LIFECORE BIOMEDICAL, INC. DE 10-Q

Item 1. Financial statements Table of contents Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025 2 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2026 and May 25, 2025 3 Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Six Months Ended June 30, 2026 and May 25, 2025 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2026 and May 25, 2025 6 Notes to the Consolidated Financial Statements 7 1 Organization, basis of presentation and summary of significant accounting policies 7 2 Income or loss per share 9 3 Segment reporting for single reportable segment 9 4 Accounts and note receivable 10 5 Inventory 10 6 Property, plant and equipment, net 11 7 Accrued expenses and other current liabilities 11 8 Commitments and contingencies 12 9 Debt 14 10 Equity 17 11 Revenue recognition 19 12 Stock-based compensation 20 13 Income taxes 22 14 Fair value of financial instruments 22 15 Leases 24 16 Related party transactions 25 1 Table of Contents LIFECORE BIOMEDICAL, INC. CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands, except share and per share amounts) June 30, 2026 December 31, 2025 ASSETS Current assets: Cash and cash equivalents $ 17,241 $ 17,469 Accounts receivable, net 13,728 13,233 Accounts receivable, related party 16,727 12,929 Contract assets 7,568 7,655 Inventory 25,475 29,085 Prepaid expenses and other current assets 2,952 1,921 Total current assets 83,691 82,292 Property, plant and equipment, net 123,714 127,304 Goodwill 13,881 13,881 Other assets 8,214 8,700 Total assets $ 229,500 $ 232,177 LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 7,534 $ 6,211 Accrued expenses and other current liabilities 14,107 17,362 Total current liabilities 21,641 23,573 Debt, net of current portion 5,590 5,694 Debt, net of current portion, related party 148,508 135,588 Debt derivative liability, related party 30,922 26,564 Other liabilities 6,746 6,698 Total liabilities 213,407 198,117 Commitments and contingencies, see note 8 Series A Redeemable Convertible Preferred Stock, $ 0.001 par value; 2,000,000 shares authorized; 49,263 and 47,466 shares issued and outstanding, redemption value $ 50,187 and $ 48,356 50,187 48,262 Stockholders’ (deficit) equity: Common Stock, $ 0.001 par value; 75,000,000 shares authorized; 37,697,012 and 37,477,386 shares issued and outstanding 38 37 Additional paid-in capital 210,205 208,962 Accumulated deficit ( 244,337 ) ( 223,201 ) Total stockholders’ deficit ( 34,094 ) ( 14,202 ) Total liabilities, convertible preferred stock and stockholders’ deficit $ 229,500 $ 232,177 See accompanying notes to the consolidated financial statements 2 Table of Contents LIFECORE BIOMEDICAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three months ended Six months ended (in thousands, except share and per share amounts) June 30, 2026 May 25, 2025 June 30, 2026 May 25, 2025 Revenues $ 11,480 $ 19,768 $ 25,716 $ 36,001 Revenues, related party 22,687 16,676 31,644 35,597 Total revenues 34,167 36,444 57,360 71,598 Cost of sales 22,092 22,462 40,823 47,771 Gross profit 12,075 13,982 16,537 23,827 Research and development expenses 1,537 2,103 2,754 4,148 Selling, general, and administrative expenses 7,971 8,980 15,888 19,073 Restructuring recovery — ( 2,519 ) — ( 2,634 ) Loss on sale or disposal of assets, net of portion classified as cost of sales — 91 — 6,942 Operating income (loss) 2,567 5,327 ( 2,105 ) ( 3,702 ) Interest income 144 206 272 314 Interest expense ( 480 ) ( 604 ) ( 934 ) ( 1,460 ) Interest expense, related party ( 7,271 ) ( 5,123 ) ( 14,165 ) ( 9,856 ) Change in fair value of debt derivative liability, related party ( 1,203 ) ( 1,091 ) ( 4,358 ) ( 1,691 ) Other income, net 110 171 220 504 Loss before income taxes ( 6,133 ) ( 1,114 ) ( 21,070 ) ( 15,891 ) Income tax expense ( 23 ) ( 33 ) ( 66 ) ( 25 ) Net loss ( 6,156 ) ( 1,147 ) ( 21,136 ) ( 15,916 ) Preferred stock dividends ( 924 ) ( 852 ) ( 1,831 ) ( 1,689 ) Accretion of preferred stock to redemption value ( 47 ) ( 48 ) ( 94 ) ( 96 ) Loss available to common stockholders $ ( 7,127 ) $ ( 2,047 ) $ ( 23,061 ) $ ( 17,701 ) Loss per share, basic and diluted $ ( 0.19 ) $ ( 0.06 ) $ ( 0.61 ) $ ( 0.48 ) Weighted average shares outstanding, basic and diluted 37,574,538 37,007,838 37,526,230 37,014,204 See accompanying notes to the consolidated financial statements 3 Table of Contents LIFECORE BIOMEDICAL, INC. CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (unaudited) Redeemable Convertible Preferred Stock Common Stock Additional paid-in capital Accumulated deficit Total stockholders’ equity (deficit) (dollars in thousands) Shares Amount Shares Amount Balance at March 31, 2026 48,356 $ 49,216 37,477,386 $ 37 $ 209,706 $ ( 238,181 ) $ ( 28,438 ) Dividends paid-in-kind 907 924 — — ( 924 ) — ( 924 ) Accretion to redemption value — 47 — — ( 47 ) — ( 47 ) Settlement of stock-based awards — — 219,626 1 ( 615 ) — ( 614 ) Stock-based compensation — — — — 2,085 — 2,085 Net loss — — — — — ( 6,156 ) ( 6,156 ) Balance at June 30, 2026 49,263 $ 50,187 37,697,012 $ 38 $ 210,205 $ ( 244,337 ) $ ( 34,094 ) Balance at February 23, 2025 44,894 $ 45,197 37,025,331 $ 37 $ 206,277 $ ( 204,093 ) $ 2,221 Dividends paid-in-kind 842 852 — — ( 852 ) — ( 852 ) Accretion to redemption value — 48 — — ( 48 ) — ( 48 ) Settlement of stock-based awards — — 77,417 — ( 163 ) — ( 163 ) Retirement of shares — — ( 76,514 ) — ( 490 ) — ( 490 ) Stock-based compensation — — — — 1,815 — 1,815 Net loss — — — — — ( 1,147 ) ( 1,147 ) Balance at May 25, 2025 45,736 $ 46,097 37,026,234 $ 37 $ 206,539 $ ( 205,240 ) $ 1,336 See accompanying notes to the consolidated financial statements. 4 Table of Contents LIFECORE BIOMEDICAL, INC. CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED) (unaudited) Redeemable Convertible Preferred Stock Common Stock Additional paid-in capital Accumulated deficit Total stockholders’ equity (deficit) (dollars in thousands) Shares Amount Shares Amount Balance at December 31, 2025 47,466 $ 48,262 37,477,386 $ 37 $ 208,962 $ ( 223,201 ) $ ( 14,202 ) Dividends paid-in-kind 1,797 1,831 — — ( 1,831 ) — ( 1,831 ) Accretion to redemption value — 94 — — ( 94 ) — ( 94 ) Settlement of stock-based awards — — 219,626 1 ( 615 ) — ( 614 ) Stock-based compensation — — — — 3,783 — 3,783 Net loss — — — — — ( 21,136 ) ( 21,136 ) Balance at June 30, 2026 49,263 $ 50,187 37,697,012 $ 38 $ 210,205 $ ( 244,337 ) $ ( 34,094 ) Balance at November 24, 2024 44,068 $ 44,312 36,980,790 $ 37 $ 204,736 $ ( 189,324 ) $ 15,449 Issuance of stock, net of fees — — — — 8 — 8 Dividends paid-in-kind 1,668 1,689 — — ( 1,689 ) — ( 1,689 ) Accretion to redemption value — 96 — — ( 96 ) — ( 96 ) Settlement of stock-based awards — — 121,958 — ( 297 ) — ( 297 ) Retirement of shares — — ( 76,514 ) — ( 490 ) — ( 490 ) Stock-based compensation — — — — 4,367 — 4,367 Net loss — — — — — ( 15,916 ) ( 15,916 ) Balance at May 25, 2025 45,736 $ 46,097 37,026,234 $ 37 $ 206,539 $ ( 205,240 ) $ 1,336 See accompanying notes to the consolidated financial statements. 5 Table of Contents LIFECORE BIOMEDICAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Six months ended (in thousands) June 30, 2026 May 25, 2025 Cash flows from operating activities: Net loss $ ( 21,136 ) $ ( 15,916 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 4,825 3,990 Stock-based compensation 3,783 4,367 Non-cash interest expense, inclusive of related party 13,941 10,606 Change in fair value of debt derivative liability, related party 4,358 1,691 Loss on sale or disposal of assets — 7,727 Gain on settlement of lease liability — ( 2,642 ) Other, net ( 209 ) 190 Changes in operating assets and liabilities: Accounts receivable, inclusive of related party ( 4,084 ) ( 4,891 ) Contract assets 87 ( 1,281 ) Inventory 3,610 6,923 Other assets ( 845 ) 1,517 Accounts payable 1,788 ( 2,461 ) Accrued expenses and other liabilities ( 3,607 ) ( 3,272 ) Net cash provided by operating activities 2,511 6,548 Cash flows from investing activities: Purchases of property, plant, and equipment ( 1,631 ) ( 7,553 ) Proceeds from sale of equipment — 7,000 Net cash used in investing activities ( 1,631 ) ( 553 ) Cash flows from financing activities: Payments on revolving credit facility ( 64,400 ) ( 66,493 ) Proceeds from revolving credit facility 64,400 60,493 Payments related to employee stock plans ( 614 ) ( 297 ) Other financing activities ( 494 ) ( 888 ) Net cash used in financing activities ( 1,108 ) ( 7,185 ) Net decrease in cash and cash equivalents ( 228 ) ( 1,190 ) Cash and cash equivalents, beginning of period 17,469 9,455 Cash and cash equivalents, end of period $ 17,241 $ 8,265 See accompanying notes to the consolidated financial statements, including note 1 for supplemental cash flow information 6 Table of Contents LIFECORE BIOMEDICAL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (amounts in thousands of U.S. dollars, except share and per share values) 1. Organization, basis of presentation and summary of significant accounting policies Organization Lifecore Biomedical, Inc. and its subsidiaries (“Lifecore” or the “Company”) is a fully integrated contract development and manufacturing organization (“CDMO”) that provides services in the development, fill and finish of complex sterile injectable pharmaceutical products in syringes, vials and cartridges. Basis of presentation The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) for interim financial information, the instructions for Form 10-Q and Regulation S-X of the Securities and Exchange Commission (the “SEC”). In the opinion of management, all adjustments (which were of a normal recurring nature) have been made which are necessary to present fairly the financial position of the Company at June 30, 2026, and the results of operations and cash flows for all periods presented. Although the Company believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information normally included in the notes to the financial statements prepared following U.S. GAAP may have been condensed or omitted per the rules and regulations of the SEC. The accompanying financial data should be reviewed in conjunction with the audited financial statements and accompanying notes included in the Company’s Transition Report on Form 10-KT for the transition period ended December 31, 2025. The accounting policies underlying the accompanying consolidated financial statements are set forth in note 1 to the consolidated financial statements included in the Company’s Transition Report on Form 10-KT for the transition period ended December 31, 2025. There have been no material changes in the Company’s significant accounting policies during the six months ended June 30, 2026. On August 1, 2025, the Company’s Board of Directors approved changing its fiscal year from a fiscal year ending on the last Sunday of May to a calendar year (the “Fiscal Year Change”), and the Company has reported calendar periods since September 30, 2025. In accordance with SEC rules, the Company is presenting current period results compared to the most closely-comparable prior periods that can be derived from previously-reported results, which for this report were the three and six months ended May 25, 2025. With the exception of certain statements of operations, the Company did not previously report these periods on a standalone basis; rather, those periods were generally derived from the audited financial statements in the Company’s Form 10-K for the year ended May 25, 2025, less the unaudited results reported in its Forms 10-Q for the nine months ended February 23, 2025 and the six months ended November 24, 2024, respectively. In deriving the comparative period results, the Company reclassified certain amounts from previously-reported results to present them on a basis consistent with the current period presentation and, in some cases, the previously audited annual results. It was not practicable or cost-justifiable for the Company to prepare equivalent calendar-based comparative periods because the Company’s previous fiscal calendar does not align to the new calendar periods. The Company will begin providing calendar-based comparative periods beginning with its reporting as of and for the periods ended September 30, 2026. Basis of consolidation The consolidated financial statements have been prepared in accordance with U.S. GAAP. All intercompany accounts and transactions have been eliminated. 7 Table of Contents Use of estimates The preparation of financial statements and the notes to the financial statements in accordance with U.S. GAAP requires management to make estimates and judgments that affect the amounts reported. The accounting estimates that require management’s most significant and subjective judgments include revenue recognition for development services; the establishment of valuation allowances on deferred income tax assets; evaluating assets for reserves and potential impairment; and the valuation of the debt derivative liability. Actual results may differ from management’s estimates. Supplemental disclosures of cash flow information The following table presents supplemental cash flow information: Six months ended June 30, 2026 May 25, 2025 Cash paid (refunded) for income taxes, net $ 19 $ ( 81 ) Cash paid for interest 1,155 609 Non-cash investing and financing activities: Purchases of property, plant and equipment in accounts payable 306 1,539 Non-cash portion of sale of property, plant and equipment via note receivable — 9,590 Capitalization of non-cash interest to property, plant and equipment 77 1,594 Dividends paid-in-kind on Redeemable Convertible Preferred Stock 1,831 1,689 Recent accounting pronouncements In November 2024, the Financial Accounting Standards Board (“FASB”) issued accounting standards update 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which was subsequently clarified by accounting standards update 2025-01, to require more detailed disclosures related to certain costs and expenses. The guidance requires entities to disclose amounts of certain expense categories included in expense captions presented on the face of the income statement, including purchases of inventory, employee compensation, depreciation, and intangible asset amortization. This guidance is effective for public entities for annual periods beginning after December 15, 2026, which for Lifecore begins with the year ending December 31, 2027, and for interim reporting periods following that year. Management is currently evaluating the impact that the adoption of this update will have on its financial statements. In September 2025, the FASB issued accounting standards update 2025-06, Targeted Improvements to the Accounting for Internal-Use Software , to modernize the recognition and disclosure framework for internal-use software costs, removing the previous “development stage” model and introducing a more judgment-based approach. This guidance is effective for annual periods beginning after December 15, 2027, which for Lifecore begins with the year ending December 31, 2028, and interim periods therein. Early adoption is permitted as of the beginning of an annual reporting period. Management is currently evaluating the impact that the adoption of this update may have on its financial statements. Management has evaluated recently issued accounting pronouncements outside of those mentioned above and does not believe that any of these pronouncements will have a significant impact on the Company’s consolidated financial statements and related disclosures. 8 Table of Contents 2. Income or loss per share Due to the Company’s net loss for all periods presented, the inclusion of dilutive securities would be antidilutive because it would reduce the amount of loss incurred per share. As a result, no additional dilutive shares were included in diluted loss per share, and there were no differences between basic and diluted loss per share. The following securities on an as-converted basis were excluded from the computations of diluted loss per share: Three months ended Six months ended June 30, 2026 May 25, 2025 June 30, 2026 May 25, 2025 Redeemable Convertible Preferred Stock 7,681,847 7,091,531 7,681,847 7,091,531 Stock options 1,293,036 1,260,299 1,293,036 1,260,299 RSUs 1,695,376 1,519,287 1,695,376 1,519,287 PSUs 2,283,000 2,545,000 2,283,000 2,545,000 Total 12,953,259 12,416,117 12,953,259 12,416,117 See note 10 for more information about Redeemable Convertible Preferred Stock and note 12 for more information about stock options, restricted stock units (“RSUs”) and performance share units (“PSUs”). 3. Segment reporting for single reportable segment The following table presents the components of net income or loss, which is the measure of profit or loss used for the Company’s single reportable segment: Three months ended Six months ended June 30, 2026 May 25, 2025 June 30, 2026 May 25, 2025 Revenues $ 34,167 $ 36,444 $ 57,360 $ 71,598 Personnel costs (1) 10,952 12,820 22,469 25,128 Materials and non-depreciation overhead (2) 12,902 12,070 22,026 27,335 Depreciation 2,515 1,913 4,825 3,990 Stock-based compensation 2,085 1,815 3,783 4,367 Reorganization costs 1,247 2,179 2,789 4,426 Loss on sale or disposal of assets — 91 — 7,727 All other operating expenses (3) 1,899 229 3,573 2,327 Interest expense, net 7,607 5,521 14,827 11,002 Change in fair value of debt derivative liability 1,203 1,091 4,358 1,691 Other income, net ( 110 ) ( 171 ) ( 220 ) ( 504 ) Income tax expense 23 33 66 25 Net loss $ ( 6,156 ) $ ( 1,147 ) $ ( 21,136 ) $ ( 15,916 ) (1) Includes all wages and salary, bonus, employer taxes, and employee benefit plan expenses (2) Represents cost of sales, excluding direct labor and all personnel cost and depreciation allocations (3) Includes expenses for accounting, legal and other professional services, software licensing, insurance costs, public company costs and board fees. 9 Table of Contents For the three months ended June 30, 2026, the Company earned revenue of approximately 70 % in the United States, 20 % in Belgium and 10 % in all other countries combined. For the three months ended May 25, 2025, the Company earned revenue of approximately 60 % in the United States, 25 % in Belgium and 15 % in all other countries combined. For the six months ended June 30, 2026, the Company earned revenue of approximately 75 % in the United States, 10 % in Belgium and 15 % in all other countries combined. For the six months ended May 25, 2025, the Company earned revenue of approximately 55 % in the United States, 30 % in Belgium and 15 % in all other countries combined. 4. Accounts and note receivable Accounts receivable Two of the Company’s customers had accounts receivable concentrations of 10% or greater as of June 30, 2026, with those customers comprising 54 % and 19 % of accounts receivable. Two of the Company’s customers had accounts receivable concentrations of 10% or greater as of December 31, 2025, with those customers comprising 48 % and 10 % of accounts receivable. Changes in the allowance for credit losses related to accounts receivable are as follows: Six months ended June 30, 2026 May 25, 2025 Beginning balance $ 1,044 $ 561 Provision (reversal of provision) ( 209 ) 808 Charge-offs — ( 18 ) Ending balance $ 835 $ 1,351 Note receivable On January 7, 2025, the Company accepted a $ 10,000 note as a portion of the proceeds from the sale of certain excess equipment described in note 6. The note would have matured on July 7, 2026 and was payable by the note holder in whole or in part at any time prior to maturity without penalty or premium. Otherwise, it was scheduled to be collected as follows: $ 4,000 on July 7, 2025, $ 4,000 on January 7, 2026 and $ 2,000 on July 7, 2026. The note was interest-free through July 7, 2025, and thereafter principal would have earned interest at the U.S. prime rate plus 1 % until repayment. Management concluded that interest should have been imputed for the full duration of the note at an effective interest rate of 8.5 %, representing the stated rate. As a result, the Company recorded an initial discount of $ 410 as an offset to the noncurrent portion of the note based on its maturity date at that time. In June 2025, the note holder paid the note in full. 5. Inventory The following table presents the components of inventory: June 30, 2026 December 31, 2025 Finished goods $ 2,667 $ 11,845 Raw materials 9,254 10,092 Work in process 13,554 7,148 Inventory $ 25,475 $ 29,085 10 Table of Contents 6. Property, plant and equipment, net All property, plant and equipment is located in the United States. The following table presents the components of property, plant and equipment: June 30, 2026 December 31, 2025 Land and land improvements $ 3,491 $ 3,491 Buildings and building improvements 86,078 82,021 Machinery and equipment 82,596 82,139 Computer equipment and software 9,634 7,852 Furniture and fixtures 1,422 1,422 Construction in process 3,627 9,539 Property, plant, and equipment, gross 186,848 186,464 Less: accumulated depreciation ( 63,134 ) ( 59,160 ) Property, plant, and equipment, net $ 123,714 $ 127,304 On January 7, 2025, the Company entered into an agreement for the sale of certain excess equipment. The aggregate purchase price was $ 17,000 . Lifecore received $ 7,000 cash and paid fees of $ 752 at closing . Lifecore also accepted a note for the remainder of the proceeds (see note 4) and recorded current and noncurrent payables of $ 800 and $ 200 , respectively, for selling fees due to a third-party broker. The note and the payables were each cash-settled in June 2025. The sale resulted in a $ 21,239 reduction in idle construction in process. The Company recorded a loss on the sale of the equipment of $ 6,400 , which is included in loss on sale or disposal of assets, net of portion classified as cost of sales, within the statement of operations. Depreciation expense for property, plant and equipment for the three months ended June 30, 2026 and May 25, 2025 was $ 2,515 and $ 1,913 , respectively. Depreciation expense for property, plant and equipment for the six months ended June 30, 2026 and May 25, 2025 was $ 4,825 and $ 3,990 , respectively. 7. Accrued expenses and other current liabilities The following table presents the components of accrued expenses and other current liabilities: June 30, 2026 December 31, 2025 Accrued compensation $ 4,367 $ 4,548 Contract liabilities, related party 3,005 5,642 Contract liabilities 2,274 3,018 Accrued professional fees 1,576 1,444 Current portion of debt, related party 773 773 Current portion of debt 197 181 Other 1,915 1,756 Accrued expenses and other current liabilities $ 14,107 $ 17,362 11 Table of Contents 8. Commitments and contingencies In the ordinary course of business, the Company is involved in various legal proceedings and claims. The Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least each quarter and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. Legal fees are expensed in the period in which they are incurred. Investor dispute On December 23, 2024, 22NW Fund, L.P. (“22NW”), a holder of shares of the Company’s Common Stock and Series A Redeemable Convertible Preferred Stock (see note 10), filed a complaint against the Company, two former officers, and five former or current directors in the Commercial Division of the Supreme Court of the State of New York, New York County. The complaint seeks money damages (including compensatory damages, court costs, and attorneys’ fees) for (i) alleged material misrepresentations by the Company on which 22NW allegedly relied when purchasing shares of the Series A Redeemable Convertible Preferred Stock and Common Stock, (ii) alleged breaches of certain express representations in the stock purchase agreement through which 22NW acquired its shares, and (iii) registration delay fees owed under a registration rights agreement entered into in connection with the issuance of the Series A Redeemable Convertible Preferred Stock. The complaint also seeks the equitable remedy of specific performance under the aforementioned stock purchase agreement, requesting an order compelling the Company to file a proxy statement with the SEC and to hold a stockholder meeting to seek the approval of the removal of the current cap on the conversion of Series A Redeemable Convertible Preferred Stock into Common Stock as set forth in the Certificate of Designations related to the Redeemable Convertible Preferred Stock, which the Company has since satisfied. On February 24, 2025, the Company filed a motion to dismiss all claims against it except for the claims relating to the registration delay fees, which the Company subsequently paid to 22NW in full in November 2025. On that same day, the individual defendants also filed a separate motion to dismiss the complaint against them in its entirety. On April 22, 2026, the Court granted the Company’s motion to dismiss in part and the individual defendants’ motion to dismiss in its entirety. With respect to the Company, all but two claims were dismissed: the claim for alleged breaches of certain express representations in the Series A stock purchase agreement and the claim for failure to pay registration delay fees. At the prior oral argument on the motions, 22NW’s counsel agreed on the record that the registration delay fees claim was mooted by the Company’s prior payments. The Company intends to vigorously defend itself against these remaining claims. Any potential remaining loss arising from these claims is not currently probable or estimable. 12 Table of Contents Class action complaint On July 29, 2024, a putative class action complaint was filed on behalf of stockholders of the Company in the United States District Court of Minnesota against the Company and certain of its named executive officers. The complaint generally alleges that statements made to the Company’s stockholders between October 7, 2020, and March 19, 2024 regarding the Company’s financial results, internal controls, remediation efforts, periodic reporting, and financial prospects were false and misleading in violation of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that the individual defendants are liable for such statements because they are controlling persons under Section 20(a) of the Exchange Act. The complaint seeks compensatory damages, court costs, and attorneys’ fees. On November 15, 2024, the Court appointed co-lead plaintiffs and their respective counsel. The co-lead plaintiffs filed an amended complaint on January 24, 2025, which contained substantially similar allegations and claims as those set forth in the original complaint. The Company filed a motion to dismiss the complaint on March 25, 2025, and the plaintiffs filed their opposition to the motion to dismiss on May 23, 2025. In November 2025, the Company and individual defendants entered into an agreement in principle with the plaintiffs to settle this matter, without any admission of wrongdoing, which was subject to court approval. On March 13, 2026, the Court granted preliminary approval of the proposed settlement, and the final approval hearing was held on July 28, 2026. If final approval of the proposed settlement is granted by the court in its current form, this settlement is expected to be covered by the Company’s insurance policies with no material loss incurred by the Company. The Company continues to believe that the claims are without merit and intends to vigorously defend against them if the settlement is not so approved. SEC subpoena On February 16, 2024, the Chicago Regional Office of the SEC issued a subpoena to the Company seeking documents and information concerning the financial statement restatement. The Company cooperated with the SEC during its review of the matter. On March 9, 2026, the Company received notice from the SEC’s Division of Enforcement that it had concluded its investigation with no action taken against the Company. Yucatan litigation On December 1, 2018, the Company acquired all of the voting interests and substantially all of the assets of Yucatan Foods L.P. (“Yucatan”, collectively the “Yucatan Acquisition”), which owned a guacamole manufacturing plant in Mexico called Procesadora Tanok, S de RL de C.V. (“Tanok”). On September 2, 2020, one of the former owners of Yucatan filed a lawsuit against the Company in Los Angeles County Superior Court for breach of employment agreement, breach of holdback agreement, declaratory relief and accounting. The Plaintiff sought over $ 10,000 in damages, including delivery of shares of his stock held in escrow for Company’s indemnification claims to recover the cost of a portion of the liabilities that were incurred by the Company in connection with certain compliance matters arising from facts and circumstances prior to the closing of the Yucatan Acquisition. On November 3, 2020, the Company filed an answer and cross-complaint against the Plaintiff and other former equity holders of Yucatan for fraud, indemnification, and other claims, and seeking no less than $ 80,000 in damages. The Company previously reached settlements with several of the cross-defendants, pursuant to which the settling cross-defendants agreed that certain of the shares of escrowed stock they received when the Company acquired Yucatan either be sold and the proceeds paid to the Company, or that those shares be released to the Company. The trial for the remaining defendants was severed into two trials by the Court: • The first trial involved claims by and against one defendant only. This trial concluded on October 18, 2024, and final judgment was entered on March 21, 2025, with offsetting verdicts that resulted in a net award in the Company’s favor of $ 902 against the defendant and an award of recoverable costs of $ 275 for a total judgment of $ 1,177 . The Company filed a notice of appeal on June 9, 2025 and the Plaintiff filed a notice of cross-appeal on July 1, 2025. 13 Table of Contents • The second trial for the other defendants will involve only the Company’s claims against them, and there are no claims made by those defendants against the Company. That second trial has been stayed by the Court pending a final judgment, including any appeal, in the first trial. • The Plaintiff filed a new complaint seeking over $ 15,000 in damages and delivery of shares of his stock held in escrow, and served it on the Company on June 30, 2025. The Plaintiff’s new lawsuit arises out of the same allegations as his earlier lawsuit, asserts the same claims, and seeks the same damages. The Company’s motion to dismiss the new complaint on the grounds it is duplicative of the first lawsuit was denied by the trial court, but the Company appealed the trial court’s decision on February 17, 2026. The ultimate outcome of these matters or any other investigations, legal actions, or potential claims that may arise from these matters remains uncertain. The Company cannot reasonably predict the timing or outcomes, or estimate the amount of final judgments, or the effect, if any, they may have on its financial statements. Separately, future rulings from the Court will affect pending claims against the severed defendants for indemnification under provisions in the purchase agreement for the Yucatan Acquisition. Because recovery of amounts is still contingent upon the resolution of certain issues, no amounts have been recorded as recoverable costs through June 30, 2026. 9. Debt The following table presents the components of debt: June 30, 2026 December 31, 2025 Debt principal: Term loan credit facility with related party $ 192,725 $ 184,087 Leaseback liability with related party 5,410 5,798 Finance lease liability 5,787 5,875 Debt principal 203,922 195,760 Unamortized debt discount on term loan credit facility with related party ( 48,854 ) ( 53,524 ) Total debt, net of discounts $ 155,068 $ 142,236 Classification on consolidated balance sheet: Accrued expenses and other current liabilities $ 970 $ 954 Debt, net of current portion 5,590 5,694 Debt, net of current portion, related party 148,508 135,588 Total debt, net of discounts $ 155,068 $ 142,236 The following table presents future minimum principal payments at June 30, 2026: Remainder of 2026 $ 479 2027 987 2028 1,023 2029 193,774 2030 1,068 Thereafter 6,591 Debt principal $ 203,922 14 Table of Contents The following table presents the classification of interest in the consolidated financial statements: Three months ended Six months ended June 30, 2026 May 25, 2025 June 30, 2026 May 25, 2025 Expensed in statement of operations 7,751 5,727 15,099 11,316 Capitalized to property, plant and equipment 52 796 77 1,594 Total interest incurred $ 7,803 $ 6,523 $ 15,176 $ 12,910 As of June 30, 2026, the Company was in compliance with all financial covenants under the Term Loan Credit Facility and Revolving Credit Facility. Term Loan Credit Facility On May 22, 2023, the Company entered into a Credit and Guaranty Agreement (the “Term Loan Credit Facility”) with Alcon Research, LLC (“Alcon”). The Term Loan Credit Facility refinanced in full all obligations of the Company and its subsidiaries under its prior term loan credit facility. This facility has been amended from time to time, including for the purpose of (i) enhancing and clarifying certain reporting requirements; (ii) providing limited waivers of potential events of default and permitting the Company to retain cash proceeds from the recent sale of certain excess equipment (see note 6); and (iii) most recently, on November 6, 2025, making certain changes to reporting requirements to correspond to the Fiscal Year Change and providing the Company with flexibility regarding the investment of excess cash and alignment on making certain third party payments. The Company initially made $ 142,270 of term loan borrowings under the facility. Interest was at a fixed rate of 10 % per annum payable-in-kind until May 22, 2026, following which interest is now payable at a fixed rate of 3 % per annum in cash with the remainder payable-in-kind. The Company may elect to pay any amount of interest in cash instead of in-kind. The obligations under the Term Loan Credit Facility mature on May 22, 2029. Term loan principal generally cannot be repaid prior to the maturity date except as follows: (i) the Company is permitted to make voluntary prepayments beginning May 22, 2028 at a rate of 110 %; (ii) Alcon or the Company can require prepayment upon a change in control at a rate of 115 %; (iii) Alcon can require prepayment upon uncured material default of its supply agreement with the Company at a rate of 120 %; (iv) sales of certain collateral assets, with specific exception, require the Company to prepay the term loans in the amount of proceeds received. The Term Loan Credit Facility contains customary affirmative covenants including, but not limited to, financial reporting requirements and maintenance of existence requirements, and negative covenants, including, but not limited to, limitations on the incurrence of debt, liens, investments, restricted payments, restricted debt payments, and affiliate transactions. The Term Loan Credit Facility contains one financial covenant, a minimum liquidity covenant, requiring $ 4,000 of Consolidated Liquidity (as defined in the Term Loan Credit Facility) as of the end of each quarter. See also note 10, “Redeemable Convertible Preferred Stock — Redemption” for more information. As of June 30, 2026, the Company’s effective annual interest rate under the Term Loan Credit Facility was 20.9 %. Borrowings are guaranteed and secured by substantially all of the Company’s consolidated assets. Pursuant to an intercreditor agreement between Alcon and BMO (as defined below), Alcon is generally entitled to a priority claim with respect to property, plant and equipment, intellectual property and all other collateral to which BMO does not have a priority claim, as described further below. The facility contains customary financial covenants and events of default under which the obligations thereunder could be accelerated and/or the interest rate increased in specified circumstances. 15 Table of Contents Revolving Credit Facility On December 31, 2020, the Company entered into a revolving credit agreement with BMO Harris Bank, N.A. (“BMO,” collectively the “Revolving Credit Facility”). The Revolving Credit Facility has been amended from time to time, including for the purpose of (i) providing limited waivers from historical events of default; (ii) as a result of discontinued operations, reducing the maximum committed amount to its current level of $ 40,000 ; (iii) creating an additional $ 2,500 borrowing tranche, which was repaid in June 2025; (iv) extending the maturity date to November 26, 2027, reducing the applicable interest rates and making certain other changes to the financial and reporting covenants; and (v) most recently, on November 6, 2025, making certain changes to reporting requirements to correspond to the Fiscal Year Change and providing the Company with flexibility regarding the investment of excess cash and alignment on making certain third party payments. The Company can borrow under the facility in an amount up to the lesser of (i) the maximum committed amount and (ii) a specified borrowing base calculated as of the end of each month. The monthly borrowing base is determined using specified percentages of qualifying accounts receivable and inventory that serve as collateral under the facility, net of reserves. As of June 30, 2026, the Company's borrowing base was $ 21,600 , and the Company had no outstanding borrowings. These borrowings, when outstanding, bear interest based on an average daily SOFR rate plus a spread of 2.00 % to 2.50 % per annum based on average availability. The facility also bears a commitment fee on the unused portion of the maximum committed amount of 0.375 % per annum. Average borrowings under the facility were no t material for the three and six months ended June 30, 2026. For the three and six months ended May 25, 2025, average borrowings were approximately $ 2,500 and $ 3,500 , respectively, and the weighted average interest rate on those borrowings was approximately 8.8 % and 8.8 %, respectively. The Revolving Credit Facility contains customary affirmative covenants including, but not limited to, financial reporting requirements and maintenance of existence requirements, and negative covenants, including, but not limited to, limitations on the incurrence of debt, liens, investments, restricted payments, restricted debt payments and affiliate transactions. The Revolving Credit Facility contains one financial covenant, a minimum Consolidated Fixed Charge Coverage Ratio of 1.00 to 1.00, which is generally tested only when an event of default has occurred and is continuing or when availability falls below $ 2,500 . See also note 10, “Redeemable Convertible Preferred Stock — Redemption” for more information. Borrowings are guaranteed and secured by substantially all of the Company’s consolidated assets. Pursuant to an intercreditor agreement between Alcon and BMO, BMO is generally entitled to a priority claim with respect to cash and cash equivalents, accounts receivable and inventory, subject to certain specific exclusions. The facility contains customary financial covenants and events of default under which the obligations thereunder could be accelerated and/or the interest rate increased in specified circumstances. Leaseback liability with related party On May 22, 2023, the Company entered into an equipment sale and leaseback transaction with Alcon. The sale and leaseback did not meet the requirements for sale-leaseback accounting, which resulted in the creation of a $ 7,730 leaseback liability representing the Company's total payment obligation under the lease. The lease expires on the earlier of May 22, 2033 or the date on which the Company exercises its option to repurchase the leased equipment. The Company may exercise that option beginning on the earlier of May 22, 2030 or completion of an agreed expansion of the Company's HA production capacity, in which case the repurchase price equals the remaining unpaid balance of the liability. If the Company does not exercise the option, the equipment transfers to the Company automatically upon expiration for a nominal amount. During the lease term, the Company is obligated to make quarterly principal payments to Alcon of $ 193 plus interest at a rate of 6 % per annum on the unpaid principal balance. 16 Table of Contents The lease contains terms and provisions that are generally customary for a commercial lease of this nature, including obligations relating to the use, operation and maintenance of the equipment. During the term of the lease, Alcon is not permitted to sell or encumber the equipment. Alcon is only entitled to cancel the lease in the event of insolvency, liquidation or bankruptcy; its remedies for other breaches of the lease are limited to monetary damages. 10. Equity Common stock The Company is authorized to issue up to 75,000,000 shares of common stock, $ 0.001 par value (“Common Stock”). The Company is generally not permitted to pay cash dividends to common stockholders due to prohibitions and restrictions arising from the Term Loan Credit Facility, the Revolving Credit Facility and the Redeemable Convertible Preferred Stock, as defined below. Redeemable Convertible Preferred Stock On January 9, 2023, the Company issued 38,750 shares of Series A Convertible Preferred Stock, par value $ 0.001 per share, that is in certain cases redeemable for cash and/or convertible into shares of Common Stock at the election of the holders, each as discussed further below (the “Redeemable Convertible Preferred Stock”). The Redeemable Convertible Preferred Stock ranks senior to the Common Stock with respect to dividends, distributions and payments on liquidation, winding-up and dissolution. The Company received proceeds of $ 38,750 at issuance, net of issuance costs of $ 668 . The deduction for issuance costs was being amortized through June 29, 2026 as a charge to additional paid-in capital. The Company is generally not permitted to pay cash to holders of the Series A Convertible Preferred Stock, including in connection with distributions or redemptions, pursuant to the prohibitions on restricted payments under the Term Loan Credit Facility and the Revolving Credit Facility, without the consent of the lenders. As of June 30, 2026 and December 31, 2025, the aggregate liquidation preference of the Redeemable Convertible Preferred Stock was equal to the Conversion Amount (defined below) of $ 50,187 and $ 48,356 , respectively. Dividends The holders of Redeemable Convertible Preferred Stock are entitled to dividends at a rate of 7.5 % per annum, or $ 75 per share, payable in-kind and compounding quarterly. The holders are also entitled to participate in dividends declared or paid on the Common Stock on an as-converted basis. At June 30, 2026, there were $ 924 of dividends in arrears that had not yet been paid-in-kind in the form of additional shares of Redeemable Convertible Preferred Stock, representing $ 18.75 per preferred share. Conversion Each holder has the right, any time at its option, to convert its Redeemable Convertible Preferred Stock, in whole or in part, into an amount of fully paid and non-assessable shares of Common Stock equal to $ 1,000 per share of Redeemable Convertible Preferred Stock, plus accrued and unpaid dividends in arrears (the “Conversion Amount”), divided by the conversion price. The initial conversion price of $ 7.00 per share was subsequently reduced to approximately $ 6.53 per share following the issuance of Common Stock for less than its conversion price in 2024. The Redeemable Convertible Preferred Stock continues to be subject to customary anti-dilution adjustments, including in the event of any future stock split, stock dividend, recapitalization or similar events, and in the event of any subsequent offerings of Common Stock or convertible securities by the Company for less than the conversion price. As of June 30, 2026, the Redeemable Convertible Preferred Stock was convertible into 7,681,847 shares of Common Stock. 17 Table of Contents The Company may also elect to convert the Redeemable Convertible Preferred Stock if, for at least 20 consecutive trading days during the respective measuring period, the Company's closing stock price equals or exceeds $ 10.50 per share and certain other conditions are satisfied. Redemption Holders had the right to request that the Company redeem all or part of their Redeemable Convertible Preferred Stock beginning on June 29, 2026. As of June 30, 2026, the Company had received notices of redemption for all 49,263 shares of Redeemable Convertible Preferred Stock. Pursuant to the terms of the Redeemable Convertible Preferred Stock, the redemption date and payment of the redemption price for all shares of the Redeemable Convertible Preferred Stock would occur on December 28, 2026. To make such cash redemption payments the Company would be required to obtain a consent to such cash redemption payments or waiver of the restriction on cash dividends and/or redemptions set forth in each of the Company’s credit agreements. To the extent consents or waivers are not obtained under each of the Company’s credit agreements, the Company would be in breach thereof if such payments in cash were made. On such date the Company would be required to pay in cash an amount equal to $ 1,000 per share of Redeemable Convertible Preferred Stock to be redeemed plus accrued and unpaid dividends on such shares through the date of redemption. To the extent that the Company does not or cannot redeem all of the Redeemable Convertible Preferred Shares submitted for redemption, the Company would be subject to interest on the unpaid balance at a rate of 1 % per month from the redemption date until paid in full, in addition to its continuing obligation to accrue dividends paid in kind at 7.5 % per annum. Holders retain their right to convert the Redeemable Convertible Preferred Stock even while the Company is under notice of redemption, so the instrument does not meet the definition of mandatorily redeemable under GAAP. As a result, the Company continues to present the Redeemable Convertible Preferred Stock as temporary equity on the consolidated balance sheets. Voting Each holder is entitled to vote with the holders of the shares of Common Stock on all matters submitted for a vote of holders of shares of Common Stock, with certain limited exceptions. Each holder is entitled to the whole number of votes equal to the number of shares of Common Stock into which such holder’s shares of Redeemable Convertible Preferred Stock would be convertible on the record date for the vote. The holders of the Redeemable Convertible Preferred Stock are also entitled to elect two directors to serve on the Company's board of directors so long as at least 30 % of the initial shares of Redeemable Convertible Preferred Stock remain outstanding. Registration rights The holders of the Redeemable Convertible Preferred Stock also entered into a registration rights agreement with the Company. This agreement required the Company to file an initial registration statement covering sufficient shares of Common Stock into which the Redeemable Convertible Preferred Stock may be converted, which the Company filed in 2023. The agreement contains monetary penalties if the Company fails to maintain the effectiveness of that registration statement. The agreement has no specified termination date and no specified maximum amount of penalties. The Company has paid a total of $ 5,238 pursuant to the registration rights agreement, including $ 4,703 in November 2025 due to a lapse in the effectiveness of the initial registration statement following the Company’s failure to timely file periodic reports with the SEC in 2023 and 2024. 18 Table of Contents 11. Revenue recognition The following tables present disaggregated revenues: Three months ended Six months ended June 30, 2026 May 25, 2025 June 30, 2026 May 25, 2025 CDMO $ 15,552 $ 23,516 $ 31,327 $ 44,305 HA manufacturing 18,615 12,928 26,033 27,293 Total $ 34,167 $ 36,444 $ 57,360 $ 71,598 Revenues recognized over time $ 4,462 $ 5,691 $ 8,685 $ 11,196 Revenues recognized at a point in time 29,705 30,753 48,675 60,402 Total $ 34,167 $ 36,444 $ 57,360 $ 71,598 During the three months ended June 30, 2026, the Company had revenue concentrations of 10% or greater from two customers, with those customers comprising 66 % and 10 % of revenue. During the three months ended May 25, 2025, the Company had revenue concentrations of 10% or greater from two customers, with those customers comprising 46 % and 16 % of revenue. During the six months ended June 30, 2026, the Company had revenues concentrations of 10% or greater from two customers, accounting for 55 % and 15 %. During the six months ended May 25, 2025, the Company had revenues concentrations of 10% or greater from two customers, accounting for 50 % and 17 %. The following table presents changes in contract assets and liabilities: Contract assets Contract liabilities Balance at December 31, 2025 $ 7,655 $ ( 8,660 ) Changes to the beginning balance arising from: Amounts billed as accounts receivable as the result of rights to consideration becoming unconditional ( 6,343 ) — Recognition of revenue as the result of performance obligations satisfied — 5,297 Estimated credit loss ( 170 ) — Net change to contract balances recognized after the comparative balance sheet date due to amounts billed, recognition of revenue, changes in estimate, and interest from significant financing component 6,426 ( 1,916 ) Balance at June 30, 2026 $ 7,568 $ ( 5,279 ) 19 Table of Contents 12. Stock-based compensation The Company provides stock-based compensation to its employees under two plans: • The 2019 Stock Incentive Plan is a seven-year plan that became effective upon stockholder approval at the Company’s 2019 annual meeting held on October 16, 2019 and has been subsequently amended with stockholder approval, most recently at the Annual Meeting held on August 15, 2024. This plan provides for the grant of stock options, stock grants, stock units and stock appreciation rights to employees, consultants and directors. Under the plan, no recipient may receive awards during any fiscal year that exceed 500,000 stock options, 250,000 stock grants or stock units, or 500,000 stock appreciation rights, nor may any non-employee director be granted awards in excess of $ 350 . As of June 30, 2026, the Company had 1,308,040 common shares reserved for new awards under the 2019 Stock Incentive Plan. The plan expires October 16, 2026. A replacement plan, the 2026 Stock Incentive Plan, was approved by stockholders at the 2026 annual meeting held on June 4, 2026. The 2026 Stock Incentive Plan will become effective by its terms on October 16, 2026. • The Equity Inducement Plan became effective on March 20, 2024. This plan provides for the grant of equity awards to individuals that were not previously employees or directors of the Company as an inducement material to the individual’s entry into employment with the Company. As of June 30, 2026, the Company had 140,474 common shares reserved for new awards under the Equity Inducement Plan. The following table presents information about stock options: Six months ended June 30, 2026 May 25, 2025 Information about stock options granted: Weighted-average grant date fair value per share $ 5.28 $ 4.49 Weighted-average assumptions used to determine grant-date fair value: Expected life 4.4 years 4.4 years Risk-free interest rate 3.6 % 4.0 % Volatility 88 % 84 % Dividend yield — % — % There were no stock option exercises during either of the periods presented. 20 Table of Contents The following table presents information about other stock-based awards: Six months ended June 30, 2026 May 25, 2025 Information about awards granted: Weighted-average fair value per share as of transaction date: RSUs granted $ 6.65 $ 6.54 PSUs granted — 5.06 Weighted-average assumptions used to determine grant-date fair value of PSUs: Expected life — 5.0 years Risk-free interest rate — 4.0 % Volatility — 84 % Dividend yield — — % Fair value of RSUs vested 7.24 6.25 The following table presents information about stock option balances and activity: Shares Weighted-average exercise price per share Weighted-average remaining contractual term Aggregate intrinsic value Outstanding at December 31, 2025 1,377,054 $ 7.83 Granted 8,775 7.88 Forfeited ( 69,843 ) 6.74 Expired ( 22,950 ) 10.01 Outstanding at June 30, 2026 1,293,036 7.85 4.7 years $ 18 Exercisable at June 30, 2026 658,060 8.92 3.4 years $ 8 The following table presents information about recent RSU and PSU activity: RSUs PSUs Shares Weighted-average grant date fair value per share Shares Weighted-average grant date fair value per share Outstanding at December 31, 2025 1,440,419 $ 6.46 2,283,000 $ 4.25 Granted 676,911 6.65 — — Vested ( 346,916 ) 7.24 — — Forfeited ( 75,038 ) 7.78 — — Outstanding at June 30, 2026 1,695,376 6.32 2,283,000 4.25 21 Table of Contents Stock-based compensation expense The following table summarizes stock-based compensation by income statement line item: Three months ended Six months ended June 30, 2026 May 25, 2025 June 30, 2026 May 25, 2025 Cost of sales $ 241 $ 425 $ 457 $ 609 Research and development expense 144 1 ( 98 ) 1 Selling, general and administrative expense 1,700 1,389 3,424 3,757 Stock-based compensation expense $ 2,085 $ 1,815 $ 3,783 $ 4,367 Most of the stock-based compensation expense for the current period and going forward arises from RSU awards to the Company’s named executive officers under the Equity Inducement Plan and the Company’s directors. The RSU awards to named executive officers vest annually and are expensed ratably over their five-year lives ( three-year in one case) since date of hire. The annual RSU awards granted to directors vest in full one year from the grant date and are expensed ratably over the same one-year vesting period. The Company has also issued PSU awards to its named executive officers, for which most of the expense has already been recognized through December 31, 2025. These awards are divided into ten equal tranches that will vest, if at all, based upon closing stock price milestones over a five-year performance period, and to the extent a PSU award tranche vests based on stock price performance, 50 % of the shares for each tranche will be issued immediately, and 50 % of the shares will be issued on the one-year anniversary of the performance vesting date. As of June 30, 2026, there was $ 11,444 of total unrecognized compensation expense related to unvested equity compensation awards granted under the Lifecore incentive stock plans. This total expense is expected to be recognized over a weighted-average period of 1.9 years. 13. Income taxes The effective tax rate was approximately ( 1 )% for the three months ended June 30, 2026, compared to approximately ( 3 )% for the three months ended May 25, 2025. For both the six months ended June 30, 2026 and May 25, 2025, the effective tax rate was approximately ( 1 )%. The effective tax rates were lower than the U.S. federal statutory tax rate in all periods primarily due to the Company’s valuation allowance on its deferred tax assets. 14. Fair value of financial instruments Term Loan Credit Facility and debt derivative liability The Term Loan Credit Facility contains various features that meet the definition of an embedded derivative and require bifurcation. These features, which were necessary for the Company to accept in order for Alcon to agree to provide the term loan financing, comprise various options for early prepayment of the term loans at stated premiums above par if certain future events were to occur, as described more fully in note 9. These embedded derivatives were initially recorded at fair value as a noncurrent liability (“debt derivative liability”) offset by a discount to the carrying value of the Term Loan Credit Facility that is being amortized to interest expense over the term of that facility. The debt derivative liability is being subsequently remeasured at fair value every reporting period with changes in fair value reported as a non-operating item on the statement of operations. 22 Table of Contents The disclosed fair value of the term loan and the recorded fair value of the debt derivative liability are estimated using a discounted cash flow method (a level 3 measurement) that includes annually weighted probabilities that the lender exercises its option to require payment of the term loans upon a qualifying change in control or that the debt is held to maturity and refinanced. As of June 30, 2026, the fair value of the term loan, excluding the value of the embedded debt derivative liability, was $ 150,365 with a carrying value of $ 143,871 ; the fair value of the debt derivative liability was $ 30,922 , which was the same as its carrying value. As of December 31, 2025, the fair value of the term loan, excluding the value of the embedded debt derivative liability, was $ 149,400 with a carrying value of $ 130,563 ; the fair value of the debt derivative liability was $ 26,564 , which was the same as its carrying value. The debt derivative liability is currently the only financial instrument recorded at fair value on a recurring basis in the accompanying balance sheets. The following table presents information about those measurements: Type of measurement Measurement date Type of measurement Level 1 Level 2 Level 3 Liabilities Debt derivative liability Recurring June 30, 2026 — — 30,922 Debt derivative liability Recurring December 31, 2025 — — 26,564 The following table presents the rollforward reconciliation of this level 3 recurring fair value measurement: Three months ended Six months ended June 30, 2026 May 25, 2025 June 30, 2026 May 25, 2025 Balance at beginning of period $ 29,719 $ 23,900 $ 26,564 $ 23,300 Change in fair value recorded in earnings 1,203 1,091 4,358 1,691 Balance at end of period $ 30,922 $ 24,991 $ 30,922 $ 24,991 The key inputs to the valuation model are (i) the probability and timing of a change in control event occurring over the remaining term of the debt; and (ii) the discount rate, which can be influenced by changes in the risk-free rate, the Company's credit rating and/or changes in the overall credit market. Factors that can affect the estimate of fair value at each reporting date, and therefore the amount of gain or loss recorded for a particular period, include imprecision in estimating unobservable market inputs and the selection of particular methodologies and assumptions used to determine the fair value. Key inputs used to develop the fair value measurement were as follows: June 30, 2026 December 31, 2025 Probability of change in control event 80.0 % 80.0 % Weighted average discount rate 20.7 % 17.6 % The weighted average discount rate was calculated based on the individual discount rate used for each future payment and weighted by both the present value of the future payments and the probability of each scenario. Cash and Revolving Credit Facility Cash and outstanding borrowings under the Company's Revolving Credit Facility, if any, are carried at cost, which approximates fair value due to their short duration and variable rates of interest (a level 2 measurement). 23 Table of Contents Leaseback liability with related party As discussed further in note 9, the Company maintains a financial liability for an equipment sale and leaseback with Alcon for which control of the asset was deemed not to have transferred. In accordance with U.S. GAAP, the Company presents supplemental fair value information based on market conditions of the underlying financial instrument. The fair value information does not change the stated rate or carrying value of the instrument. The fair value of the leaseback liability was estimated using a discounted cash flow method (a level 3 measurement) that assumes a weighted-average discount rate of 5.5 % and 5.1 % as of June 30, 2026 and December 31, 2025, respectively. As of June 30, 2026 and December 31, 2025, the fair value of the leaseback liability approximated its carrying value of $ 5,410 and $ 5,798 , respectively. Customer deposit A significant customer of the Company agreed to provide an upfront cash deposit in order to finance working capital requirements for the duration of its commercial supply agreement with the Company. The deposit bears no interest and is to be repaid after a wind-up period following expiration or termination of the commercial supply agreement. Prior to the most recent amendment, the commercial supply agreement had automatically extended to December 31, 2027. In June 2026, it was amended and extended to December 31, 2030. In accordance with U.S. GAAP, the Company presents supplemental fair value information based on market conditions of the underlying financial instrument. The fair value information does not change the stated rate or carrying value of the instrument. The fair value of the deposit is estimated using a discounted cash flow method (a level 3 measurement) that includes assumed discount rates of 6.7 % and 6.0 % as of June 30, 2026 and December 31, 2025, respectively. The fair value assumed repayment in 4.5 years and 2.0 years as of June 30, 2026 and December 31, 2025, respectively, which was the remaining contractual term of the agreement as of each measurement date. As of June 30, 2026 and December 31, 2025, the fair value of the deposit approximated its carrying value of $ 4,751 and $ 4,515 , respectively. 15. Leases Substantially all current lease activity comes from two active facilities near the Company’s owned headquarters facility in Chaska, Minnesota. In January 2016, a lease commenced for the Company’s warehouse and final packaging building in Chaska, Minnesota. The lease has since been amended twice to accomplish the following: (i) to extend the term of the lease to September 2034, (ii) to add a purchase option equal to the balance of the lessor’s mortgage loan, valued at $ 3,100 as of June 30, 2026; and (iii) to provide a $ 2,400 cash payment to the Company in October 2024 in exchange for an increased rent payment schedule and the updated purchase option. The lease is classified as a finance lease and has a discount rate of 9 %, which was the Company’s incremental borrowing rate at the time of the most recent amendment to the lease in August 2024. In January 2021, a lease commenced for the Company’s warehouse and office space in Chanhassen, Minnesota. The lease expires in March 2028 with an option to extend through March 2033 that the Company is reasonably certain to exercise. The lease is classified as an operating lease and has a discount rate of 3 %, which was the Company’s incremental borrowing rate at lease inception. 24 Table of Contents The components of lease cost were as follows: Six months ended June 30, 2026 May 25, 2025 Finance lease cost: Amortization of leased assets $ 79 $ 79 Interest on lease liabilities 257 264 Operating lease cost 148 148 Total lease cost $ 484 $ 491 The Company’s maturity analysis of operating and finance lease liabilities as of June 30, 2026 are as follows: Operating leases Finance leases Remainder of 2026 $ 205 $ 346 2027 $ 414 $ 708 2028 144 725 2029 148 729 2030 153 724 Thereafter 347 5,975 Total lease payments 1,411 9,207 Less: interest ( 104 ) ( 3,420 ) Present value of lease liabilities $ 1,307 $ 5,787 Classification on consolidated balance sheet: Accounts payable $ 379 $ — Accrued expenses and other current liabilities (see note 7) — 197 Debt, net of current portion — 5,590 Other liabilities 928 — Present value of lease liabilities $ 1,307 $ 5,787 Supplemental cash flow information related to leases are as follows: Six months ended June 30, 2026 May 25, 2025 Operating cash flows from operating leases $ 205 $ 203 Operating cash flows from finance leases 257 264 Financing cash flows from finance leases 89 74 16. Related party transactions Alcon has been and continues to be the Company's largest customer, comprising 55 % and 50 % of its revenues for the six months ended June 30, 2026 and May 25, 2025, respectively. On May 22, 2023, Alcon entered into the Term Loan Credit Facility with the Company as described in note 9. This relationship as the Company's largest creditor, combined with its position as the Company's largest customer, caused management to conclude that Alcon has the ability to exert significant influence over the Company and therefore meets the definition of a related party beginning in May 2023 through the present. 25 Table of Contents Alcon’s transactions with the Company are as follows: • Customary current financial positions for a customer of Alcon's size, including accounts receivable, contract assets and liabilities, and revenue, each as presented in the consolidated balance sheets and statements of operations and the notes thereto. Alcon has provided the Company guaranteed contractual minimum purchasing commitments through 2031, and the Company is required to maintain certain manufacturing capacity levels through 2033; • A significant individual prepayment that Alcon made to the Company in May 2024 of $ 5,500 . The prepayment was accounted for as a contract liability and initially discounted to present value due to the existence of a significant financing component. The discount is being amortized over the life of the contract liability via charges to interest expense, related party. This contract liability is being derecognized beginning January 2026 by delivering goods to Alcon at a discount equal to twelve month ly credit memos totaling $ 5,500 . As of June 30, 2026, the remaining contract liability balance of $ 2,688 which is net of the unamortized discount, is included in accrued expenses and other current liabilities on the consolidated balance sheet; • Proceeds of $ 142,270 from term loans issued in May 2023 that were used to repay prior borrowings. The term loan principal plus accrued interest has grown to $ 192,725 through June 30, 2026 as a result of interest paid-in-kind, which decreased from 10 % to 7 % beginning May 2026. Cash interest paid to Alcon for the three and six months ended June 30, 2026 was $ 605 . See note 9 for additional information; • Alcon purchased equipment in May 2023 for $ 7,730 that it is leasing back to the Company in exchange for quarterly payments over a ten-year period. Payments to Alcon under the lease were $ 277 and $ 292 for the three months ended June 30, 2026 and May 25, 2025, respectively, and $ 557 and $ 587 for the six months ended June 30, 2026 and May 25, 2025, respectively. See note 9 for additional information; • Interest expense incurred from the Alcon instruments noted above, net of capitalized interest, was $ 14,165 and $ 9,856 for the six months ended June 30, 2026 and May 25, 2025, respectively. Included in those amounts was non-cash interest expense of $ 13,386 and $ 9,659 for the six months ended June 30, 2026 and May 25, 2025, respectively; and • Contract assets, net of contract liabilities, from development projects of $ 3,005 and $ 728 as of June 30, 2026 and December 31, 2025, respectively, for the recognition of revenue as the result of performance obligations satisfied in advance of billing the customer.