Laird Superfood, Inc.: Form 10-Q for the period ended Mar 31, 2026

The following discussion and analysis of the financial condition and results of operations of Laird Superfood, Inc. (together with its wholly owned subsidiaries 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, 2025 (the "2025 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 2025 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 solutions and (ii) functional foods. 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.

Our e-commerce channel consists of (i) our direct-to-consumer ("DTC") business, which includes sales through lairdsuperfood.com, navitasorganics.com, and pickybars.com, and (ii) Amazon.com. Our websites 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 accounted for approximately 77% of DTC sales for the three months ended March 31, 2026 and 2025.

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 months ended March 31, 2026 and 2025, the e-commerce channel made up 46% and 53% of our net sales, respectively. For the three months ended March 31, 2026 and 2025, the wholesale channel made up 54% and 47% of our net sales, respectively. The shift towards Wholesale is consistent with 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 $13.9 million for the three months ended March 31, 2026 ("Q1 2026"), from $11.7 million for the three months ended March 31, 2025 ("Q1 2025"). Wholesale net sales in Q1 2026 increased by 37% compared to Q1 2025 driven primarily by distribution expansion and improved velocities at shelf. E-commerce channel sales for Q1 2026 increased by 4% compared to Q1 2025, primarily due to growth on Amazon.

Recent Developments

The Navitas Acquisition

On the Navitas Closing Date, we completed the Navitas Acquisition, pursuant to the terms of the Navitas Acquisition Agreement following the receipt of approval from our stockholders, we acquired (i) all of the issued and outstanding units of Navitas from the Navitas Sellers and (ii) all of the issued and outstanding capital stock of GSC, from Encore for a purchase price of $38.5 million in cash, subject to customary purchase price adjustments, including a working capital adjustment. GSC is a holding company with no operations whose purpose is to hold units of Navitas.

The Nexus Investment

On the Navitas Closing Date and concurrently with the closing of the Navitas Acquisition, we completed the transactions contemplated by the Investment Agreement entered into by and among the Company and the Investor, with the Investor being an affiliate of Nexus, pursuant to which the Investor purchased an aggregate of 50,000 initial shares (the “Initial Shares”) of Series A Preferred Stock (“Series A Preferred Stock”) at a purchase price of $1,000 per share for gross proceeds of $50.0 million at closing (the “Nexus Investment”). The net proceeds from the Nexus Investment were subsequently used to complete the Navitas Acquisition (the Nexus Investment together with the Navitas Acquisition, the “Transactions”). For additional information regarding the Investment Agreement, see the information under the heading “Liquidity and Capital Resources.”

Board Appointments

We approved changes to our Board in connection with the Transactions. As of the Navitas Closing Date, the number of directors serving on the Board was increased to nine, and we appointed Doug Behrens, Michael Cohen, Kayla Dean Obia, and Kristin Patrick as representatives nominated by Nexus (the “Nexus Designees”), with Grant LaMontagne remaining on the Board and being considered the fifth Nexus Designee. In the future, the number of Nexus representatives will adjust proportionately to Nexus’s ownership thresholds, subject to applicable law and stock exchange rules.

The Terrasoul Acquisition

On the Terrasoul Closing Date, we completed the Terrasoul Acquisition for a purchase price of (i) $48.0 million in cash, subject to customary purchase price adjustments, and (ii) contingent consideration of up to $5.0 million in cash payable upon the achievement of specified performance-based milestones following the Terrasoul Closing Date. Terrasoul is a vertically integrated, branded superfoods platform offering a portfolio of products including nuts, seeds, dried fruits, powders, baking ingredients, and functional beverage mix-ins, sourced globally and processed and packaged in-house. We acquired Terrasoul to expand our product portfolio, broaden our distribution footprint across e-commerce, foodservice, and retail channels, and further our strategy of building a scaled platform in the superfoods and functional nutrition category.

The Subsequent Issuance

On the Terrasoul Closing Date, we concurrently completed the Subsequent Issuance pursuant to the exercise of our option under the Investment Agreement to require the Investor to purchase the Additional Shares, as approved by a majority of the disinterested directors of the Board on March 27, 2026. The net proceeds from the Subsequent Issuance were used to fund the Terrasoul Acquisition. An aggregate of 16,806,722 shares of Common Stock may be issued upon conversion of the shares of Series A Preferred Stock issued in the Subsequent Issuance. For additional information regarding the Investment Agreement, see the information under the heading “Liquidity and Capital Resources.”

Our Strategy and Key Factors Affecting our Future Performance

There have been no material changes to our strategy or key factors affecting our future performance from those described in Item 7 of the 2025 Form 10-K.

Components of Results of Operations

The components of our results of operations are described in Item 7 of the 2025 Form 10-K and have not changed during the three months ended March 31, 2026.

Results of Operations

Comparison of Q1 2026 and Q1 2025

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

The increase in net sales during Q1 2026 was driven primarily by the acquisition of Navitas, which contributed $1.6 million of net sales during the quarter. The wholesale channel grew 37%, which was driven by the addition of Navitas wholesale revenues, distribution expansion, product assortment expansion in grocery and club stores, and velocity growth in our key categories. The e-commerce channel grew 4% year-over-year, driven by the addition of Navitas e-commerce sales, and strong Amazon sales growth, partially offset by a decline in DTC sales.

The increase in cost of goods sold during Q1 2026 was driven primarily by growth in sales volume, inflationary commodity costs, and tariffs.

Gross margin contracted 8.6 percentage points to 33.3% in Q1 2026 from 41.9% in the prior year period. Approximately 5.4 percentage points year-over-year was attributable to unfavorable channel and product mix, inflationary commodity costs, as well the impact of import tariffs on certain input costs. Approximately 3.2 percentage points of this contraction was driven by a timing-related inventory costing benefit in the prior year period that did not recur.

The increase in general and administrative expenses during Q1 2026 was primarily driven by $1.3 million of costs incurred related to the Navitas Acquisition, $0.1 million of amortization expense related to Navitas acquisition intangible assets, and increased personnel costs.

The increase in sales and marketing expenses during Q1 2026 was driven by media spend, agency fees, and selling costs on higher 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 Q1 2026 was driven by decreases in dividend income on money market funds, as the amounts carried in those accounts decreased on average.

The income tax benefit during Q1 2026 was driven by a discrete, non-recurring release of our valuation allowance in connection with the Navitas Acquisition, whereby approximately $4.7 million of net deferred tax liabilities were acquired. The income tax expense in the prior year related to state and local income taxes.

Cash Flows

The following table shows a summary of our cash flows for the three months ended March 31, 2026 and 2025:

The increase in cash used in operating activities for Q1 2026 was driven primarily by the payment of costs incurred in relation to the Navitas Acquisition, as well as strategic investment into working capital.

Cash used in investing activities for Q1 2026 consisted primarily of consideration paid in the acquisition of Navitas.

Cash provided by financing activities for Q1 2026 consisted primarily of the proceeds from the private placement of Series A Preferred Stock, as well as stock option exercises, offset in part by payroll taxes paid related to net issuances of stock awards.

Liquidity and Capital Resources

As of March 31, 2026, we had an accumulated deficit of $109.6 million. 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 March 31, 2026 and December 31, 2025, we had $10.5 million and $5.3 million, respectively, of cash-on-hand, and total net working capital of $25.7 million and $11.1 million, respectively, for the same periods. As of March 31, 2026, we had access to up to $2.0 million of advances under our factoring Agreement, of which none had been utilized as of the date of this report.

On March 12, 2026, we completed the Transactions, pursuant to which (i) the Investor purchased the Initial Shares of Series A Preferred Stock at a purchase price of $1,000 per share for gross proceeds of $50.0 million at closing and (ii) the Company acquired Navitas for a purchase price of $40.9 million. Pursuant to the terms of the Investment Agreement, the Company had the option, subject to certain conditions, to require the Investor to purchase the Additional Shares, provided that the decision to require the Investor to purchase the Additional Shares be approved by a majority of the disinterested directors of the Board and any funding of the Additional Shares be used to fund substantially concurrent strategic acquisitions.

As of March 31, 2026, we had no significant unused sources of liquid assets outside of our working capital, aside from any potential future proceeds from the issuance of the Additional Shares following the Nexus Investment.

On April 20, 2026, we exercised our option to require the Investor to purchase the Additional Shares in connection with the Terrasoul Acquisition. Upon closing the transaction, we had approximately $8.0 million of additional cash that can be used to support the working capital of the combined enterprise.

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 lease arrangements for corporate office space. As of March 31, 2026, we had fixed lease payment obligations of $0.6 million, with $0.3 million payable within 12 months.
• As of March 31, 2026, $11.4 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 $2.5 million in Q1 2026 and $1.8 million in Q1 2025. 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.
• We have non-cancelable purchase contracts with certain raw material vendors. Total estimated outstanding commitments were approximately $9.0 million as of March 31, 2026. See Note 14 for further information on these purchase contracts.
• 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.

We continue to monitor macroeconomic trends and uncertainties such as 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 in the near future. To date, we have elected to acquire additional inventory in advance of anticipated future tariff implementations, which has impacted our cash balances as of March 31, 2026, but which is not expected to meaningfully impact our cash balances long-term. 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 shareholders, 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

There have been no material changes to our critical accounting estimates from those disclosed in Item 7 of the 2025 Form 10-K, aside from the following:

Business Combinations

We account for business combinations under the acquisition method in accordance with ASC 805. Consideration transferred is allocated to the assets acquired and liabilities assumed at their acquisition-date fair values, with any excess recorded as goodwill. Acquisition-related transaction costs are expensed as incurred and included in general and administrative expenses.

Determining the fair value of acquired identifiable intangible assets — principally brand names, customer and distributor relationships, and product portfolios — requires significant management judgment. We typically engage independent valuation specialists and apply the income approach (including the multi-period excess earnings and relief-from-royalty methods), the market approach, or the cost approach, as appropriate. Key assumptions include projected revenue growth and margins, customer and distributor attrition rates, royalty rates, contributory asset charges, useful lives, and discount rates. Changes in these assumptions could result in materially different fair values, with corresponding effects on intangible assets, goodwill, deferred income taxes, and future amortization expense.

The initial accounting for a business combination may be incomplete at the reporting date. In such cases, we record provisional amounts and adjust them during the measurement period (not to exceed one year from the acquisition date) as new information about acquisition-date facts and circumstances becomes available.

During the three months ended March 31, 2026, we completed the acquisition of Navitas LLC and recorded a preliminary allocation of the approximately $40.9 million purchase price, including $20.0 million of identifiable intangible assets and $16.7 million of goodwill. The Navitas allocation is preliminary and remains subject to measurement-period adjustments. The accounting for our subsequent acquisition of Terrasoul, completed on April 21, 2026, is incomplete. See Notes 2 and 15 for additional information.

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

Our management, with the participation of our principal executive officer and our principal financial officer, and under the oversight of the Board of Directors, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2026, due to a material weakness in our internal controls over financial reporting described below. However, our management, including our principal executive officer and our principal financial officer, has concluded that, notwithstanding the identified material weakness in our internal controls over financial reporting, the consolidated financial statements in Quarterly Report on Form 10-Q fairly presents, in all material respects, our financial position, results of operations, and cash flows for the periods presented in conformity with U.S. GAAP.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.

Financial System Design. We identified a deficiency in the design of our internal controls related to the preparation and approval of journal entries within our financial systems relevant to the preparation of our consolidated financial statements. The configuration of the journal entry approval workflows in our financial accounting system was not designed to adequately enforce segregation of duties, whereby certain personnel had the ability to create, post, and edit journal entries that are not identified to be reviewed by separate individuals. This design deficiency constitutes a material weakness in internal control over financial reporting. The material weakness could result in misstatements of the consolidated financial statements or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Management conducted a comprehensive review of journal entry activity for the affected population and found no evidence of resulting misstatements in the financial statements.

Management's Remediation Plan

Prior to March 31, 2026, management implemented a system-level configuration change that enforces segregation of duties within the journal entry approval workflow in a manner designed to address the risk pathways identified. While management believes that the changes enacted will remediate the design deficiency, management will continue to test and monitor the impacts of the changes enacted to ensure that the design is operating effectively prior to concluding whether it has been fully remediated.

Changes in Internal Control over Financial Reporting

Notwithstanding the aforementioned remediation activities, 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. The new remedial controls were in place as of March 31, 2026, but had not been operating long enough to be tested for operating effectiveness.

There were no material changes to the Risk Factors disclosed in “Item 1A. Risk Factors” in the 2025 Form 10-K during the three months ended March 31, 2026. This Quarterly Report on Form 10-Q should be read in conjunction with the risk factors previously described in the Company's 2025 Form 10-K.