LFCR

The following discussion should be read in conjunction with the unaudited consolidated financial statements and accompanying notes included in Part I, Item 1, of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Transition Report on Form 10-KT for the transition period ended December 31, 2025 (the “2025 Transition Report”). This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933, as amended, and the Exchange Act. Words such as “anticipate,” “estimate,” “expect,” “project,” “aim,” “designed to,” “plan,” “intend,” “believe,” “may,” “might,” “will,” “should,” “can have,” “likely” and similar expressions are used to identify forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected. Potential risks and uncertainties include, without limitation: 26 Table of Contents •the timing and amount of future expenses, revenue, cash flow and capital requirements, and timing and availability of and the need for additional financing; •our ability to maintain or expand our relationships with our current customers, including the impact of changes in consumer demand or prices for the products we manufacture for our customers; •our ability to grow and diversify our business with new customers, including the potential loss of development customers if they do not receive required funding or regulatory approvals or for other reasons; •our ability to comply with covenants under our credit agreements and to pay required interest and principal payments when due; •our ability to fund redemptions of shares of the outstanding Series A Redeemable Convertible Preferred Stock in accordance with their terms; •our ability to raise additional capital for ongoing needs, including through equity financing, debt financing, collaborations, strategic alliances or licensing arrangements; •the impact of macroeconomic events or circumstances on our operations and financial performance, including inflation, tariffs, interest rates, social unrest and global instability; •the performance of our third-party suppliers; •pharmaceutical industry market forces that may impact our customers’ success and continued demand for the products we produce for those customers; •our ability to recruit or retain key scientific, technical, business development, and management personnel and our executive officers; •our ability to comply with stringent U.S. and foreign government regulation in the manufacture of pharmaceutical products, including current Good Manufacturing Practice, or cGMP; and •the outcome and cost of existing and any new litigation or regulatory proceedings. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Accordingly, our actual results could differ materially from those projected in the forward-looking statements for many reasons, including the risk factors referenced in Item 1A. “Risk Factors” of the 2025 Transition Report. All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in this report, the 2025 Transition Report, and hereafter in our other SEC filings and public communications. You should evaluate all forward-looking statements made by us in the context of all risks and uncertainties described with respect to our business. We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. 27 Table of Contents Overview Lifecore is a fully integrated CDMO that offers highly differentiated clinical and commercial capabilities in the development, cGMP manufacturing and aseptic filling of complex formulations and highly viscous sterile injectable pharmaceutical drug or medical device products in syringes, vials and cartridges, across a wide variety of modalities. We manufacture pharmaceutical-grade, non-animal-sourced hyaluronic acid (“HA”) in bulk form as well as for use in formulated and filled syringes and vials for our customers’ injectable products used in treating a broad spectrum of medical conditions and procedures, including ophthalmic and orthopedic applications. We also offer product development service capabilities to our customers that include analytical method development and validation, formulation development, sterile filtration, process scale-up, pilot studies, stability studies, process validation and production of materials for clinical studies. Since May 2024, Lifecore has continued to make impactful improvements to its operations and financial position: •We have improved operations by expanding our revenue‑generating capacity, increasing our focus on manufacturing efficiency and cost management, and investing in systems and processes to support more effective execution. In September 2024, the Company expanded its aseptic filling capabilities through the installation of a fully automated high‑speed, multi‑purpose 5‑head aseptic isolator filler. In January 2026, Lifecore implemented a new enterprise resource planning (“ERP”) system designed to enhance inventory control, data visibility, and financial management. Through these and other initiatives, the Company believes that it has improved workforce productivity, reflecting the performance-driven culture at Lifecore and underscoring the Company’s commitment to continuous improvement. •We have strengthened our financial position through, among other actions, (i) raising $24.3 million in a private placement of Lifecore common stock in October 2024, (ii) a three-year term extension of our existing asset-based lending revolving credit facility with BMO in November 2024, (iii) the sale of certain excess capital equipment for $17 million in January 2025, (iv) the repayment of $19.7 million of borrowings on our outstanding revolving credit facility over the past 18 months, (v) reduced obligations with the payment of an aggregate amount of $4.7 million to the holders of the Redeemable Convertible Preferred Stock in full satisfaction of outstanding registration delay fees in November 2025, (vi) the implementation of operational cost reductions, including overhead costs and professional fees associated with legal, accounting and consulting spend; and (vii) in October 2024 we regained compliance with SEC reporting requirements and have been maintaining those requirements. •We enhanced our business development strategy, increased our investment in sales and marketing to support brand visibility, and expanded our business development team with sales talent who will focus on key drug development geographies in the United States and internationally. We have signed a total of 13 programs over the last 12 months, including eight late-stage programs. Lifecore expects to further improve efficiencies and productivity through additional procurement and operational strategies that will build upon the new capabilities and information available from our ERP system. Lifecore expects this system to strengthen inventory control, support sharper financial management, and help reduce costs as the company grows. To further advance the Company’s efficiency objectives, the Company’s senior management team includes a head of business transformation who is championing the Company’s efforts to improve its cost structure, to drive productivity, and gain efficiencies. Through June 30, 2026, the Company has progressed more than 40 projects intended to promote cost reductions or productivity improvements. 28 Table of Contents On August 1, 2025, our Board of Directors approved changing our fiscal year from a fiscal year ending on the last Sunday of May to a calendar year ending on December 31, 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. Financial overview Lifecore generates revenues from two activities within a single, integrated segment: CDMO and HA manufacturing. CDMO includes aseptic formulation and filling of syringes, vials and cartridges for injectable products used for medical purposes and product development services to assist its customers in obtaining regulatory approval for the commercial sale of their device or drug product. HA manufacturing includes the production and sale of pharmaceutical-grade, non-animal-sourced HA using our proprietary, fermentation-based HA process in bulk form. The following costs are included in cost of sales: raw materials (including packaging, syringes, fermentation supplies and purification supplies), direct labor, overhead (including indirect labor, depreciation, and facility-related costs), and shipping and shipping-related costs. Numerous factors can influence gross profit, including product mix, customer mix, manufacturing costs, timing of production, production yields, volume, sales discounts, contractual provisions, and charges to state inventories at their net realizable value, including as that relates to excess or obsolete inventory, among others. Many of these factors influence or are interrelated with other factors. R&D expenses consist primarily of product development and commercialization initiatives. SG&A expenses consist of salaries and related costs for administrative, public company and business development functions as well as legal fees, and consulting fees. Public company costs include compliance, audit, tax, insurance and investor relations. The debt derivative liability, related party, represents the fair value of various features in the credit facility that require bifurcation and accounting as a derivative instrument. Changes in the fair value are recorded as non-operating income or expense. The income tax benefit or expense primarily consists of current state income tax obligations and a schedule of net deferred federal tax attributes that are substantially offset by valuation allowances and net operating loss carryforwards. Changes in the income tax benefit or expense are generally driven by the mix of these various items and are generally not material. 29 Table of Contents Results of operations – three months ended June 30, 2026 Revenues and gross profit Three months ended Change (dollars in thousands) June 30, 2026 May 25, 2025 Amount % Revenues: CDMO $ 15,552 $ 23,516 $ (7,964) (34) % HA manufacturing 18,615 12,928 5,687 44 % Total revenues 34,167 36,444 (2,277) (6) % Cost of sales 22,092 22,462 (370) (2) % Gross profit 12,075 13,982 (1,907) (14) % Gross profit percentage 35.3 % 38.4 % (3.1) % The decrease in revenues of $2.3 million was primarily due to a $8.0 million decrease in CDMO revenue, which was primarily from $5.9 million of lower sales volumes, $1.2 million of lower development revenue due to completion of discrete development projects in the prior comparable period and timing of customer project lifecycles, and a $0.9 million contractual take-or-pay arrangement in the prior period. The CDMO decline was partially offset by a $5.7 million increase in HA manufacturing revenues primarily due to timing. The decrease of $1.9 million in gross profit is due to a $4.5 million decrease in CDMO gross profit due to lower commercial and development sales, unfavorable adjustments for net realizable value, revaluation, process loss, manufacturing variances, and a $0.9 million contractual take-or-pay arrangement in the prior period, partially offset by favorable labor and overhead absorption and lower departmental expenses. The CDMO decline was partially offset by a $2.6 million increase in HA manufacturing gross profit due to increased sales volume. Operating expenses Three months ended Change (dollars in thousands) June 30 2026 May 25 2025 Amount % Research and development $ 1,537 $ 2,103 $ (566) (27) % Selling, general and administrative 7,971 8,980 (1,009) (11) % Restructuring recovery — (2,519) 2,519 n/m Loss on sale or disposal of assets, net of portion classified as cost of sales — 91 (91) n/m Total operating expenses $ 9,508 $ 8,655 $ 853 10 % Research and development (“R&D”) R&D expenses declined primarily due to increased utilization of R&D personnel on revenue-generating development projects as well as a headcount reduction following an internal reorganization. These were offset in part by increased stock-based compensation. Selling, general, and administrative (“SG&A”) The $1.0 million decrease in SG&A expenses includes $0.5 million of lower recurring legal and accounting expenses, and lower compensation, as well as a $0.6 million of lower non-recurring expenses primarily related to legacy legal matters and prior period restructuring. 30 Table of Contents Restructuring recovery The three months ended May 25, 2025 included a credit of $2.6 million for the favorable reversal of a historical lease obligation of the divested Curation Foods business. Loss on sale or disposal of assets The loss on sale or disposal of assets was immaterial. Non-operating income or expense Three months ended Change (dollars in thousands) June 30, 2026 May 25, 2025 Amount % Interest expense, net $ (7,607) $ (5,521) $ (2,086) 38 % Change in fair value of debt derivative liability, related party (1,203) (1,091) (112) n/m Other income, net 110 171 (61) n/m Income tax expense (23) (33) 10 n/m Interest expense, net The increase in interest expense, net of interest income, included an increase of $1.4 million related to the Alcon term loans, which will continue to grow due to accumulating interest paid-in-kind and amortization of the debt discount and $0.7 million more interest expense caused by the completion of certain capital expenditure projects where interest was previously capitalized to property, plant and equipment. Other non-operating income or expense None of the other income or expense categories changed materially period over period. Results of operations – six months ended June 30, 2026 Revenues and gross profit Six months ended Change (dollars in thousands) June 30, 2026 May 25, 2025 Amount % Revenues: CDMO $ 31,327 $ 44,305 $ (12,978) (29) % HA manufacturing 26,033 27,293 (1,260) (5) % Total revenues 57,360 71,598 (14,238) (20) % Cost of sales 40,823 47,771 (6,948) (15) % Gross profit 16,537 23,827 (7,290) (31) % Gross profit percentage 28.8 % 33.3 % (4.5) % The decrease of $14.2 million in revenues was primarily due to a $13.0 million decrease in CDMO revenue, which was primarily from $8.8 million of overall lower sales volumes, $2.5 million of lower development revenue, and a $1.7 million take-or-pay arrangement in the prior period. In addition, HA manufacturing revenues decreased $1.3 million, $3.1 million of which was primarily due to timing of revenues from Lifecore’s largest customer’s supply chain initiatives, partially offset by $1.8 million of increased demand from other customers and pricing initiatives. 31 Table of Contents The decrease of $7.3 million in gross profit is due to a $4.3 million decrease in CDMO gross profit due to lower commercial and development sales, unfavorable adjustments for net realizable value, revaluation, process loss, manufacturing variances, and a $1.7 million contractual take-or-pay arrangement in the prior period, partially offset by favorable labor and overhead absorption, lower departmental expenses, and $0.9 million of higher prior year costs due to a customer termination resulting in write-off of inventory and equipment. In addition, HA manufacturing gross profit declined $3.2 million due to lower sales and unfavorable absorption. Operating expenses Six months ended Change (dollars in thousands) June 30, 2026 May 25, 2025 Amount % Research and development $ 2,754 $ 4,148 $ (1,394) (34) % Selling, general and administrative 15,888 19,073 (3,185) (17) % Restructuring recovery — (2,634) 2,634 n/m Loss on sale or disposal of assets, net of portion classified as cost of sales — 6,942 (6,942) n/m Total operating expenses $ 18,642 $ 27,529 $ (8,887) (32) % Research and development R&D expenses declined primarily due to increased utilization of R&D personnel on revenue-generating development projects, as well as a headcount reduction following an internal reorganization. Selling, general, and administrative The $3.2 million decrease in SG&A expenses includes a reduction of $1.4 million in recurring accounting and legal expenses, and lower compensation, a $0.4 million reduction in stock-based compensation, and a $1.3 million reduction in non-recurring expenses primarily related to legacy matters and prior period restructuring. Restructuring recovery The six months ended May 25, 2025 included a credit of $2.6 million for the favorable reversal of a historical lease obligation of the divested Curation Foods business. Loss on sale or disposal of assets The $6.9 million loss on sale or disposal of assets in the prior period was primarily due to a $6.4 million loss on the sale of certain excess equipment. That loss was primarily related to the write-off of historically capitalized interest costs, as we recovered substantially all of the cash originally paid to purchase the equipment from the sale proceeds. Non-operating income or expense Six months ended Change (dollars in thousands) June 30, 2026 May 25, 2025 Amount % Interest expense, net $ (14,827) $ (11,002) $ (3,825) 35 % Change in fair value of debt derivative liability, related party (4,358) (1,691) (2,667) n/m Other income, net 220 504 (284) n/m Income tax expense (66) (25) (41) n/m 32 Table of Contents Interest expense, net The increase in interest expense, net of interest income, of $3.8 million was primarily from $2.8 million more interest related to the Alcon term loans, which will continue to grow due to accumulating interest paid-in-kind and amortization of the debt discount and $1.5 million more interest expense caused by the completion of certain capital expenditure projects where interest was previously capitalized to property, plant and equipment. These increases were partially offset from various other small items. Change in fair value of debt derivative liability, related party The $2.7 million increase in expense was primarily attributable to changes in key valuation inputs during the period, including a higher discount rate caused by a decline in the Company’s synthetic credit rating, as well as the passage of time. Other non-operating income or expense None of the other income or expense categories changed materially period over period. Liquidity and capital resources As of June 30, 2026, the Company had cash of $17.2 million and $21.6 million available for borrowing (together, “consolidated liquidity”) under its $40.0 million Revolving Credit Facility, with no amounts outstanding as of June 30, 2026. As of June 30, 2026, the Company had approximately $198.1 million in total indebtedness with Alcon, with $192.7 million outstanding under the Term Loan Credit Facility. The Company is subject to minimum liquidity covenants under its credit agreements, the most restrictive of which requires the Company to maintain at least $4.0 million of consolidated liquidity, as adjusted for any excess payables, at the end of each fiscal quarter. As of June 30, 2026, the Company was in compliance with all financial covenants under the Term Loan Credit Facility and Revolving Credit Facility. See “Part I, Item 1. Note 9 – Debt” in this Quarterly Report on Form 10-Q for a summary of the Term Loan Credit Facility and Revolving Credit Facility. The following table presents comparative summary cash flows for the six months ended June 30, 2026 and May 25, 2025: Six months ended Change (in thousands) June 30, 2026 May 25, 2025 Net cash provided by (used in): Operating activities $ 2,511 $ 6,548 $ (4,037) Investing activities (1,631) (553) (1,078) Financing activities (1,108) (7,185) 6,077 Total $ (228) $ (1,190) $ 962 Cash flow improved by $1.0 million in the six months ended June 30, 2026 compared to the six months ended May 25, 2025 for the following reasons: •Operating cash flows decreased $4.0 million primarily due to the decline in revenue period over period. In the 2026 period, the combined effect of net loss and the non-working capital adjustments to reconcile net loss to operating cash flows generated $5.6 million of cash, which was partially offset by changes in working capital of $3.1 million primarily related to an increase in accounts receivable. In the 2025 period, the combined effect of net loss and the non-working capital adjustments to reconcile net loss to operating cash flows generated $10.0 million, which was partially offset by $3.5 million of net working capital changes; 33 Table of Contents •Investing cash outflows decreased by $1.1 million due to the absence of $7.0 million cash from the sale of certain excess equipment in the 2025 period, partially offset by lower capital spending in the 2026 period compared to the 2025 period; and •Financing cash outflows decreased $6.1 million primarily from the absence of a net $6.0 million of repayments under the revolving credit facility in the 2025 period. The Company’s future capital requirements will depend on numerous factors, including our future capital expenditure requirements; development, production and manufacturing activities; administrative requirements (including salaries, insurance expenses and legal compliance costs); ability to establish and maintain new and existing customer arrangements; the costs associated with any legal proceedings and claims; any decision to pursue acquisition opportunities; the timing and amount of amounts payable or payments owed under customer agreements; the ability to comply with regulatory requirements; the emergence of competitive technology and market forces; the effectiveness of customers’ activities and arrangements; the redemptions of the Redeemable Convertible Preferred Stock and any payment of the accrued and unpaid liquidation preference on shares of the Redeemable Convertible Preferred Stock, if required; payments required under the Term Loan Credit Facility and Revolving Credit Facility; and other factors. If the Company’s currently available funds, together with the internally generated cash flow from operations are not sufficient to satisfy its capital needs, the Company would be required to seek additional funding through various financing transactions or arrangements, including equity financing, debt financing, collaborations, strategic alliances or licensing arrangements, or other means. There can be no assurance that additional funds, if required, will be available to the Company on favorable terms, if at all. The Company’s principal sources of liquidity consist of its existing cash, any additional cash generated by operations, and availability under its Revolving Credit Facility. The Company expects these sources will be sufficient to finance its current operational and capital requirements for at least the next twelve months. Cash obligations relating to Redeemable Convertible Preferred Stock On January 9, 2023, the Company issued 38,750 shares of Redeemable Convertible Preferred Stock for a purchase price of $1,000 per share (the stated value) and gross proceeds of $38.8 million. The Redeemable Convertible Preferred Stock accrues dividends and is redeemable at the option of the holder as discussed further below. 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 $0.9 million 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. 34 Table of Contents Each holder of outstanding shares of Redeemable Convertible Preferred Stock had the right to request that the Company redeem all or part of such holder’s outstanding Redeemable Convertible Preferred Stock beginning on June 29, 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. The redemption price for each share of Redeemable Convertible Preferred Stock is an amount equal to its liquidation preference of $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. As of June 30, 2026 and December 31, 2025, the aggregate liquidation preference of the Redeemable Convertible Preferred Stock was $50.2 million and $48.4 million, respectively. 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 the extent that the Company does not or cannot redeem all shares of Redeemable Convertible Preferred Stock that are submitted for redemption, we would be subject to interest on the unpaid balance at a rate of 1% per month in respect of that holder’s unredeemed shares of Redeemable Convertible Preferred Stock from the redemption date until paid in full in addition to our continuing obligation to accrue dividends paid in kind at 7.5% per annum. Lifecore’s internally generated cash is not expected to be sufficient to fund all or any significant redemptions of the Redeemable Convertible Preferred Stock. The Company has previously begun and continues to evaluate a range of strategic alternatives to facilitate the redemptions, including use of cash on hand, potential debt or equity financing transactions, and/or other possible strategic transactions, and to seek the requisite consents from the Company’s lenders. The Company intends to seek alternatives that it believes will improve its capital structure for what it expects to be its next phase of growth, and the Company’s Board of Directors remains committed to maximizing value for the Company’s stockholders, while remaining committed to serving the Company’s customers, supporting the Company’s employees and growing the business. In November 2025, the Company paid an aggregate amount of $4.7 million to the holders of the Redeemable Convertible Preferred Stock in full satisfaction of the outstanding registration delay fees. Contractual and other cash obligations The Company’s material contractual obligations for the next five years mainly relate to its debt and lease obligations. Indebtedness Refer to “Part I, Item 1. Note 9. – Debt” elsewhere in this Quarterly Report on Form 10-Q for a description of the terms of outstanding indebtedness, including the Term Loan Credit Facility and Revolving Credit Facility, which is incorporated herein by reference. As of June 30, 2026 the Company had $192.7 million in borrowings outstanding under the Term Loan Credit Facility at an effective annual interest rate of 20.9%, which includes the amortization of the debt discount. The stated annual interest rate is 10%, which is payable-in-kind until May 2026, following which interest is payable at a fixed rate of 3% per annum in cash with the remainder payable-in-kind. The obligations under the Term Loan Credit Facility mature on May 22, 2029. Interest paid-in-kind under the Term Loan Credit Facility for the six months ended June 30, 2026 was $8.6 million. In June 2026, the Company made its first quarterly payment of 3% cash interest for the first month following the third anniversary of entering into the Term Loan Credit Facility in the amount of $0.6 million. As of June 30, 2026, the Company had no outstanding borrowings under the Revolving Credit Facility. The obligations under the Revolving Credit Facility mature on November 26, 2027. Interest paid under the Revolving Credit Facility for the six months ended June 30, 2026 was negligible. 35 Table of Contents Critical accounting estimates There have been no material changes to the Company’s critical accounting estimates from those disclosed in the Company’s 2025 Transition Report. For a discussion of our critical accounting estimates, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Use of Estimates” in Part II, Item 7 of the Company’s 2025 Transition Report.