Laird Superfood, Inc.: Form 10-Q for the period ended Sep 30, 2025

The following discussion and analysis of the financial condition and results of operations of Laird Superfood, Inc. (together with its wholly owned subsidiary on a consolidated basis, the "Company," "Laird Superfood," "our," "us," or "we") is a supplement to and should be read in conjunction with the unaudited consolidated condensed financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Form 10-K"). This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q and the section titled “Risk Factors” included herein and in the 2024 Form 10-K.

Overview

Laird Superfood creates clean, minimally processed, functional foods, many of which incorporate adaptogens which may be beneficial in reducing stress, improving energy levels, enhancing mental performance, mood regulation, and immune system support. Our primary products include (i) coffee creamers, (ii) hydration and beverage enhancing products, (iii) snacks and other food items, and (iv) coffee, tea, and hot chocolate products. Consumer preferences within the evolving food and beverage industry are shifting away from sugar-laden food and beverage products, as well as those containing highly processed and artificial ingredients. Our long-term goal is to build and scale a widely recognized brand that authentically focuses on recognizable ingredients, nutritional density, and functionality, which we believe will allow us to maximize penetration of a multi-billion-dollar opportunity in the grocery market. We generate revenue through two channels: e-commerce and wholesale.

Financial Highlights

Our e-commerce channel consists of (i) our Direct-to-consumer ("DTC") business, which includes sales through lairdsuperfood.com and pickybars.com, and (ii) Amazon.com. Lairdsuperfood.com and pickybars.com offer an authentic brand experience for our consumers that drive engagement through educational content. These platforms also provide us with direct consumer feedback for future product development. We view our proprietary database of customers ordering directly from our website as a strategic asset, as it enhances our ability to develop long-term relationships with these customers. We believe the content on our websites allows Laird Superfood to educate our consumers on the benefits of our products and ingredients, while providing a positive customer experience. We believe this experience leads to higher retention rates among repeat customers and subscribers, as evidenced by the fact that repeat customers and subscribers accounted for approximately 88% of DTC sales for the three and nine months ended September 30, 2025 and 2024.

Our wholesale channel consists of products sold through various retail outlets, including natural, specialty, and conventional grocery stores, club stores, and food service locations. We believe the diversity of our retail outlets represents a strong competitive advantage for Laird Superfood and provides us with a larger total addressable market than would be considered normal for a food brand that is singularly focused on the grocery market.

For the three and nine months ended September 30, 2025, the e-commerce channel made up 47% and 51% of our net sales, respectively, compared to 58% and 59%, respectively, for the three and nine months ended September 30, 2024. For the three and nine months ended September 30, 2025, the wholesale channel made up 53% and 49% of our net sales, respectively, compared to 42% and 41% for the three and nine months ended September 30, 2024. We expect that, over time, our wholesale channel will overtake our e-commerce channel as a percentage of net sales, as we continue to execute our strategy to expand our retail distribution footprint. As our business continues to shift toward wholesale, quarter-to-quarter variability may increase due to the timing of larger orders from key customers, however, long-term, we remain confident in the underlying demand trends in this channel.

Net sales increased to $12.9 million for the three months ended September 30, 2025 ("Q3 2025"), from $11.8 million for the three months ended September 30, 2024 ("Q3 2024"). Wholesale net sales in Q3 2025 increased by 39% compared to Q3 2024 driven primarily by distribution expansion. E-commerce channel sales for Q3 2025 decreased by 11% compared to Q3 2024, primarily due to softness in the direct-to-consumer platform resulting from lower new-customer acquisition, partially offset by growth in sales on Amazon.com.

Net sales increased to $36.5 million for the nine months ended September 30, 2025 ("YTD 2025"), from $31.7 million for the nine months ended September 30, 2024 ("YTD 2024"). Wholesale net sales in YTD 2025 increased by 40% compared to YTD 2024, driven by velocity growth and distribution expansion. E-commerce channel sales for YTD 2025 were relatively flat compared to YTD 2024.

Our Strategy and Key Factors Affecting our Future Performance

We believe that our future performance will depend on many factors, including the following:

Ability to Grow Our Customer Base in both E-commerce and Traditional Wholesale Distribution Channels at a Reasonable Cost

We are continuously growing our customer base through our e-commerce channels, as well as by expanding our presence in our wholesale channel through a variety of physical retail outlets and geographical regions. We typically attract new customers in our e-commerce channel through our direct websites, lairdsuperfood.com and pickybars.com, and through Amazon.com. We also seek to attract new e-commerce customers through paid and unpaid social media, search, display, and traditional media. Our products are also sold through a growing number of retail outlets. Customers in our wholesale channel include grocery chains, natural food outlets, club stores, and food service customers. Attracting new customers in physical retail outlets depends on, among other things, paid promotions through retailers, display, and traditional media. We believe an ability to consistently attract and retain customers at a reasonable cost relative to projected life-time value will be a key factor affecting future performance.

Ability to Manage Co-Manufacturer and Third-Party Logistics Relationships

Our production and logistics are executed by third parties, and our performance is highly dependent on the ability of these partners to produce and deliver our products timely, to our standards, and at a reasonable cost.

Ability to Drive Repeat Usage of Our Products

Repeat customers who consistently re-order our products are critical to our business. The pace of our growth will be affected by our ability to maintain and establish long-term relationships with existing and new customers to drive repeat orders.

Ability to Expand Our Product Lines

Our goal is to expand our product lines over time to increase our growth opportunity and reduce product-specific risks through diversification into multiple products, each designed around daily use. Our pace of growth will be partially affected by the cadence and magnitude of new product launches over time.

Ability to Expand Gross Margins

Our overall profitability will be impacted by our ability to expand gross margins through effective sourcing of raw materials, controlling input and shipping costs, controlling the impacts of inflationary market factors, import tariffs and other trade policies, as well as managing co-packer relationships.

Ability to Expand Operating Margins

Our ability to expand operating margins will be impacted by our ability to cover fixed general and administrative costs and variable sales and marketing costs with higher revenues and gross profit dollars.

Ability to Manage Our Global Supply Chain

Our ability to grow and meet future demand will be affected by our ability to adequately plan for and source inventory from a variety of suppliers located inside and outside the United States. We may encounter difficulties in sourcing products.

Ability to Optimize Key Components of Working Capital

Our ability to maintain positive cash flows will be partially impacted by our ability to effectively manage all the key working capital components that could influence our cash conversion cycle.

Components of Results of Operations

Sales, net

We sell our products through two channels: wholesale and e-commerce. Through our wholesale channel, we sell our products to distributors and retail outlets which, in turn, sell to end consumers. Through our e-commerce channel, we derive revenue from the sale of our products directly to consumers through our direct websites, lairdsuperfood.com and pickybars.com, as well as third-party e-commerce platforms such as Amazon.com.

Cost of Goods Sold

Cost of goods sold includes the cost of raw materials and packaging, co-packing tolling fees, inbound and outbound freight costs, import duties and tariffs, indirect labor, third party labor to store and ship our products, and overhead costs incurred in the storage and distribution of products sold in the period.

Operating Expenses

Our operating expenses consist of general and administrative, research and product development, and sales and marketing expenses, including non-production personnel costs.

Income Taxes

Due to our history of operating losses and expectation of future operating losses, we do not expect any significant federal income tax expenses and benefits for the foreseeable future. We will continue to owe state and local income taxes.

Results of Operations

Comparison of Q3 2025 and Q3 2024

For the periods indicated, the following table sets forth results of operations and the increase or decrease therewith:

The increase in net sales during Q3 2025 was fueled by distribution expansion in the Wholesale channel and slightly decreased promotional trade spend across all channels. E-commerce channel sales decreased by 11% year-over-year, primarily due to softness in the direct-to-consumer platform resulting from lower new-customer acquisition, partially offset by growth in sales on Amazon.com.

The increase in cost of goods sold during Q3 2025 was driven primarily by the growth in gross sales volume and commodity cost inflation, as well as the non-recurrence of a supplier settlement benefit recorded in the prior year period.

The decrease in gross profit in Q3 2025 compared to the prior year period was driven by commodity cost inflation and channel mix, as well as the non-recurrence of a supplier settlement benefit recorded in the prior year period, which accounted for approximately 3 points of the 6.5 points of margin contraction to 36.5% in Q3 2025, from 43.0% in the prior year period.

The general and administrative expenses were relatively flat during Q3 2025, with impairment charges largely offset by decreases in personnel costs and professional fees.

The increase in sales and marketing expenses during Q3 2025 was driven by marketing and advertising costs, as well as increased selling costs due to increased sales volume.

Other income is composed of interest income and expense, rental income, and other non-operating gains and losses. The decrease in other income during Q3 2025 was driven by decreases in dividend income on money market funds, as the amounts carried in those accounts decreased, and the termination of the Picky Bars, LLC sublease in the fourth quarter of 2024.

Comparison of YTD 2025 and YTD 2024

For the periods indicated, the following table sets forth results of operations and the increase or decrease therewith:

The increase in net sales during YTD 2025 was driven by distribution expansion in grocery and club stores, and velocity growth in our key categories, partially offset by increased promotional trade spend to support a 40% increase in wholesale channel sales year-over-year. E-commerce channel sales were relatively flat year-over-year, with softness in the DTC channel due to lower new customer sales partially offset by growth in sales on Amazon.com.

The increase in cost of goods sold during YTD 2025 was driven by growth in sales volume, channel mix, and higher commodity costs, as well as the non-recurrence of a supplier settlement benefit recorded in the prior year period.

The increase in gross profit in YTD 2025 compared to the prior year period was driven by increased sales volume. Gross margin contracted 2.3 points to 39.3% in YTD 2025 compared to 41.7% in the prior year period, which was due to the non-recurrence of the supplier settlement benefit recorded in the prior year period, as well as channel mix and commodity cost inflation.

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The increase in general and administrative expenses during YTD 2025 was primarily driven by impairment charges, partially offset by decreased personnel costs and professional fees.

The increase in sales and marketing expenses during YTD 2025 was driven by increased selling costs due to increased sales volume.

Other income is composed of interest income and expense, rental income, and other non-operating gains and losses. The decrease in other income during YTD 2025 was driven by decreases in dividend income on money market funds, as the amounts carried in those accounts decreased, and the termination of the Picky Bars, LLC sublease in the fourth quarter of 2024.

Cash Flows

The following table shows a summary of our cash flows for the nine months ended September 30, 2025 and 2024:

The increase in cash used in operating activities for YTD 2025 was driven by strategic investment into working capital. This investment was made (i) to meet higher demand for our products, (ii) to address the out-of-stocks experienced at the end of 2024, and (iii) to forward purchase inventory in anticipation of potential tariffs on the import of raw materials that we source outside of the United States, particularly in Southeast Asia. As we continue to sell down this forward-purchased inventory during the balance of 2025 and into 2026, we expect our cash balance to normalize and further increase by the end of the 2025 fiscal year.

Cash used in investing activities for YTD 2025 consisted of purchases of long-lived capital assets.

Cash used in financing activities for YTD 2025 consisted of payroll taxes paid related to net issuances of stock awards, offset in part by stock option exercises.

Liquidity and Capital Resources

As of September 30, 2025, we had an accumulated deficit of $109.6 million, which includes operating losses of $1.6 million and $1.7 million for YTD 2025 and YTD 2024, respectively. We may incur additional operating losses as we execute our strategy to invest in the growth of our business, reinvesting any incremental profit into future top-line sales growth while holding cash reserves largely flat. We will continue to seek opportunities to optimize spending, expand gross margins, and free up cash flow through efficient working capital management. We have historically financed our operations and capital expenditures through private placements of our common stock, our initial public offering, our prior lines of credit, term loans, and from our core operating activities. Our historical uses of cash have primarily consisted of cash used in operating activities and working capital needs.

As of September 30, 2025 and December 31, 2024, we had $5.3 million and $8.5 million, respectively, of cash-on-hand, and total net working capital of $12.4 million and $12.0 million, respectively, for the same periods. As of September 30, 2025, we had access to up to $1.3 million of advances under our factoring Agreement, of which none had been utilized as of the date of this report. We have no significant unused sources of liquid assets outside of our working capital.

Our future capital requirements will depend on many factors, including our growth rate, the continued expansion of sales and marketing activities, the enhancement of our product platforms, the introduction of new products, acquisition activity, as well as economic and market trends. Recent and expected working and other capital requirements, in addition to the matters above, also include the items described below:

• We have a lease arrangement for corporate office space. As of September 30, 2025, we had fixed lease payment obligations of $0.2 million, with $0.1 million payable within 12 months.
• As of September 30, 2025, $5.9 million of current liabilities were accrued related to short-term operating activities and personnel costs, excluding the aforementioned current lease liabilities.
• Marketing and advertising expenditures, including related party advertising costs, were $5.6 million in YTD 2025 and $5.2 million in YTD 2024. We expect to continue to invest in these activities as part of the strategic expansion of sales volume, however, we have made strategic shifts to reduce and improve the efficacy of future customer acquisition costs.
• The prices of various commodities, such as coffee, have increased in the last twelve months. These inflationary pressures have impacted our working capital and our margins. Should this trend continue, our margins could be further impacted.
• In the third quarter of 2025, we decided that we will be discontinuing the Picky Bars brand in the second quarter of 2026, in order to re-deploy our monetary and human capital into growing the Laird Superfood brand. In connection with this decision, we recognized impairment charges of $0.7 million in the three and nine months ended September 30, 2025. While we have plans to re-deploy our investment dollars into the Laird Superfood brand and do not expect the discontinuation to have a material impact on our long-term results, we expect future sales of Picky Bars products will decline.

We continue to monitor macroeconomic trends and uncertainties such inflation of commodity costs, the effects of tariffs, and the potential imposition of modified or additional tariffs, which may have adverse effects on net sales and margins. As a result of the tariffs announced by the U.S. presidential administration, and potential tariff modifications or the imposition of tariffs or export controls by other countries, we have experienced some commodity cost volatility, and anticipate that there could be increased supply chain challenges and consumer and economic uncertainty due to rapid changes in global trade policies in the future. Based on preliminary analysis of the potential effects of the announced tariffs and these other factors, we do not expect these factors to result in a material negative effect on our net sales or profitability for the remainder of fiscal year 2025. To date, we have elected to acquire additional inventory in advance of anticipated future tariff implementations, which has impacted our cash balances as of September 30, 2025, but which is not expected to meaningfully impact our cash balances for the balance of the 2025 fiscal year. However, we are continuing to evaluate these factors and their potential effects as well as our ability to potentially offset all or a portion of cost increases through pricing actions and cost savings efforts for fiscal year 2026 planning. Economic pressures on customers and consumers, including the challenges of high inflation and the effects of increased tariffs, may negatively affect our net sales and profitability in the future.

Based on our current business plans, we believe that our existing cash balances, including our anticipated cash flow from operations, will be sufficient to finance our operations and meet our foreseeable cash requirements through at least the next twelve months. In the future, we may raise funds by issuing debt or equity securities, or securities convertible into or exchangeable for our common stock. Such financing and other potential financing may result in dilution to stockholders, reduction in the market price of our common stock, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect our business. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. However, we may be unable to raise additional funds or enter into such other arrangements when needed, on favorable terms, or at all.

Segment Information

We have one operating segment and one reportable segment, for which our Chief Operating Decision Maker, our Chief Executive Officer, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and our management's discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported. Note 1, “Summary of Significant Accounting Policies” of the Notes to the Unaudited Consolidated Condensed Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2024 Form 10-K describe the significant accounting policies and methods used in the preparation of our financial statements. There have been no material changes to our critical accounting estimates since the 2024 Form 10-K.

Emerging Growth Company Status

As a company with less than $1.235 billion in annual gross revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

• a requirement to have only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations;
• an exemption from the auditor attestation requirement on the effectiveness of our internal control over financial reporting;
• reduced disclosure about our executive compensation arrangements; and
• no non-binding advisory votes on executive compensation or golden parachute arrangements.

We may take advantage of these provisions until the end of the fiscal year in which the fifth anniversary of our IPO occurs (i.e., December 31, 2025), or such earlier time when we no longer qualify as an emerging growth company. We will cease to be an emerging growth company on the earlier of (1) the last day of the fiscal year (a) in which we have more than $1.235 billion in annual gross revenue or (b) in which we have more than $700 million in market value of our capital stock held by non-affiliates, or (2) the date on which we issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all these reduced burdens.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards, and therefore we will not be subject to the same requirements to adopt new or revised accounting standards as other public companies that are not emerging growth companies.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Company management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), to allow timely decisions regarding required disclosure.

Our management, with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2025, the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2025.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Except as set forth below, there were no material changes to the Risk Factors disclosed in “Item 1A. Risk Factors” in the 2024 Form 10-K during the three months ended September 30, 2025. This Quarterly Report on Form 10-Q should be read in conjunction with the risk factors previously described in the Company's 2024 Form 10-K.

We are subject to the risks associated with conducting business operations outside of the U.S., which could adversely affect our business.

We purchase our products from a variety of suppliers, including international suppliers. Our direct purchases from non-US suppliers represented a majority of our raw materials, and we expect our international purchases may grow with time. Additionally, we may source from new non-US suppliers over time as raw material availability changes. We may in the future enter into agreements with distributors in foreign countries to sell our products. All of these activities are subject to the uncertainties associated with international business operations, including:

• difficulties with foreign and geographically dispersed operations;
• having to comply with various U.S. and international laws;
• changes and uncertainties relating to foreign rules and regulations;
• tariffs, export or import restrictions, restrictions on remittances abroad, imposition of duties or taxes that limit our ability to import necessary materials;
• limitations on our ability to enter into cost-effective arrangements with distributors, or at all;
• fluctuations in foreign currency exchange rates;
• imposition of limitations on production, sale or export in foreign countries, including due to pandemic or quarantine;
• imposition of limitations on or increase of withholding and other taxes on remittances and other payments by foreign processors or joint ventures;
• imposition of differing labor laws and standards;
• economic, political, environmental, health-related, or social instability in foreign countries and regions (such as in Southeast Asia in 2022 and South America in 2023);
• an inability, or reduced ability, to protect our intellectual property;
• availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us;
• difficulties in enforcing contracts and legal decisions; and
• less developed infrastructure.

If we expand into other target markets, we cannot assure you that our expansion plans will be realized, or if realized, be successful. We expect each market to have particular regulatory and funding hurdles to overcome and any future developments in these markets, including the uncertainty relating to governmental policies and regulations, could harm our business. If we expend significant time and resources on expansion plans that fail or are delayed, our reputation, business and financial condition may be harmed.

In addition, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws, which generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials or other third parties for the purpose of obtaining or retaining business. While our policies mandate compliance with these anti-bribery laws, our internal control policies and procedures may not protect us from reckless or criminal acts committed by our employees or agents. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations, cash flows and financial condition.

All risks relating to business operations outside of the U.S. may be exacerbated by the current U.S. political climate. For example, the U.S. presidential administration recently announced significant tariffs on imports from a broad range of countries, including Canada, Mexico, China, and countries in Southeast Asia, which may have caused and may continue to cause, among other things, inflationary pressures and higher costs on certain of our raw materials and imports from Southeast Asia. We have in the past and intend to continue to source certain of our raw materials from China. In the future, additional tariffs may be implemented on other countries from which we import a significant portion of our raw materials.

Tariffs announced by the U.S. government, particularly against countries in Southeast Asia, could impact our business and results of operations. Further, reciprocal tariffs and other related measures could be taken by other countries, including the potential escalation of trade disputes, could further impact our business and results of operations. The extent and duration of tariffs and the resulting effect on general economic conditions and on our business could result in increases in prices for raw materials that we import from our suppliers. The impact of tariffs or reciprocal tariffs on our supply chain are uncertain and depend on various factors, such as negotiations between the United States and affected countries, the responses of other countries or regions, exemptions or exclusions that may be granted, availability and cost of alternative sources of supply, and demand for our products.

The ultimate impact of changing trade policies on our business will depend on various factors, including the magnitude, duration and nature of tariffs. While we actively monitor these developments, we may not be able to fully mitigate the adverse impact of potential tariff initiatives or other trade-related disruptions.