demand for our products and to invest in future quality improvements and gross margin expansion, we have invested in capital equipment, capacity expansion and cost reduction projects with many of our suppliers. These projects may cost more than anticipated, may not produce the anticipated benefits or may be delayed, any of which would potentially limit our expected return on investment and affect our operations. In addition, we may face competition which may limit our ability to maintain existing selling prices for our products which in turn would negatively affect our reported gross margins on product sales. Our gross margins on product sales may be impacted in the future based on all of these and other factors.

Current wording

Our gross margin on product sales was 51% during the three months ended June 30, 2026 compared to 55% during the three months ended June 30, 2025. Our gross margin on product sales was 52% during the six months ended June 30, 2026 compared to 57% during the six months ended June 30, 2025. The margin decrease for the three months ended June 30, 2026 was driven primarily by foreign exchange rates and the cost of our product inventory. The decrease for the six months ended June 30, 2026 was driven by similar factors and the favorable effects of the capitalization of inventoriable charges during the first quarter of 2025. Margins were impacted by the mix of geographies into which products were sold, with higher U.S. kit sales over sales in other regions and, to a lesser extent product mix. Geographic mix and by extension foreign exchange rates along with the impact of enacted import tariffs had an adverse effect on our gross margins. Changes in our gross margin on product sales are affected by various factors, including prices of products sold, the volume of product manufactured, pricing with suppliers, the timing of inventory purchases related to the underlying exchange rate of the Euro relative to the U.S. dollar, manufacturing and supply chain costs, including transportation costs, import tariffs, the mix of product sold, the mix of customers to which products are sold, and the reserves for excess and obsolete inventory. Furthermore, we may experience cost pressures due to the current inflationary environment, tariffs and escalating trade tensions, the global economic impacts of the ongoing military conflict involving the U.S., Israel, and Iran, including disruptions of the global supply chain and energy markets, increased transportation costs and adverse impacts on the efficiency of our supply chain. Additionally, we may encounter unforeseen manufacturing difficulties, which, at a minimum, may lead to higher than anticipated costs, scrap rates, delays in manufacturing products, or lower production levels of manufacturing than would be needed to meet demand. We may also decide to make investments with our manufacturing partners to identify longer-term efficiencies, but result in near-term increased costs. To meet the growing demand for our products and to invest in future quality improvements and gross margin expansion, we have invested in capital equipment, capacity expansion and cost reduction projects with many of our suppliers. These projects may cost more than anticipated, may not produce the anticipated benefits or may be delayed, any of which would potentially limit our expected return on investment and affect our operations. In addition, we may face competition which may limit our ability to maintain existing selling prices for our products which in turn would negatively affect our reported gross margins on product sales. Our gross margins on product sales may be impacted in the future based on all of these and other factors.

Previous wording

Research and development expenses decreased during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily driven by decreased costs related to our LED-based illuminator.

Current wording

Research and development expenses decreased during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025, primarily driven by decreased costs related to government contract work and our LED-based illuminator.

Previous wording

Selling, general and administrative expenses were relatively consistent during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, which was due to multiple offsetting factors and reflects our ongoing focus on driving leverage.

Current wording

Selling, general and administrative expenses increased during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 which was due to multiple offsetting factors and reflects our ongoing focus on driving leverage.

Previous wording

We had foreign exchange gain during the three months ended March 31, 2026, compared to foreign exchange loss during the three months ended March 31, 2025. These are primarily due to foreign exchange variations between the Euro and the U.S. dollar.

Current wording

We had foreign exchange loss during the three months ended June 30, 2026 and 2025. We had foreign exchange gain during the six months ended June 30, 2026 compared to foreign exchange loss during the six months ended June 30, 2025. These are primarily due to foreign exchange variations between the Euro and the U.S. dollar.

Previous wording

Interest expense decreased during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to a decrease in interest rates on our Term Loan. Should interest rates increase, the rates that we are obligated to pay under our credit agreements would increase, leading to higher interest expense.

Current wording

Interest expense decreased during the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025, primarily due to a decrease in interest rates and the principal balance on our Term Loan. Should interest rates increase, the rates that we are obligated to pay under our credit agreements would increase, leading to higher interest expense.

Previous wording

Other income, net decreased during the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Current wording

Other income, net decreased during the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025.

Previous wording

The increase in net cash used in operating activities for the three months ended March 31, 2026 compared to three months ended March 31, 2025, primarily related to the timing of cash collections and payments during the three months ended March 31, 2026, compared to the same period in 2025.

Current wording

The increase in net cash used in operating activities for the six months ended June 30, 2026 compared to six months ended June 30, 2025, was primarily related to changes in working capital during the six months ended June 30, 2026, compared to the same period in 2025.

Previous wording

We had net cash provided by investing activities for the three months ended March 31, 2026 compared to net cash used in investing activities during the same period in 2025. The change was primarily due to higher proceeds from the maturity of our investments compared to the same period in 2025.

Current wording

We had net cash provided by investing activities for the six months ended June 30, 2026 compared to net cash used in investing activities during the same period in 2025. The change was primarily due to higher proceeds from the maturity and sale of our investments and lower purchases of investments compared to the same period in 2025.

Previous wording

The increase in net cash provided by financing activities for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, was primarily due to higher proceeds from the Revolving Loan Credit Agreement during the three months ended March 31, 2026.

Current wording

We had net cash used in financing activities for the six months ended June 30, 2026 compared to net cash provided by financing activities during the same period in 2025. The change was primarily due to the repayment on Prior Term Loan and partially offset by higher proceeds from the Revolving Loan Credit Agreement during the six months ended June 30, 2026.

Previous wording

Working capital decreased as of March 31, 2026, compared to December 31, 2025, primarily due to the reclassification of $8.1 million of long-term debt to short-term due to our amended Term Loan Credit agreement partially offset by an increase in inventory. Contract assets related to DoD of $0.2 million and $0.4 million as of March 31, 2026 and December 31, 2025, respectively are excluded from working capital.

Current wording

Working capital decreased as of June 30, 2026, compared to December 31, 2025, primarily due to the refinancing of debt under our Prior Term Loan and partially offset by an increase in inventory. Contract assets related to DoD of $1.4 million and $0.4 million as of June 30, 2026 and December 31, 2025, respectively are excluded from working capital.

Previous wording

We have borrowed and, in the future, may borrow additional capital from institutional and commercial banking sources to fund future growth, including pursuant to the Term Loan Credit Agreement and Revolving Loan Credit Agreement, or potentially pursuant to new arrangements with different lenders. We have borrowed and, in the future, may borrow funds on terms that may include restrictive covenants, including covenants that restrict the operation of our business, liens on assets, high effective interest rates, financial performance covenants and repayment provisions that reduce cash resources and limit future access to capital markets. In addition, the principal amounts outstanding under our Term Loan Credit Agreement began amortizing on April 1, 2026 and will require us to pay amounts as they come due in cash, which may negatively impact our available working capital beyond the next 12 months. Should interest rates increase again, the rates that we are obligated to pay under our credit agreements would increase, leading to higher interest expense. See Note 5, Debt, in Part I, Item 1—Financial Statements of this Quarterly Report on Form 10-Q for more information on the debt under our Term Loan Credit Agreement and the Revolving Loan Credit Agreement.

Current wording

We have borrowed and, in the future, may borrow additional capital from institutional and commercial banking sources to fund future growth, including pursuant to the Term Loan Credit Agreement and Revolving Loan Credit Agreement, or potentially pursuant to new arrangements with different lenders. We have borrowed and, in the future, may borrow funds on terms that may include restrictive covenants, including covenants that restrict the operation of our business, liens on assets, high effective interest rates, financial performance covenants and repayment provisions that reduce cash resources and limit future access to capital markets. Should interest rates increase again, the rates that we are obligated to pay under our credit agreements would increase, leading to higher interest expense. See Note 5, Debt, in Part I, Item 1—Financial Statements of this Quarterly Report on Form 10-Q for more information on the debt under our Term Loan Credit Agreement and the Revolving Loan Credit Agreement.

Previous wording

Our investment policy is to manage our marketable securities portfolio to preserve principal and liquidity while maximizing the return on the investment portfolio to assist us in funding our operations. We currently invest our cash and cash equivalents in money market funds and interest-bearing accounts with financial institutions. Our money market funds are classified as Level 1 in the fair value hierarchy, in which quoted prices are available in active markets, as the maturity of money market funds are relatively short and the carrying amount is a reasonable estimate of fair value. Our available-for-sale securities related to corporate debt and U.S. government agency securities are classified as Level 2 in the fair value hierarchy, which uses observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. We maintain portfolio liquidity by ensuring that the securities have active secondary or resale markets. We did not record any credit losses during the three months ended March 31, 2026 and 2025. Adverse global economic conditions have had, and may continue to have, a negative impact on the market values of potential investments.

Current wording

Our investment policy is to manage our marketable securities portfolio to preserve principal and liquidity while maximizing the return on the investment portfolio to assist us in funding our operations. We currently invest our cash and cash equivalents in money market funds and interest-bearing accounts with financial institutions. Our money market funds are classified as Level 1 in the fair value hierarchy, in which quoted prices are available in active markets, as the maturity of money market funds are relatively short and the carrying amount is a reasonable estimate of fair value. Our available-for-sale securities related to corporate debt and U.S. government agency securities are classified as Level 2 in the fair value hierarchy, which uses observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. We maintain portfolio liquidity by ensuring that the securities have active secondary or resale markets. We did not record any credit losses during the three and six months ended June 30, 2026 and 2025. Adverse global economic conditions have had, and may continue to have, a negative impact on the market values of potential investments.