What changed in this filing

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Item 1. Business

2022-09-14 compared with 2021-07-29 · 66 added, 83 removed, 98 unchanged (60% of the section changed)

Corporate Overview

Landec Corporation and its subsidiaries (“Landec,” the “Company”, "we" or "us") design, develop, manufacture, and sell differentiated products for food and biomaterials markets, and license technology applications to partners.

Landec’s natural food company, Curation Foods, Inc.

(“Curation Foods”) is focused on innovating and distributing plant-based foods with 100% clean ingredients to retail, club and foodservice channels throughout North America.

Curation Foods is able to maximize product freshness through its geographically dispersed family of growers, refrigerated supply chain and patented BreatheWay ® packaging technology.

Landec Corporation and its subsidiaries (“Landec,” the “Company”, "we" or "us") design, develop, manufacture, and sell differentiated products for biomaterials and food markets, and license technology applications to partners.

On August 10, 2022, Landec formally announced that we will become a CDMO-focused life sciences company with a planned corporate rebranding including renaming the Company to Lifecore Biomedical and exploring potential sales opportunities of the Company’s remaining Curation Foods assets.

Landec’s biomedical company, Lifecore Biomedical, Inc.

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As a leading manufacturer of premium, injectable grade Hyaluronic Acid, Lifecore brings 37 years of expertise as a partner for global and emerging biopharmaceutical and biotechnology companies across multiple therapeutic categories to bring their innovations to market.

Landec’s natural food company, Curation Foods, Inc.

(“Curation Foods”) is focused on innovating and distributing plant-based foods with 100% clean ingredients to retail, club and foodservice channels throughout North America.

Landec was incorporated in California on October 31, 1986 and reincorporated as a Delaware corporation on November 6, 2008.

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The Company’s principal executive offices are located at 2811 Airpark Drive Santa Maria, California 93455, and the telephone number is (650) 306-1650.

Table of Conten ts

Reportable Segments

Landec has three reportable business segments – Curation Foods, Lifecore and Other, which are described below.

During the fourth quarter of fiscal years 2019 the Company discontinued its Now Planting® business.

The operating results for the Now Planting business are presented as discontinued operations in the Company’s accompanying Consolidated Financial Statements and the financial results for fiscal years 2021, 2020 and 2019.

Curation Foods

Curation Foods Overview

Based in Santa Maria, California, Curation Foods’ primary business is the processing, marketing and selling of fresh packaged plant based salads and vegetables.

Curation Foods serves as the corporate umbrella for its patented BreatheWay® packaging technology and for its portfolio of four natural food brands, including the Company’s legacy and flagship brand Eat Smart® as well as its three more recently acquired natural food brands, O Olive Oil & Vinegar® (“ O ”) products, and Yucatan® and Cabo Fresh® authentic guacamole and avocado products.

The major distinguishing characteristics of Curation Foods that provide competitive advantage are insight driven product innovation, diversified fresh food supply chain, refrigerated supply chain and customer reach.

We believe that Curation Foods is well positioned as a single source of a broad range of products.

Curation Foods also has six processing facilities.

In addition to processing, the company has two distribution centers and a nationwide network of third party providers for nationwide delivery of all of its packaged salads, vegetable products, avocado products and specialty oil and vinegar products.

Our products are currently available in over 74% of retail and club stores across North America.

During fiscal 2019, the Company redefined the strategy for its Curation Foods segment in order to improve the Company’s overall profitability by launching Project SWIFT, a value creation program designed to transform the Curation Foods business by simplifying the business, realigning its resources and seeking to improve the Company’s balance sheet through three strategic priorities - optimizing its operations networks, maximizing strategic assets and redesigning the organization to be more competitive.

Curation Foods Brands

The Company sells specialty fresh packaged Eat Smart branded and private label salads, fresh-cut vegetables and whole produce to retailers, club stores, and food service operators, primarily in the United States and Canada.

Within the Eat Smart brand, produce is processed by trimming, washing, sorting, blending, and packaging into bags and trays.

O Olive Oil & Vinegar:

The Company acquired O on March 1, 2017.

O , founded in 1995, is based in Petaluma, California, and is the premier producer of California specialty olive oils and wine vinegars.

Its products are sold in natural food, conventional grocery and mass retail stores, primarily in the United States and Canada.

Yucatan & Cabo Fresh Avocado Products:

The Company acquired Yucatan Foods on December 1, 2018.

Yucatan Foods was founded in 1991.

As part of the acquisition of Yucatan Foods, Curation Foods acquired the newly built production facility in Guanajuato, Mexico.

The Yucatan Foods business added a double-digit growth platform, a lower-cost infrastructure in Mexico, and higher margin product offerings that generally exhibit less sourcing volatility.

The Company manufactures and sells Yucatan and Cabo Fresh guacamole and avocado food products primarily to the U.S.

grocery channel, but also to the U.S.

mass retail, Canadian grocery retail and foodservice channels.

BreatheWay Packaging Technology :

The Company’s BreatheWay membrane technology establishes a beneficial packaging atmosphere adapting to changing fresh product respiration and temperature in order to extend freshness naturally.

The BreatheWay supply chain packaging technology extends shelf-life and reduces shrink (waste) for retailers and helps to ensure that consumers receive fresh products.

The Company generates revenue from the sale to and/or use of its BreatheWay patented packaging technology and integrated packaging solutions.

Until June 1, 2021, the Company held a 26.9% investment ownership in Windset Holding 2010 Ltd.

(“Windset”), a leading edge grower of hydroponically-grown produce.

Windset owns and operates greenhouses in British Columbia, Canada and California.

In addition to growing produce in its own greenhouses, Windset has numerous marketing arrangements with other greenhouse growers and utilizes buy/sell arrangements to meet fluctuation in demand from their customers.

The Curation Foods segment operating results include the dividends and Landec’s share of the change in fair market value of its investment in Windset.

Table of Conten ts

On June 1, 2021, the Company and Curation Foods entered into and closed a Share Purchase Agreement (the “Purchase Agreement”) with Newell Capital Corporation and Newell Brothers Investment 2 Corp., as Purchasers (the “Purchasers”) and Windset, pursuant to which Curation Foods sold all of its equity interests of Windset to the Purchasers in exchange for an aggregate purchase price of $45.1 million.

Pursuant to the terms of the Purchase Agreement, Curation Foods also retained certain rights to additional purchase price consideration in the event of certain transactions or equity issuances involving Windset until September 2022.

The Purchase Agreement included various representations, warranties and covenants of the parties generally customary for a transaction of this nature.

Landec has three reportable business segments – Lifecore, Curation Foods, and Other, which are described below.

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Lifecore Biomedical

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Deliver consistent quality:

Lifecore has built a world class quality and regulatory system that is demonstrated in their results, processes and customer relationships.

Lifecore has built a world class quality and regulatory system that is demonstrated in its results, processes and customer relationships.

With over 35 years of a superior track record with global regulatory bodies (FDA, EMA, ANVISA, etc.), Lifecore is the partner of choice for companies looking for proven experience in delivering QbD, cGMP compliance, and manufacturing excellence with pharmaceutical elegance and quality.

Lifecore’s world class quality and regulatory system and excellent track record with the global regulatory bodies ensure partners that they will safely bring innovative therapies to market.

Table of Conten ts

Included in the Other segment is Corporate, which includes corporate general and administrative expenses, non-Curation Foods and non-Lifecore interest income and income tax expenses.

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Curation Foods

Curation Foods Overview

Based in Santa Maria, California, Curation Foods’ primary business is the processing, marketing and selling of guacamole, avocado products, and olive oils and wine vinegars.

Curation Foods serves as the corporate umbrella for its portfolio of three natural food brands, O Olive Oil & Vinegar® products, and Yucatan® and Cabo Fresh® authentic guacamole and avocado products.

We believe that the major distinguishing characteristics of Curation Foods that provide competitive advantage are insight driven product innovation, diversified fresh food supply chain, refrigerated supply chain and customer reach.

We believe that Curation Foods is well positioned as a single source of a broad range of its products.

On December 13, 2021 (the “Closing Date”), Landec and Curation Foods (together, the “Sellers”), and Taylor Farms Retail, Inc.

(“Taylor Farms” and together with the Sellers, the “Parties”) completed the sale (the “Eat Smart Disposition”) of Curation Foods’ Eat Smart business, including its salad and cut vegetable businesses (the “Business”), pursuant to the terms of an asset purchase agreement executed by the Parties on December 13, 2021 (the “Asset Purchase Agreement”).

Pursuant to the Asset Purchase Agreement, Taylor Farms acquired the Business for a purchase price of $73.5 million in cash, subject to post-closing adjustments based upon net working capital at the Closing Date.

As part of the Eat Smart Disposition, Taylor Farms acquired, among other assets related to the Business, the manufacturing facility and warehouses (and corresponding equipment) located in Bowling Green, Ohio and Guadalupe, California, as well as inventory, accounts receivable and accounts payable, intellectual property and information related to the Business, and assumed certain liabilities and executory obligations under the Company’s and Curation Foods’ outstanding contracts related to the Business, in each case, subject to the terms of the Asset Purchase Agreement.

Following the Eat Smart Disposition, and BreatheWay sale subsequent to fiscal year end, Curation Foods retains its O Olive and Yucatan businesses, and the Company retains its Lifecore business.

As a result of the Eat Smart Disposition, the Company met the requirements of ASC 205-20, to report the results of the Eat Smart business as a discontinued operation.

Accordingly, the operating results for the Eat Smart business have been reclassified as a discontinued operation within these consolidated financial statements.

Curation Foods Brands

O Olive Oil & Vinegar (" O ") :

The Company acquired O on March 1, 2017.

O , founded in 1995, is based in Petaluma, California, and is the premier producer of California specialty olive oils and wine vinegars.

Its products are sold in natural food, conventional grocery and mass retail stores, primarily in the United States and Canada.

Yucatan & Cabo Fresh Avocado Products:

The Company acquired Yucatan Foods on December 1, 2018.

Yucatan Foods was founded in 1991.

As part of the acquisition of Yucatan Foods, Curation Foods acquired the newly built production facility in Guanajuato, Mexico.

The Yucatan Foods business added a double-digit growth platform, a lower-cost infrastructure in Mexico, and higher margin product offerings that generally exhibit less sourcing volatility.

The Company manufactures and sells Yucatan and Cabo Fresh guacamole and avocado food products primarily to the U.S.

grocery channel, but also to the U.S.

mass retail, Canadian grocery retail and foodservice channels.

BreatheWay Packaging Technology :

The Company’s BreatheWay membrane technology establishes a beneficial packaging atmosphere adapting to changing fresh product respiration and temperature in order to extend freshness naturally.

Subsequent to the fiscal year ended May 29, 2022, on June 2, 2022, the Company sold its BreatheWay technology business for $3.2 million in cash.

Until June 1, 2021, the Company held a 26.9% investment ownership in Windset Holding 2010 Ltd.

(“Windset”), a leading edge grower of hydroponically-grown produce.

Included in discontinued operations are the dividends and Landec’s share of the change in fair market value of its investment in Windset.

On June 1, 2021, the Company and Curation Foods sold all of its equity interests of Windset in exchange for an aggregate purchase price of $45.1 million, subject to certain adjustments.

Included in the Other segment is Corporate, which includes corporate general and administrative expenses, non-Lifecore and non-Curation Food interest income, interest expense, and income tax expenses.

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COVID-19 Pandemic

There are many uncertainties regarding the current novel coronavirus (“COVID-19”) pandemic, including the scope of scientific and health issues, the anticipated duration of the pandemic, and the extent of local and worldwide social, political, and economic disruption it may cause.

The COVID-19 pandemic has had and we believe will continue to have significant adverse impacts on many aspects of the Company’s operations, directly and indirectly, including with respect to sales, customer behaviors, business and manufacturing operations, inventory, the Company’s employees, and the market generally, and the scope and nature of these impacts continue to evolve each day.

The COVID-19 pandemic, as well as actions taken in response to the pandemic, have had and we believe will continue to have significant adverse impacts on many aspects of the Company’s operations, directly and indirectly, including with respect to sales, customer behaviors, business and manufacturing operations, inventory, the Company’s employees, and the market generally, and the scope and nature of these impacts continue to evolve each day.

The Company expects to continue to assess the evolving impact of the COVID-19 pandemic, and intends to continue to make adjustments to its responses accordingly.

Sales and Marketing

Curation Foods is supported by dedicated sales and marketing teams located throughout the U.S.

Lifecore relies on name recognition and referrals regarding its biomedical-based CDMO and manufacturing experience and expertise to attract new customers and offers its services with minimal marketing and sales infrastructure.

Curation Foods is supported by dedicated sales and marketing teams located throughout the U.S.

Manufacturing and Processing

Curation Foods can be affected by seasonal weather factors, which can result in higher costs of sourcing and processing its produce products due to a shortage of essential produce items.

Lifecore is not significantly affected by seasonality.

Curation Foods can be affected by seasonal weather factors, which can result in higher costs of sourcing and processing its products.

Lifecore Biomedical

The commercial production of HA requires fermentation, separation, and purification and aseptic processing capabilities.

HA can primarily be produced in two ways, either through bacterial fermentation or through extraction from rooster combs.

Lifecore produces HA only from bacterial fermentation, using an efficient microbial fermentation process and an effective purification operation.

Lifecore’s facilities in Chaska, Minnesota are used for the HA and non-HA manufacturing process, formulation, aseptic syringe and vial filling, analytical services, secondary packaging, warehousing raw materials and finished goods, and distribution.

Lifecore provides versatility in the manufacturing of various types of finished products and supplies several different forms of HA and non-HA products in a variety of molecular weight fractions as powders, solutions and gels, and in a variety of bulk and single-use finished packages.

As of the date of this report, the Company believes that its current manufacturing capacity plan will be sufficient to allow it to meet the needs of its current customers for the foreseeable future.

Curation Foods

Eat Smart Fresh Packaged Salads and Vegetables

Fresh packaged salads, vegetable products and fresh-cut packaged green beans are processed in the Company’s facilities located in Guadalupe, California and Bowling Green, Ohio.

Cooling of produce is done by third parties as well as our own cooling systems.

As part of Landec’s Project SWIFT, during the second quarter of fiscal year 2021, the Company sold the Hanover building and assets related thereto for net proceeds of $8.0 million.

O Olive Oil & Vinegar

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BreatheWay packaging systems use polymer manufacturing, membrane manufacturing, and label package conversion.

Contract manufacturers currently make virtually all of the polymers for the BreatheWay packaging system and breathable membranes.

The Company performs the label package conversion in its various processing facilities.

Table of Conten ts

Lifecore Biomedical

The commercial production of HA requires fermentation, separation, and purification and aseptic processing capabilities.

HA can primarily be produced in two ways, either through bacterial fermentation or through extraction from rooster combs.

Lifecore produces HA only from bacterial fermentation, using an efficient microbial fermentation process and an effective purification operation.

As of the date of this report, the Company believes that its current manufacturing capacity plan will be sufficient to allow it to meet the needs of its current customers for the foreseeable future.

Contract manufacturers make virtually all of the polymers for the BreatheWay packaging system and breathable membranes.

Subsequent to the fiscal year ended May 29, 2022, on June 2, 2022, the Company sold its BreatheWay technology business for $3.2 million in cash.

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The Company operates in highly competitive and rapidly evolving fields, and new developments are expected to continue at a rapid pace.

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The food industry is highly competitive, and further consolidation with our customers would likely increase competition.

The Company’s principal competitors, Taylor Farms, Fresh Express and Dole, have substantial financial, marketing, and other resources.

Increased competition can reduce our sales due to loss of market share or the need to reduce prices to respond to competitive and customer pressures.

Competitive pressures also may restrict our ability to increase prices, including in response to commodity and other cost increases.

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The expanding presence of e-commerce retailers has impacted, and may continue to impact, consumer preferences and market dynamics, which in turn may negatively affect our sales or profits.

Patents and Proprietary Rights

The Company’s success depends in large part on its ability to obtain patents, maintain trade secret protection and operate without infringing on the proprietary rights of third parties.

The Company has 19 active U.S.

patents as of May 30, 2021 with expiration dates ranging from 2021 to 2035.

Government Regulation

Curation Foods

The Company’s food products and operations are also subject to regulation by various foreign, federal, state, and local agencies, with respect to production processes, product attributes, packaging, labeling, advertising, import, export, storage, transportation and distribution.

In the U.S., food products are primarily regulated by the Food and Drug Administration (“FDA”), which has the authority to inspect the Company’s food facilities, and regulates, among other things, food manufacturing, food packing and holding, food additives, food safety, the growing and harvesting of produce intended for human consumption, food transportation,

Table of Conten ts

food labeling, food packaging, and food supplier controls including foreign supplier verification.

In addition, advertising of our products is subject to regulation by the Federal Trade Commission (“FTC”), and operations are subject to certain health and safety regulations, such as those issued under the Occupational Safety and Health Act (“OSHA”).

All of our U.S.

facilities and food products must be in compliance with the Federal Food, Drug, and Cosmetic Act (“FDC Act”) as amended by, among other things, the FDA Food Safety Modernization Act (“FSMA”).

In addition, our operations in Mexico are subject to Mexican regulations through the SAGARPA, and our food products sold into Canada must be in compliance with applicable Canadian food safety and labeling regulations.

The FDA regulates and/or approves the clinical trials, manufacturing, labeling, distribution, import, export, sale and promotion of medical devices and drug products in or from the United States.

The Food and Drug Administration (“FDA”) regulates and/or approves the clinical trials, manufacturing, labeling, distribution, import, export, sale and promotion of medical devices and drug products in or from the United States.

Some of the Company’s and its customers’ products are subject to extensive and rigorous regulation by the FDA, which regulates some of the products as medical devices or drug products, that in some cases require FDA approval or clearance, prior to U.S.

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FDA also maintains adverse event reporting requirements for drug products, among other post-market regulatory requirements.

Curation Foods

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In the U.S., food products are primarily regulated by the FDA, which has the authority to inspect the Company’s food facilities, and regulates, among other things, food manufacturing, food packing and holding, food additives, food safety, the growing and harvesting of produce intended for human consumption, food transportation, food labeling, food packaging, and food supplier controls including foreign supplier verification.

All of our U.S.

facilities and food products must be in compliance with the Federal Food, Drug, and Cosmetic Act (“FDC Act”) as amended by, among other things, the FDA Food Safety Modernization Act (“FSMA”).

Human Capital

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ZEST is our manufacturing operational system that will empower our people to work in a different way, changing their mindset and behaviors leading to an acceleration of our performance across our operations.

Table of Conten ts

• Zero Mindset - Zero breakdown, zero defects, zero recalls, zero accidents, zero pollution.

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The reference to the Company’s website address does not constitute incorporation by reference of the information contained on the website, and the information contained on the website is not part of this document.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business