Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

When we use the terms "CV Sciences," "Company," "we," "our" and "us," we mean CV Sciences, Inc., a Delaware corporation, taken as a whole, as well as any predecessor entities, unless the context otherwise indicates.

The following discussion of our financial condition and results of operations for the three and six months ended June 30, 2025 and 2024, respectively, should be read in conjunction with our condensed consolidated financial statements and the notes to those statements that are included elsewhere in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could," and similar expressions to identify forward-looking statements.

OVERVIEW

We are a consumer wellness company specializing in hemp extracts and other proven, science-backed, natural ingredients and products, which are sold through a range of sales channels from B2B to B2C.

Our +PlusCBD™branded products are sold at select retail locations throughout the U.S. and are the top-selling brands of hemp extracts in the natural products market, according to SPINS, the leading provider of syndicated data and insights for the natural, organic and specialty products industry. We follow all guidelines for good manufacturing practices ("GMP") and our products are processed, produced, and tested throughout the manufacturing process to confirm strict compliance with company and regulatory standards and specifications. With a commitment to science, +PlusCBD™product benefits in healthy people are supported by human clinical research data, in addition to three published clinical case studies available on PubMed.gov. +PlusCBD™was the first hemp extract supplement brand to invest in the scientific evidence necessary to receive self-affirmed "generally recognized as safe" ("GRAS") status.

In addition, on December 7, 2023, we entered into a Membership Interest Purchase Agreement, pursuant to which we purchased all of the outstanding equity interests in Cultured Foods Sp. z.o.o., resulting in Cultured Foods becoming a wholly owned subsidiary of the Company. Cultured Foods is a leading European manufacturer and distributor of plant-based protein products.

In May 2024, we acquired all outstanding membership interests of Elevated Softgels, LLC, a Delaware limited liability company, for a total purchase price of up to $1.0 million. Elevated Softgels is a leading manufacturer of encapsulated softgels and tinctures for the supplement and nutrition industry, based in Colorado.

In August 2024, we engaged Maxim Group LLC ("Maxim") as a non-exclusive financial advisor and investment banker to provide strategic financial advisory and investment banking services. With the help of Maxim, the Company intends to continue to build an efficient and cost effective consumer products platform and continue to evaluate inbound and outbound merger, sale, acquisition or other opportunities for the Company.

Subsequent to quarter-end, federal legislation was enacted that, effective November 13, 2026, will prohibit the sale of hemp-derived products containing more than 0.4 milligrams of total THC per container. The Company is assessing the potential implications of this legislation on its operations and product offerings. Depending on future regulatory developments or changes to the legislation, this provision could materially affect the Company's ability to continue selling certain of its existing products.

We also have a drug development program focused on developing and commercializing CBD-based novel therapeutics, subject to available capital.

Our primary offices and facilities are located in San Diego, California; Grand Junction, Colorado; and Warsaw, Poland.

Our common stock is traded on the OTC:QB market under the trading symbol CVSI.

Results of Operations

Revenues and gross profit

Third Quarter 2025 vs. 2024

We had net product sales of $3.3 million and gross profit of $1.6 million, representing a gross margin of 48.5%, in the third quarter of 2025, compared to net product sales of $3.9 million and gross profit of $1.8 million, representing a gross margin of 46.0%, in the third quarter of 2024. Net product sales decreased in the third quarter of 2025 when compared to the third quarter 2024 driven by lower sales volume due to out-of-stock issues for some of our key products and restrictive regulation in certain states. The total number of units sold during the third quarter 2025 decreased by 15.8% compared to the third quarter 2024, partially offset by an increase of our average sales price per unit of 1.4% compared to the same period 2024. In addition, our net sales declined due to lower third-party contract manufacturing ("CMO") revenue in the third quarter of 2025 compared to the same period in 2024.

39.0% of our net revenue for the third quarter 2025 was from new products launched since January 1, 2023. During this time, we launched 38 new products. The overall market continues to be fragmented and highly competitive, which we believe is largely due to the lack of a clear regulatory framework and a patchwork of state regulation.

Cost of goods sold consists primarily of raw materials, packaging, manufacturing overhead (including payroll, employee benefits, stock-based compensation, facilities, depreciation, supplies and quality assurance costs), merchant card fees and shipping. We were able to reduce our cost of goods sold in the third quarter of 2025 compared to the third quarter of 2024 by $0.4 million, or 19.6%. The reduction is mostly due to the lower number of units sold in the third quarter of 2025. In addition, cost of goods sold in the third quarter of 2025 decreased as a percentage of revenue compared to the second quarter of 2024, mostly due lower freight, lower inventory losses and product mix, partially offset by higher cost of goods sold for Elevated Softgels and Cultured Foods in the third quarter of 2025 compared to the prior year period. Our gross profit in the third quarter 2025 declined by $0.2 million, or 11.2% from the third quarter of 2024. Our gross margin improved from 46.0% in the third quarter 2024 to 48.5% in the third quarter of 2025. The improvement in our gross margin is primarily due to lower freight, lower inventory losses, and product and channel mix, partially offset by higher cost of goods sold for Elevated Softgels and Cultured Foods.

First nine months 2025 vs. 2024

We had net product sales of $10.5 million and gross profit of $5.1 million, representing a gross margin of 48.5%, in the nine months ended September 30, 2025, compared to net product sales of $11.8 million and gross profit of $5.5 million, representing a gross margin of 46.5%, in the nine months ended September 30, 2024. Our net product sales decreased in the nine months ended September 30, 2025 when compared to the nine months ended September 30, 2024 mostly due to lower sales volume. Our sales volume declined due to the impact of restrictive state regulations and most recently due to out-of-stock issues for some of our key products. The total number of units sold during the nine months ended September 30, 2025 decreased by 11.6% compared to the nine months ended September 30, 2024. In addition, our average sales price per unit for the nine months ended September 30, 2025 decreased by 0.2% compared to the same period in 2024.

37.6% of our net revenue for the nine month ended September 30, 2025 was from new products launched since January 1, 2023. During this time, we launched 38 new products. The overall market continues to be fragmented and highly competitive, which we believe is largely due to the lack of a clear regulatory framework and a patchwork of state regulation.

Cost of goods sold consists primarily of raw materials, packaging, manufacturing overhead (including payroll, employee benefits, stock-based compensation, facilities, depreciation, supplies and quality assurance costs), merchant card fees and shipping. We were able to reduce our cost of goods sold in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 by $0.9 million, or 14.7%. The reduction is mostly due to the lower number of units sold in the nine months ended September 30, 2025. In addition, cost of goods sold in the nine months ended September 30, 2025 decreased as a percentage of revenue compared to the nine months ended September 30, 2024, mostly due to lower freight, cost savings and product mix, partially offset by higher cost of goods sold for Elevated Softgels and Cultured Foods in the nine months ended September 30, 2025 compared to the prior year period. Our gross profit declined to $5.1 million in the nine months ended September 30, 2025 from $5.5 million in the nine months ended September 30, 2024. Our gross margin improved from 46.5% in the nine months ended September 30, 2024 to 48.5% in the nine months ended September 30, 2025. The improvement in our gross margin is primarily due to lower freight, product and channel mix, and additional cost savings, partially offset by higher cost of goods sold for Elevated Softgels and Cultured Foods.

Research and development expense

Third Quarter 2025 vs. 2024

Research and development ("R&D") expense for the third quarter 2025 decreased slightly compared to the same period in 2024 due to lower new product development activity.

First nine months 2025 vs. 2024

R&D expense increased slightly due to additional product development activity associated with the in-sourcing of the manufacturing of our vegan softgels.

Selling, general and administrative expense

Third Quarter 2025 vs. 2024

Selling, general and administrative ("SG&A") expense decreased to $1.8 million in the third quarter of 2025 compared to $2.1 million in the third quarter of 2024, which was primarily a result of the following:

First nine months 2025 vs. 2024

SG&A expense decreased to $5.9 million in the nine months ended September 30, 2025 compared to $6.9 million in the nine months ended September 30, 2024, which was primarily a result of the following:

Benefit from reversal of accrued payroll taxes

We previously recorded a contingent liability for payroll taxes associated with the RSU release to our founder. On April 15, 2025, the statute of limitations for employer and employee Medicare portion of FICA taxes expired. As a result of the expiration of the relevant statutes of limitations, the IRS does not have the rights to assess and collect the $0.5 million of employer and employee Medicare portion of FICA taxes from the Company and we have made a change in accounting estimate and no longer expect to incur a loss with respect to this matter. As a result, we derecognized the contingent liability of $0.5 million during the nine months ended September 30, 2025. For more information, please see Note 12, Related Parties, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Interest expense, net

Interest expense, net consists of interest expense and interest income. Interest expense, net was $0.1 million in the three months ended September 30, 2025 and 2024. Interest expense increased from $0.1 million for the nine months ended September 30, 2024 to $0.3 million for the nine months ended September 30, 2025 due to the amortization of debt discount and debt issuance costs for the note payable with an institutional investor.

Non-GAAP Financial Measures

We use Adjusted EBITDA internally to evaluate our performance and make financial and operational decisions that are presented in a manner that adjusts from their equivalent GAAP measures or that supplement the information provided by our GAAP measures. Adjusted EBITDA is defined by us as EBITDA (net loss plus depreciation, amortization, interest and income tax expense), further adjusted to exclude certain non-cash expenses and other adjustments as set forth below. We use Adjusted EBITDA because we believe it also highlights trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures, since Adjusted EBITDA eliminates from our results specific financial items that have less bearing on our core operating performance.

We use Adjusted EBITDA in communicating certain aspects of our results and performance, including in this Quarterly Report on Form 10-Q, and believe that Adjusted EBITDA, when viewed in conjunction with our GAAP results and the accompanying reconciliation, can provide investors with greater transparency and a greater understanding of factors affecting our financial condition and results of operations than GAAP measures alone. In addition, we believe the presentation of Adjusted EBITDA is useful to investors in making period-to-period comparison of results because the adjustments to GAAP are not reflective of our core business performance.

Adjusted EBITDA is not presented in accordance with, or as an alternative to, GAAP financial measures and may be different from non-GAAP measures used by other companies. We encourage investors to review the GAAP financial measures included in this Quarterly Report on Form 10-Q, including our condensed financial statements, to aid in their analysis and understanding of our performance and in making comparisons.

A reconciliation from our net loss to Adjusted EBITDA, a non-GAAP measure, for the three and nine months ended September 30, 2025 and 2024 is detailed below:

Liquidity and Capital Resources

During the nine months ended September 30, 2025 and the year ended December 31, 2024, our primary sources of capital came from (i) cash generated from our operations, (ii) existing cash, and (iii) proceeds from note payable financings. As of September 30, 2025, we had approximately $0.4 million of cash and working capital of approximately $0.3 million.

For the nine months ended September 30, 2025, the Company generated negative cash flows from operations of $0.1 million and had an accumulated deficit of $87.7 million as of September 30, 2025.

We believe that a combination of factors have adversely impacted our business operations for the nine months ended September 30, 2025 and the year ended December 31, 2024. Due to a low barrier entry market with a lack of a clear regulatory framework, we face intense competition from both licensed and illicit market operators that may also sell herbal supplements and hemp-based CBD consumer products. Because we operate in a market that is rapidly evolving and expanding globally, our customers may choose to obtain CBD products from our competitors, and our success depends on our ability to attract and retain our customers from purchasing CBD products elsewhere. To remain competitive, we intend to continue to innovate new products, build brand awareness, and make significant investments in our business strategy by introducing new products into the markets in which we operate, adopt quality assurance protocols and procedures, build our market presence, and undertake further research and development. In addition, we intend to make additional acquisitions to further diversify our product offerings.

In October 2025, we received net proceeds of $0.3 million under a secured promissory note with an institutional investor - please see Note 14, Subsequent Events, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.

Subsequent to quarter-end, federal legislation was enacted that, effective November 13, 2026, will prohibit the sale of hemp-derived products containing more than 0.4 milligrams of total THC per container. We are assessing the potential implications of this legislation on our operations and product offerings - please see Note 14, Subsequent Events, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.

Management implemented, and continues to make and implement, strategic cost reductions, including reductions in employee headcount, vendor spending, and the delaying of certain expenses related to our drug development activities. To the extent that we feel

it is necessary and in the best interest of the Company and our shareholders, we may also take further actions that alter our operations in order to ensure the success of our business.

Note Payable

In February 2025, we entered into a securities purchase agreement with an institutional investor (the "Investor"), pursuant to which we issued and sold to the Investor a secured promissory note in the original principal amount of $1,600,000 (the "Note"). The Note carries an original issuance discount of $400,000 and we paid $10,000 to the Investor to cover legal fees. We incurred additional legal and professional fees of $72,424. The original issuance discount was deducted from the proceeds of the Note received by us which resulted in a purchase price received by us of $1,200,000.

The Note was due and payable on August 12, 2026 and we were required to make monthly repayments to the Investor of $106,667 starting on June 12, 2025.

In September 2025, we entered into an agreement (the "Agreement") with the Investor. The Agreement amended the Note among other things: (a) to provide for a new maturity date of February 12, 2027, (b) to provide that the monthly redemption amount consists of (i) $106,667 of the outstanding principal amount of the Note on each of the first 3 monthly redemption dates, (ii) $0 of the outstanding principal amount of the Note on each of the next 6 monthly redemption dates, and (iii) $106,667 of the outstanding principal amount of the Note on each of the subsequent 12 monthly redemption dates, and (c) to provide the Investor $150,000 in cash.

We can pay all or any portion of the outstanding balance earlier than it is due without penalty. In the event we paid the Note in full on or before August 12, 2025, we would have received a $100,000 discount from the outstanding balance. The Note is secured by all of our assets pursuant to a security agreement and intellectual property security agreement entered into with the Investor on February 12, 2025. Our obligations under the Note are guaranteed by each of our subsidiaries. No interest will accrue on the Note unless and until an occurrence of an event of default, as defined in the Note.

In October 2025, we entered into a new note with the Investor. Please see Note 14, Subsequent Events, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.

Streeterville Note

In July 2024, we entered into a note purchase agreement with Streeterville, pursuant to which we issued and sold to Streeterville a Secured Promissory Note (the "Streeterville Note") in the original principal amount of $1.2 million. The Streeterville Note carried an original issuance discount of $283,500. We incurred additional debt issuance costs of $5,000. As a result, we received aggregate net proceeds of approximately $0.9 million in connection with the sale and issuance of the Streeterville Note. The Streeterville Note was to mature on July 3, 2025 and we were required to make weekly repayments to Streeterville on the note in the amount of $22,856 until the Streeterville Note was paid in full. We were able to pay all or any portion of the outstanding balance earlier than it is due without penalty. In the event we repaid the Streeterville Note in full on or before December 31, 2024, we would have received a $75,000 discount from the outstanding balance.

No interest was to accrue on the Streeterville Note until an occurrence of an Event of Default, as defined in Section 4 of the Streeterville Note, if ever. The Streeterville Note provided for customary events of default, including, among other things, the event of nonpayment of principal, interest, fees or other amounts, a representation or warranty proving to have been incorrect when made, failure to perform or observe covenants within a specified period of time, a cross-default to certain other indebtedness of the Company, the bankruptcy or insolvency of the Company or any significant subsidiary, monetary judgment defaults of a specified amount and other defaults resulting in liability of a specified amount. In the event of an occurrence of an Event of Default by us, Streeterville could have declaree all amounts owed under the Streeterville Note immediately due and payable. Also, a late fee and interest penalty of equal to either 22% per annum or the maximum rate allowable under law, whichever is lesser, could have been applied to any outstanding amount not paid when due or that remained outstanding while an Event of Default exists. The Streeterville Note was secured by all of our assets as set forth in the Security Agreement dated July 3, 2024.

We made principal payments to Streeterville of $0.6 million during the six months ended June 30, 2025. We repaid the outstanding Streeterville Note prior to its maturity date and recognized a gain on extinguishment of $37,500. As a result, the Streeterville Note has been fully repaid and satisfied as of June 30, 2025, and our obligations thereunder, were cancelled and terminated.

First Insurance Funding Agreements

In October 2025, we entered into a financing agreement with First Insurance Funding in order to fund a portion of our insurance policies for the upcoming policy year. The amount financed was $0.2 million, which incurs interest at a rate of 7.72% per annum. We are required to make monthly payments of $18,299 from November 2025 through July 2026.

In October 2024, we entered into a finance agreement with First Insurance Funding in order to fund a portion of our insurance policies. The amount financed is $0.2 million, which incurred interest at an annual rate of 8.42%. We were required to make monthly payments of $20,396 from November 2024 through July 2025. There was no outstanding balance as of September 30, 2025.

Going Concern

U.S. GAAP requires management to assess a company's ability to continue as a going concern within one year from the financial statement issuance date and to provide related note disclosure in certain circumstances. Our condensed consolidated financial statements and corresponding notes have been prepared assuming the Company will continue as a going concern. We generated negative cash flows from operations of $0.1 million for the nine months ended September 30, 2025 and had an accumulated deficit of $87.7 million as of September 30, 2025. Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund our operations and growth initiatives. The Company intends to position itself so that it will be able to raise additional funds through the capital markets, issuance of debt, and/or securing lines of credit in order to continue its operations. However, there can be no assurances that additional working capital will be available to us on favorable terms, or at all, which would be likely to have a material adverse effect on the Company's ability to continue its operations.

The Company's financial operating results and accumulated deficit, amongst other factors, raise substantial doubt about the Company's ability to continue as a going concern. The Company will continue to work towards increasing revenue and operating cash flows to meet its future liquidity requirements. However, there can be no assurance that the Company will be successful in any capital-raising efforts that it may undertake, and the failure of the Company to raise additional capital could adversely affect its future operations and viability.

A summary of our changes in cash flows for the three and nine months ended September 30, 2025 and 2024 is provided below:

Operating Activities

Net cash used in operating activities includes net loss adjusted for non-cash items such as depreciation, amortization, bad debt expense, stock-based compensation, benefit of reversal of payroll tax liability, interest expense related to our promissory notes, and gain on debt extinguishment. Operating assets and liabilities primarily include balances related to funding of inventory purchases and customer accounts receivable. Operating assets and liabilities that arise from the funding of inventory purchases and customer accounts receivable can fluctuate significantly from day to day and period to period depending on the timing of inventory purchases and customer payment behavior.

Cash flows used in operating activities was $0.1 million in the nine months ended September 30, 2025, compared to $0.7 million in the nine months ended September 30, 2024. Our net loss of $0.8 million for the nine months ended September 30, 2025, adjusted for non-cash items of $0.7 million, resulted in a net loss, adjusted for non-cash items of $0.1 million, compared to a net loss, adjusted for non-cash items, of $1.0 million in the prior year period, an improvement of $0.9 million. Our non-cash adjustments increased by $0.1 million from $0.6 million in the nine months ended September 30, 2024 to $0.7 million in the nine months ended September 30, 2025. Non-cash adjustments increased due to higher stock-based compensation and interest expense, partially offset by the benefit for the reversal of accrued payroll tax of $0.5 million related to the RSU's previously issued to Mona during the nine months ended September 30, 2025. Recurring non-cash adjustments consists of depreciation, amortization, interest expense and stock-based compensation. Changes in working capital generated $0.3 million during the first nine months of 2024, but did not provide a material amount during the first nine months of 2025. Our net loss declined by $0.9 million, mostly due to the benefit for the reversal of accrued payroll taxes of $0.5 million and our improved operating performance and reduced SG&A expenses.

Investing Activities

Cash used in investing activities was $0.1 million in the nine months ended September 30, 2025 related to improvements to our manufacturing facility at Elevated Softgels. We used cash in investing activities in the nine months ended September 30, 2024 for the acquisition of Elevated Softgels.

Financing Activities

Net cash provided by financing activities was $0.1 million for the nine months ended September 30, 2025 compared to $0.4 million for the nine months ended September 30, 2024. Our financing activities for the nine months ended September 30, 2025 consisted of proceeds from our note payable financing of $1.1 million, offset by repayments of Streeterville note of $0.6 million, repayments of our note financing of $0.3 million, and repayment of our insurance financing of $0.1 million. Our financing activities for the nine months ended September 30, 2024 consisted of proceeds from our Streeterville financing of $0.9 million, repayments of assumed debt for Cultured Foods of $0.1 million, repayments to Streeterville of $0.2 million and our insurance financing of $0.2 million.

Inflation

We have not been affected materially by inflation during the periods presented. However, recent trends towards rising inflation may adversely impact our business and corresponding financial position and cash flow.

Known Trends or Uncertainties

There can be no assurance that the Company's business and corresponding financial performance will not be adversely affected by general economic or consumer trends. In particular, global economic conditions remain constrained, and if such conditions continue, recur or worsen, this may have a material adverse effect on the Company's business, financial condition and results of operations. Additionally, inflation has risen and Federal Reserve interest rates remain high, which may also materially adversely our business and corresponding financial position and cash flows.

Furthermore, such economic conditions have produced downward pressure on share prices and on the availability of credit for financial institutions and corporations. If current levels of market disruption and volatility continue, the Company might experience reductions in business activity, increased funding costs and funding pressures, as applicable, a decrease in the market price of shares of our common stock, a decrease in asset values, additional write-downs and impairment charges and lower profitability.

We have seen some consolidation in our industry during economic downturns. These consolidations have not had a negative effect on our total sales; however, should consolidations and downsizing in the industry continue to occur, those events could adversely impact our revenues and earnings going forward.

There is currently a lack of a clear federal regulatory framework regarding the development, sale and use of CBD products in the United States. As a result, differing state regulations have emerged, which regulations are constantly evolving and differ significantly from state to state in many cases. Several states, including without limitation, California, Florida, Maryland, Minnesota, New York, Utah and Virginia, have recently adopted regulations that may impact our ability to sell certain of our products in these states. In September 2024, California Governor Gavin Newsom signed an emergency order into law, effectively banning the sale of hemp products intended for human use that contain detectable amounts of THC or certain other cannabinoids in California, amongst other things. The emergency order was originally in effect through March 25, 2025, and has been extended by one year. We have certain products which fall under this category that we have historically sold in California. It is currently unknown whether the duration of the emergency order will be extended, and/or whether it will be replaced with a permanent law with similar or more stringent prohibitions. This emergency order had a negative impact on our operating results for the three and nine months ended September 30, 2025 and we expect that it will continue to have a negative impact on our business going forward for so long as it, or any permanent law with similar or more stringent prohibitions, remains in effect; however, it is currently impossible to quantify the expected impact on our business. There is also substantial uncertainty and different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses as to the emerging regulation of cannabinoids. These different opinions include, but are not limited to, the regulation of cannabinoids by the FDA and the extent to which manufacturers of products containing cannabinoids may engage in interstate commerce. These uncertainties have had, and may continue to have, an adverse effect on our business. Additionally, restrictive state regulations could adversely impact our revenue and earnings going forward.

Subsequent to quarter-end, federal legislation was enacted that, effective November 13, 2026, will prohibit the sale of hemp-derived products containing more than 0.4 milligrams of total THC per container. The Company is assessing the potential implications of this legislation on its operations and product offerings. Depending on future regulatory developments or changes to the legislation, this provision could materially affect the Company's ability to continue selling certain of its existing products.

Changes in U.S. and foreign governments' trade policies have resulted in, and may continue to result in, tariffs on imports into and exports from the U.S., among other restrictions. In February 2025, the U.S. administration announced increased tariff on imports from China, where certain components of our finished products are sourced. We are closely monitoring this evolving situation and evaluating our responses, which may include price adjustments or other cost-mitigation measures. However, there can be no assurance that we will be able to fully mitigate the impact of such tariffs or trade restrictions. If further tariffs are imposed, we could be forced to raise prices on all or certain of our products or make changes to our operations, any of which could materially harm our revenue or operating results. Any additional future tariffs or quotas imposed may impact our sales, gross margin and profitability if we are unable to pass increased prices onto our customers. Currently, we cannot fully determine how these tariffs will affect our business operations. The overall impact on our business will be influenced by several variables, including the duration and potential expansion of current tariffs, future changes to tariff rates, scope, or enforcement, retaliatory measures by impacted trade partners, inflationary effects and broader macroeconomic responses, changes to consumer purchasing behavior, and the effectiveness of our responses in managing these challenges.

We are currently experiencing certain manufacturing constraints that are expected to result in temporary out-of-stock situations for some of our key products during the fourth quarter of 2025 and potentially in early 2026. We are working closely to resolve these issues and expect supply to normalize in 2026. While we do not currently anticipate a material long-term impact, these temporary shortages may affect our near-term revenue and customer order fulfillment.

Critical Accounting Estimates

We have disclosed in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2024 Annual Report, filed with the SEC March 27, 2025, those accounting policies and estimates that we consider to be significant in determining our results of operation and financial condition. There have been no material changes to those policies and estimates that we consider to be significant since the filing of our 2024 Annual Report. The accounting principles used in preparing our unaudited condensed consolidated financial statements conform in all material respects to GAAP.

Recent Accounting Pronouncements

See Note 1 in the accompanying notes to unaudited condensed consolidated financial statements.