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Item 9A. Controls and Procedures

2022-09-14 compared with 2021-07-29 · 629 added, 405 removed, 1061 unchanged (49% of the section changed)

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Evaluation of Disclosure Controls and Procedures

As of May 30, 2021, our management evaluated, with participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures.

Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission, and are effective in providing reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended).

In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013 Framework) .

Our management has concluded that we maintained effective internal control over financial reporting as of May 30, 2021.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Our independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on our internal control over financial reporting, which appears below.

As required by Rule 13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-K.

Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

Based upon the evaluation, our principal executive officer and principal financial officer concluded that due to a material weakness in our internal control over financial reporting as described in the “Management’s Report on Internal Control over Financial Reporting”, our disclosure controls and procedures were not effective as of May 29, 2022.

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As further described below, the Company’s management is in the process of developing plans to remediate the material weakness identified, but it has not been remediated as of the date of filing of this Annual Report on Form 10-K.

Despite the existence of this material weakness, our management believes that the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, the Company’s financial condition, results of operations and cash flows for the periods presented in conformity with U.S.

generally accepted accounting principles.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended May 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other than the identification of the material weakness as described in “Management’s Report on Internal Control over Financial Reporting”, there have been no changes in our system of internal control over financial reporting during the quarter ended May 29, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting (as defined in Rule 13(a)-15(f) under the Securities Exchange Act of 1934, as amended).

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and presentation of consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, these controls can only provide reasonable assurance with respect to financial statement preparation and presentation.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that the internal controls may become inadequate because of changes in conditions or because the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of May 29, 2022.

In making this assessment, which was conducted under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).

As part of our annual assessment, management has concluded that we did not design and operate effective internal controls over the completeness and accuracy of the accounting for non-standard transactions, that would include discontinued operations and restructuring activity.

Specifically, we did not design controls for non-standard transactions to ensure the accurate presentation of non-standard transactions, which would include discontinued operations and certain restructuring costs in our financial statements.

This resulted in a material error in our interim financial information as presented in and filed with our Quarterly Report on Form 10-Q for our fiscal third quarter ended February 27, 2022.

As a result, we have restated the impacted financial information and corrected these errors in Note 1 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

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

We have determined that a gap exists in the design and operations of our controls related to the accounting and classification of certain non-standard transactions, including discontinued operations and certain restructuring costs, which constitutes a material weakness.

As discussed in Part II, Item 8.

Financial Statements and Supplementary Data, Note 1 to our consolidated financial statements, the Company is restating (the “Restatement”) our previously issued (i) unaudited consolidated balance sheet as of February 27, 2022 and May 30, 2021, (ii) unaudited consolidated statements of comprehensive (loss) income for the three and nine months ended February 27, 2022, (iii) unaudited consolidated statement of cash flows for the nine months ended February 27, 2022, (iv) unaudited consolidated statement of changes in stockholders' equity, and unaudited notes related thereto, as previously reported in our Quarterly Report on Form 10-Q for the third quarter period ended February 27, 2022 (the “Prior Financial Statements”).

The Restatement results from corrections by the Company primarily related to:

(i) the classification of certain expenses and the recording of accruals related to the Company’s recent disposition activities and the Company’s corporate transition of Landec Corporation to Lifecore Biomedical, which were previously classified as restructuring expenses from continuing operations in our Prior Financial Statements, but which the Company intends to correct to classify as selling, general and administrative expenses, and cost of goods sold within continuing operations;

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(ii) the treatment of the fees received and costs incurred by the Company pursuant to the transition services agreement related to the sale of the Curation Foods’ Eat Smart business (the “TSA”), for which the Company had previously recognized the net of the TSA fees received and costs incurred as loss on sale of Eat Smart within discontinued operations, but for which the Company intends to correct to classify the TSA fees received by the Company within transition services income and the TSA costs incurred by the Company as selling, general and administrative expenses within continuing operations;

(iii) the classification of certain costs and expenses related to the Company’s recent disposition activities and the Company’s corporate transition of Landec Corporation to Lifecore Biomedical, which were previously classified as loss on sale of Eat Smart within discontinued operations, but which the Company intends to correct to classify as selling, general and administrative expenses within continuing operations.

Based upon our current assessment, which considered the material weakness described above, our management concluded that our internal control over financial reporting was not effective at May 29, 2022.

Management’s Plan for Remediation of the Material Weakness

In response to the material weakness described above, with the oversight of the Audit Committee of our Board of Directors, management has corrected the error in its interim financial statements.

Management is currently evaluating remediation activities related to our non-standard transaction processes that will include, but are not limited to the following (i) enhancing and developing a more comprehensive review process and monitoring controls related to non-standard transactions and (ii) continuing to provide training and development to our accounting team related to non-standard transactions, including discontinued operations and restructuring activity.

The remediation efforts are intended to both address the identified material weakness and to enhance our overall financial control environment and will be subject to ongoing senior management review, as well as Audit Committee oversight.

We plan to complete this remediation process as quickly as possible.

Management is committed to continuous improvement of our internal control over financial reporting and will continue to diligently review our internal control over financial reporting.

Our independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on our internal control over financial reporting, which appears in Part IV, Item 15 of this Annual Report on Form 10-K, and is incorporated herein by reference.

Other Information

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Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

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Directors, Executive Officers and Corporate Governance

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This information required by this item will be contained in the Registrant’s definitive proxy statement or in an amendment to this Annual Report on Form 10-K to be filed with the Securities and Exchange Commission not later than September 26, 2022 (120 days after the Registrant’s fiscal year end covered by this Annual Report on Form 10-K) and is incorporated herein by reference.

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Exhibits and Financial Statement Schedules

Consolidated Financial Statements of Landec Corporation

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets at May 29 , 202 2 and May 3 0 , 202 1 .

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The exhibits listed in the accompanying Index of Exhibits are filed or incorporated by reference as part of this report.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of May 30, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated July 29, 2021 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of May 29, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated September 13, 2022 expressed an adverse opinion thereon.

Basis for Opinion

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The Company measured the fair value of the goodwill using an income approach and the fair value of trademarks/tradenames using a royalty savings method.

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In identifying an excess of the carrying value over fair value, the Company recorded an impairment of $20.0 million to the carrying amount of goodwill and $8.7 million to the carrying amount of trademarks/tradenames with indefinite lives related to the Yucatan reporting unit for the year ended May 29, 2022.

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Auditing the Company’s annual impairment test related to the Yucatan reporting unit’s goodwill and trademarks/tradenames with indefinite lives is complex and highly judgmental and required the involvement of our valuation specialist due to the significant judgment in estimating their fair values.

In particular, the fair value estimate of the Yucatan reporting unit’s goodwill is sensitive to assumptions such as net sales growth rates, gross margins and discount rate.

The Yucatan reporting unit’s trademarks/tradenames with indefinite lives are sensitive to assumptions such as net sales growth rates, royalty rate and discount rate.

The Yucatan reporting unit’s trademarks/tradenames with indefinite lives are sensitive to assumptions related to the discount rate.

These assumptions are forward-looking and sensitive to and affected by expected future market or economic conditions and industry and company-specific qualitative factors.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s impairment review process related to the goodwill and trademarks/tradenames with indefinite lives.

This included evaluating controls over the Company’s budgetary and forecasting process used to develop the estimated future earnings and cash flows used in estimating the fair value of the Yucatan reporting unit and trademarks/tradenames with indefinite lives.

We also tested controls over management’s review of the data used in their valuation models and review of the significant assumptions described above.

We tested controls over management’s review of the data used in their valuation models and review of the significant assumptions described above.

To test the estimated fair value of the Yucatan reporting unit and trademarks/tradenames with indefinite lives, we performed audit procedures that included, among others, assessing the methodologies, testing the significant assumptions discussed above used to develop the estimates of future earnings and cash flows and testing the completeness and accuracy of the underlying data.

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We involved our valuation specialists to assist in reviewing the valuation methodology and the royalty and discount rate assumptions.

In addition, for goodwill we also tested the Company’s calculation of implied multiples of the reporting units, compared them to guideline companies and evaluated the resulting premium.

For trademarks/tradenames with indefinite lives, where applicable, we also assessed whether the assumptions used were consistent with those used in the goodwill impairment review process.

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San Francisco, California

July 29, 2021

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September 13, 2022

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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We have audited Landec Corporation and subsidiaries’ internal control over financial reporting as of May 29, 2022, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Landec Corporation and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of May 30, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of May 30, 2021 and May 31, 2020, and the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity and cash flows for each of the three years in the period ended May 30, 2021, and the related notes and our report dated July 29, 2021 expressed an unqualified opinion thereon.

In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, Landec Corporation and subsidiaries' (the Company) has not maintained effective internal control over financial reporting as of May 29, 2022, based on the COSO criteria.

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

The following material weakness has been identified and included in management’s assessment.

Management did not design and operate effective controls over the completeness and accuracy of accounting for non-standard transactions, which include discontinued operations and certain restructuring costs.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of May 29, 2022 and May 30, 2021, and the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity and cash flows for each of the three years in the period ended May 29, 2022, and the related notes.

This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the May 29, 2022 consolidated financial statements, and this report does not affect our report dated September 13, 2022 which expressed an unqualified opinion thereon.

Basis for Opinion

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San Francisco, California

July 29, 2021

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September 13, 2022

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LANDEC CORPORATION

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Prepaid expenses and other current assets 7,052 5,038

Current assets, discontinued operations — 37,618

Total Current Assets 123,712 148,321

Investment in non-public company, fair value 45,100 56,900

Property and equipment, net 130,435 120,286

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Other assets 3,002 3,531

Other assets, discontinued operations — 154,140

Total Assets $ 295,160 $ 502,924

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Current portion of long-term debt, net 599 —

Current liabilities, discontinued operations — 42,644

Total Current Liabilities 79,231 101,888

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Other non-current liabilities 190 2,870

Non-current liabilities, discontinued operations — 3,981

Total Liabilities 187,215 300,140

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Additional paid-in capital 167,352 165,533

Retained earnings 38,580 71,245

Retained earnings (accumulated deficit) ( 58,851 ) 38,580

Accumulated other comprehensive loss ( 586 ) ( 1,358 )

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See accompanying notes to the consolidated financial statements.

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LANDEC CORPORATION

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Total operating costs and expenses 91,664 50,605 65,263

Operating (loss) income ( 13,496 ) ( 38,537 ) 5,475

Dividend income 1,125 1,125 1,650

Operating loss ( 41,294 ) ( 134 ) ( 25,876 )

Interest income 81 48 72

Interest expense, net ( 17,357 ) ( 10,387 ) ( 4,646 )

Transition services income 5,814 — —

Loss on debt refinancing — ( 1,110 ) —

Other (expense) income, net ( 11,689 ) ( 4,395 ) 1,600

Net (loss) income from continuing operations before taxes ( 40,466 ) ( 51,307 ) 3,640

Income tax benefit (expense) 7,801 13,116 ( 1,518 )

Net (loss) income from continuing operations ( 32,665 ) ( 38,191 ) 2,122

Other income (expense), net 641 111 ( 195 )

Net loss from continuing operations before taxes ( 52,115 ) ( 11,472 ) ( 30,645 )

Income tax benefit 5,839 1,903 8,774

Net loss from continuing operations ( 46,276 ) ( 9,569 ) ( 21,871 )

Discontinued operations:

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Loss from discontinued operations, net of tax ( 51,155 ) ( 23,096 ) ( 16,320 )

Net (loss) income ( 32,665 ) ( 38,191 ) 411

Basic net (loss) income per share:

(Loss) income from continuing operations $ ( 1.12 ) $ ( 1.31 ) $ 0.07

Net loss $ ( 97,431 ) $ ( 32,665 ) $ ( 38,191 )

Basic net loss per share:

Loss from continuing operations $ ( 1.57 ) $ ( 0.33 ) $ ( 0.75 )

Loss from discontinued operations ( 1.74 ) ( 0.79 ) ( 0.56 )

Total basic net (loss) income per share $ ( 1.12 ) $ ( 1.31 ) $ 0.01

Diluted net (loss) income per share:

(Loss) income from continuing operations $ ( 1.12 ) $ ( 1.31 ) $ 0.07

Total basic net loss per share $ ( 3.31 ) $ ( 1.12 ) $ ( 1.31 )

Diluted net loss per share:

Loss from continuing operations $ ( 1.57 ) $ ( 0.33 ) $ ( 0.75 )

Loss from discontinued operations ( 1.74 ) ( 0.79 ) ( 0.56 )

Total diluted net (loss) income per share $ ( 1.12 ) $ ( 1.31 ) $ 0.01

Total diluted net loss per share $ ( 3.31 ) $ ( 1.12 ) $ ( 1.31 )

Shares used in per share computation:

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See accompanying notes to the consolidated financial statements.

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LANDEC CORPORATION

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May 29, 2022 May 30, 2021 May 31, 2020

Net (loss) income $ ( 32,665 ) $ ( 38,191 ) $ 411

Net loss $ ( 97,431 ) $ ( 32,665 ) $ ( 38,191 )

Other comprehensive (loss) income, net of tax:

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See accompanying notes to the consolidated financial statements.

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LANDEC CORPORATION

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STOCKHOLDERS’ EQUITY

(In thousands, except per share amounts)

(In thousands)

Earnings (Accumulated Deficit)

Comprehensive

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Balance at May 26, 2019 29,102 $ 29 $ 160,341 $ 109,710 $ 64 $ 270,144

ASC 842 transition adjustment — — — ( 274 ) — ( 274 )

Issuance of stock under stock plans, net of shares withheld 122 — 30 — — 30

Issuance of common stock in connection with Yucatan Foods acquisition 1,203 1 15,067 — — 15,068

Taxes paid by Company for employee stock plans — — ( 212 ) — — ( 212 )

Stock-based compensation — — 2,419 — — 2,419

Net income — — — 411 — 411

Net loss — — — ( 38,191 ) — ( 38,191 )

Other comprehensive loss, net of tax — — — — ( 2,872 ) ( 2,872 )

Balance at May 31, 2020 29,224 29 162,578 71,245 ( 2,808 ) 231,044

ASC 842 transition adjustment — — — ( 274 ) — ( 274 )

Issuance of stock under stock plans, net of shares withheld 109 — — — — —

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Net loss — — — ( 32,665 ) — ( 32,665 )

Other comprehensive loss, net of tax — — — — ( 2,872 ) ( 2,872 )

Other comprehensive income, net of tax — — — — 1,450 1,450

Balance at May 30, 2021 29,333 29 165,533 38,580 ( 1,358 ) 202,784

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See accompanying notes to the consolidated financial statements.

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LANDEC CORPORATION

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Cash flows from operating activities:

Net (loss) income $ ( 32,665 ) $ ( 38,191 ) $ 411

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Net loss $ ( 97,431 ) $ ( 32,665 ) $ ( 38,191 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Impairment of goodwill and intangible assets 60,792 — 12,953

Depreciation, amortization of intangibles, debt costs and right-of-use assets 17,884 19,867 18,838

Loss on debt refinancing 1,110 — —

Deferred taxes ( 6,884 ) ( 7,893 ) ( 5,440 )

Loss on disposal of property and equipment related to restructuring, net 5,185 10,143 14,802

Stock-based compensation expense 2,608 3,360 2,419

Loss on sale of Eat Smart 336 — —

Net loss on disposal of property and equipment held and used 152 61 143

Provision (benefit) for expected credit losses ( 14 ) 418 ( 284 )

Deferred taxes ( 7,893 ) ( 5,440 ) 910

Change in investment in non-public company, fair value — 11,800 4,200

Net loss on disposal of property and equipment held and used 61 143 188

Loss on disposal of property and equipment related to restructuring, net 10,143 14,802 —

Other, net ( 74 ) 195 —

Impairment of goodwill and intangible assets — 12,953 2,000

Change in contingent consideration liability — ( 500 ) ( 3,500 )

Loss on debt refinancing — 1,110 —

Pacific Harvest note receivable reserve — — 1,202

Change in contingent consideration liability — — ( 500 )

Other, net ( 426 ) ( 74 ) 195

Changes in current assets and current liabilities:

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Deferred revenue ( 18 ) 778 ( 147 )

Net cash provided by (used in) operating activities 15,017 ( 17,041 ) 16,020

Net cash (used in) provided by operating activities ( 24,399 ) 15,017 ( 17,041 )

Cash flows from investing activities:

Proceeds from the Sale of Eat Smart 73,500 — —

Eat Smart sale net working capital adjustment and cash sale expenses ( 9,839 ) — —

Proceeds from sale of investment in non-public company 45,100 — —

Purchases of property and equipment ( 28,134 ) ( 23,769 ) ( 26,686 )

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Proceeds from collections of notes receivable — — 364

Proceeds from sale of investment in non-public company — — 7,000

Acquisition of Yucatan Foods (Note 2), net of cash acquired — — ( 59,872 )

Net cash used in investing activities ( 10,856 ) ( 23,888 ) ( 96,797 )

Net cash provided by (used in) investing activities 81,768 ( 10,856 ) ( 23,888 )

Cash flows from financing activities:

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See accompanying notes to the consolidated financial statements.

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LANDEC CORPORATION

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(“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.

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

The company categorizes revenue in three categories, fresh packaged salads and vegetables, avocado products and technology which reports revenues for BreatheWay patented supply chain solutions.

Included in the Curation Foods segment and fresh packaged salads and vegetables revenue disaggregation is O Olive Oil & Vinegar ( “ O ” ), which is a premier producer of California specialty olive oils and wine vinegars.

Also included in the Curation Foods segment are the dividends and Landec’s share of the change in the fair market value of the Company’s 26.9 % investment ownership of Windset Holdings 2010 Ltd.

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

The company categorizes revenue in three categories, avocado products, olive oil and wine vinegars and technology which reports revenues for BreatheWay patented supply chain solutions.

Eat Smart Sale and Discontinued Operations

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, subject to post-closing adjustments based upon negotiation of the net working capital balances at the Closing Date.

As part of the Eat Smart Disposition, Taylor Farms acquired, among other assets and liabilities 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, 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, Curation Foods retains its O Olive Oil & Vinegar (“ O ”) and Yucatan Foods businesses and its rights and interests in BreatheWay, and the Company retains its Lifecore business.

During the third quarter of its fiscal year, the Company used net proceeds from the Eat Smart Disposition to repay $ 67.9 million in borrowings under the Company’s existing credit agreements.

The accounting requirements for reporting the Eat Smart business as a discontinued operation were met when the Eat Smart Disposition was completed on the Closing Date.

Accordingly, the consolidated financial statements and notes to the consolidated financial statements reflect the results of the Eat Smart business as a discontinued operation for all periods presented.

A loss of $ 0.3 million from the Eat Smart Disposition is included in Loss from discontinued operations, net of tax, within the Consolidated Statements of Operations during the fiscal year ended May 29, 2022.

Refer to Note 12 - Discontinued Operations for additional information.

Basis of Presentation and Consolidation

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A 14th week is included in the fiscal year every five or six years to realign the Company’s fiscal quarters with calendar quarters.

In May 2019, the Company discontinued the Now Planting business.

As a result, the Now Planting business, which was launched during the second quarter of fiscal year 2019, was reclassified as a discontinued operation for all periods presented.

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Arrangements that are not controlled through voting or similar rights are reviewed under the guidance for variable interest entities (“VIEs”).

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The Company reviewed the consolidation guidance and concluded that the equity investment in the non-public company by the Company is not a VIE.

Reclassifications

Certain reclassifications have been made to prior year financial statements to conform to the current year presentation.

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Summary of Significant Accounting Policies

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recognition and measurement of current and deferred income tax assets and liabilities;

the assessment of recoverability of long-lived and indefinite lived assets (including intangible assets), and inventory;

the valuation of investments;

the assessment of recoverability of long-lived and indefinite lived assets (including intangible assets and goodwill), and inventory;

and the valuation and recognition of stock-based compensation.

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Concentrations of Risk

Cash and cash equivalents, trade accounts receivable, grower advances, and notes receivable are financial instruments that potentially subject the Company to concentrations of credit risk.

Cash and cash equivalents and trade accounts receivable are financial instruments that potentially subject the Company to concentrations of credit risk.

Our Company policy limits, among other things, the amount of credit exposure to any one issuer and to any one type of investment, other than securities issued or guaranteed by the U.S.

The Company routinely assesses the financial strength of customers and growers and, as a consequence, believes that trade receivables, grower advances and notes receivable credit risk exposure is limited.

The Company routinely assesses the financial strength of customers and, as a consequence, believes that trade receivables credit risk exposure is limited.

Credit losses for bad debt are provided for in the consolidated financial statements through a charge to operations.

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Several of the raw materials the Company uses to manufacture its products are currently purchased from a single source, including some monomers used to synthesize Intelimer polymers, substrate materials for its breathable membrane products, and raw materials for its HA products.

During the fiscal year ended May 30, 2021, sales to the Company’s top five customers accounted for approximately 49 % of total revenue with the top two customers from the Curation Foods segment, Walmart, Inc.

(“Walmart”) and Costco Corporation (“Costco”) accounting for approximately 16 % and 15 %, respectively, of total revenues.

During the fiscal year ended May 31, 2020, sales to the Company’s top five customers accounted for approximately 48 % of total revenue with the top two customers from the Curation Foods segment, Walmart and Costco accounting for approximately 18 % and 15 %, respectively, of total revenues.

As of May 30, 2021, the top two customers, Walmart and Costco represented approximately 11 % and 8 %, respectively, of total accounts receivable.

Lifecore had one customer that represented 11 % of total accounts receivable at the end of fiscal year 2021.

As of May 31, 2020, the top two customers, Walmart and Costco represented approximately 13 % and 7 %, respectively, of total accounts receivable.

Lifecore had one customer that represented 12 % of total accounts receivable at the end of fiscal year 2020.

During the fiscal years ended May 29, 2022, May 30, 2021,and May 31, 2020 the Company had sales concentrations of 10% or greater from two customers, accounting for 16 % and 13 %, 18 % and 13 %, and 16 % and 11 %, respectively.

The Company’s same two customers had accounts receivable concentrations of 10% or greater, accounting for 26 % and 13 % of accounts receivable as of May 29, 2022, and 18 % and 16 %, as of May 30, 2021.

Impairment of Long-Lived Assets

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Financial Instruments

The Company’s financial instruments are primarily composed of commercial-term trade payables, grower advances, notes receivable, debt instruments, and derivative instruments.

The Company’s financial instruments are primarily composed of commercial-term trade payables, debt instruments, and derivative instruments.

For short-term instruments, the historical carrying amount approximates the fair value of the instrument.

The fair value of long-term debt and lines of credit approximates their carrying value.

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Cash Flow Hedges

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During the third quarter of fiscal year 2021, the Company discontinued its hedge accounting prospectively since it was determined that the derivatives are no longer highly effective in offsetting changes in the net investment.

The derivatives continue to be carried at fair value in the accompanying Consolidated Balance Sheets with changes in their fair values from the date of discontinued hedge accounting recognized in current period earnings in Other expense (income), net in the Consolidated Statements of Operations.

The derivatives continue to be carried at fair value in the accompanying Consolidated Balance Sheets with changes in their fair values from the date of discontinued hedge accounting recognized in current period earnings in Other income (expense), net in the Consolidated Statements of Operations.

Amounts previously accumulated in AOCL during the period of effectiveness will continue to be realized over the remaining term of the underlying forecasted debt payments as a component of AOCL in Stockholders’ Equity.

Accumulated Other Comprehensive Loss

Comprehensive income consists of two components, net (loss) income and Other comprehensive (loss) income (“OCI”).

OCI refers to revenue, expenses, and gains and losses that under GAAP are recorded as a component of stockholders’ equity but are excluded from net (loss) income.

Comprehensive income consists of two components, Net loss and Other comprehensive (loss) income (“OCI”).

OCI refers to revenue, expenses, and gains and losses that under GAAP are recorded as a component of stockholders’ equity but are excluded from net loss.

The Company’s OCI consists of net deferred gains and losses on its interest rate swap derivative instruments.

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Balance as of May 30, 2021 $ ( 1,358 )

Other comprehensive loss before reclassifications, net of tax effect ( 344 )

Amounts reclassified from OCI 772

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The Company uses the loss rate method to estimate its expected credit losses on trade accounts receivable and contract assets.

In order to estimate expected credit losses, the Company assessed recent historical experience, current economic conditions and any reasonable and supportable forecasts to identify risk characteristics that are shared within the financial asset.

In order to estimate expected credit losses, the Company assessed recent historical experience, current economic conditions and any reasonable and supportable forecast to identify risk characteristics that are shared within the financial asset.

These risk characteristics are then used to bifurcate the loss rate method into risk pools.

The risk pools were determined based on the industries in which the Company operates.

Historical credit loss for each risk pool is then applied to the current period aging as presented in the identified risk pools to determine the needed reserve allowance.

Historical credit loss for each risk pool is then applied to the current period aging as presented in the identified risk pool to determine the needed reserve allowance.

At times when there are no current economic conditions or forecasts that may affect future credit losses, the Company has determined that recent historical experience provides the best basis for estimating credit losses.

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The information obtained from assessing historical experience, current economic conditions and reasonable and supportable forecasts were used to identify risk characteristics that can affect future credit loss experience.

There were no

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significant risk characteristics identified in the review of historical experiences or in the review of estimates of current economic conditions and forecasts.

There were no significant risk characteristics identified in the review of historical experiences or in the review of estimates of current economic conditions and forecasts.

Estimating credit losses based on risk characteristics requires significant judgment by management.

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The changes in the Company’s allowance for sales returns and credit losses are summarized in the following table (in thousands):

period Adjustments resulting from acquisitions Provision (benefit) for expected credit losses Write offs,

period Provision (benefit) for expected credit losses Write offs,

recoveries Balance at

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The Company’s contract liabilities as of May 29, 2022, and May 30, 2021, were $ 0.9 million and $ 0.9 million, respectively.

No revenue was recognized during fiscal year 2021 that was included in the contract liability balance at the beginning of the fiscal 2021.

Revenue recognized during the fiscal year ended May 29, 2022 that was included in the contract liability balance at the beginning of fiscal year 2022, was $ 0.4 million.

Revenue Recognition

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Revenue, net of estimated allowances and returns, is recognized when or as the Company satisfies its performance obligations under a contract and control of the product is transferred to the customer.

Curation Foods

Curation Foods’ standard terms of sale are generally included in its contracts and purchase orders.

Revenue is recognized at the time shipment is made or upon delivery as control of the product is transferred to the customer.

Shipping and other transportation costs charged to customers are recorded in both revenue and cost of goods sold.

Curation Foods has elected to account for shipping and handling as fulfillment activities, and not as a separate performance obligation.

Curation Foods’ standard payment terms with its customers generally range from 30 days to 90 days.

Certain customers may receive cash-based incentives (including:

volume rebates, discounts, and promotions), which are accounted for as variable consideration to Curation Foods’ performance obligations.

Curation Foods estimates these sales incentives based on the expected amount to be provided to its customers and reduces revenue recognized towards its performance obligations.

The Company has not historically had and does not anticipate significant changes in its estimates for variable consideration.

Lifecore generates revenue from two integrated activities:

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Lifecore’s standard payment terms with its customers generally range from 30 days to 60 days.

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Lifecore provides aseptic formulation and filling of syringes and vials with precisely formulated medical grade HA and non-HA materials for injectable products used for medical purposes.

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Lifecore recognizes revenue for these products at the point in time when legal title to the product is transferred to the customer, which is at the time that shipment is made or upon delivery of the product.

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Development Services

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Curation Foods

Curation Foods’ standard terms of sale, both prior to and following the Eat Smart Disposition, are generally included in its contracts and purchase orders.

Revenue is recognized at the time shipment is made or upon delivery as control of the product is transferred to the customer.

Shipping and other transportation costs charged to customers are recorded in both revenue and cost of goods sold.

Curation Foods has elected to account for shipping and handling as fulfillment activities, and not as a separate performance obligation.

Curation Foods’ standard payment terms with its customers generally range from 30 days to 90 days.

Certain customers may receive cash-based incentives (including:

volume rebates, discounts, and promotions), which are accounted for as variable consideration to Curation Foods’ performance obligations.

Curation Foods estimates these sales incentives based on the expected amount to be provided to its customers and reduces revenues recognized towards its performance obligations.

The Company has not historically had and does not anticipate significant changes in its estimates for variable consideration.

The Company disaggregates its revenue by segment based on how it markets its products and services and reviews results of operations.

The following tables disaggregate segment revenue by major product lines and services (in thousands):

Curation Foods:

May 29, 2022 May 30, 2021 May 31, 2020

Fresh packaged salads and vegetables $ 380,205 $ 438,083 $ 453,182

Avocado products 63,575 62,194 27,322

Technology 2,294 4,256 1,182

Total $ 446,074 $ 504,533 $ 481,686

May 30, 2021 May 31, 2020 May 26, 2019

Contract development and manufacturing organization

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Total $ 109,320 $ 98,087 $ 85,833

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Curation Foods:

May 29, 2022 May 30, 2021 May 31, 2020

Avocado products $ 65,269 $ 63,575 $ 62,194

Olive oil and wine vinegars 9,287 7,589 7,783

Technology 1,910 2,295 4,256

Total $ 76,466 $ 73,459 $ 74,233

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Shipping and Handling Costs

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Restricted cash — — 193

Cash and cash equivalents, discontinued operations — 136 —

Cash, cash equivalents and restricted cash $ 1,643 $ 1,295 $ 553

The Company was required to maintain restricted cash of $ 0.0 million as of May 30, 2021, $ 0.2 million as of May 31, 2020, and $ 0.4 million as of May 26, 2019 related to certain collateral requirements for obligations under its workers’ compensation programs.

The restricted cash is included in Other assets in the Company’s accompanying Consolidated Balance Sheets.

Inventories are stated at the lower of cost (using the first-in, first-out method) or net realizable value.

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The Company also records a provision for slow moving and obsolete inventories based on the estimate of demand for its products.

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Advertising Expense

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Related Party Transactions

The Company sold products to and earned license fees from Windset during the last three fiscal years.

During fiscal years 2021, 2020 and 2019, the Company recognized revenues of $ 0.5 million, $ 0.6 million, and $ 0.6 million, respectively, from the sale of products to and license fees from Windset.

The Company sells and licenses its BreatheWay® food packaging technology to Windset Holdings 2010 Ltd.

(“Windset”), in which, as further described in Note 2 - Investment in Non-public Company, the Company had a 26.9 % ownership interest until it sold that interest on June 1, 2021.

During fiscal years 2021 and 2020, the Company recognized revenues of $ 0.5 million and $ 0.6 million, respectively, from the sale of products to and license fees from Windset.

These amounts have been included in Product sales in the accompanying Consolidated Statements of Operations.

The related receivable balances of $ 0.1 million and $ 0.5 million from Windset are included in accounts receivable in the accompanying Consolidated Balance Sheets as of May 30, 2021 and May 31, 2020, respectively.

The related receivable balance of $ 0.1 million from Windset is included in Accounts receivable in the accompanying Consolidated Balance Sheets as of May 30, 2021.

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All related party transactions are monitored quarterly by the Company and approved by the Audit Committee of the Board of Directors.

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The use of different assumptions would increase or decrease the estimated fair value of assets and would increase or decrease any impairment measurement.

The Company tests its indefinite-lived intangible assets for impairment at least annually.

Application of the impairment tests for indefinite-lived intangible assets requires significant judgment by management, including identification of reporting units, assignment of assets and liabilities to reporting units, assignment of intangible assets to reporting units, which judgments are inherently uncertain.

During fiscal year 2020, the Company recorded impairment charges of $ 1.3 million and $ 0.5 million related to O property and equipment, and finite-lived intangible assets (customer relationships), respectively.

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The impairment charge of the customer relationships intangible asset impairment charge is included in the line item Impairment of goodwill and intangible assets on the Consolidated Statements of Operations, and is in the Curation Foods business segment.

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Impairment Review of Goodwill and Indefinite-Lived Intangible Asset

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The quantitative test compares the carrying amount of a reporting unit that includes goodwill to its fair value.

The Company determines the fair value using both an income approach and a market approach.

The Company determines the fair value using an income approach.

To determine the fair value of a reporting unit as part of its quantitative test, the Company uses a discounted cash flow ("DCF") method under the income approach, as it believes that this approach is the most reliable indicator of the fair value of its businesses and the fair value of their future earnings and cash flows.

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The other key estimates and factors used in the DCF method include, but are not limited to, future volumes, net sales and expense growth rates, and gross margin and gross margin growth rates.

Changes in such estimates or the application of alternative assumptions could produce different results.

Under the market-based approach, information regarding the Company is utilized along with publicly available industry information to determine earnings multiples that are used to value the Company.

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such estimates or the application of alternative assumptions could produce different results.

A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit.

For trademarks and other intangible assets with indefinite lives, the Company performs a quantitative analysis to test for impairment.

When a quantitative test is performed, the estimated fair value of an asset is compared to its carrying amount.

For trademarks and other intangible assets with indefinite lives, the Company has the option to first assess qualitative factors such as macro-economic conditions, industry and market environment, cost factors, overall financial performance of the Company, litigation, and changes in the business in its annual, qualitative analysis to test for impairment.

If the results of a qualitative test indicate a potential for impairment of an intangible asset with an indefinite life, a quantitative test is performed.

The quantitative test compares the estimated fair value of an asset to its carrying amount.

If the carrying amount of such asset exceeds its estimated fair value, an impairment charge is recorded for the difference between the carrying amount and the estimated fair value.

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These impairment charges are included in the line item Impairment of goodwill and intangible assets on the Consolidated Statements of Operations, and both are in the Curation Foods business segment.

During fiscal year 2019, the Company re-packaged its GreenLine branded food service products to the Eat Smart brand, and recorded an impairment charge for the remaining $ 2.0 million trademarks intangible assets.

Other than the goodwill write-offs discussed above, there were no other impairment losses for goodwill during fiscal years 2021, 2020 and 2019.

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During fiscal year 2022, the Company recorded impairment charges of $ 32.1 million and $ 20.0 million related to its Eat Smart business and Yucatan Foods goodwill, respectively.

The Company also recorded an impairment charge of $ 8.7 million related to its Yucatan Foods trademarks.

These impairment charges were primarily a result of an indication of a decrease in the fair market values of the Eat Smart and Yucatan Foods businesses driven by lower market valuations and a decrease in projected cash flows.

The goodwill impairment charge related to the Eat Smart business goodwill is included in Loss from discontinued operations within the Consolidated Statements of Operations.

The Yucatan Foods related impairment charges are included in the line item Impairment of goodwill and intangible assets on the Consolidated Statements of Operations and are in the Curation Foods business segment.

Other than the goodwill and intangibles write-offs discussed above, there were no other impairment losses for goodwill or intangibles during fiscal years 2022, 2021 and 2020.

Investment in Non-Public Company

On February 15, 2011, the Company made an investment in Windset which is reported as an investment in non-public company, fair value, in the accompanying Consolidated Balance Sheets as of May 30, 2021 and May 31, 2020.

On February 15, 2011, the Company made an investment in Windset which is reported at fair value in the accompanying Consolidated Balance Sheets as of May 30, 2021.

The Company has elected to account for its investment in Windset under the fair value option.

See Note 2 – Investment in Non-public Company for further information.

Subsequent to fiscal year end, on June 1, 2021, the Company sold all of its equity interest in Windset to the Newell Capital Corporation and Newell Brothers Investment 2 Corp., see Note 15 - Subsequent Events.

On June 1, 2021, the Company sold all of its equity interest in Windset to the Newell Capital Corporation and Newell Brothers Investment 2 Corp.

Business Interruption Insurance Recoveries

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In fiscal year 2020, the Company recognized $ 3.0 million of business interruption insurance recoveries.

Amounts received on insurance recoveries related to business interruption are recorded when amounts are realized and are included as a reduction to cost of product sales and operating cash flows.

Amounts received on insurance recoveries related to business interruption are recorded when amounts are realized and are included within Loss from discontinued operations in the Consolidated Statement of Operations and as operating cash flows.

Deferred Revenue

Cash received in advance of services performed are recorded as deferred revenue.

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The Company accounts for income taxes in accordance with accounting guidance which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities.

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Diluted common equivalent shares consist of stock options and restricted stock units, calculated using the treasury stock method.

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The following table sets forth the computation of diluted net (loss) income per share:

The following table sets forth the computation of diluted net loss per share:

(in thousands, except per share amounts) May 29, 2022 May 30, 2021 May 31, 2020

Net (loss) income $ ( 32,665 ) $ ( 38,191 ) $ 411

Weighted average shares for basic net (loss) income per share 29,294 29,162 28,359

Net loss $ ( 97,431 ) $ ( 32,665 ) $ ( 38,191 )

Weighted average shares for basic net loss per share 29,466 29,294 29,162

Effect of dilutive securities:

Stock options and restricted stock units — — —

Weighted average shares for diluted net (loss) income per share 29,294 29,162 28,607

Diluted net (loss) income per share $ ( 1.12 ) $ ( 1.31 ) $ 0.01

Due to the Company’s net loss in fiscal years 2021 and 2020, the net loss per share for fiscal years 2021 and 2020 includes only the weighted average shares outstanding and thus excludes 0.3 million and 0.2 million of outstanding restricted stock unit awards ("RSUs"), respectively, as such impact would be antidilutive.

Options to purchase 1.7 million, 1.7 million, and 1.6 million shares of Common Stock at a weighted average exercise price of $ 11.36 , $ 12.71 , and $ 13.74 per share during the fiscal years ended May 30, 2021, May 31, 2020 and May 26, 2019, respectively, were not included in the computation of diluted net (loss) income per share due to the net loss in fiscals years 2021 and 2020, or because the options’ exercise price was greater than the average market price of the common stock and, therefore, their inclusion would be antidilutive.

Weighted average shares for diluted net loss per share 29,466 29,294 29,162

Diluted net loss per share $ ( 3.31 ) $ ( 1.12 ) $ ( 1.31 )

Due to the Company’s net loss in fiscal years 2022, 2021, and 2020 the net loss per share includes only the weighted average shares outstanding and thus excludes restricted stock unit awards ("RSUs") and stock options, as such impact would be antidilutive.

See Note 5 - Stock Based Compensation and Stockholders' Equity for more information on outstanding RSUs and stock options.

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Research and Development Expenses

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The Company has not elected the fair value option for any of its other eligible financial assets or liabilities.

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Applicable accounting guidance establishes a three-tier hierarchy for fair value measurements, which prioritizes the inputs used in measuring fair value as follows:

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Level 3 – unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions.

As of May 30, 2021, the Company held certain assets and liabilities that were required to be measured at fair value on a recurring basis, including its interest rate swap, and its minority interest investment in Windset.

As of May 29, 2022 and May 30, 2021, the Company held certain assets and liabilities that were required to be measured at fair value on a recurring basis, including its interest rate swap, and its minority interest investment in Windset.

The fair value of the Company’s interest rate swap contracts is determined based on model inputs that can be observed in a liquid market, including yield curves, and is categorized as a Level 2 fair value measurement and is included in Other assets or Other non-current liabilities in the accompanying Consolidated Balance Sheets.

As of May 30, 2021, related to Curation Foods’ distribution facility in Rock Hill, South Carolina we have $ 0.5 million in prepaid expenses and other current assets within the Consolidated Balance Sheets meeting the criteria of assets held for sale.

As of May 31, 2020, related to Curation Foods’ salad dressing plant in Ontario, California we have $ 2.6 million of property and equipment, net included in property and equipment, net within the Consolidated Balance Sheets meeting the criteria of assets held for sale.

As of May 29, 2022, related to the assets of Curation Foods’ BreatheWay packaging technology business, the Company had $ 1.0 million in Prepaid expenses and other current assets within the Consolidated Balance Sheets meeting the criteria of held for sale.

As of May 30, 2021, related to Curation Foods’ distribution facility in Rock Hill, South Carolina the Company had $ 0.5 million in Current assets, discontinued operations within the Consolidated Balance Sheets meeting the criteria of assets held for sale.

These assets are recognized at the lower of cost or fair value less cost to sell using market approach.

The fair value of these assets are classified as level 3 in the fair value hierarchy due to mix of unobservable inputs utilized such as independent research in the market as well as actual quotes from market participants.

See Note 4 and Note 14 for additional information.

The Company has elected the fair value option of accounting for its investment in Windset.

The calculation of fair value utilizes significant unobservable inputs, including projected cash flows, growth rates, and discount rates.

As a result, the Company’s investment in Windset is considered to be a Level 3 measurement investment.

The fair value of these assets are classified as level 3 in the fair value hierarchy due to a mix of unobservable inputs utilized such as independent research in the market as well as actual quotes from market participants.

See Note 3 - Property and Equipment and Note 13 - Restructuring Costs for additional information.

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The Company elected the fair value option of accounting for its investment in Windset.

The calculation of fair value utilized significant unobservable inputs, including projected cash flows, growth rates, and discount rates.

As a result, the Company’s investment in Windset was considered to be a Level 3 measurement investment.

The Company sold its entire investment in Windset on June 1, 2021 for $ 45.1 million.

No gain or loss was recorded upon the sale of the Company’s investment in Windset.

In determining the fair value of the Company's investment in Windset, the Company utilizes the following significant unobservable inputs in the discounted cash flow models:

May 30, 2021 Range (Weighted Average) May 31, 2020 Range (Weighted Average)

May 30, 2021 Range (Weighted Average)

Revenue growth rates 7 % ( 6.9 %)

6 % to 7 % ( 6.4 )%

Expense growth rates 0 % to 8 % ( 5.5 %)

6 % to 8 % ( 6.6 )%

Discount rates 10 %

The revenue growth and expense growth rate assumptions are considered the Company’s best estimate of the trends in those items over the discount period.

The discount rate assumption takes into account the risk-free rate of return, the market equity risk premium, and the Company’s specific risk premium and then applies an additional discount for lack of liquidity of the underlying securities.

The discounted cash flow valuation model used by the Company has the following sensitivity to changes in inputs and assumptions (in thousands):

Impact on value of

Windset investment as

of May 30, 2021

10% increase in revenue growth rates $ 6,000

10% increase in expense growth rates $ ( 3,200 )

10% increase in discount rates $ ( 1,300 )

Imprecision in estimating unobservable market inputs can affect the amount of gain or loss recorded for a particular position.

The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

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The following table summarizes the fair value of the Company’s assets and liabilities that are measured at fair value on a recurring and non-recurring basis (in thousands):

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Assets held for sale - nonrecurring $ — $ — $ 1,027 $ — $ — $ —

Current assets, discontinued operations

Assets held for sale - nonrecurring — — — — — 515

Other assets, discontinued operations

Investment in non-public company — — — — — 45,100

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Balance as of May 30, 2021 $ 45,100

Fair value change ( 11,800 )

Sale of Investment in non-public company ( 45,100 )

Balance as of May 29, 2022 $ —

Recent Accounting Pronouncements

Cloud Computing Arrangements

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (“ASU 2018-15”), which requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an asset.

The Accounting Standards Update generally aligns the guidance on recognizing implementation costs incurred in a cloud computing arrangement that is a service contract with that for implementation costs incurred to develop or obtain internal-use software, including hosting arrangements that include an internal-use software license.

ASU 2018-15 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

Early application is permitted.

The Company adopted ASU 2018-15 on June 1, 2020, and the adoption of this standard did not have an impact on the Company’s consolidated financial statements.

Fair Value Measurement

In August 2018, the FASB issued ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”).

The guidance eliminates, adds, and modifies certain disclosure requirements for fair value measurements.

Entities will no longer have to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.

ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The Company adopted ASU 2018-13 on June 1, 2020, and the adoption of this standard did not have an impact on the Company’s consolidated financial statements.

As required by ASU 2018-13, the Company included additional disclosures in the Fair Value Measurement section related to the range and weighted average rates used to develop significant inputs for the Level 3 investment.

Financial Instruments – Credit Losses

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments —Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13” or "ASC 326"), which requires measurement and recognition of expected credit losses for financial assets held.

Effective June 1, 2020, the Company adopted ASC 326 using the transition method introduced by ASU 2016-13.

The adoption of ASC 326 did not have a material impact on our consolidated financial statements.

Under ASC 326, the Company changed its policy for assessing credit losses to include consideration of a broader range of information to estimate credit losses over the life of its financial assets.

As of May 30, 2021 the financial assets of the

Table of Conten ts

Company within the scope of the assessment comprised of trade accounts receivable, contract assets, and deposits.

See the Accounts Receivable and Sales Returns and Allowance for Credit Losses section within Note 1 for further discussion of the Company's accounting for credit losses.

Yucatan Foods Acquisition

On December 1, 2018 (the “Acquisition Date”), the Company acquired all of the voting interests and substantially all of the assets of Yucatan Foods, a manufacturer and seller of avocado-based food products.

The total consideration paid to acquire Yucatan Foods was $ 75.0 million, consisting of $ 59.9 million in cash and 1,203,360 shares of common stock (“Stock Consideration”) with a fair value of $ 15.1 million.

The fair value of the Stock Consideration is based on a per-share value of the Company’s common stock on the Acquisition Date.

Given that the holders are restricted from selling the Landec common stock, a discount for lack of marketability was applied to the Stock Consideration.

The discount for lack of marketability was based on restricted stock studies, pre-IPO studies, and utilizing the Black-Scholes option pricing model to estimate a discount of 17.5 % and 20.0 % for the 3 -year and 4 -year lockup period, respectively.

Pursuant to the terms of the purchase agreement, all 1,203,360 shares issued as Stock Consideration will be held in an escrow account to secure the indemnification rights of Landec with respect to certain matters, including breaches of representations, warranties and covenants such as environmental and tax representations.

The Stock Consideration is comprised of two tranches, with 3 -year and 4 -year lock-up provisions, respectively, such that 50 % of the Stock Consideration will be released from lock-up on November 30, 2021, the 3 -year anniversary of the Acquisition Date, and 50 % of the Stock Consideration is released on November 30, 2022, the 4 -year anniversary of the Acquisition Date.

Yucatan Foods, founded in 1991, with its headquarters in Los Angeles, California, produces and sells guacamole and other avocado products under its Yucatan and Cabo Fresh brands primarily in the U.S.

Yucatan Foods’ production facility is located in Guanajuato, Mexico, very near where avocados are grown.

Landec acquired Yucatan Foods to grow, strengthen, and stabilize its position in the natural foods market and to improve Curation Foods’ margins over time.

Upon acquisition, Yucatan Foods became a wholly-owned subsidiary of Curation Foods.

The Acquisition Date fair value of the consideration paid consisted of the following (in thousands):

Cash consideration $ 59,898

Stock consideration 15,068

The excess of the purchase price over the aggregate fair value of identifiable net assets acquired was recorded as goodwill.

These preliminary fair values of the assets acquired and the liabilities assumed were determined through established and generally accepted valuation techniques and were subject to change during the measurement period as valuations were finalized.

During the fourth quarter of fiscal 2019, the Company recorded measurement period adjustments to deferred income taxes of $ 1.7 million and indemnification provisions for environmental related items of $ 0.7 million, resulting in an increase to goodwill of $ 1.0 million.

During the second quarter of fiscal 2020, the Company recorded measurement period adjustments to deferred income taxes of $ 0.5 million, resulting in an increase to goodwill of $ 0.5 million, and completed the acquisition accounting for the Yucatan Foods acquisition.

These were non-cash adjustments.

The following is a summary of the amounts recognized in accounting for the Yucatan Foods acquisition:

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Correction of Error in Previously Reported Fiscal Year 2022 Interim Financial Statements (Unaudited)

The Company is restating (the “Restatement”) its previously issued (i) unaudited consolidated balance sheets as of February 27, 2022 and May 30, 2021, (ii) unaudited consolidated statements of comprehensive (loss) income for the three and nine months ended February 27, 2022, (iii) unaudited consolidated statement of cash flows for the nine months ended February 27, 2022, (iv) unaudited consolidated statement of changes in stockholders' equity, and (v) unaudited Note 4, Note 7, Note 8, and Note 9 to the consolidated financial statements, in each case, as previously reported in our Quarterly Report on Form 10-Q for the period ended February 27, 2022 (the “Prior Financial Statements”).

We assessed the materiality of this error in accordance with the U.S.

Securities and Exchange Commission Staff Accounting Bulletin No.

99, Materiality and have concluded that the Prior Financial Statements should be restated.

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This restatement reflected in the tables below results from corrections by us primarily related to:

The effects of this error on our previously reported February 27, 2022 and May 30, 2021 consolidated balance sheets as presented in the Company’s fiscal year 2022 third quarter Form 10-Q are as follows:

As reported As restated

(in thousands) February 27, 2022 Adjustment February 27, 2022

LIABILITIES AND STOCKHOLDERS’ EQUITY

Other accrued liabilities $ 13,735 $ 348 $ 14,083

Total Current Liabilities 90,065 348 90,413

Total Liabilities 181,510 348 181,858

Retained earnings (accumulated deficit) ( 22,188 ) ( 348 ) ( 22,536 )

Total Stockholders’ Equity 144,072 ( 348 ) 143,724

Total Liabilities and Stockholders’ Equity $ 325,582 $ — $ 325,582

As reported As restated

(in thousands) May 30, 2021 Adjustment May 30, 2021

Property and equipment, net

$ 112,770 $ 7,516 $ 120,286

Operating lease right-of-use assets 7,480 9,618 17,098

Other assets, discontinued operations 171,274 ( 17,134 ) 154,140

Total Assets 502,924 — 502,924

Current portion of lease liabilities 1,465 135 1,600

Current liabilities, discontinued operations 42,779 ( 135 ) 42,644

Total Current Liabilities 101,888 — 101,888

Long-term lease liabilities 9,581 10,778 20,359

Non-current liabilities, discontinued operations

14,759 ( 10,778 ) 3,981

Total Liabilities $ 300,140 $ — $ 300,140

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The effects of this error on our previously reported fiscal year 2022 interim consolidated statements of comprehensive (loss) income for the three month period ended February 27, 2022 are as follows:

As reported As restated

(in thousands, except per share amounts) February 27, 2022 Adjustment February 27, 2022

Product sales $ 53,074 $ — $ 53,074

Cost of product sales

39,179 675 39,854

Gross profit 13,895 ( 675 ) 13,220

Operating costs and expenses:

Research and development 2,056 — 2,056

Selling, general and administrative 9,725 6,625 16,350

Restructuring cost 5,865 ( 595 ) 5,270

Total operating costs and expenses 17,646 6,030 23,676

Operating loss

( 3,751 ) ( 6,705 ) ( 10,456 )

Interest income 20 — 20

Interest expense ( 4,105 ) — ( 4,105 )

Transition services income

— 5,473 5,473

Other income (expense), net 454 — 454

Net loss from continuing operations before taxes ( 7,382 ) ( 1,232 ) ( 8,614 )

Income tax benefit 276 37 313

Net loss from continuing operations ( 7,106 ) ( 1,195 ) ( 8,301 )

Loss from discontinued operations, net of tax ( 5,744 ) 959 ( 4,785 )

Net loss $ ( 12,850 ) $ ( 236 ) $ ( 13,086 )

Basic and diluted net loss per share:

Loss from continuing operations $ ( 0.24 ) $ ( 0.04 ) $ ( 0.28 )

Loss from discontinued operations ( 0.19 ) 0.03 ( 0.16 )

Total basic and diluted net loss per share $ ( 0.43 ) $ ( 0.01 ) $ ( 0.44 )

Other comprehensive income (loss), net of tax:

Net unrealized gain (losses) on interest rate swaps (net of tax effect) $ 104 $ — $ 104

Other comprehensive income (loss), net of tax 104 — 104

Total comprehensive loss $ ( 12,746 ) $ ( 236 ) $ ( 12,982 )

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The effects of this error on our previously reported fiscal year 2022 interim consolidated statements of comprehensive (loss) income for the nine-month period ended February 27, 2022 are as follows:

As reported As restated

(in thousands, except per share amounts) February 27, 2022 Adjustment February 27, 2022

Product sales $ 138,158 $ — $ 138,158

Cost of product sales

99,113 787 99,900

Gross profit 39,045 ( 787 ) 38,258

Operating costs and expenses:

Research and development 5,785 — 5,785

Selling, general and administrative 27,207 6,906 34,113

Restructuring costs 8,406 ( 876 ) 7,530

Total operating costs and expenses 41,398 6,030 47,428

Operating loss

( 2,353 ) ( 6,817 ) ( 9,170 )

Interest income 66 — 66

Interest expense ( 13,877 ) — ( 13,877 )

Transition services income

— 5,473 5,473

Other income (expense), net 642 — 642

Net loss from continuing operations before taxes ( 15,522 ) ( 1,344 ) ( 16,866 )

Income tax benefit 5,012 14 5,026

Net loss from continuing operations ( 10,510 ) ( 1,330 ) ( 11,840 )

Loss from discontinued operations, net of tax ( 50,258 ) 982 ( 49,276 )

Net loss $ ( 60,768 ) $ ( 348 ) $ ( 61,116 )

Basic and diluted net loss per share:

Loss from continuing operations $ ( 0.36 ) $ ( 0.05 ) $ ( 0.41 )

Loss from discontinued operations ( 1.71 ) 0.03 ( 1.68 )

Total basic and diluted net loss per share $ ( 2.07 ) $ ( 0.02 ) $ ( 2.09 )

Other comprehensive income (loss), net of tax:

Net unrealized gain (losses) on interest rate swaps (net of tax effect) $ 646 $ — $ 646

Other comprehensive income (loss), net of tax 646 — 646

Total comprehensive loss $ ( 60,122 ) $ ( 348 ) $ ( 60,470 )

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The effects of this error on our previously reported fiscal year 2022 consolidated statements of changes in stockholders' equity for the nine-month period ended February 27, 2022 are as follows:

As reported As reported Adjustment As restated As restated

Earnings (Accumulated Deficit)

Stockholders’

Equity Retained

Earnings (Accumulated Deficit)

Stockholders’

(In thousands)

Cash and cash equivalents $ 26

Balance at May 30, 2021 $ 38,580 $ 202,784 $ — $ 38,580 $ 202,784

Net loss ( 9,477 ) ( 9,477 ) ( 32 ) ( 9,509 ) ( 9,509 )

Balance at August 29, 2021 29,103 193,865 ( 32 ) 29,071 193,833

Net loss ( 38,441 ) ( 38,441 ) ( 80 ) ( 38,521 ) ( 38,521 )

Balance at November 28, 2021 ( 9,338 ) 156,202 ( 112 ) ( 9,450 ) 156,090

Net loss ( 12,850 ) ( 12,850 ) ( 236 ) ( 13,086 ) ( 13,086 )

Balance at February 27, 2022 $ ( 22,188 ) $ 144,072 $ ( 348 ) $ ( 22,536 ) $ 143,724

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The effects of this error on our previously reported fiscal year 2022 consolidated statements of cash flows for the nine-month period ended February 27, 2022 are as follows:

As reported As restated

(in thousands) February 27, 2022 Adjustment February 27, 2022

Cash flows from operating activities:

Net loss $ ( 60,768 ) $ ( 348 ) $ ( 61,116 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Impairment of goodwill 32,057 — 32,057

Depreciation, amortization of intangibles, debt costs and right-of-use assets 14,488 — 14,488

Loss on disposal of property and equipment related to restructuring, net 5,185 — 5,185

Deferred taxes ( 5,471 ) — ( 5,471 )

Loss on sale of Eat Smart

4,354 ( 4,119 ) 235

Stock-based compensation expense 1,928 — 1,928

Net loss on disposal of property and equipment held and used 25 — 25

Provision (benefit) for expected credit losses ( 14 ) — ( 14 )

Other, net ( 551 ) — ( 551 )

Changes in current assets and current liabilities:

Accounts receivable, net ( 7,525 ) — ( 7,525 )

1 unchanged sentence

Prepaid expenses and other current assets ( 1,448 ) — ( 1,448 )

Other assets 102

Property and equipment 14,083

Trademarks/tradenames 15,900

Customer relationships 11,000

Accounts payable 13,055 452 13,507

Accrued compensation ( 3,849 ) 1,822 ( 2,027 )

Other accrued liabilities ( 4,195 ) 4,125 ( 70 )

Deferred tax liabilities ( 1,767 )

Net identifiable assets acquired 52,231

Goodwill 22,735

Total fair value purchase consideration $ 74,966

Finite-lived Intangible Assets

The Company identified one finite-lived intangible asset in connection with the Yucatan Foods acquisition:

customer relationships valued at $ 11.0 million which is included in customer relationships in the accompanying Consolidated Balance Sheets.

Customer relationships have an estimated useful life of 12 years and will be amortized to operating expenses on an accelerated basis that reflects the pattern in which the economic benefits are consumed.

The customer relationships are valued using the excess earnings method.

Goodwill and Indefinite-lived Intangible Assets

As a result of the Yucatan Foods acquisition, the Company recorded goodwill of $ 22.2 million and trademarks valued at $ 15.9 million, which are included within goodwill and trademarks in the accompanying Consolidated Balance Sheets, respectively.

The goodwill recognized from the Yucatan Foods acquisition was primarily attributable to Yucatan Foods’ long history and expected synergies from future growth and expansion of our Curation Foods business segment.

Approximately 80 % of the goodwill is expected to be deductible for income tax purposes.

Trademarks are considered to be an indefinite lived asset and therefore, will not be amortized.

The trademarks are valued using the relief from royalty valuation method.

As discussed in Note 1, the Company recognized impairment charges of $ 2.7 million and $ 3.5 million in the Curation Foods business segment (in the Yucatan reporting unit) during the year ended May 31, 2020, related to goodwill and trademarks, respectively.

Acquisition Related Transaction Costs

For the year ended May 26, 2019, the Company recognized $ 3.3 million of acquisition-related costs that were expensed as incurred and included in the Selling, general and administrative line item in the Consolidated Statements of Operations.

These expenses included investment banking fees, legal, accounting and tax service fees and appraisals fees.

O Acquisition

On March 1, 2017, the Company purchased substantially all of the assets of O for $ 2.5 million in cash plus contingent consideration of up to $ 7.5 million over the next three years based upon O achieving certain EBITDA targets.

The potential earn out payment of up to $ 7.5 million was based on O ’s cumulative EBITDA over the Company’s fiscal years 2018 through 2020.

Based on this analysis, the Company recorded a contingent consideration liability, included in Other non-current liabilities.

The earn out period expired in March 2020, with no payments made under the contractual provisions of the earn out arrangement.

As of May 30, 2021 and May 31, 2020, there was no contingent consideration liability.

The reduction in the contingent consideration liability was $ 0.5 million and $ 3.5 million for fiscal years 2020 and 2019, respectively, and is recorded as a reduction to selling, general, and administrative expense in the accompanying Consolidated Statements of Operations.

The $ 3.5 million reduction during fiscal year 2019 was due to a very poor olive harvest in California during 2018 resulting in

Table of Conten ts

substantially lower volumes of olive oil available for sale over the next twelve months.

This, combined with a slower than anticipated apple cider vinegar sales reduced the current projected EBITDA through fiscal year 2020.

Deferred revenue 204 458 662

Net cash (used in) provided by operating activities ( 24,435 ) 2,390 ( 22,045 )

Cash flows from investing activities:

Proceeds from sale of Eat Smart 73,500 — 73,500

Sale of Investment in non-public company 45,100 — 45,100

Purchases of property and equipment ( 18,539 ) — ( 18,539 )

Proceeds from sales of property and equipment 1,096 — 1,096

Eat Smart sale net working capital adjustment and cash sale expenses — ( 2,390 ) ( 2,390 )

Net cash provided by investing activities 101,157 ( 2,390 ) 98,767

Net cash used in financing activities ( 76,163 ) — ( 76,163 )

Net increase in cash, cash equivalents and restricted cash 559 — 559

Cash, cash equivalents and restricted cash, beginning of period 1,295 — 1,295

Cash, cash equivalents and restricted cash, end of period $ 1,854 $ — $ 1,854

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The effects of this error on our previously reported fiscal year 2022 diluted earnings per share for the three and nine month periods ended February 27, 2022 as presented in the Company’s fiscal year 2022 third quarter Form 10-Q Note 4 - Diluted Earnings per share are as follows:

Three Months Ended Nine Months Ended

As reported As restated As reported As restated

(in thousands, except per share amounts) February 27, 2022 Adjustment February 27, 2022 February 27, 2022 Adjustment February 27, 2022

Net loss $ ( 12,850 ) $ ( 236 ) $ ( 13,086 ) $ ( 60,768 ) $ ( 348 ) $ ( 61,116 )

Weighted average shares for diluted net loss per share 29,482 29,482 29,482 29,459 29,459 29,459

Diluted net loss per share $ ( 0.43 ) $ ( 0.01 ) $ ( 0.44 ) $ ( 2.07 ) $ ( 0.02 ) $ ( 2.09 )

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The effects of this error on our previously reported fiscal year 2022 operations by business segment for the three and nine month periods ended February 27, 2022 as presented in the Company’s fiscal year 2022 third quarter Form 10-Q Note 7 - Business Segment Reporting are as follows:

(In Thousands) Lifecore Curation Foods Other Total

Three Months Ended February 27, 2022

Gross profit, As reported $ 12,905 $ 990 $ — $ 13,895

Adjustment — ( 675 ) — ( 675 )

Gross profit, As restated 12,905 315 — 13,220

Net income (loss) from continuing operations, As reported 5,054 ( 5,848 ) ( 6,312 ) ( 7,106 )

Adjustment — ( 1,195 ) — ( 1,195 )

Net income (loss) from continuing operations, As restated 5,054 ( 7,043 ) ( 6,312 ) ( 8,301 )

Loss from discontinued operations, As reported — ( 2,703 ) ( 3,041 ) ( 5,744 )

Adjustment — 959 — 959

Loss from discontinued operations, As restated — ( 1,744 ) ( 3,041 ) ( 4,785 )

Nine Months Ended February 27, 2022

Gross profit, As reported $ 30,384 $ 8,661 $ — $ 39,045

Adjustment — ( 787 ) — ( 787 )

Gross profit, As restated 30,384 7,874 — 38,258

Net income (loss) from continuing operations, As reported 11,317 5,513 ( 27,340 ) ( 10,510 )

Adjustment — ( 1,330 ) — ( 1,330 )

Net income (loss) from continuing operations, As restated 11,317 4,183 ( 27,340 ) ( 11,840 )

Loss from discontinued operations, As reported — ( 47,217 ) ( 3,041 ) ( 50,258 )

Adjustment — 982 — 982

Loss from discontinued operations, As restated — ( 46,235 ) ( 3,041 ) ( 49,276 )

The effects of this error on our previously reported fiscal year 2022 restructuring costs for the three and nine month periods ended February 27, 2022 as presented in the Company’s fiscal year 2022 third quarter Form 10-Q Note 8 - Restructuring Costs are as follows:

(In thousands)

Three Months Ended February 27, 2022 Lifecore

Curation Foods

Total restructuring costs, As reported

$ 271 $ 5,344 $ 250 $ 5,865

( 271 ) ( 124 ) ( 200 ) ( 595 )

Total restructuring costs, As restated

$ — $ 5,220 $ 50 $ 5,270

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(In thousands)

Nine Months Ended February 27, 2022 Lifecore

Curation Foods

Total restructuring costs, As reported

$ 271 $ 5,810 $ 2,325 $ 8,406

( 271 ) ( 124 ) ( 481 ) ( 876 )

Total restructuring costs, As restated

$ — $ 5,686 $ 1,844 $ 7,530

The effects of this error on our previously reported May 30, 2021 carrying amounts of the major classes of assets and liabilities of the Eat Smart business included in assets and liabilities of discontinued operations as presented in the Company’s fiscal year 2022 third quarter Form 10-Q Note 9 - Discontinued Operations are as follows:

As reported As restated

(in thousands) May 30, 2021 Adjustment May 30, 2021

Property and equipment, net

$ 66,789 $ ( 7,516 ) $ 59,273

Operating lease right-of-use assets 13,347 ( 9,618 ) 3,729

Other assets, discontinued operations 171,274 ( 17,134 ) 154,140

Current portion of lease liabilities 2,424 ( 135 ) 2,289

Current liabilities, discontinued operations 42,779 ( 135 ) 42,644

Long-term lease liabilities 14,030 ( 10,778 ) 3,252

Non-current liabilities, discontinued operations

14,759 ( 10,778 ) 3,981

The effects of this error on our previously reported fiscal year 2022 components of loss from discontinued operations for the three month period ended February 27, 2022 as presented in the Company’s fiscal year 2022 third quarter Form 10-Q Note 9 - Discontinued Operations are as follows:

As reported As restated

(in thousands) February 27, 2022 Adjustment February 27, 2022

Operating costs and expenses:

Loss on sale of Eat Smart $ 4,354 $ ( 4,119 ) $ 235

Restructuring cost 86 3,123 3,209

Total operating costs and expenses 5,601 ( 996 ) 4,605

Operating loss

( 5,762 ) 996 ( 4,766 )

Income tax benefit 222 ( 37 ) 185

Loss from discontinued operations, net of tax $ ( 5,744 ) $ 959 $ ( 4,785 )

The effects of this error on our previously reported fiscal year 2022 components of loss from discontinued operations for the nine-month period ended February 27, 2022 as presented in the Company’s fiscal year 2022 third quarter Form 10-Q Note 9 - Discontinued Operations are as follows:

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As reported As restated

(in thousands) February 27, 2022 Adjustment February 27, 2022

Operating costs and expenses:

Loss on sale of Eat Smart $ 4,354 $ ( 4,119 ) $ 235

Restructuring cost 1,519 3,123 4,642

Total operating costs and expenses 53,198 ( 996 ) 52,202

Operating loss

( 47,998 ) 996 ( 47,002 )

Income tax benefit 422 ( 14 ) 408

Loss from discontinued operations, net of tax $ ( 50,258 ) $ 982 $ ( 49,276 )

Investment in Non-public Company

18 unchanged sentences

Assumptions included in these discounted cash flow models are evaluated quarterly based on Windset’s actual and projected operating results to determine the change in fair value.

The Company recorded $ 1.1 million in dividend income for the fiscal years ended May 30, 2021 and May 31, 2020, respectively, and $ 1.7 million for the fiscal year ended May 26, 2019.

The decrease in the fair market value of the Company’s investment in Windset for the fiscal years ended May 30, 2021 and May 31, 2020 was $ 11.8 million and $ 4.2 million, respectively, and is included in Other income (expense) in the accompanying Consolidated Statements of Operations.

The increase in the fair market value of the Company’s investment in Windset for the fiscal year ended May 26, 2019 was $ 1.6 million and is included in Other income (expense) in the accompanying Consolidated Statements of Operations.

Subsequent to fiscal year end, 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.

See Note 15 - Subsequent Events.

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During the fiscal years ended May 30, 2021 and May 31, 2020, the Company recorded $ 1.1 million in dividend income, respectively, which is included in loss from discontinued operations in the accompanying Consolidated Statements of Operations.

The decrease in the fair market value of the Company’s investment in Windset for the fiscal years ended May 30, 2021 and May 31, 2020 was $ 11.8 million and $ 4.2 million, respectively, and is included in loss from discontinued operations in the accompanying Consolidated Statements of Operations.

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.

Property and Equipment

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Depreciation and amortization expense for property and equipment for the fiscal years ended May 29, 2022, May 30, 2021 and May 31, 2020 was $ 9.3 million, $ 7.2 million and $ 6.9 million, respectively.

Amortization related to finance leases, which is included in depreciation expense, was $ 0.1 million for each of the fiscal years ended May 30, 2021, May 31, 2020 and May 26, 2019, respectively.

Amortization related to finance leases, which is included in depreciation expense, was $ 0.1 million for the fiscal years ended May 29, 2022, May 30, 2021, and May 31, 2020.

During fiscal years 2022, 2021 and 2020, the Company capitalized $ 0.3 million, $ 0.4 million, and $ 0.8 million in software development costs, respectively.

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As disclosed in Note 1, an impairment of property and equipment related to the O reporting unit of $ 1.3 million was recorded in Selling, general and administrative in the accompanying Consolidated Statements of Operations for the year ended May 31, 2020.

As disclosed in Note 13, an impairment of property and equipment related to the Curation Foods Santa Maria Office leasehold improvements of $ 3.7 million was recorded in Restructuring costs in the accompanying Consolidated Statements of Operations for the year ended May 29, 2022.

Assets Held for Sale

In June 2019, the Company designated the Santa Maria office as the Curation Foods headquarters, and decided to close and put up for sale the Curation Foods office in San Rafael, California.

During the fiscal year ended May 31, 2020, the Company closed escrow on the San Rafael property and recognized a $ 0.4 million impairment loss, which is included in restructuring costs within the Consolidated Statements of Operations.

During the fiscal year ended May 31, 2020, the Company closed escrow on the San Rafael property and recognized a $ 0.4 million impairment loss, which is included in restructuring costs

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within the Consolidated Statements of Operations.

The Company received net cash proceeds of $ 2.4 million in connection with the sale.

In January 2020, the Company decided to seek to divest its Curation Foods salad dressing plant in Ontario, California.

During the fiscal year ended May 31, 2020, the Company (1) designated the fixed assets of its office and manufacturing space located in Ontario, California, as assets held for sale, and (2) recognized a $ 10.9 million impairment loss, which is included in restructuring costs within the Consolidated Statements of Operations for the Curation Foods segment.

The remaining net carrying value of $ 2.6 million is included in property and equipment, net within the Consolidated Balance Sheets as of May 31, 2020.

Liabilities of $ 0.3 million and $ 2.9 million related to these assets are included in Current portion of lease liabilities and Long-term lease liabilities, respectively, within the Consolidated Balance Sheet as of May 31, 2020.

In the first quarter of fiscal year 2021, the Company sold its interest in Ontario.

The Company received net cash proceeds of $ 4.9 million in connection with the sale and recorded a gain of $ 2.8 million during the fiscal year ended May 30, 2021, which is included in restructuring costs within the Consolidated Statements of Operations.

On June 25, 2020 the Board of Directors approved a plan to close Curation Foods’ underutilized manufacturing operations in Hanover, Pennsylvania (“Hanover”), sell the building and assets related thereto, and consolidate its operations into its manufacturing facilities in Guadalupe, California and Bowling Green, Ohio.

The $ 17.2 million carrying value of these assets was included in property and equipment, net on the consolidated Balance Sheets as of May 31, 2020, and was not classified as assets held for sale as the plan to sell was not finalized until subsequent to fiscal year end 2020.

In the first quarter of fiscal year 2021, the Company recognized an $ 8.8 million impairment loss, which is included in Restructuring costs within the Consolidated Statements of Operations.

During the fiscal year ended May 31, 2020, the Company recognized a $ 10.9 million impairment loss, which is included in Loss from discontinued operations within the Consolidated Statements of Operations.

In fiscal year 2021, the Company sold its interest in Ontario.

The Company received net cash proceeds of $ 4.9 million in connection with the sale and recorded a gain of $ 2.8 million during the fiscal year ended May 30, 2021, which is included in Loss from discontinued operations within the Consolidated Statements of Operations.

In June 2020 the Board of Directors approved a plan to close Curation Foods’ underutilized manufacturing operations in Hanover, Pennsylvania (“Hanover”), sell the building and assets related thereto, and consolidate its operations into its manufacturing facilities in Guadalupe, California and Bowling Green, Ohio.

In the first quarter of fiscal year 2021, the Company recognized an $ 8.8 million impairment loss, which is included in Loss from discontinued operations within the Consolidated Statements of Operations.

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, no gain or loss was recorded upon sale.

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In May 2021 the Board of Directors approved a plan to sell Curation Foods’ Rock Hill, South Carolina distribution facility.

The $ 0.5 million carrying value of this asset is included in prepaid expenses and other current assets on the Consolidated Balance Sheets as of May 30, 2021, and was classified as an asset held for sale.

The $ 0.5 million carrying value of this asset is included in Current assets, discontinued operations on the Consolidated Balance Sheets as of May 30, 2021, and was classified as an asset held for sale.

There was no impairment recorded in fiscal year 2021.

The asset was sold subsequent to fiscal year end on June 9, 2021 for gross proceeds of $ 1.1 million.

The asset was sold in fiscal year 2022 for gross proceeds of $ 1.1 million.

In May 2022 the Board of Directors approved a plan to sell the assets of Curation Foods’ BreatheWay packaging technology business.

The $ 1.0 million carrying value of these assets ($ 0.9 million of inventory and $ 0.1 million net book value of property and equipment) are included in Prepaid expenses and other current assets on the Consolidated Balance Sheets as of May 29, 2022, and were classified as assets held for sale.

There was no impairment recorded in fiscal year 2022.

These assets were sold in fiscal year 2023 for gross proceeds of $ 3.2 million.

Goodwill and Intangible Assets

1 unchanged sentence

Balance at beginning of year $ 33,916 $ 33,916

Yucatan Foods measurement period adjustment — 504

Impairment ( 20,035 ) —

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As disclosed in Note 1, an impairment charge of $ 5.2 million and $ 2.7 million in O and Yucatan Foods reporting units, respectively, was recorded during the year ended May 31, 2020.

As of May 30, 2021, the Eat Smart, Yucatan, and Lifecore reporting unit had $ 35.5 million, $ 20.0 million, and $ 13.9 million of goodwill, respectively.

As disclosed in Note 1, an impairment charge of $ 32.1 million and $ 20.0 million in the Eat Smart and Yucatan Foods reporting units, respectively, was recorded during the year ended May 29, 2022.

As of May 29, 2022, the Lifecore reporting unit had $ 13.9 million of goodwill.

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Intangible Assets

4 unchanged sentences

Customer relationships

Eat Smart (Curation Foods) 13 $ 7,500 $ 5,240 $ 7,500 $ 4,663

Yucatan Foods (Curation Foods) 12 11,000 2,750 11,000 1,650

Lifecore 12 $ 3,700 $ 3,700 $ 3,700 $ 3,418

Yucatan Foods (Curation Foods) 12 11,000 3,850 11,000 2,750

Total customer relationships $ 14,700 $ 7,550 $ 14,700 $ 6,168

Trademarks/tradenames

Eat Smart (Curation Foods) $ 9,100 $ 872 $ 9,100 $ 872

Lifecore $ 4,200 $ — $ 4,200 $ —

O (Curation Foods) 500 — 500 —

Yucatan Foods (Curation Foods) 3,700 — 12,400 —

Lifecore 4,200 — 4,200 —

Total trademarks/tradenames $ 8,400 $ — $ 17,100 $ —

1 unchanged sentence

Amortization expense related to finite-lived intangible assets was $ 1.4 million, $ 1.4 million, and $ 1.5 million in fiscal 2022, 2021 and 2020, respectively.

Table of Conten ts

The amortization expense for each year presented are as follows (in thousands):

7 unchanged sentences

In addition, the Company recognized an impairment of the trademarks in the Curation Foods business segment for O and Yucatan Foods of $ 1.1 million and $ 3.5 million, respectively during the year ended May 31, 2020.

As discussed in Note 1, the Company recognized an impairment of the trademarks in the Curation Foods business segment for Yucatan Foods of $ 8.7 million during the year ended May 29, 2022.

Stock-based Compensation and Stockholders’ Equity

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Employees (including officers), consultants and directors of the Company and its subsidiaries and affiliates are eligible to participate in the Plan.

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The Plan provides for the grant of stock options (both nonstatutory and incentive stock options), stock grants, stock units and stock appreciation rights.

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Under the 2013 Plan, 2.0 million shares were initially available for awards and as of May 29, 2022, 541,374 options to purchase shares and RSUs were outstanding.

On October 15, 2009, following stockholder approval at the Annual Meeting of Stockholders of the Company, the 2009 Stock Incentive Plan (the “2009 Plan”) became effective and replaced the Company’s 2005 Stock Incentive Plan.

Employees (including officers), consultants and directors of the Company and its subsidiaries and affiliates were eligible to participate in the 2009 Plan.

The 2009 Plan provided for the grant of stock options (both nonstatutory and incentive stock options), stock grants, stock units and stock appreciation rights.

Under the 2009 Plan, 1.9 million shares were initially available for awards.

On October 19, 2017, 1.0 million shares were added to the 2013 Plan following stockholder approval at the 2017 Annual Meeting of Stockholders.

As of May 30, 2021, there were options to purchase shares or RSUs outstanding under the 2009 Plan.

At May 29, 2022, the Company had 3.7 million common shares reserved for future issuance under Landec stock incentive plans.

1 unchanged sentence

The Company has authorized 2.0 million shares of preferred stock, and as of May 29, 2022 has no outstanding preferred stock.

Table of Conten ts

Grant Date Fair Value

8 unchanged sentences

Dividend yield — % — % — %

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Stock-Based Compensation Activity

18 unchanged sentences

Options exercisable at May 29, 2022 986,594 $ 10.96 3.73 $ 195,247

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A summary of the Company’s restricted stock unit award activity as of May 29, 2022 and changes during the fiscal year then ended is presented below:

16 unchanged sentences

(in thousands) May 29, 2022 May 30, 2021 May 31, 2020

Continuing operations:

Cost of sales $ 314 $ 348 $ 118

1 unchanged sentence

Selling, general and administrative 2,126 2,734 2,099

Discontinued Operations ( 34 ) 55 44

Total stock-based compensation $ 2,608 $ 3,360 $ 2,419

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During fiscal years 2022, 2021 and 2020, the Company did no t purchase any shares on the open market.

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On September 23, 2016, the Company entered into a Credit Agreement with JPMorgan, BMO, and City National Bank, as lenders (collectively, the “Lenders”), and JPMorgan as administrative agent, pursuant to which the Lenders provided the Company with a $ 100.0 million revolving line of credit (the “Revolver”) and a $ 50.0 million term loan facility (the “Term Loan”), guaranteed by each of the Company’s direct and indirect subsidiaries and secured by substantially all of the Company’s assets, with the exception of the Company’s investment in Windset.

Table of Conten ts

On November 30, 2018, the Company entered into the Fourth Amendment to the Credit Agreement, which increased the Term Loan to $ 100.0 million and the Revolver to $ 105.0 million.

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Interest on the Refinance Term Loan is at a per annum rate based on either (i) the base rate plus a spread of 7.50 % or (ii) the LIBOR rate plus a spread of 8.50 %.

The Refinance Term Loan Credit Agreement also states that in the event of a prepayment of any amount other than the scheduled installments within twelve months after the closing date, a penalty will be assessed equal to the aggregate amount of interest that would have otherwise been payable from date of prepayment event until twelve months after the closing date plus 3 % of the amount prepaid.

The Refinance Term Loan Credit Agreement also provides that in the event of a prepayment of any amount other than the scheduled installments within twelve months after the

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closing date, a penalty will be assessed equal to the aggregate amount of interest that would have otherwise been payable from date of prepayment event until twelve months after the closing date plus 3 % of the amount prepaid.

The New Credit Agreements provide the Company the right to increase the revolver commitments under the Refinance Revolver, subject to the satisfaction of certain conditions (including consent from BMO), by obtaining additional commitments from either BMO or another lending institution at an amount of up to $ 15.0 million.

The New Credit Agreements contain customary financial covenants and events of default under which the obligations thereunder could be accelerated and/or the interest rate increased in specified circumstances.

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In connection with the New Credit Agreements, the Company incurred debt issuance costs from the lender and third-parties of $ 10.3 million.

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In connection with the repayment of borrowings under the Credit Agreement, the Company recognized a loss in fiscal year 2021 of $ 1.1 million, as a result of the non-cash write-off of unamortized debt issuance costs related to the refinancing under the New Credit Agreements.

In April 2022 the Company amended the New Credit Agreement to make available again $ 20.0 million of term debt that that had been previously repaid.

In connection with this amendment, the Company incurred debt issuance costs from the lender of $ 0.7 million.

As of May 29, 2022, $ 40.0 million was outstanding on the Refinance Revolver, at an interest rate of 3.00 %.

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Fiscal year 2026 84,696

Fiscal year 2026 150,984

Total $ 103,712

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The 2016 Swap had the effect of changing the Company’s previous Term Loan obligation from a variable interest rate to a fixed 30-day LIBOR rate of 1.22 %.

The 2016 Swap matured in September 2021.

On June 25, 2018, the Company entered into an interest rate swap contract (the “2018 Swap”) with BMO at a notional amount of $ 30.0 million.

The 2018 Swap had the effect on our previous debt of converting the first $ 30.0 million of the total outstanding amount of the Company’s 30-day LIBOR borrowings from a variable interest rate to a fixed 30-day LIBOR rate of 2.74 %%.

The 2018 Swap matured in September 2021.

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On December 2, 2019, the Company entered into an interest rate swap contract (the “2019 Swap”) with BMO at a notional amount of $ 110.0 million which decreases quarterly.

The 2019 Swap had the effect on our previous debt of converting primarily all of the $ 110.0 million of the total outstanding amount of the Company’s 30-day LIBOR borrowings from a variable interest rate to a fixed 30-day LIBOR rate of 1.53 %.

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The 2019 Swap will mature in November 2022 and its value is de minimis.

The (benefit) provision for income taxes from continuing operations consisted of the following:

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Total ( 6,218 ) ( 1,995 ) ( 1,145 )

Income tax (benefit) expense $ ( 7,801 ) $ ( 13,116 ) $ 1,518

Income tax benefit $ ( 5,839 ) $ ( 1,903 ) $ ( 8,774 )

The actual (benefit) provision for income taxes from continuing operations differs from the statutory U.S.

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Other ( 985 ) ( 86 ) 83

Income tax (benefit) expense $ ( 7,801 ) $ ( 13,116 ) $ 1,518

Income tax benefit $ ( 5,839 ) $ ( 1,903 ) $ ( 8,774 )

(1) Statutory rate was 21.0% for fiscal year 2022, 2021 and 2020.

The effective tax rate for fiscal year 2021 changed from a tax provision benefit of 25.56 % to a tax provision benefit of 19.29 % in comparison to fiscal year 2020.

The decrease in the income tax benefit for fiscal year 2021 was primarily due to significant decrease in the Company's loss before tax, and the increase in change in valuation allowance which offsets federal and state research and development credits, and $ 2.8 million of NOL carryback benefit applied only for fiscal year 2020.

The effective tax rate for fiscal year 2020 changed from a tax provision expense of 70.66 % to tax provision benefit of 25.56 % in comparison to fiscal year 2019.

The decrease in the income tax expense for fiscal year 2020 was primarily due to a decrease in the Company’s profit before tax, carryback of net operating losses, and the benefit of federal and state research and development credits which is offset by the change in valuation allowance, and impairment of goodwill.

The effective tax rate for fiscal year 2022 changed from a tax provision benefit of 16.59 % to a tax provision benefit of 11.20 % in comparison to fiscal year 2021 after adjustment for discontinued operations.

The decrease in the effective tax rate for fiscal year 2022 was primarily due to a significant valuation allowance increase and the impairment of Yucatan Foods goodwill.

The income tax benefit from discontinued operations for fiscal years 2022, 2021, and 2020 of $ 0.1 million, $ 5.9 million, and $ 4.3 million are not included in the above income tax benefit from continuing operations.

The effective tax rate for fiscal year 2021 changed from a tax provision benefit of 28.63 % to a tax provision benefit of 16.59 % in comparison to fiscal year 2020 after adjustment for discontinued operations.

The decrease in the income tax benefit for fiscal year 2021 was primarily due to significant decrease in the Company's loss before tax from continuing operations, and the

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increase in change in valuation allowance which offsets federal and state research and development credits, and $ 2.8 million of NOL carryback benefit applied only for fiscal year 2020.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law.

The CARES Act includes, among other items, provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

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The CARES Act allows losses incurred in tax years 2018, 2019, and 2020 to be carried back to each of the five preceding tax years and to offset 100% of regular taxable income.

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Limitations on business interest expense 4,245 2,411

Goodwill and other indefinite life intangibles 1,426 —

Other 750 927

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Net deferred tax liabilities $ ( 232 ) $ ( 6,140 )

The effective tax rates for fiscal year 2021 differ from the blended statutory federal income tax rate of 21% as a result of several factors, including a significant decrease in the Company's loss before tax, the change in valuation allowance related to federal, state and foreign deferred balances, foreign rate differential, change in ending state deferred blended rate, fixed assets, and the benefit of federal and state research and development credits.

The effective tax rates for fiscal year 2020 differ from the blended statutory federal income tax rate of 21% as a result of several factors, including a decrease in the Company's profit before tax, carryback of net operating losses, the change in valuation allowance related with state and foreign deferred balances, foreign rate differential, change in ending state deferred blended rate, impairment of goodwill and fixed assets, and the benefit of federal and state research and development credits.

The effective tax rates for fiscal year 2019 differ from the statutory federal blended income tax rate of 21% as a result of several factors, including Yucatan acquisition, the change in valuation allowance related with foreign deferred balances, foreign rate differential, change in ending state deferred blended rate, limitation of deductibility of executive compensation, and the benefit of federal and state research and development credits.

The effective tax rates for fiscal years 2022 and 2021 differ from the blended statutory federal income tax rate of 21% as a result of several factors, including the change in valuation allowance related with federal, state and foreign deferred balances, foreign rate differential, change in ending state deferred blended rate, impairment of goodwill and intangibles, and the benefit of federal and state research and development credits.

The effective tax rates for fiscal year 2020 differ from the blended statutory federal income tax rate of 21% as a result of several factors, including carryback of net operating losses, the change in valuation allowance related with state and foreign deferred balances, foreign rate differential, change in ending state deferred blended rate, impairment of goodwill and fixed assets, and the benefit of federal and state research and development credits.

As of May 29, 2022, the Company had federal, foreign, California, Indiana, and other state net operating loss carryforwards of approximately $ 74.1 million, $ 25.9 million, $ 37.7 million, $ 30.6 million, and $ 20.8 million respectively.

These losses expire in different periods through 2042, if not utilized.

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losses expire in different periods through 2032, if not utilized.

The Company acquired additional net operating losses through the acquisition of Greenline.

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The net operating losses presented above for federal and state purposes is net of any such limitation.

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The Company has federal, California, and Minnesota research and development tax credit carryforwards of approximately $ 2.6 million, $ 2.0 million, and $ 1.2 million, respectively.

As of May 29, 2022, the Company has federal, California, and Minnesota research and development tax credit carryforwards of approximately $ 2.8 million, $ 2.1 million, and $ 1.4 million, respectively.

The research and development tax credit carryforwards have an unlimited carryforward period for California purposes, 20 year carryforward for federal purposes, and 15 year carryforward for Minnesota purposes.

Valuation allowances are reviewed each period on a tax jurisdiction by jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets.

Based on this analysis and considering all positive and negative evidence, we determined that a valuation allowance of $ 1.4 million, $ 4.2 million, and $ 4.9 million should be recorded as a result of uncertainty around the utilization of federal, state, and foreign net operating losses, and federal capital loss carryforward.

Based on this analysis and considering all positive and negative evidence, we determined that as of May 29, 2022, a valuation allowance of $ 15.5 million, $ 8.2 million, and $ 8.1 million should be recorded as a result of uncertainty around the utilization of federal, state, and foreign net operating losses, and federal capital loss carryforward.

The accounting for uncertainty in income taxes recognized in an enterprise’s financial statements prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and the derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure, and transition.

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Gross increases – current-period tax positions 83 115 121

Lapse of statute of limitations — — ( 25 )

Unrecognized tax benefits – end of the period $ 1,025 $ 942 $ 827

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Right-of-use assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

Landec leases land, facilities, and equipment under operating lease agreements with various terms and conditions, which expire at various dates through fiscal year 2040.

Landec leases facilities and equipment under operating lease agreements with various terms and conditions, which expire at various dates through fiscal year 2033.

Certain of these leases have renewal options.

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The lease contains a buyout option at any time after year seven with the purchase price equal to the mortgage balance on the lessor’s loan secured by the building.

Gross assets recorded under finance leases, included in property and equipment, net, were $ 3.8 million as of both May 30, 2021 and May 31, 2020.

Gross assets recorded under finance leases, included in property and equipment, net, were $ 3.8 million as of both May 29, 2022 and

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May 30, 2021.

Accumulated amortization associated with finance leases was $ 0.7 million and $ 0.6 million as of May 29, 2022 and May 30, 2021, respectively.

The monthly lease payment was initially $ 34,000 and increases by 2.4 % per year.

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the lessor made capital improvements prior to occupancy and thus the lease did not become effective until January 1, 2016.

Lifecore and the lessor made capital improvements prior to occupancy and thus the lease did not become effective until January 1, 2016.

Lifecore is currently using the building for warehousing and final packaging.

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(in thousands) Operating Leases Finance Leases Total

Fiscal year 2022 $ 4,850 $ 466 $ 5,316

Fiscal year 2023 4,052 3,497 7,549

Fiscal year 2024 3,263 9 3,272

Fiscal year 2025 2,502 2 2,504

Fiscal year 2026 2,015 — 2,015

2023 $ 2,330 $ 3,475 $ 5,805

2024 2,243 10 2,253

2025 2,002 — 2,002

2026 1,928 — 1,928

2027 1,409 — 1,409

Thereafter 3,793 — 3,793

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Operating leases $ 37 $ 3,137

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During May 2021 we entered into a transportation management, warehousing, and transportation services agreement with Castellini Company, LLC to outsource Curation Foods’ fresh packaged salads and vegetables logistics management, including transportation, warehousing and distribution.

In connection with this arrangement, during the fiscal year ended May 30, 2021 we recorded a $ 1.7 million impairment of our operating lease right-of-use assets related to certain vehicle leases, which is included in restructuring costs within the Consolidated Statements of Operations.

In connection with this arrangement, during the fiscal year ended May 30, 2021 the Company recorded a $ 1.7 million impairment of our operating lease right-of-use assets related to certain vehicle leases, which is included in Loss from discontinued operations within the Consolidated Statements of Operations.

As disclosed in Note 13 - Restructuring Costs, impairments of our operating lease right-of-use assets related to the Curation Foods Santa Maria office lease of $ 1.6 million and our Curation Foods Los Angeles, California office lease of $ 0.4 million were recorded in Restructuring cost in the accompanying Consolidated Statements of Operations for the year ended May 29, 2022.

Commitments and Contingencies

Purchase Commitments

At May 30, 2021, the Company was committed to purchase $ 75.4 million of produce and other materials.

At May 29, 2022, the Company was committed to purchase $ 54.9 million of raw materials.

For the fiscal years ended May 29, 2022, May 30, 2021 and May 31, 2020, purchases related to long term commitments under take or pay agreements were $ 5.1 million, $ 3.0 million, and $ 3.4 million, respectively.

Legal Contingencies

In the ordinary course of business, the Company is from time to time involved in various legal proceedings and claims.

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 fiscal quarter and adjusted to reflect the impacts of negotiations, estimate settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter.

These provisions are reviewed at least each fiscal 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.

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During the fiscal year 2020, the Company's review for collectability concluded that a receivable reserve of $ 1.2 million would be recorded.

The Company's conclusion regarding collectability changed as a result of Pacific Harvest communicating their refusal to pay combined with their brining claims against the Company.

The Company's conclusion regarding collectability changed as a result of Pacific Harvest communicating their refusal to pay combined with their bringing claims against the Company.

During the fiscal year ended May 30, 2021, the Company agreed to discharge Pacific Harvest from the $ 1.2 million receivable as part of a settlement agreement with Pacific Harvest (see other litigation matters section below for additional information).

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The Company has also disclosed the conduct under investigation to the Mexican Attorney General’s Office, which has commenced an investigation, and to Mexican regulatory agencies.

The Company is cooperating in the government investigations and requests for information.

The Company is cooperating in the government

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investigations and requests for information.

The conduct at issue began prior to the Yucatan Acquisition, and the agreement for the Yucatan Acquisition provides the Company with certain indemnification rights that may allow the Company to recover the cost of a portion of the liabilities that have been and may be incurred by the Company in connection with these compliance matters.

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 contract, breach of holdback agreement, declaratory relief and

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accounting, and related claims.

The Plaintiff seeks over $ 10 million in damages, including delivery of shares of his stock held in escrow for the indemnification claims described above.

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Pursuant to the settlement agreement, the case was dismissed with prejudice on April 23, 2021.

In June of 2021 a complaint was filed against the company alleging multiple wage and hour claims.

On June 6, 2022 the Company reached an agreement to settle all causes of action alleged by the Plaintiff under the California Labor Code, the California Business and Professionals Code, the applicable Wage Order, and the Private Attorneys General Act (the “PAGA”).

In connection with the settlement agreement the Company recorded a $ 0.5 million charge, and this amount is included in Loss from discontinued operations costs in the Consolidated Statements of Operations for the fiscal year ended May 29, 2022.

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Business Segment Reporting

The Company operates using three strategic reportable business segments, aligned with how the Chief Executive Officer, who is the chief operating decision maker (“CODM”), manages the business:

the Curation Foods segment, the Lifecore segment, and the Other segment.

The Curation Foods business includes (i) four natural food brands, including Eat Smart, O Olive Oil & Vinegar, Yucatan Foods, and Cabo Fresh, (ii) BreatheWay® activities, and (iii) activity related to our 26.9 % investment in Windset.

The Curation Foods segment includes activities to market and pack specialty packaged whole and fresh-cut fruit and vegetables, the majority of which incorporate the BreatheWay specialty packaging for the retail grocery, club store and food services industry and are sold primarily under the Eat Smart brand and various private labels.

The Curation Foods segment also includes sales of BreatheWay packaging to partners for fruit and vegetable products, sales of olive oils and wine vinegars under the O brand, sales of avocado products under the brands Yucatan Foods and Cabo Fresh, and activity related to our previously held investment in Windset.

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the Lifecore segment, the Curation Foods segment, and the Other segment.

The Lifecore segment sells products utilizing hyaluronan, a naturally occurring polysaccharide that is widely distributed in the extracellular matrix of connective tissues in both animals and humans, and non-HA products for medical use primarily in the Ophthalmic, Orthopedic and other markets.

The Other segment includes corporate general and administrative expenses, non-Curation Foods and non-Lifecore interest income and income tax expenses.

The Curation Foods business includes (i) three natural food brands, including O Olive Oil & Vinegar, Yucatan Foods, and Cabo Fresh and (ii) BreatheWay® activities.

The Curation Foods segment includes sales of BreatheWay packaging to partners for fruit and vegetable products, sales of olive oils and wine vinegars under the O brand, and sales of avocado products under the brands Yucatan Foods and Cabo Fresh.

In December 2021, the Company completed the Eat Smart Disposition.

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

The operating results for the Eat Smart business, in all periods presented, have been reclassified to discontinued operations and are no longer reported in the Curation Foods business segment.

See Note 1 – Organization, Basis of Presentation, and Summary of Significant Accounting Policies – Eat Smart Sale and Discontinued Operations for further discussion.

The Other segment includes corporate general and administrative expenses, non-Lifecore and non-Curation Foods interest expense, interest income, and income tax expenses.

Corporate overhead is allocated between segments based on actual utilization and relative size.

All of the Company's assets are located within the United States of America except for the production facility in Mexico, which was acquired by the Company as a result of the Yucatan Foods acquisition.

All of the Company's assets are located within the United States of America except for its Yucatan production facility in Mexico.

The following table presents our property and equipment, net by geographic region (in millions):

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May 29, 2022 May 30, 2021 May 31, 2020

Canada $ 60.9 $ 76.4 $ 83.6

Belgium $ 13.7 $ 13.8 $ 15.1

Switzerland $ 16.8 $ 4.7 $ 1.7

Canada $ 12.6 $ 10.7 $ 9.7

Czech Republic $ 3.5 $ 3.5 $ 1.4

United Kingdom $ 2.9 $ 1.9 $ 1.1

Ireland $ 2.2 $ 2.0 $ 4.0

Belgium $ — $ 13.7 $ 13.8

All Other Countries $ 2.0 $ 1.9 $ 2.2

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Operations by segment consisted of the following (in thousands):

Year Ended May 30, 2021 Curation Foods Lifecore Other Total

Year Ended May 29, 2022 Lifecore Curation Foods Other Total

Product sales $ 109,320 $ 76,466 $ — $ 185,786

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Net income (loss) from continuing operations 16,675 ( 30,429 ) ( 32,522 ) ( 46,276 )

Loss from discontinued operations, net of tax — ( 48,114 ) ( 3,041 ) ( 51,155 )

Identifiable assets 213,969 76,948 4,243 295,160

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Capital expenditures 23,552 2,674 — 26,226

Dividend income 1,125 — — 1,125

Interest income 72 — 9 81

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Net income (loss) from continuing operations 14,461 ( 357 ) ( 23,673 ) ( 9,569 )

Loss from discontinued operations, net of tax — ( 23,096 ) — ( 23,096 )

Identifiable assets 185,417 121,069 4,680 311,166

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Capital expenditures 16,222 3,042 — 19,264

Dividend income 1,125 — — 1,125

Interest income — — 48 48

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Net income (loss) from continuing operations 11,749 ( 17,728 ) ( 15,892 ) ( 21,871 )

Loss from discontinued operations, net of tax — ( 16,320 ) — ( 16,320 )

Identifiable assets 165,461 117,427 10,613 293,501

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Capital expenditures 10,612 1,472 130 12,214

Dividend income 1,650 — — 1,650

Interest income — 6 66 72

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Corporate overhead allocation 4,190 868 ( 5,058 ) —

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Quarterly Consolidated Financial Information (unaudited)

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Net (loss) income from continuing operations ( 7,214 ) 3,675 ( 8,301 ) ( 34,436 ) ( 46,276 )

Net (loss) income per basic share from continuing operations $ ( 0.38 ) $ ( 0.45 ) $ ( 0.19 ) $ ( 0.14 ) $ ( 1.12 )

Net (loss) income per diluted share from continuing operations $ ( 0.38 ) $ ( 0.45 ) $ ( 0.19 ) $ ( 0.14 ) $ ( 1.12 )

Net (loss) income from discontinued operations ( 2,295 ) ( 42,196 ) ( 4,785 ) ( 1,879 ) ( 51,155 )

Net (loss) income per basic and diluted share from continuing operations $ ( 0.25 ) $ 0.12 $ ( 0.28 ) $ ( 1.16 ) $ ( 1.57 )

Net (loss) income per basic and diluted share from discontinued operations $ ( 0.08 ) $ ( 1.44 ) $ ( 0.16 ) $ ( 0.06 ) $ ( 1.74 )

Fiscal Year 2021 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Annual

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Net (loss) income from continuing operations ( 4,957 ) ( 2,367 ) ( 1,465 ) ( 780 ) ( 9,569 )

Net income (loss) applicable to common stockholders ( 4,784 ) ( 6,740 ) ( 11,518 ) ( 15,149 ) ( 38,191 )

Net (loss) income per basic share from continuing operations $ ( 0.16 ) $ ( 0.23 ) $ ( 0.39 ) $ ( 0.52 ) $ ( 1.31 )

Net (loss) income per diluted share from continuing operations $ ( 0.16 ) $ ( 0.23 ) $ ( 0.39 ) $ ( 0.52 ) $ ( 1.31 )

Net (loss) income from discontinued operations ( 6,044 ) ( 10,934 ) ( 4,033 ) ( 2,085 ) ( 23,096 )

Net (loss) income per basic and diluted share from continuing operations $ ( 0.17 ) $ ( 0.08 ) $ ( 0.05 ) $ ( 0.03 ) $ ( 0.33 )

Net (loss) income per basic and diluted share from discontinued operations $ ( 0.21 ) $ ( 0.37 ) $ ( 0.14 ) $ ( 0.07 ) $ ( 0.79 )

Fiscal year 2022 third quarter has been restated for the correction of an error.

Fiscal year 2022 first quarter and second quarter for been revised for an immaterial correction of an error.

See Note 1 – Organization, Basis of Presentation, and Summary of Significant Accounting Policies – Correction of Error in Previously Reported Fiscal Year 2022 Interim Financial Statements (Unaudited) for additional information.

Discontinued Operations

During the fourth quarter of fiscal year 2019, the Company discontinued its Now Planting business, which resided in its Curation Foods segment.

As a result, the Company met the requirements to report the results of Now Planting as discontinued operations and to classify any assets and liabilities as held for abandonment.

As of May 30, 2021 and May 31, 2020 there were no assets or liabilities of the Now Planting business segment included in assets and liabilities of discontinued operations.

Once the Now Planting businesses was discontinued, the operations associated with these business qualified for reporting as discontinued operations.

Accordingly, the operating results, net of tax, from discontinued operations are presented separately in the Company’s Consolidated Statements of Operations and the Notes to the Consolidated Financial Statements have been adjusted to exclude Now Planting in fiscal year 2019.

Components of amounts reflected in (loss) income from discontinued operations, net of tax are as follows (in thousands):

As discussed in Note 1 – Organization, Basis of Presentation, and Summary of Significant Accounting Policies – Eat Smart Sale and Discontinued Operations, on December 13, 2021, we completed the Eat Smart Disposition.

Eat Smart represented a component of the business within the Curation Foods segment and its sale represents a strategic shift in the Company going forward.

Accordingly, concurrent with the execution of the Asset Purchase Agreement, Eat Smart meets the accounting requirements for reporting as discontinued operations for all periods presented.

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The key components of loss from discontinued operations for the fiscal years ended May 29, 2022, May 30, 2021, and May 31, 2020 were as follows (in thousands):

May 29, 2022 May 30, 2021 May 31, 2020

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Cost of product sales 181,555 341,612 394,699

Gross profit 5,200 31,003 35,601

Operating costs and expenses:

Research and development 1,918 2,799 3,517

Selling, general and administrative 13,350 27,704 31,514

Impairment of goodwill 32,057 — —

Loss on sale of Eat Smart 336 — —

Restructuring costs 6,133 13,862 13,231

Total operating costs and expenses 53,794 44,365 48,262

Operating loss ( 48,594 ) ( 13,362 ) ( 12,661 )

Dividend income — 1,125 1,125

Interest income — — 31

Interest expenses ( 2,682 ) ( 4,957 ) ( 4,957 )

Other income (expense), net — ( 11,800 ) ( 4,200 )

Loss from discontinued operations before taxes ( 51,276 ) ( 28,994 ) ( 20,662 )

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Loss from discontinued operations, net of tax $ ( 51,155 ) $ ( 23,096 ) $ ( 16,320 )

Table of Conten ts

Cash provided by (used in) operating activities by the Now Planting business totaled $ 0.0 million, $ 0.0 million, and $( 1.3 ) million for the fiscal years ended May 30, 2021, May 31, 2020 and May 26, 2019, respectively.

Cash provided by (used in) operating activities by the Eat Smart business totaled $( 16.5 ) million, $( 1.4 ) million, and $ 13.8 million for the twelve months ended May 29, 2022, May 30, 2021, and May 31, 2020, respectively.

Cash provided by (used in) investing activities from the Eat Smart business totaled $ 108.0 million, $ 8.4 million, and $( 14.1 ) million for the twelve months ended May 29, 2022, May 30, 2021, and May 31, 2020, respectively.

Depreciation and amortization expense of the Eat Smart business totaled $ 5.3 million, $ 9.4 million, and $ 10.0 million for the twelve months ended May 29, 2022, May 30, 2021, and May 31, 2020, respectively.

Capital expenditures of the Eat Smart business totaled $ 1.8 million, $ 4.5 million, and $ 14.5 million for the twelve months ended May 29, 2022, May 30, 2021, and May 31, 2020, respectively.

Interest expense was allocated to discontinued operations based on the interest expense related to the amount of debt required to be paid down under the New Credit Agreements as a result of the Eat Smart Disposition.

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The carrying amounts of the major classes of assets and liabilities of the Eat Smart business included in assets and liabilities of discontinued operations are as follows (in thousands):

Cash and cash equivalents $ 136

Accounts receivable, less allowance for credit losses 28,583

Inventories 6,587

Prepaid expenses and other current assets 2,312

Total current assets, discontinued operations 37,618

Investment in non-public company, fair value 45,100

Property and equipment, net 59,273

Operating lease right-of-use assets 3,729

Goodwill 35,470

Trademarks/tradenames, net 8,228

Customer relationships, net 2,260

Other assets 80

Total other assets, discontinued operations 154,140

Total assets, discontinued operations $ 191,758

Accounts payable $ 31,271

Accrued compensation 4,550

Other accrued liabilities 4,041

Current portion of lease liabilities 2,289

Deferred revenue 493

Total current liabilities, discontinued operations 42,644

Long-term lease liabilities 3,252

Other non-current liabilities 729

Non-current liabilities, discontinued operations 3,981

Total liabilities, discontinued operations $ 46,625

Restructuring Costs

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(In thousands)

Curation Foods

Year Ended May 30, 2021

Year Ended May 29, 2022 Curation Foods

Asset write-off costs

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2,072 — 2,072

1,774 — — 1,774

Other restructuring costs

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$ 6,425 $ 2,536 $ 8,961

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Asset Write-off Costs

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These costs are included in restructuring costs within the Consolidated Statements of Operations.

See the Assets Held for Sale section within Note 1 for additional information.

In the first quarter of fiscal year 2021, the Company sold its interest in Ontario.

The Company received net cash proceeds of $ 4.9 million in connection with the sale and recorded a gain of $ 2.8 million.

In the first quarter of fiscal year 2021, the Company recognized an $ 8.8 million impairment loss related to its Hanover building and related assets which were sold in the second quarter of fiscal year 2021.

In the third quarter of fiscal year 2021, the Company recognized a $ 1.9 million impairment loss related to BreatheWay equipment as a result of a strategic shift in our BreatheWay business model driven by our restructuring plan.

In the fourth quarter of fiscal year 2021, the Company recognized a $ 0.5 million impairment loss related to nonoperational internal use software as a result of a strategic shift in our logistics strategy driven by our restructuring plan and our transportation management, warehousing, and transportation services agreement with Castellini Company, LLC.

During the fiscal year ended May 31, 2020, the Company closed escrow on the San Rafael, California property and recognized a $ 0.4 million impairment loss, which is included in Restructuring costs within the Consolidated Statements of Operations.

The Company received net cash proceeds of $ 2.4 million in connection with the sale.

In the fourth quarter of fiscal year 2020, the Company recognized a $ 1.9 million impairment loss related to BreatheWay equipment as a result of a strategic shift in our BreatheWay business model driven by our restructuring plan.

In the third quarter of fiscal year 2021, the Company recognized an additional $ 1.9 million impairment loss related to BreatheWay equipment as a result of a strategic shift in our BreatheWay business model driven by our restructuring plan.

The Company leases its main office located in Santa Maria, California (the “Santa Maria Office”).

During the third quarter of fiscal year 2022, the Company approved a plan to explore opportunities to sub lease its Santa Maria Office.

The Santa Maria Office assets, included as lease hold improvements within property and equipment, net, has been designated as held for use within the Consolidated Balance Sheets as of May 29, 2022, as no finalized plan for disposition existed at the balance sheet date.

The Company recognized a $ 5.3 million impairment loss, which is included in Restructuring costs within the Consolidated Statements of Operations ($ 3.7 million included in asset write-off costs related to lease hold improvements impairment and $ 1.6 million included in lease costs related to right-of-use asset impairment).

The Company expects to complete the sublease plan within the next 12 months.

Employee Severance and Benefit Costs

Employee severance and benefit costs are costs incurred as a result of reduction-in-force driven by our restructuring plan and closure of offices and facilities.

These costs were driven primarily by the closure of our San Rafael, California office, Santa Clara, California office, Los Angeles, California office, the sale of our Hanover manufacturing facility, and our transportation management, warehousing, and transportation services agreement with Castellini Company, LLC.

These costs were driven primarily by the closure of our San Rafael, California office, Santa Clara, California office, and Los Angeles, California office.

In August 2020, the Company closed its leased Santa Clara, California office and entered into a sublease agreement.

In the fourth quarter of fiscal year 2020 the Company closed its leased Los Angeles, California office and plans to sublease the office.

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As noted in the Asset write-off costs section, the Company approved a plan to explore opportunities to sublease its Santa Maria Office and expects to complete the sublease plan within the next 12 months.

Other restructuring costs

For the fiscal year ended May 30, 2021, other restructuring costs primarily related to consulting costs to execute the Company’s restructuring plan to drive enhanced profitability, focus the business on its strategic assets, and redesign the organization to be the appropriate size to compete and thrive.

The following table summarizes the restructuring costs recognized in the Company’s Consolidated Statements of Operations by Business Segment, since inception of the restructuring plan in fiscal year 2020 through the fiscal year ended

May 30, 2021:

Curation Foods

Other restructuring costs primarily related to consulting costs to execute the Company’s restructuring plan to drive enhanced profitability, focus the business on its strategic assets, and redesign the organization to be the appropriate size to compete and thrive.

(In thousands)

Curation Foods

Asset write-off costs

7 unchanged sentences

$ 10,652 $ 6,126 $ 16,778

The total expected cost related to the restructuring plan is approximately $ 37.0 million.

Table of Conten ts

The total expected cost related to the restructuring plan is approxim ately $ 23.0 million.

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Subsequent Events

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 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.

Sale of Windset Investment

Sale of BreatheWay Business Assets

On June 2, 2022, the Company and Curation Foods entered into and closed an Asset Purchase Agreement (the “Purchase Agreement”) with Hazel Technologies, Inc.

(the “Purchaser”), pursuant to which Curation Foods sold all of its assets related to BreatheWay packaging technology business to the Purchasers in exchange for an aggregate purchase price of $ 3.2 million (the “BreatheWay Sale”).

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

Concurrent with the consummation of the Sale, the Company used the net proceeds from the Sale, and net of $ 3.6 million of prepaid interest and prepayment penalties (as required by the Refinance Term Loan), to pay down the Company's long-term debt by $ 41.4 million.

Table of Conten ts

The Company expects to record a gain of $ 2.0 in the first quarter of fiscal year 2023 related to this transaction.

Ta ble of Contents

(b) Index of Exhibits.

Number Exhibit Title

2.1 Asset Purchase Agreement, dated June 1, 2021, by and among the Company, Curation Foods, and Taylor Farms Retail, Inc., incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on December 17, 2021.

3.1 Certificate of Incorporation of the Registrant, incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 7, 2008.

18 unchanged sentences

10.10* Long-Term Incentive Plan for Fiscal Year 2020, incorporated herein by reference to Registrant’s Current Report on Form 8-K filed on July 24, 2017.

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Number Exhibit Title

10.11* Long-Term Incentive Plan for Fiscal Year 2021, incorporated herein by reference to the Registrant’s Current Report on Form 8-K filed on July 30, 2018.

2 unchanged sentences

and the plaintiffs named therein and Addendum to the Settlement Agreement effective as of May 5, 2017, incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 10, 2017.

Table of Conten ts

Number Exhibit Title

10.13 Purchase Agreement dated as of April 26, 2018, by and between Apio, Inc.

15 unchanged sentences

10.23 Separation and General Release by and between Landec Corporation and Dawn Kimball, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 8, 2021

10.24 Share Share Purchase Agreement, dated June 1, 2021, by and among the Company, Curation Foods, Newell Capital Corporation, Newell Brothers Investment 2 Corp., and Windset Holdings 2010 Ltd., incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 2, 2021.

10.24 Separation and General Release by and between Landec Corporation and Timothy Burgess, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 15, 2021 .

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Number Exhibit Title

10.25 Share Purchase Agreement, dated June 1, 2021, by and among the Company, Curation Foods, Newell Capital Corporation, Newell Brothers Investment 2 Corp., and Windset Holdings 2010 Ltd., incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 2, 2021.

10.26 Amended and Restated Employment Agreement between the Registrant and Albert D.

2 unchanged sentences

23.1+ Consent of Independent Registered Public Accounting Firm

Table of Conten ts

Number Exhibit Title

24.1+ Power of Attorney – See signature page

12 unchanged sentences

+ Filed herewith.

Table of Conten ts

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Maria, State of California, on July 29, 2021.

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LANDEC CORPORATION

/s/ John Morberg

Chief Financial Officer

1 unchanged sentence

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Albert D.

Bolles and John Morberg, and each of them, as his or her attorney-in-fact, with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorney-in-fact to any and all amendments to said Report on Form 10-K.

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints James G.

Hall and John D.

Morberg, and each of them, as his or her attorney-in-fact, with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorney-in-fact to any and all amendments to said Report on Form 10-K.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K has been signed by the following persons in the capacities and on the dates indicated:

Signature Title Date

/s/ Albert D.

Bolles, Ph.D.

President and Chief Executive Officer (Principal Executive Officer) and Director July 29, 2021

/s/ John Morberg

John Morberg Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) July 29, 2021

Hall President and Chief Executive Officer (Principal Executive Officer) and Director September 13, 2022

Morberg Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) September 13, 2022

/s/ Craig Barbarosh

Craig Barbarosh Director July 29, 2021

Craig Barbarosh Director September 13, 2022

/s/ Deborah Carosella

Deborah Carosella Director July 29, 2021

Deborah Carosella Director September 13, 2022

/s/ Raymond Diradoorian

Raymond Diradoorian Director September 13, 2022

/s/ Jeffrey Edwards

Jeffrey Edwards Director July 29, 2021

Jeffrey Edwards Director September 13, 2022

/s/ Katrina Houde

Katrina Houde Director July 29, 2021

Katrina Houde Director September 13, 2022

/s/ Nelson Obus

Nelson Obus Director July 29, 2021

Nelson Obus Director September 13, 2022

/s/ Tonia Pankopf

Tonia Pankopf Director July 29, 2021

Tonia Pankopf Director September 13, 2022

/s/ Andrew K.

Powell Director July 29, 2021

Powell Director September 13, 2022

/s/ Joshua E Schechter

Schechter Director July 29, 2021

Schechter Director September 13, 2022

/s/ Catherine A.

Sohn Director July 29, 2021

/s/ Patrick D.

Walsh Director July 29, 2021

Sohn Director September 13, 2022

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 9A. Controls and Procedures