Insight Molecular Diagnostics Inc.

Previous wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information necessary to understand our consolidated financial statements for the three months ended March 31, 2026 and 2025 included elsewhere in this Report, and highlight certain other information which, in the opinion of management, will enhance a reader’s understanding of our financial condition, changes in financial condition and results of operations. These historical consolidated financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing, particularly under “Risk Factors” in this Report and those “Risk Factors” in Part I, Item 1A. of our most recent Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC. For additional information, refer to the section above entitled “Cautionary Note Regarding Forward-Looking Statements.” The following discussion should be read in conjunction with our consolidated financial statements and the related notes thereto provided under Part I, Item 1 of this Report.

Current wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information necessary to understand our consolidated financial statements for the three and six months ended June 30, 2026 and 2025 included elsewhere in this Report, and highlight certain other information which, in the opinion of management, will enhance a reader’s understanding of our financial condition, changes in financial condition and results of operations. These historical consolidated financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing, particularly under “Risk Factors” in this Report and those “Risk Factors” in Part I, Item 1A. of our most recent Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC. For additional information, refer to the section above entitled “Cautionary Note Regarding Forward-Looking Statements.” The following discussion should be read in conjunction with our consolidated financial statements and the related notes thereto provided under Part I, Item 1 of this Report.

Previous wording

We are developing molecular diagnostic test kits designed to empower our customers to run their own tests in-house to participate in the patient-care value chain, which is counter-positioned with the send-out-testing central laboratory model. Our decentralized approach also puts testing in the hands of researchers to enable more studies, which we believe can improve standards of care while also creating demand for more testing. We believe that combining innovative science with a simple, but disruptive, business model can create substantial value. Our initial targeted customer institutions are hospitals, transplant centers and labs. The decisions to deploy our tests come from doctors, including surgeons, nephrologists and oncologists, as well as researchers, pathologists, lab directors, medical directors, department heads, lab managers and chief medical officers.

Current wording

We are developing molecular diagnostic test kits designed to empower our customers to run their own tests in-house to participate in the patient-care value chain, which is counter-positioned with the send-out-testing central laboratory model. Our decentralized approach also puts testing in the hands of researchers to enable more studies, which we believe can improve standards of care while also creating demand for more testing. We believe that combining innovative science with a simple, but disruptive, business model can create substantial value. Our initial targeted customer institutions are hospitals, transplant centers and labs, including large reference laboratories. The decisions to deploy our tests come from doctors, including surgeons, nephrologists and oncologists, as well as researchers, pathologists, lab directors, medical directors, department heads, lab managers and chief medical officers.

Previous wording

Our current intellectual property portfolio comprises three general areas: 1) organ transplant, 2) oncology therapy selection, and 3) oncology therapy monitoring. Within these categories, we have developed or are in the process of developing LDTs that can be run at our Franklin, Tennessee laboratory, kitted RUO tests, and IVD kitted clinical tests that can be run by local labs.

Current wording

Our current intellectual property portfolio comprises three general areas: 1) organ transplant testing, 2) oncology therapy selection, and 3) oncology therapy monitoring. Within these categories, we have developed or are in the process of developing LDTs that can be run at our Franklin, Tennessee laboratory, kitted RUO tests, and IVD kitted clinical tests that can be run by local labs.

Previous wording

Our GraftAssure family of assays are performed on a digital PCR instrument that is manufactured by Bio-Rad. Consequently, we have entered into a global strategic partnership agreement with Bio-Rad to collaborate in the development and the commercialization of kitted transplant products for clinical use (see Note 10, “Collaborative Arrangements,” to our consolidated financial statements included elsewhere in this Report for additional information). In May 2025, we sold our first GraftAssureIQ kits to a research laboratory customer (see Note 2, “Revenue Recognition – Kitted Products,” to our consolidated financial statements included elsewhere in this Report for additional information).

Current wording

Our GraftAssure family of assays are performed on a digital PCR instrument that is manufactured by Bio-Rad. Consequently, we have entered into a global strategic partnership agreement with Bio-Rad to collaborate in the development and the commercialization of kitted transplant products for clinical use (see Note 10, “Collaborative Arrangements,” to our consolidated financial statements included elsewhere in this Report for additional information). See Note 2, “Revenue Recognition,” to our consolidated financial statements included elsewhere in this Report for additional Kitted Products revenue information.

Previous wording

Under strict regulatory rules, our kitted tests may not be used in a clinical treatment setting until they have attained marketing authorization from the Food and Drug Administration (“FDA”) for U.S. sales, and In Vitro Diagnostic Medical Devices Regulation approval, for European Union sales. As such, we are working with these regulatory bodies to attain such clearance and approval, as applicable, supporting future distribution and higher sales of our products for clinical use. In 2025, we started a clinical trial in conjunction with our IVD submission for GraftAssureDx. On March 25, 2026, we submitted a data package to the FDA seeking marketing authorization for GraftAssureDx, which is the kitted version of our transplanted organ rejection monitoring assay. We believe that our assays will perform across multiple tissue, or organ, types, and we are pursuing regulatory authorization in kidneys first.

Current wording

Under strict regulatory rules, our kitted tests may not be used in a clinical treatment setting until they have attained marketing authorization from the Food and Drug Administration (“FDA”) for U.S. sales, and In Vitro Diagnostic Medical Devices Regulation approval, for European Union sales. As such, we are working with these regulatory bodies to attain such clearance and approval, as applicable, supporting future distribution and higher sales of our products for clinical use. In 2025, we started a clinical trial in conjunction with our IVD submission for GraftAssureDx. On March 25, 2026, we submitted a data package to the FDA seeking marketing authorization for GraftAssureDx, which is the kitted version of our transplanted organ rejection monitoring assay. We believe that our assays will perform across multiple tissue, or organ, types, and we are pursuing regulatory authorization in kidneys first. Since our March 2026 submission, we have had meaningful and productive dialogue with the FDA as we work with reviewers to obtain marketing authorization to market and sell GraftAssureDx.

Previous wording

Our secondary strategic market is in the field of oncology. The inherent uncertainties of developing and commercializing new diagnostic tests for medical use make it impossible to predict the amount of time and expense that will be required to complete the development and commercialization of our oncology tests. We continue to dedicate a minimum amount of resources to our oncology assays, DetermaIO and DetermaCNI, although currently we do not intend to commercialize either in the next 12 months.

Current wording

Our secondary strategic market is in the field of oncology. The inherent uncertainties of developing and commercializing new diagnostic tests for medical use make it impossible to predict the amount of time and expense that will be required to complete the development and commercialization of our oncology tests. We continue to dedicate a minimum amount of resources to our oncology assays, DetermaIO and DetermaCNI, although currently we do not intend to commercialize either in the next 12 months. From time to time, we may evaluate strategic alternatives to commercializing and further developing our oncology assets, including but not limited to a divestiture or licensing of such assets, which we may pursue if determined to be in the best interests of shareholders and customers. We may not be able to accurately estimate the timing of any such strategic alternative, valuation or purchase price, or whether economic or other market conditions will impact the timing, price or market interest. In addition, there is no guarantee that we are able to negotiate terms of a strategic acceptable to the Company, successfully complete a transaction at all or that the results of such strategic alternative will be successful.

Previous wording

Total net revenue decreased to $32,000 for the three months ended March 31, 2026, compared to $2.1 million in the comparable prior period primarily from Laboratory Services as further discussed below. Future Laboratory Services revenue is expected to be impacted as a result of our shift in strategic focus on commercializing our transplant kitted tests, and deploying our sales personnel toward signing new laboratory customers.

Current wording

Total net revenue decreased to $239,000 for the three months ended June 30, 2026, compared to $518,000 in the comparable prior period primarily from Laboratory Services as further discussed below. Future Laboratory Services revenue is expected to be impacted as a result of our shift in strategic focus on commercializing our transplant kitted tests, and deploying our sales personnel toward signing new laboratory customers.

Previous wording

Net loss was $4.3 million for the three months ended March 31, 2026, compared to $6.7 million for the comparable prior period. Net loss decreased by $2.4 million primarily due to the change in fair value of contingent consideration, which was partially offset by a decrease in Laboratory Services revenue and increases in operating expenses. Further details related to the change in net loss are as follows:

Current wording

Net loss was $11.3 million for the three months ended June 30, 2026, compared to $9.7 million for the comparable prior period. Net loss increased by $1.5 million primarily due to a decrease in Laboratory Services revenue and increases in operating expenses, which was partially offset by the change in fair value of contingent consideration. Further details related to the change in net loss are as follows:

Previous wording

Cost of revenues decreased by $796,000, primarily related to labor and allocated overhead associated with performing our Laboratory Services. See below for additional cost of revenues information.

Current wording

Cost of revenues decreased by $98,000, primarily related to labor and allocated overhead associated with performing our Laboratory Services. See below for additional cost of revenues information.

Previous wording

Total other income, net decreased by $5,000, primarily due to losses in money market funds, partially offset by additional interest income related to higher cash balances from our February 2025 Offering and February 2026 Offering. See below for additional details.

Current wording

Total other income, net increased by $42,000, primarily due to additional interest income related to higher cash balances from our February 2026 Offering and lower foreign currency losses. See below for additional details.

Previous wording

Laboratory Services revenue decreased by $2.1 million. We earned Laboratory Services revenue from one existing customer in the amount of approximately $32,000 during 2026. See below for additional revenue information.

Current wording

Laboratory Services revenue decreased by $2.4 million. We earned Laboratory Services revenue from one existing customer in the amount of approximately $250,000 during the six months ended June 30, 2026. Kitted Products revenue decreased by $3,000. See below for additional revenue information.

Previous wording

Research and development expenses increased by $2.0 million, as we continue development of GraftAssureCore, GraftAssureIQ and GraftAssureDx. The main drivers of the increase were clinical trials, professional fees, personnel-related expenses, facilities and insurance, and laboratory costs. See below for additional details.

Current wording

Research and development expenses increased by $3.2 million, as we continue development of GraftAssureCore, GraftAssureIQ and GraftAssureDx. The main drivers of the increase were clinical trial and registry service fees, personnel-related expenses, laboratory costs, professional fees, and facilities and insurance. See below for additional details.

Previous wording

Sales and marketing expenses increased by $1.2 million, primarily attributable to continued ramp up in sales, marketing and advertising activities related to the transplant business. The main drivers of the increase were personnel-related expenses and professional fees. See below for additional details.

Current wording

Sales and marketing expenses increased by $1.7 million, primarily attributable to continued ramp up in sales, marketing and advertising activities related to the transplant business. The main drivers of the increase were personnel-related expenses, professional fees, and marketing and advertising expenses. See below for additional details.

Previous wording

General and administrative expenses decreased by $124,000, primarily due to decreases in professional fees, and facilities and insurance, partially offset by stock-based compensation, and personnel-related expenses and board fees. See below for additional details.

Current wording

General and administrative expenses increased by $102,000, primarily due to increases in stock-based compensation, and personnel-related expenses and board fees, partially offset by professional fees, and facilities and insurance. See below for additional details.

Previous wording

Change in fair value of contingent consideration was a gain of $5.9 million in 2026 compared to a loss of $879,000 in 2025. This change was due to changes in the fair value model inputs and revised estimates on if and when future payouts will occur. See below for additional information.

Current wording

Change in fair value of contingent consideration was a gain of $3.6 million for the six months ended June 30, 2026 compared to a loss of $3.7 million in the same period of 2025. This change was due to changes in the fair value model inputs and revised estimates on if and when future payouts will occur. See below for additional information.

Previous wording

Cost of revenues generally consists of cost of materials, direct labor including benefits, bonus and stock-based compensation, equipment and infrastructure expenses, clinical sample related costs associated with performing Laboratory Services, providing deliverables according to our licensing agreements, license fees due to third-parties, and Kitted Products inventory costs and royalties based on net product sales. Infrastructure expenses include depreciation of laboratory equipment, allocated rent costs, leasehold improvements, and allocated information technology costs for operations at our CLIA-certified laboratory in Tennessee. Costs associated with generating service revenue are recorded as the tests or services are performed regardless of whether revenue was recognized. Royalties or revenue share payments for licensed technology calculated as a percentage of revenues generated using the associated technology, or from product sales, are recorded as expenses at the time the related revenues are recognized. Cost of revenues for Laboratory Services varies depending on the nature, timing, and scope of customer projects.

Current wording

Cost of revenues generally consists of cost of materials, direct labor including benefits, bonus and stock-based compensation, equipment and infrastructure expenses, clinical sample related costs associated with performing Laboratory Services, providing deliverables according to our licensing agreements, license fees due to third-parties, and Kitted Products inventory costs and royalties based on net product sales. Infrastructure expenses include depreciation and amortization of laboratory equipment, allocated rent costs, leasehold improvements, and allocated information technology costs for operations at our CLIA-certified laboratory in Tennessee. Costs associated with generating service revenue are recorded as the tests or services are performed regardless of whether revenue was recognized. Royalties or revenue share payments for licensed technology calculated as a percentage of revenues generated using the associated technology, or from product sales, are recorded as expenses at the time the related revenues are recognized. Cost of revenues for Laboratory Services varies depending on the nature, timing, and scope of customer projects.

Previous wording

In 2025, we started a clinical trial in conjunction with our IVD submission for GraftAssureDx. On March 25, 2026, we submitted a data package to the FDA seeking marketing authorization for GraftAssureDx, which is the kitted version of our transplanted organ rejection monitoring assay.

Current wording

In 2025, we started a clinical trial in conjunction with our IVD submission for GraftAssureDx. On March 25, 2026, we submitted a data package to the FDA seeking marketing authorization for GraftAssureDx, which is the kitted version of our transplanted organ rejection monitoring assay. We believe that our assays will perform across multiple tissue, or organ, types, and we are pursuing regulatory authorization in kidneys first. Since our March 2026 submission, we have had meaningful and productive dialogue with the FDA as we work with reviewers to obtain marketing authorization to market and sell GraftAssureDx.

Previous wording

We will pay contingent consideration if various payment milestones are triggered under the merger agreements through which we acquired IGI and Chronix. In 2025, we earned our first Kitted Products revenue and, accordingly, we began to pay related royalties to Chronix. Changes in the fair value of the contingent consideration will be based on our reassessment of the key assumptions underlying the determination of this liability as changes in circumstances and conditions occur from the IGI and Chronix acquisition dates to the reporting periods being presented, with the subsequent changes in fair value recorded as part of our consolidated results from operations for such periods. See Note 3 to our consolidated financial statements included elsewhere in this Report for additional information.

Current wording

We will owe and pay contingent consideration under the merger agreements through which we acquired IGI and Chronix if various payment milestones are triggered. As we continue to earn Kitted Products revenue, we will pay the related royalties to Chronix under the merger agreement. Changes in the fair value of the contingent consideration will be based on our reassessment of the key assumptions underlying the determination of this liability as changes in circumstances and conditions occur from the IGI and Chronix acquisition dates to the reporting periods being presented, with the subsequent changes in fair value recorded as part of our consolidated results from operations for such periods. See Note 3, “Business Combinations and Contingent Consideration Liabilities,” to our consolidated financial statements included elsewhere in this Report for additional information.

Previous wording

We did not record any provision or benefit for income taxes for the three months ended March 31, 2026 and 2025, as we had a full valuation allowance for the periods presented. A valuation allowance is provided when it is more-likely-than-not that some portion of the deferred tax assets will not be realized. We established a full valuation allowance for all periods presented due to the uncertainty of realizing future tax benefits from our net operating loss carry-forwards and other deferred tax assets. See Note 2, “Income Taxes,” to our consolidated financial statements included elsewhere in this Report for additional information.

Current wording

We did not record any provision or benefit for income taxes for the three and six months ended June 30, 2026 and 2025, as we had a full valuation allowance for the periods presented. A valuation allowance is provided when it is more-likely-than-not that some portion of the deferred tax assets will not be realized. We established a full valuation allowance for all periods presented due to the uncertainty of realizing future tax benefits from our net operating loss carry-forwards and other deferred tax assets. See Note 2, “Income Taxes,” to our consolidated financial statements included elsewhere in this Report for additional information.

Previous wording

Since formation, we have financed our operations primarily through the sale of our common stock, preferred stock and warrants to acquire common stock (see Note 7 to our consolidated financial statements included elsewhere in this Report). We have incurred operating losses and negative operating cash flows since inception and had an accumulated deficit of $405.1 million as of March 31, 2026. At March 31, 2026, we had $28.2 million of cash and cash equivalents. On February 12, 2026, we raised additional capital as discussed below. Management anticipates that we may continue to incur operating losses and negative operating cash flows for the near future. Although it is difficult to predict our liquidity requirements, based on the going concern evaluation discussed in Note 1, “Liquidity,” to our consolidated financial statements included elsewhere in this Report, management believes that it will have sufficient cash to meet its projected operating requirements for at least the next twelve months following the issuance of these consolidated financial statements.

Current wording

Since formation, we have financed our operations primarily through the sale of our common stock, preferred stock and warrants to acquire common stock (see Note 7 to our consolidated financial statements included elsewhere in this Report). We have incurred operating losses and negative operating cash flows since inception and had an accumulated deficit of $416.3 million as of June 30, 2026. At June 30, 2026, we had $17.8 million of cash and cash equivalents. Management anticipates that we will continue to incur operating losses and negative operating cash flows for the near future. Although it is difficult to predict our liquidity requirements, based on the going concern evaluation discussed in Note 1, “Liquidity,” to our consolidated financial statements included elsewhere in this Report, management believes that it will have sufficient cash to meet its projected operating requirements for at least the next twelve months following the issuance of these consolidated financial statements.

Previous wording

Our remaining restricted cash balance in the total amount of $1.2 million as of March 31, 2026 relates to a bank letter of credit required under our Irvine office lease. From July 1, 2025 and continuing on the first day of each calendar month thereafter, the letter of credit will be reduced by an amount equal to $60,714.29 on each such date, until the letter of credit is fully reduced, after which the letter of credit arrangement will terminate and we will have no further obligation to maintain or deliver the letter of credit. See Note 6, “Office and Facilities Leases – Irvine Office Lease,” to our consolidated financial statements included elsewhere in this Report for additional information.

Current wording

Our remaining restricted cash balance in the total amount of $972,000 as of June 30, 2026 relates to a bank letter of credit required under our Irvine office lease. From July 1, 2025 and continuing on the first day of each calendar month thereafter, the letter of credit will be reduced by an amount equal to $60,714.29 on each such date, until the letter of credit is fully reduced on October 31, 2027, after which the letter of credit arrangement will terminate and we will have no further obligation to maintain or deliver the letter of credit. See Note 6, “Office and Facilities Leases – Irvine Office Lease,” to our consolidated financial statements included elsewhere in this Report for additional information.

Previous wording

We may need to meet significant cash payment or stock obligations to former IGI and Chronix shareholders in connection with our acquisition of those companies, as disclosed in Note 3 to the consolidated financial statements included elsewhere in this Report. As of March 31, 2026 and December 31, 2025, total contingent consideration liabilities were $38.0 million and $43.9 million, respectively. To meet the future cash payment obligations, we may have to utilize cash on hand that would otherwise be available to us for other business and operational purposes, which could cause us to delay or reduce activities in the development and commercialization of our tests. In 2025, we earned our first Kitted Products revenue, accordingly, we began to pay related royalties to Chronix.

Current wording

We may need to meet significant cash payment or stock obligations to former IGI and Chronix shareholders in connection with our acquisition of those companies, as disclosed in Note 3 to the consolidated financial statements included elsewhere in this Report. As of June 30, 2026 and December 31, 2025, total contingent consideration liabilities were $40.2 million and $43.9 million, respectively. To meet the future cash payment obligations, we may have to utilize cash on hand that would otherwise be available to us for other business and operational purposes, which could cause us to delay or reduce activities in the development and commercialization of our tests. As we continue to earn Kitted Products revenue, we will pay the related royalties to Chronix under the merger agreement.

Previous wording

During the three months ended March 31, 2026, our total research and development expenses were $5.0 million, our sales and marketing expenses were $2.4 million, and our general and administrative expenses were $3.0 million. We also incurred $17,000 in total cost of revenues. Net loss for the period was $4.3 million, and our net cash used in operating activities amounted to $7.6 million. Our cash used in operating activities during 2026 did not include the following noncash items: $631,000 in depreciation and amortization expenses, $615,000 in stock-based compensation, $32,000 in other equity compensation expenses, $5.9 million gain from the change in fair value of contingent consideration, and unrealized foreign currency gains of $5,000. Net changes in operating assets and liabilities for the period were $1.3 million as a source of additional cash.

Current wording

During the six months ended June 30, 2026, our total research and development expenses were $9.4 million, our sales and marketing expenses were $4.3 million, and our general and administrative expenses were $5.9 million. We also incurred $99,000 in total cost of revenues. Net loss for the period was $15.6 million, and our net cash used in operating activities amounted to $16.9 million. Our cash used in operating activities during 2026 did not include the following noncash items: $1.3 million in depreciation and amortization expenses, $1.3 million in stock-based compensation, $40,000 in other equity compensation expenses, $3.6 million gain from the change in fair value of contingent consideration, and unrealized foreign currency losses of $7,000. Net changes in operating assets and liabilities for the period were $342,000 as an additional use of cash.

Previous wording

During the three months ended March 31, 2025, our total research and development expenses were $2.9 million, our sales and marketing expenses were $1.2 million, and our general and administrative expenses were $3.1 million. We also incurred $813,000 in total cost of revenues, including $7,000 for amortization of intangible assets. Net loss for the period was $6.7 million, and our net cash used in operating activities amounted to $5.8 million. Our cash used in operating activities during 2025 did not include the following noncash items: $491,000 in depreciation and amortization expenses, $473,000 in stock-based compensation, $14,000 in other equity compensation expenses, $879,000 loss from change in fair value of contingent consideration, and unrealized foreign currency losses of $39,000. Net changes in operating assets and liabilities for the period were $1.1 million as an additional use of cash.

Current wording

During the six months ended June 30, 2025, our total research and development expenses were $6.2 million, our sales and marketing expenses were $2.7 million, and our general and administrative expenses were $5.8 million. We also incurred $993,000 in total cost of revenues, including $7,000 for amortization of intangible assets. Net loss for the period was $16.4 million, and our net cash used in operating activities amounted to $12.0 million. Our cash used in operating activities during 2025 did not include the following noncash items: $1.1 million in depreciation and amortization expenses, $977,000 in stock-based compensation, $88,000 in other equity compensation expenses, $3.7 million loss from the change in fair value of contingent consideration, and unrealized foreign currency losses of $188,000. Net changes in operating assets and liabilities for the period were $1.6 million as an additional use of cash.

Previous wording

During the three months ended March 31, 2025, net cash used in investing activities was $307,000 from cash paid for purchases of machinery and equipment, and construction in progress.

Current wording

During the six months ended June 30, 2026, net cash used in investing activities was $1.4 million from cash paid for purchases of machinery and equipment, and construction in progress.

Previous wording

During the three months ended March 31, 2026, net cash used in investing activities was $613,000 from cash paid for purchases of machinery and equipment, and construction in progress.

Current wording

During the six months ended June 30, 2025, net cash used in investing activities was $656,000 from cash paid for purchases of machinery and equipment, and construction in progress.

Previous wording

During the three months ended March 31, 2026, net cash provided by financing activities was $24.7 million from $24.8 million of net cash proceeds from the February 2026 Offering, partially offset by repayments of financing lease obligations of $143,000.

Current wording

During the six months ended June 30, 2026, net cash provided by financing activities was $24.1 million primarily from $24.7 million of net cash proceeds from the February 2026 Offering, partially offset by repayments of financing lease obligations of $295,000 and taxes paid related to net share settlement of stock-based awards of $237,000.

Previous wording

During the three months ended March 31, 2025, net cash provided by financing activities was $28.6 million from $28.7 million of net cash proceeds from the February 2025 Offering, partially offset by repayments of financing lease obligations of $98,000.

Current wording

During the six months ended June 30, 2025, net cash provided by financing activities was $28.4 million from $28.7 million of net cash proceeds from the February 2025 Offering, partially offset by repayments of financing lease obligations of $212,000.

Previous wording

The fair value of contingent consideration after the acquisition date is reassessed by us as changes in circumstances and conditions occur, with the subsequent change in fair value recorded in our consolidated statements of operations. Changes in key assumptions can materially affect the estimated fair value of contingent consideration liabilities and, accordingly, the resulting gain or loss that we record in our consolidated financial statements. During the three months ended March 31, 2026 and 2025, we recorded a gain of $5.9 million and a loss of $879,000, respectively, related to the fair value of contingent consideration. As of March 31, 2026 and December 31, 2025, total contingent consideration liabilities were $38.0 million and $43.9 million, respectively. As of March 31, 2026, a hypothetical 2% increase and 2% decrease in the discount rate would have resulted in total contingent consideration liabilities of $34.5 million and $42.0 million, respectively. For additional information, see Note 3 to our consolidated financial statements included elsewhere in this Report.

Current wording

The fair value of contingent consideration after the acquisition date is reassessed by us as changes in circumstances and conditions occur, with the subsequent change in fair value recorded in our consolidated statements of operations. Changes in key assumptions can materially affect the estimated fair value of contingent consideration liabilities and, accordingly, the resulting gain or loss that we record in our consolidated financial statements. During the six months ended June 30, 2026 and 2025, we recorded a gain of $3.6 million and a loss of $3.7 million, respectively, related to the fair value of contingent consideration. As of June 30, 2026 and December 31, 2025, total contingent consideration liabilities were $40.2 million and $43.9 million, respectively. As of June 30, 2026, a hypothetical 2% increase and 2% decrease in the discount rate would have resulted in total contingent consideration liabilities of $36.6 million and $44.4 million, respectively. For additional information, see Note 3, “Business Combinations and Contingent Consideration Liabilities,” to our consolidated financial statements included elsewhere in this Report.

Previous wording

We assess the impairment of long-lived assets, which consists primarily of right-of-use assets, machinery and equipment, and finite-lived intangible assets, whenever events or changes in circumstances indicate that such assets might be impaired and the carrying value may not be recoverable. When such events or changes in circumstances are present, we estimate the future cash flows expected to result from the use of the asset (or asset group) and its eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carrying amount, we recognize an impairment based on the fair value of such assets.

Current wording

We assess the impairment of long-lived assets, which currently consists primarily of right-of-use assets, and machinery and equipment, whenever events or changes in circumstances indicate that such assets might be impaired and the carrying value may not be recoverable. When such events or changes in circumstances are present, we estimate the future cash flows expected to result from the use of the asset (or asset group) and its eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carrying amount, we recognize an impairment based on the fair value of such assets.

Previous wording

We recognize compensation expense related to stock-based payment awards made to employees, board directors and other non-employees based on estimated fair values. We estimate the fair value of stock-based payment awards on the grant date and recognize the resulting fair value over the requisite service period on a straight-line basis. For stock-based awards that vest only upon the attainment of one or more performance goals, compensation cost is recognized if and when we determine that it is probable that the performance condition or conditions will be, or have been, achieved. For grants with market-based and time-based vesting conditions, the fair value is estimated using the Monte Carlo simulation model, which includes the estimated period to achievement of the performance and market conditions, which are subject to the achievement of the market-based goals established by us and continued employment. We utilize the Black-Scholes option pricing model for determining the fair value of standard time-based stock options. Our determination of fair value of stock-based payment awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. We estimate the expected volatility using our own stock price volatility for a period equal to the expected term of the options. The expected term of options granted is based on our own experience. The risk-free rate is based on the U.S. Treasury rates in effect during the corresponding period of grant. Key inputs and assumptions may change as we continue to develop our Company estimates, experience and key inputs including our expected term, and stock price volatility based on the trading history of our stock in the public market. Changes in these subjective assumptions can materially affect the estimated value of equity grants and the stock-based compensation that we record in our consolidated financial statements. During the three months ended March 31, 2026 and 2025, we recognized total stock-based compensation of $615,000 and $473,000, respectively. For additional information, see Note 8 to our consolidated financial statements included elsewhere in this Report.

Current wording

We recognize compensation expense related to stock-based payment awards made to employees, board directors and other non-employees based on estimated fair values. We estimate the fair value of stock-based payment awards on the grant date and recognize the resulting fair value over the requisite service period on a straight-line basis. For stock-based awards that vest only upon the attainment of one or more performance goals, compensation cost is recognized if and when we determine that it is probable that the performance condition or conditions will be, or have been, achieved. For grants with market-based and time-based vesting conditions, the fair value is estimated using the Monte Carlo simulation model, which includes the estimated period to achievement of the performance and market conditions, which are subject to the achievement of the market-based goals established by us and continued employment. We utilize the Black-Scholes option pricing model for determining the fair value of standard time-based stock options. Our determination of fair value of stock-based payment awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. We estimate the expected volatility using our own stock price volatility for a period equal to the expected term of the options. The expected term of options granted is based on our own experience. The risk-free rate is based on the U.S. Treasury rates in effect during the corresponding period of grant. Key inputs and assumptions may change as we continue to develop our Company estimates, experience and key inputs including our expected term, and stock price volatility based on the trading history of our stock in the public market. Changes in these subjective assumptions can materially affect the estimated value of equity grants and the stock-based compensation that we record in our consolidated financial statements. During the six months ended June 30, 2026 and 2025, we recognized total stock-based compensation of $1.3 million and $977,000, respectively. For additional information, see Note 8 to our consolidated financial statements included elsewhere in this Report.