LIFECORE BIOMEDICAL, INC. DE 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures 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. 33 Ta ble of Contents 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 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; 34 Ta ble of Contents (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; and (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. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 35 Ta ble of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance 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. Item 11. Executive Compensation 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. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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. Item 13. Certain Relationships and Related Transactions and Director Independence 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. Item 14. Principal Accountant Fees and Services 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. 36 Ta ble of Contents PART IV Item 15. Exhibits and Financial Statement Schedules (a) 1. Consolidated Financial Statements of Landec Corporation Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 38 Consolidated Balance Sheets at May 29 , 202 2 and May 3 0 , 202 1 . 41 Consolidated Statements of Operations for the Years Ended May 29 , 202 2 , May 3 0 , 202 1 and May 31 , 20 20 . 42 Consolidated Statements of Comprehensive (Loss) Income for the Years Ended May 29, 2022, May 30, 2021 and May 31, 2020 . 43 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended May 29, 2022, May 30, 2021 and May 31, 2020 . 44 Consolidated Statements of Cash Flows for the Years Ended May 29, 2022, May 30, 2021 and May 31, 2020 . 45 Notes to Consolidated Financial Statements 46 2. All schedules provided for in the applicable accounting regulations of the Securities and Exchange Commission have been omitted since they pertain to items which do not appear in the financial statements of Landec Corporation and its subsidiaries or to items which are not significant or to items as to which the required disclosures have been made elsewhere in the financial statements and supplementary notes and such schedules. 3. Index of Exhibits 87 The exhibits listed in the accompanying Index of Exhibits are filed or incorporated by reference as part of this report. 37 Ta ble of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Landec Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Landec Corporation and subsidiaries (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 (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at May 29, 2022 and May 30, 2021, and the results of its operations and its cash flows for each of the three years in the period ended May 29, 2022, in conformity with U.S. 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 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 These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Goodwill and Trademarks/tradenames with Indefinite lives Description of the Matter At May 29, 2022, the Company’s goodwill was $13.9 million and trademarks/tradenames with indefinite lives was $8.4 million. The carrying values of the Company’s Yucatan reporting unit’s goodwill and trademarks/tradenames with indefinite lives were $0 million and $3.7 million, respectively at May 29, 2022. As discussed in Note 1 of the consolidated financial statements, goodwill and trademarks/tradenames with indefinite lives are assessed by the Company’s management for impairment at least annually, in the fiscal fourth quarter, unless there are indications of impairment at other points throughout the year. Goodwill is tested for impairment at the reporting unit level. 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. 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. 38 Ta ble of Contents 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 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. 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. We compared the significant assumptions used by management to current industry and economic trends, the Company’s historical results and other guideline companies within the same industry and evaluated how changes in the Company’s business may affect the significant assumptions. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the change in the fair value of the Yucatan reporting unit and trademarks/tradenames with indefinite lives resulting from changes in these assumptions. We involved our valuation specialists to assist in reviewing the valuation methodology and the royalty and discount rate assumptions. 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. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2008. San Francisco, California September 13, 2022 39 Ta ble of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Landec Corporation Opinion on Internal Control over Financial Reporting 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, 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 The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP San Francisco, California September 13, 2022 40 Ta ble of Contents LANDEC CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except par value) As restated May 29, 2022 May 30, 2021 ASSETS Current Assets: Cash and cash equivalents $ 1,643 $ 1,159 Accounts receivable, less allowance for credit losses 48,172 41,430 Inventories 66,845 63,076 Prepaid expenses and other current assets 7,052 5,038 Current assets, discontinued operations — 37,618 Total Current Assets 123,712 148,321 Property and equipment, net 130,435 120,286 Operating lease right-of-use assets 8,580 17,098 Goodwill 13,881 33,916 Trademarks/tradenames, net 8,400 17,100 Customer relationships, net 7,150 8,532 Other assets 3,002 3,531 Other assets, discontinued operations — 154,140 Total Assets $ 295,160 $ 502,924 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 15,802 $ 16,298 Accrued compensation 9,238 7,754 Other accrued liabilities 7,647 3,955 Current portion of lease liabilities 5,026 1,600 Deferred revenue 919 637 Line of credit 40,000 29,000 Current portion of long-term debt, net 599 — Current liabilities, discontinued operations — 42,644 Total Current Liabilities 79,231 101,888 Long-term debt, net 97,579 164,902 Long-term lease liabilities 9,983 20,359 Deferred taxes, net 232 6,140 Other non-current liabilities 190 2,870 Non-current liabilities, discontinued operations — 3,981 Total Liabilities 187,215 300,140 Stockholders’ Equity: Common stock, $ 0.001 par value; 50,000 shares authorized; 29,513 and 29,333 shares issued and outstanding at May 29, 2022 and May 30, 2021, respectively 30 29 Additional paid-in capital 167,352 165,533 Retained earnings (accumulated deficit) ( 58,851 ) 38,580 Accumulated other comprehensive loss ( 586 ) ( 1,358 ) Total Stockholders’ Equity 107,945 202,784 Total Liabilities and Stockholders’ Equity $ 295,160 $ 502,924 See accompanying notes to the consolidated financial statements. 41 Ta ble of Contents LANDEC CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended May 29, 2022 May 30, 2021 May 31, 2020 Product sales $ 185,786 $ 171,546 $ 160,066 Cost of product sales 135,416 121,075 120,679 Gross profit 50,370 50,471 39,387 Operating costs and expenses: Research and development 7,841 7,423 7,582 Selling, general and administrative 46,127 37,660 40,674 Impairment of goodwill and intangible assets 28,735 — 12,953 Legal settlement charge — 1,763 — Restructuring costs 8,961 3,759 4,054 Total operating costs and expenses 91,664 50,605 65,263 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 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: Loss from discontinued operations ( 51,276 ) ( 28,994 ) ( 20,662 ) Income tax benefit 121 5,898 4,342 Loss from discontinued operations, net of tax ( 51,155 ) ( 23,096 ) ( 16,320 ) 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 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 per share $ ( 3.31 ) $ ( 1.12 ) $ ( 1.31 ) Shares used in per share computation: Basic 29,466 29,294 29,162 Diluted 29,466 29,294 29,162 See accompanying notes to the consolidated financial statements. 42 Ta ble of Contents LANDEC CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (In thousands) Year Ended May 29, 2022 May 30, 2021 May 31, 2020 Net loss $ ( 97,431 ) $ ( 32,665 ) $ ( 38,191 ) Other comprehensive (loss) income, net of tax: Net unrealized gains (losses) on interest rate swaps, (net of tax effect of ($ 430 ), $( 445 ), and $ 878 ) 772 1,450 ( 2,872 ) Other comprehensive (loss) income, net of tax 772 1,450 ( 2,872 ) Total comprehensive loss $ ( 96,659 ) $ ( 31,215 ) $ ( 41,063 ) See accompanying notes to the consolidated financial statements. 43 Ta ble of Contents LANDEC CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (In thousands) Common Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Total Stockholders’ Equity Shares Amount 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 Taxes paid by Company for employee stock plans — — ( 212 ) — — ( 212 ) Stock-based compensation — — 2,419 — — 2,419 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 Issuance of stock under stock plans, net of shares withheld 109 — — — — — Taxes paid by Company for employee stock plans — — ( 405 ) — — ( 405 ) Stock-based compensation — — 3,360 — — 3,360 Net loss — — — ( 32,665 ) — ( 32,665 ) 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 Issuance of stock under stock plans, net of shares withheld 180 1 — — — 1 Taxes paid by Company for employee stock plans — — ( 789 ) — — ( 789 ) Stock-based compensation — — 2,608 — — 2,608 Net loss — — — ( 97,431 ) — ( 97,431 ) Other comprehensive income, net of tax — — — — 772 772 Balance at May 29, 2022 29,513 $ 30 $ 167,352 $ ( 58,851 ) $ ( 586 ) $ 107,945 See accompanying notes to the consolidated financial statements. 44 Ta ble of Contents LANDEC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended May 29, 2022 May 30, 2021 May 31, 2020 Cash flows from 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 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 ) Change in investment in non-public company, fair value — 11,800 4,200 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: Accounts receivable, net ( 6,138 ) 5,775 ( 6,357 ) Inventory ( 5,960 ) ( 3,352 ) ( 12,179 ) Prepaid expenses and other current assets ( 602 ) 7,941 ( 6,815 ) Accounts payable 9,343 ( 5,982 ) ( 1,249 ) Accrued compensation ( 2,546 ) 3,270 ( 1,894 ) Other accrued liabilities ( 680 ) 460 1,263 Deferred revenue ( 18 ) 778 ( 147 ) 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 ) Proceeds from sales of property and equipment 1,141 12,913 2,434 Proceeds from collections of notes receivable — — 364 Net cash provided by (used in) investing activities 81,768 ( 10,856 ) ( 23,888 ) Cash flows from financing activities: Proceeds from long-term debt 20,000 170,000 27,500 Payments on long-term debt ( 86,411 ) ( 114,130 ) ( 11,125 ) Proceeds from lines of credit 55,111 100,000 119,300 Payments on lines of credit ( 44,111 ) ( 148,400 ) ( 93,900 ) Payments for debt issuance costs ( 821 ) ( 10,484 ) ( 1,576 ) Taxes paid by Company for employee stock plans ( 789 ) ( 405 ) ( 212 ) Proceeds from sale of common stock — — 30 Net cash (used in) provided by financing activities ( 57,021 ) ( 3,419 ) 40,017 Net increase (decrease) in cash, cash equivalents and restricted cash 348 742 ( 912 ) Cash, cash equivalents and restricted cash, beginning of period 1,295 553 1,465 Cash, cash equivalents and restricted cash, end of period $ 1,643 $ 1,295 $ 553 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 16,888 $ 13,223 $ 10,130 Cash paid during the period for income taxes, net of refunds received $ 441 $ ( 7,680 ) $ ( 1,124 ) Supplemental disclosure of non-cash investing and financing activities: Purchases of property and equipment on trade vendor credit $ 2,260 $ 4,724 $ 2,820 See accompanying notes to the consolidated financial statements. 45 Ta ble of Contents LANDEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization, Basis of Presentation, and Summary of Significant Accounting Policies Organization Landec Corporation and its subsidiaries (“Landec” or the “Company”) design, develop, manufacture, and sell differentiated products for food and biomaterials markets, and license technology applications to partners. Landec’s biomedical company, Lifecore Biomedical, Inc. (“Lifecore”), is a fully integrated contract development and manufacturing organization (“CDMO”) that offers highly differentiated capabilities in the development, fill and finish of sterile, injectable-grade pharmaceutical products in syringes and vials. As a leading manufacturer of premium, injectable grade Hyaluronic Acid, Lifecore brings 37 years of expertise as a partner for global and emerging biopharmaceutical and biotechnology companies across multiple therapeutic categories to bring their innovations to market. Lifecore recognizes revenue in two different product categories, CDMO and Fermentation. Landec’s natural food company, Curation Foods, Inc. (“Curation Foods”), is focused on innovating and distributing plant-based foods with 100% clean ingredients to retail, club and foodservice channels throughout North America. 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, 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 The consolidated financial statements are presented on the accrual basis of accounting in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and include the accounts of Landec Corporation and its subsidiaries, Curation Foods and Lifecore. All material inter-company transactions and balances have been eliminated. The Company’s fiscal year is the 52- or 53-week period that ends on the last Sunday of May with quarters within each year ending on the last Sunday of August, November, and February; however, in instances where the last Sunday would result in a quarter being 12-weeks in length, the Company’s policy is to extend that quarter to the following Sunday. A 14th week is included in the fiscal year every five or six years to realign the Company’s fiscal quarters with calendar quarters. 46 Ta ble of Contents Arrangements that are not controlled through voting or similar rights are reviewed under the guidance for variable interest entities (“VIEs”). A company is required to consolidate the assets, liabilities and operations of a VIE if it is determined to be the primary beneficiary of the VIE. An entity is a VIE and subject to consolidation, if by design: a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders or b) as a group the holders of the equity investment at risk lack any one of the following three characteristics: (i) the power, through voting rights or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity. The Company reviewed the consolidation guidance and concluded that the equity investment in the non-public company by the Company is not a VIE. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. The accounting estimates that require management’s most significant and subjective judgments include revenue recognition; loss contingencies; sales returns and credit losses; 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 goodwill), and inventory; and the valuation and recognition of stock-based compensation. These estimates involve the consideration of complex factors and require management to make judgments. The analysis of historical and future trends can require extended periods of time to resolve and are subject to change from period to period. The actual results may differ from management’s estimates. Concentrations of 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. government. 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. A valuation allowance is provided for known and anticipated credit losses. The recorded amounts for these financial instruments approximate their fair value. 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 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 Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets is measured by comparison of the carrying amount of the asset to the net undiscounted future cash flow expected to be generated from the asset. If the future undiscounted cash flows are not sufficient to recover the carrying value of the assets, the assets’ carrying value is adjusted to fair value. The Company regularly evaluates its long-lived assets for indicators of possible impairment. Financial 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. 47 Ta ble of Contents Cash Flow Hedges The Company has entered into interest rate swap agreements to manage interest rate risk. These derivative instruments may offset a portion of the changes in interest expense. The Company designates these derivative instruments as cash flow hedges. The Company accounts for its derivative instruments as either an asset or a liability and carries them at fair value in Other assets or Other non-current liabilities. The accounting for changes in the fair value of the derivative instrument depends on the intended use of the derivative instrument and the resulting designation. For derivative instruments that hedge the exposure to variability in expected future cash flows and are designated as cash flow hedges, the entire change in the fair value of the hedging instrument is recorded as a component of Accumulated other comprehensive loss (“AOCL”) in Stockholders’ Equity. Those amounts are subsequently reclassified to earnings in the same line item in the Consolidated Statement of Operations as impacted when the hedged item affects earnings. To receive hedge accounting treatment, cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions. 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 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 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. The components of AOCL, net of tax, are as follows (in thousands): AOCL Balance as of May 30, 2021 $ ( 1,358 ) Amounts reclassified from OCI 772 Other comprehensive (loss) income, net 772 Balance as of May 29, 2022 $ ( 586 ) The Company expects to reclassify approximately $ 0.6 million into earnings in the next 12 months. Based on these assumptions, management believes the fair market values of the Company’s financial instruments are not significantly different from their recorded amounts as of May 29, 2022 and May 30, 2021. Accounts Receivable, Sales Returns and Allowance for Credit Losses The Company carries its accounts receivable at their face amounts less an allowance for estimated sales returns and credit losses. Sales return allowances are estimated based on historical sales return amounts. 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 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 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. 48 Ta ble of Contents 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 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. Significant judgments include, but are not limited to: assessing current economic conditions and the extent to which they are relevant to the existing characteristics of the Company’s financial assets, the estimated life of financial assets, and the level of reliance on historical experience in light of economic conditions. The Company will continually review and update, when necessary, its historical risk characteristics that are meaningful to estimating credit losses, any new risk characteristics that arise in the natural course of business, and the estimated life of its financial assets. The changes in the Company’s allowance for sales returns and credit losses are summarized in the following table (in thousands): Balance at beginning of period Provision (benefit) for expected credit losses Write offs, net of recoveries Balance at end of period Year Ended May 31, 2020 $ 644 $ ( 460 ) $ 2 $ 186 Year Ended May 30, 2021 $ 186 $ 187 $ ( 288 ) $ 85 Year Ended May 29, 2022 $ 85 $ ( 14 ) $ ( 6 ) $ 65 Contract Assets and Liabilities Contract assets primarily relate to the Company’s conditional right to consideration for work completed but not billed at the reporting date. The Company’s contract assets as of May 29, 2022, and May 30, 2021, were $ 10.2 million and $ 10.6 million, respectively. Contract liabilities primarily relate to payments received from customers in advance of performance under the contract. The Company’s contract liabilities as of May 29, 2022, and May 30, 2021, were $ 0.9 million and $ 0.9 million, respectively. 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 The Company follows the five step, principles-based model to recognize revenue upon the transfer of promised goods or services to customers and in an amount that reflects the consideration for which the Company expects to be entitled in exchange for those goods or services. 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. Lifecore Lifecore generates revenue from two integrated activities: CDMO and Fermentation. CDMO is comprised of aseptic and development services. Lifecore’s standard terms of sale are generally included in its contracts and purchase orders. Shipping and other transportation costs charged to customers are recorded in both revenue and cost of goods sold. Lifecore has elected to account for shipping and handling as fulfillment activities, and not as a separate performance obligation. Lifecore’s standard payment terms with its customers generally range from 30 days to 60 days. Aseptic 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. In instances where our customers contract with us to aseptically fill syringes or vials with our HA, the goods are not distinct in the context of the contract. 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. 49 Ta ble of Contents Development Services Lifecore provides product development services to assist its customers in obtaining regulatory approval for the commercial sale of their drug product. These services include activities such as technology development, material component changes, analytical method development, formulation development, pilot studies, stability studies, process validation and production of materials for use within clinical studies. The Company’s customers benefit from the expertise of its scientists who have extensive experience performing such tasks. Each of the promised goods and services are not distinct in the context of the contract as the goods and services are highly interdependent and interrelated. The services described above are significantly affected by each other because Lifecore would not be able to fulfill its promise by transferring each of the goods or services independently. Revenues generated from development services arrangements are recognized over time as Lifecore is creating an asset without an alternate use as it is unique to the customer. Furthermore, the Company has an enforceable right to payment for the performance completed to date for its costs incurred in satisfying the performance obligation plus a reasonable profit margin. For each of the development activities performed by Lifecore as described above, labor is the primary input (i.e., labor costs represent the majority of the costs incurred in the completion of the services). The Company determined that labor hours are the best measure of progress as it most accurately depicts the effort extended to satisfy the performance obligation over time. Fermentation Lifecore manufactures and sells pharmaceutical-grade sodium hyaluronate (“HA”) in bulk form to its customers. The HA produced is distinct as customers are able to utilize the product provided under HA supply contracts when they obtain control. 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 to our customer. 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): Year Ended Lifecore: May 29, 2022 May 30, 2021 May 31, 2020 Contract development and manufacturing organization $ 86,313 $ 75,297 $ 64,781 Fermentation 23,007 22,790 21,052 Total $ 109,320 $ 98,087 $ 85,833 Year Ended 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 50 Ta ble of Contents Shipping and Handling Costs Amounts billed to third-party customers for shipping and handling are included as a component of revenues. Shipping and handling costs incurred are included as a component of cost of products sold and represent costs incurred to ship product from the processing facility or distribution center to the end consumer markets. Cash and Cash Equivalents The Company records all highly liquid securities with three months or less from date of purchase to maturity as cash equivalents. Cash equivalents consist mainly of money market funds. The market value of cash equivalents approximates their historical cost given their short-term nature. Reconciliation of Cash and Cash Equivalents and Cash as presented on the Statements of Cash Flows The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows (in thousands): May 29, 2022 May 30, 2021 May 31, 2020 Cash and cash equivalents $ 1,643 $ 1,159 $ 360 Restricted cash — — 193 Cash and cash equivalents, discontinued operations — 136 — Cash, cash equivalents and restricted cash $ 1,643 $ 1,295 $ 553 Inventories Inventories are stated at the lower of cost (using the first-in, first-out method) or net realizable value. As of May 29, 2022 and May 30, 2021, inventories consisted of the following (in thousands): Year Ended May 29, 2022 May 30, 2021 Finished goods $ 33,029 $ 40,204 Raw materials 24,221 16,644 Work in progress 9,595 6,228 Total inventories $ 66,845 $ 63,076 If the cost of the inventories exceeds their net realizable value, provisions are recorded currently to reduce them to net realizable value. The Company also records a provision for slow moving and obsolete inventories based on the estimate of demand for its products. Advertising Expense Advertising expenditures for the Company are expensed as incurred and included in selling, general, and administrative in the accompanying Consolidated Statements of Operations. Advertising expense for the Company for fiscal years 2022, 2021 and 2020 was $ 0.2 million, $ 0.1 million and $ 0.1 million, respectively. Related Party Transactions 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 balance of $ 0.1 million from Windset is included in Accounts receivable in the accompanying Consolidated Balance Sheets as of May 30, 2021. 51 Ta ble of Contents All related party transactions are monitored quarterly by the Company and approved by the Audit Committee of the Board of Directors. Property and Equipment and Finite-Lived Intangible Assets Property and equipment and finite-lived intangible assets are stated at cost. Expenditures for major improvements are capitalized while repairs and maintenance are charged to expense. Depreciation is expensed on a straight-line basis over the estimated useful lives of the respective assets. Customer relationships are amortized to operating expense on an accelerated basis that reflects the pattern in which the economic benefits are consumed. Leasehold improvements are amortized on a straight-line basis over the lesser of the economic life of the improvement or the life of the lease. The Company capitalizes software development costs for internal use. Capitalization of software development costs begins in the application development stage and ends when the asset is placed into service. The Company amortizes such costs on a straight-line basis over estimated useful lives of three to seven years . Property, plant and equipment and finite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances occur that indicate that the carrying amount of an asset (or asset group) may not be recoverable. The Company’s impairment review requires significant management judgment including estimating the future success of product lines, future sales volumes, revenue and expense growth rates, alternative uses for the assets and estimated proceeds from the disposal of the assets. The Company conducts quarterly reviews of idle and underutilized equipment, and reviews business plans for possible impairment indicators. Impairment is indicated when the carrying amount of the asset (or asset group) exceeds its estimated future undiscounted cash flows and the impairment is viewed as other than temporary. When impairment is indicated, an impairment charge is recorded for the difference between the asset’s book value and its estimated fair value. Depending on the asset, estimated fair value may be determined either by use of a discounted cash flow model or by reference to estimated selling values of assets in similar condition. The use of different assumptions would increase or decrease the estimated fair value of assets and would increase or decrease any impairment measurement. 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. The impairment was determined using the present value of cash flows method and was primarily a result of the recently updated (lowered) financial outlook for the O reporting unit, related to a recent shift in strategic focus within the Curation Foods business segment. The impairment charge of property and equipment is included in Selling, general and administrative in the Consolidated Statements of Operations. 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. Impairment Review of Goodwill and Indefinite-Lived Intangible Asset The Company tests its goodwill and trademarks with indefinite lives annually for impairment in the fiscal fourth quarter or earlier if there are indications during a different interim period that these assets may have become impaired. On a quarterly basis, the Company considers the need to update its most recent annual tests for possible impairment of its indefinite-lived intangible assets and goodwill, based on management’s assessment of changes in its business and other economic factors since the most recent annual evaluation. Such changes, if significant or material, could indicate a need to update the most recent annual tests for impairment of the indefinite-lived intangible assets during the current period. The results of these tests could lead to write-downs of the carrying values of these assets in the current period. With respect to goodwill, 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, cash flow from operating activities, market capitalization, litigation, and stock price. If the result of a qualitative test indicates a potential for impairment of a reporting unit, a quantitative test is performed. 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 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. Under this approach, which requires significant judgments, the Company estimates the future cash flows of each reporting unit and discounts these cash flows at a rate of return that reflects their relative risk and rate of return an outside investor could expect to earn. The cash flows used in the DCF method are consistent with those the Company uses in its internal planning, which gives consideration to actual business trends experienced, and the broader business strategy for the long term. 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 52 Ta ble of Contents 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 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. The Company uses the income approach to estimate the fair value of its trademarks. This approach requires significant judgments in determining the royalty rates and the assets’ estimated cash flows as well as the appropriate discount rates applied to those cash flows to determine fair value. Changes in such estimates or the use of alternative assumptions could produce different results. During fiscal year 2020, the Company recorded an impairment charge of $ 1.1 million and $ 3.5 million related to its O and Yucatan Foods trademarks, respectively. The Company also recorded an impairment charge of $ 5.2 million and $ 2.7 million related to its O and Yucatan Foods goodwill, respectively. The O impairment charges were primarily a result of the recently updated (lowered) financial outlook for the O reporting unit, related to a recent shift in strategic focus within the Curation Foods business segment. The Yucatan Foods impairment charges were primarily a result of an increase in the Yucatan Foods carrying value and an increase in the discount rate, as a result of uncertainty in forecasting the effects of COVID-19 and general economic uncertainties. 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 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 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. 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 In the third quarter of fiscal year 2019, the Company recalled five SKUs of Eat Smart single-serve Salad Shake-Ups™. In the fourth quarter of fiscal year 2019, the Company submitted a product recall claim. 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 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. 53 Ta ble of Contents Income Taxes 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. The Company maintains valuation allowances when it is likely that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the Company’s income tax provision in the period of change. In determining whether a valuation allowance is warranted, the Company takes into account such factors as prior earnings history, expected future earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset, carryback and carryforward periods and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. In addition to valuation allowances, the Company establishes accruals for uncertain tax positions. The tax-contingency accruals are adjusted in light of changing facts and circumstances, such as the progress of tax audits, case law and emerging legislation. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. The Company’s effective tax rate includes the impact of tax-contingency accruals as considered appropriate by management. A number of years may elapse before a particular matter, for which the Company has accrued, is audited and finally resolved. The number of years with open tax audits varies by jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes its tax-contingency accruals are adequate to address known tax contingencies. Favorable resolution of such matters could be recognized as a reduction to the Company’s effective tax rate in the year of resolution. Unfavorable settlement of any particular issue could increase the Company's effective tax rate in the year of resolution. Any resolution of a tax issue may require the use of cash in the year of resolution. The Company’s tax-contingency accruals are recorded in Other accrued liabilities in the accompanying Consolidated Balance Sheets. Per Share Information Accounting guidance requires the presentation of basic and diluted earnings per share. Basic earnings per share excludes any dilutive effects of options, warrants and convertible securities and is computed using the weighted average number of common shares outstanding. Diluted earnings per share reflect the potential dilution as if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted common equivalent shares consist of stock options and restricted stock units, calculated using the treasury stock method. The following table sets forth the computation of diluted net loss per share: Year Ended (in thousands, except per share amounts) May 29, 2022 May 30, 2021 May 31, 2020 Numerator: Net loss $ ( 97,431 ) $ ( 32,665 ) $ ( 38,191 ) Denominator: 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 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. 54 Ta ble of Contents Research and Development Expenses Costs related to both research and development contracts and Company-funded research is included in research and development expenses. Research and development costs are primarily comprised of salaries and related benefits, supplies, travel expenses, consulting expenses and corporate allocations. Accounting for Stock-Based Compensation The Company’s stock-based awards include stock option grants and RSUs. The Company records compensation expense for stock-based awards issued to employees and directors in exchange for services provided based on the estimated fair value of the awards on their grant dates and is recognized over the required service periods, generally the vesting period. The estimated fair value for stock options, which determines the Company’s calculation of stock-based compensation expense, is based on the Black-Scholes option pricing model. The use of Black-Scholes requires the Company to make estimates and assumptions, such as expected volatility, expected term, and risk-free interest rate. RSUs are valued at the closing market price of the Company’s common stock on the date of grant. The Company uses the straight-line single option method to calculate and recognize the fair value of stock-based compensation arrangements. Employee Savings and Investment Plans The Company sponsors a 401(k) plan (“Landec Plan”), which is available to all full-time Landec employees and allows participants to contribute from 1% to 50 % of their salaries, up to the Internal Revenue Service limitation into designated investment funds. The Company matches 100 % on the first 3 % and 50 % on the next 2 % contributed by an employee. Employee and Company contributions are fully vested at the time of the contributions. The Company retains the right, by action of the Board of Directors, to amend, modify, or terminate the plan. For fiscal years 2022, 2021 and 2020, the Company contributed $ 1.4 million, $ 1.1 million and $ 1.1 million , respectively, to the Landec Plan. Fair Value Measurements The Company uses fair value measurement accounting for financial assets and liabilities and for financial instruments and certain other items measured at fair value. The Company has elected the fair value option for its investment in a non-public company. The Company has not elected the fair value option for any of its other eligible financial assets or liabilities. Applicable accounting guidance establishes a three-tier hierarchy for fair value measurements, which prioritizes the inputs used in measuring fair value as follows: Level 1 – observable inputs such as quoted prices for identical instruments in active markets. Level 2 – inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data. 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 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 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 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. 55 Ta ble of Contents 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) Revenue growth rates 7 % ( 6.9 %) Expense growth rates 0 % to 8 % ( 5.5 %) Discount rates 10 % 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. 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): Fair Value at May 29, 2022 Fair Value at May 30, 2021 Assets: Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 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 Total assets $ — $ — $ 1,027 $ — $ — $ 45,615 Liabilities: Interest rate swap contracts $ — $ — $ — $ — $ 1,736 $ — Total liabilities $ — $ — $ — $ — $ 1,736 $ — The following table reflects the fair value roll forward reconciliation of Level 3 assets and liabilities measured at fair value for the twelve months ended May 29, 2022 (in thousands): Windset Investment Balance as of May 30, 2021 $ 45,100 Sale of Investment in non-public company ( 45,100 ) Balance as of May 29, 2022 $ — 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. 56 Ta ble of Contents This restatement reflected in the tables below results from corrections by us 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; (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; and (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. 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 ASSETS 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 LIABILITIES 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 57 Ta ble of Contents 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 ) 58 Ta ble of Contents 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 ) 59 Ta ble of Contents 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 Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity (In thousands) 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 60 Ta ble of Contents 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 ) Inventories ( 11,910 ) — ( 11,910 ) Prepaid expenses and other current assets ( 1,448 ) — ( 1,448 ) Accounts payable 13,055 452 13,507 Accrued compensation ( 3,849 ) 1,822 ( 2,027 ) Other accrued liabilities ( 4,195 ) 4,125 ( 70 ) 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 61 Ta ble of Contents 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 Numerator: Net loss $ ( 12,850 ) $ ( 236 ) $ ( 13,086 ) $ ( 60,768 ) $ ( 348 ) $ ( 61,116 ) Denominator: 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 ) 62 Ta ble of Contents 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 Other Total Total restructuring costs, As reported $ 271 $ 5,344 $ 250 $ 5,865 Adjustment ( 271 ) ( 124 ) ( 200 ) ( 595 ) Total restructuring costs, As restated $ — $ 5,220 $ 50 $ 5,270 63 Ta ble of Contents (In thousands) Nine Months Ended February 27, 2022 Lifecore Curation Foods Other Total Total restructuring costs, As reported $ 271 $ 5,810 $ 2,325 $ 8,406 Adjustment ( 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 ASSETS 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 LIABILITIES 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: 64 Ta ble of Contents 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 ) 2. Investment in Non-public Company Windset On February 15, 2011, Curation Foods entered into a share purchase agreement (the “Windset Purchase Agreement”) with Windset. Pursuant to the Windset Purchase Agreement, Curation Foods purchased from Windset 150,000 Senior A preferred shares for $ 15.0 million and 201 common shares for $ 201 . On July 15, 2014, Curation Foods increased its investment in Windset by purchasing from the Newell Capital Corporation an additional 68 common shares and 51,211 junior preferred shares of Windset for $ 11.0 million. After this purchase, the Company’s common shares represented a 26.9 % ownership interest in Windset. The Senior A preferred shares yielded a cash dividend of 7.5 % annually. The dividend was payable within 90 days of each anniversary of the execution of the Windset Purchase Agreement. The non-voting junior preferred stock did not yield a dividend unless declared by the Board of Directors of Windset and no such dividend has been declared. The Shareholders’ Agreement between Curation Foods and Windset, as amended on March 15, 2017, included a put and call option (the “Put and Call Option”), which was exercisable on or after March 31, 2022, whereby Curation Foods could exercise the put to sell its common, Senior A preferred shares, and junior preferred shares to Windset, or Windset could exercise the call to purchase those shares from Curation Foods, in either case, at a price equal to 26.9 % of the fair market value of Windset’s common shares, plus the liquidation value of the preferred shares of $ 20.1 million ($ 15.0 million for the Senior A preferred shares and $ 5.1 million for the junior preferred shares). Under the terms of the arrangement with Windset, the Company was entitled to designate one of five members on the Board of Directors of Windset. On October 29, 2014, Curation Foods further increased its investment in Windset by purchasing 70,000 shares of Senior B preferred shares for $ 7.0 million. The Senior B preferred shares paid an annual dividend of 7.5 % on the amount outstanding at each anniversary date of the Windset Purchase Agreement. The Senior B preferred shares purchased by Curation Foods had a put feature whereby Curation Foods could sell back to Windset the Senior B preferred shares for $ 7.0 million at any time after October 29, 2017. During the fourth quarter of fiscal year 2019, the Company exercised its put feature and sold the 70,000 shares of Senior B preferred shares back to Windset for $ 7.0 million. The investment in Windset does not qualify for equity method accounting as the investment does not meet the criteria of in-substance common stock due to returns through the annual dividend on the non-voting senior preferred shares that were not available to the common stock holders. As the put and call options required all of the various shares to be put or called in equal proportions, the Company has deemed that the investment, in substance, should be treated as a single security for purposes of accounting. The fair value of the Company’s investment in Windset was determined utilizing the Windset Purchase Agreement’s put/call calculation for value and a discounted cash flow model based on projections developed by Windset that were reviewed by Landec, and considers the put and call conversion options. These features impact the duration of the cash flows utilized to derive the estimated fair values of the investment. These two discounted cash flow models' estimate for fair value are then weighted. 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. 65 Ta ble of Contents 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. 3. Property and Equipment Property and equipment consists of the following (in thousands): Years of Useful Life Year Ended May 29, 2022 May 30, 2021 Land $ 3,710 $ 3,670 Buildings 15 - 40 60,271 47,880 Leasehold improvements 3 - 15 6,793 6,465 Computers, capitalized software, machinery, equipment and autos 3 - 25 88,936 71,832 Furniture and fixtures 3 - 7 2,290 2,513 Construction in process 22,935 31,383 Gross property and equipment 184,935 163,743 Less accumulated depreciation and amortization ( 54,500 ) ( 43,457 ) Property and equipment, net $ 130,435 $ 120,286 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 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. Amortization related to capitalized software was $ 0.5 million, $ 0.4 million, and $ 0.3 million for fiscal years ended May 29, 2022, May 30, 2021 and May 31, 2020, respectively. The unamortized computer software costs as of May 29, 2022 and May 30, 2021 were $ 1.9 million and $ 1.9 million, respectively. Capitalized interest was $ 0.4 million, $ 0.3 million, and $ 0.4 million for fiscal years ended May 29, 2022, May 30, 2021 and May 31, 2020, respectively. 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 66 Ta ble of Contents 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 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. 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 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 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. 4. Goodwill and Intangible Assets Goodwill The following table presents the changes in goodwill during fiscal 2022 and fiscal 2021 (in thousands): 2022 2021 Balance at beginning of year $ 33,916 $ 33,916 Impairment ( 20,035 ) — Balance at end of year $ 13,881 $ 33,916 We have determined that the Eat Smart, Yucatan Foods, O , and Lifecore are the appropriate reporting units for testing goodwill for impairment. 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 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. 67 Ta ble of Contents Intangible Assets As of May 29, 2022 and May 30, 2021, the Company's intangible assets consisted of the following (in thousands): May 29, 2022 May 30, 2021 Amortization Period (years) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Customer relationships 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 Lifecore $ 4,200 $ — $ 4,200 $ — O (Curation Foods) 500 — 500 — Yucatan Foods (Curation Foods) 3,700 — 12,400 — Total trademarks/tradenames $ 8,400 $ — $ 17,100 $ — Total intangible assets $ 23,100 7,550 $ 31,800 $ 6,168 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. The amortization expense for each year presented are as follows (in thousands): Fiscal year 2023 $ 1,100 Fiscal year 2024 1,100 Fiscal year 2025 1,100 Fiscal year 2026 1,100 Fiscal year 2027 1,100 Total $ 5,500 As discussed in Note 1, the Company recognized an impairment of the customer relationships in the Curation Foods business segment (in the O reporting unit) of $ 0.5 million during the year ended May 31, 2020. 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. 5. Stock-based Compensation and Stockholders’ Equity Common Stock and Stock Option Plans On October 16, 2019, following stockholder approval at the Annual Meeting of Stockholders of the Company, the 2019 Stock Incentive Plan (the “Plan”) became effective and replaced the Company’s 2013 Stock Incentive Plan (the “2013 Plan”). Employees (including officers), consultants and directors of the Company and its subsidiaries and affiliates are eligible to participate in the Plan. 68 Ta ble of Contents The Plan provides for the grant of stock options (both nonstatutory and incentive stock options), stock grants, stock units and stock appreciation rights. Awards under the Plan will be evidenced by an agreement with the Plan participants and 2.0 million shares of the Company’s Common Stock (“Shares”) were initially available for award under the Plan. Under the Plan, no recipient may receive awards during any fiscal year that exceeds the following amounts: (i) stock options covering in excess of 500,000 Shares in the aggregate; (ii) stock grants and stock units covering in excess of 250,000 Shares in the aggregate; or (iii) stock appreciation rights covering more than 500,000 Shares in the aggregate. In addition, awards to non-employee directors are discretionary. However, a non-employee director may not be granted awards in excess of an aggregate fair market value of $ 120,000 during any fiscal year. The exercise price of the options is the fair market value of the Company’s Common Stock on the date the options are granted. As of May 29, 2022, 1,700,911 options to purchase shares and restricted stock units (“RSUs”) were outstanding. On October 10, 2013, following stockholder approval at the Annual Meeting of Stockholders of the Company, the 2013 Plan became effective and replaced the Company’s 2009 Stock Incentive Plan. Employees (including officers), consultants and directors of the Company and its subsidiaries and affiliates were eligible to participate in the 2013 Plan. The 2013 Plan provided for the grant of stock options (both nonstatutory and incentive stock options), stock grants, stock units and stock appreciation rights. 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. At May 29, 2022, the Company had 3.7 million common shares reserved for future issuance under Landec stock incentive plans. Convertible Preferred Stock The Company has authorized 2.0 million shares of preferred stock, and as of May 29, 2022 has no outstanding preferred stock. Grant Date Fair Value The Company uses the Black-Scholes option pricing model to calculate the grant date fair value of stock option awards. The use of an option pricing model requires the Company to make estimates and assumptions, including the expected stock price volatility, expected life of option awards, risk-free interest rate, and expected dividend yield which have a significant impact on the fair value estimates. As of May 29, 2022, May 30, 2021 and May 31, 2020, the fair value of stock option grants was estimated using the following weighted average assumptions: Year Ended May 29, 2022 May 30, 2021 May 31, 2020 Weighted-average grant date fair value $ 2.62 $ 2.37 $ 2.55 Assumptions: Expected life (in years) 2.80 3.36 3.50 Risk-free interest rate 0.45 % 0.23 % 1.01 % Volatility 33 % 33 % 31 % Dividend yield — % — % — % 69 Ta ble of Contents Stock-Based Compensation Activity A summary of the activity under the Company’s stock option plans as of May 29, 2022 and changes during the fiscal year then ended is presented below: Options Outstanding Weighted-Average Exercise Price Per Share Total Intrinsic Value of Options Exercised Weighted-Average Remaining Contractual Term in Years Aggregate Intrinsic Value Options outstanding at May 26, 2019 2,000,096 $ 12.94 Options granted 435,000 $ 10.42 Options exercised ( 163,333 ) $ 11.16 $ 169,066 Options forfeited ( 55,806 ) $ 13.08 Options expired ( 499,599 ) $ 14.04 Options outstanding at May 31, 2020 1,716,358 $ 12.15 Options granted 682,600 $ 9.66 Options exercised — $ — $ — Options forfeited ( 127,714 ) $ 9.93 Options expired ( 437,227 ) $ 13.42 Options outstanding at May 30, 2021 1,834,017 $ 11.07 Options granted 803,000 $ 11.79 Options exercised ( 161,415 ) $ 9.69 $ 304,211 Options forfeited ( 205,746 ) $ 10.96 Options expired ( 322,170 ) $ 13.31 Options outstanding at May 29, 2022 1,947,686 $ 11.13 4.72 $ 310,682 Options exercisable at May 29, 2022 986,594 $ 10.96 3.73 $ 195,247 70 Ta ble of Contents 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: Restricted Stock Units Outstanding Weighted-Average Grant Date Fair Value Per Share Restricted stock units/awards outstanding at May 26, 2019 428,427 $ 12.80 Granted 296,527 $ 9.79 Vested ( 124,045 ) $ 11.82 Forfeited ( 131,361 ) $ 12.49 Restricted stock units/awards outstanding at May 31, 2020 469,548 $ 11.24 Granted 188,225 $ 10.13 Vested ( 146,197 ) $ 11.69 Forfeited ( 31,180 ) $ 10.60 Restricted stock units/awards outstanding at May 30, 2021 480,396 $ 10.71 Granted 105,858 $ 11.98 Vested ( 228,568 ) $ 11.41 Forfeited ( 63,087 ) $ 10.70 Restricted stock units/awards outstanding at May 29, 2022 294,599 $ 10.55 Stock-Based Compensation Expense The following table summarizes the stock-based compensation by statement of operations line item: Year Ended (in thousands) May 29, 2022 May 30, 2021 May 31, 2020 Continuing operations: Cost of sales $ 314 $ 348 $ 118 Research and development 202 223 158 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 As of May 29, 2022, there was $ 2.7 million of total unrecognized compensation expense related to unvested equity compensation awards granted under the Landec stock incentive plans. Total expense is expected to be recognized over the weighted-average period of 1.90 years for stock options and 1.71 years for restricted stock unit awards. Stock Repurchase Plan On July 14, 2010, the Board of Directors of the Company approved the establishment of a stock repurchase plan which allows for the repurchase of up to $ 10.0 million of the Company’s Common Stock. The Company may repurchase its Common Stock from time to time in open market purchases or in privately negotiated transactions. The timing and actual number of shares repurchased is at the discretion of management of the Company and will depend on a variety of factors, including stock price, corporate and regulatory requirements, market conditions, the relative attractiveness of other capital deployment opportunities and other corporate priorities. The stock repurchase program does not obligate Landec to acquire any amount of its Common Stock and the program may be modified, suspended or terminated at any time at the Company’s discretion without prior notice. During fiscal years 2022, 2021 and 2020, the Company did no t purchase any shares on the open market. 71 Ta ble of Contents 6. Debt 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. 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. On October 25, 2019, the Company entered into the Sixth Amendment to the Credit Agreement, which increased the Term Loan to $ 120.0 million and decreased the revolver to $ 100.0 million. Both the Revolver and the Term Loan mature on October 25, 2022, with the Term Loan requiring quarterly principal payments of $ 3.0 million and the remainder continuing to be due at maturity. On March 19, 2020, the Company entered into the Seventh Amendment to the Credit Agreement (the “Seventh Amendment”), which among other changes, retroactively increased the maximum Total Leverage Ratio (as defined in the Credit Agreement as the ratio of the Company’s total indebtedness on such date to the Company’s consolidated EBITDA for the period of four consecutive fiscal quarters ended on or most recently prior to such date) to 5.75 to 1.00 for the fiscal quarter ended February 23, 2020, which decreases back to 5.00 to 1.00 for the fiscal quarter ending May 31, 2020. The maximum Total Leverage Ratio thereafter decreases by 25 basis points each subsequent fiscal quarter thereafter, until it reaches 3.50 for the fiscal quarter ending November 28, 2021, and then remains fixed through maturity. The Seventh Amendment also introduced additional financial covenants that remain in effect through May 31, 2020, including minimum cumulative monthly Unadjusted EBITDA thresholds and maximum capital expenditures, as well as additional reporting requirements and frequencies. Interest on both the Revolver and the Term Loan continues to be based upon the Company’s Total Leverage Ratio, at a per annum rate of either (i) the prime rate plus a spread of between 0.25 % and 3.00 % or (ii) the Eurodollar rate plus a spread of between 1.25 % and 4.00 %. On July 15, 2020, the Company entered into the Eighth Amendment to the Credit Agreement (the “Eighth Amendment”), which among other things, (i) modified the definition of EBITDA to increase the limit on permitted exclusions for certain unusual, extraordinary or one-time cash items for each fiscal quarter ending on or after February 28, 2021, to a maximum of 20 % of EBITDA, and (ii) restricted the Company from making Capital Expenditures over certain thresholds. Interest continues to be based on the Company’s Total Leverage Ratio, at a revised per annum Applicable Rate of either (i) the prime rate plus a spread of between 0.75 % and 3.50 % or (ii) the Eurodollar rate plus a spread of between 1.75 % and 4.50 %, plus, in each case, a commitment fee, as applicable, of between 0.15 % and 0.55 %, as further described in the Eighth Amendment. On December 31, 2020, the Company refinanced its existing Term Loan and Revolver by entering into two separate Credit Agreements (the "New Credit Agreements") with BMO and Goldman Sachs Specialty Lending Group, L.P. (“Goldman”) and Guggenheim Credit Services, LLC ("Guggenheim"), as lenders (collectively, the “Refinance Lenders”). Pursuant to the credit agreement related to the revolving credit facility, BMO has provided the Company, Curation Foods and Lifecore, as co-borrowers, with an up to $ 75.0 million revolving line of credit (the “Refinance Revolver”) and serves as administrative agent of the Refinance Revolver. Pursuant to the credit agreement related to the term loan, Goldman and Guggenheim have provided the Company, Curation Foods and Lifecore, as co-borrowers, with an up to $ 170.0 million term loan facility (split equally between Goldman and Guggenheim) (the “Refinance Term Loan”) and Goldman serves as administrative agent of the Refinance Term Loan. The Refinance Revolver and Refinance Term Loan are guaranteed, and secured by, substantially all of the Company’s and the Company's direct and indirect subsidiaries' assets. The Refinance Term Loan matures on December 31, 2025. The Refinance Revolver matures on December 31, 2025 or, if the Refinance Term Loan remains outstanding on such date, ninety (90) days prior to the maturity date of the Refinance Term Loan (on October 2, 2025). The Refinance Term Loan provides for principal payments by the Company of 5 % per annum, payable quarterly in arrears in equal installments, commencing on March 30, 2023, with the remainder due at maturity. Interest on the Refinance Revolver is based upon the Company’s average availability, at a per annum rate of either (i) LIBOR rate plus a spread of between 2.00 % and 2.50 % or (ii) base rate plus a spread of between 1.00 % and 1.50 %, plus a commitment fee, as applicable, of 0.375 %. 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 provides that in the event of a prepayment of any amount other than the scheduled installments within twelve months after the 72 Ta ble of Contents 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. In connection with the New Credit Agreements, the Company incurred debt issuance costs from the lender and third-parties of $ 10.3 million. Concurrent with the close of the New Credit Agreements, the Company repaid all outstanding borrowings under the current Credit Agreement, and terminated the Credit Agreement. 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 %. As of May 29, 2022, the Refinance Term Loan had an interest rate of 9.5 %. As of May 29, 2022, the Company was in compliance with all financial covenants and had no events of default under the New Credit Agreements. Long-term debt consists of the following as of May 29, 2022 and May 30, 2021 (in thousands): May 29, 2022 May 30, 2021 Term loan $ 103,712 $ 170,000 Total principal amount of long-term debt 103,712 170,000 Less: unamortized debt issuance costs ( 5,534 ) ( 5,098 ) Total long-term debt, net of unamortized debt issuance costs 98,178 164,902 Less: current portion of long-term debt, net ( 599 ) — Long-term debt, net $ 97,579 $ 164,902 The future minimum principal payments of the Company’s debt for each year presented are as follows (in thousands): Term Loan Fiscal year 2023 2,125 Fiscal year 2024 8,469 Fiscal year 2025 8,422 Fiscal year 2026 84,696 Total $ 103,712 Derivative Instruments On November 1, 2016, the Company entered into an interest rate swap contract (the “2016 Swap”) with BMO at a notional amount of $ 50.0 million. 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. 73 Ta ble of Contents 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 %. The 2019 Swap will mature in November 2022 and its value is de minimis. 7. Income Taxes The (benefit) provision for income taxes from continuing operations consisted of the following: (in thousands) Year Ended May 29, 2022 May 30, 2021 May 31, 2020 Current: Federal $ — $ ( 38 ) $ ( 7,723 ) State 23 74 38 Foreign 356 56 56 Total 379 92 ( 7,629 ) Deferred: Federal ( 5,562 ) ( 1,536 ) ( 983 ) State ( 656 ) ( 459 ) ( 162 ) Total ( 6,218 ) ( 1,995 ) ( 1,145 ) 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. federal income tax rate as follows: (in thousands) Year Ended May 29, 2022 May 30, 2021 May 31, 2020 Tax at U.S. statutory rate (1) $ ( 10,904 ) $ ( 2,409 ) $ ( 6,435 ) State income taxes, net of federal benefit ( 1,639 ) ( 304 ) ( 1,048 ) Tax reform/CARES Act — — ( 2,770 ) Change in valuation allowance 6,040 2,667 2,014 Tax credit carryforwards ( 436 ) ( 606 ) ( 613 ) Other compensation-related activity 234 249 334 Impairment of goodwill 2,347 — 647 Foreign rate differential ( 496 ) ( 1,414 ) ( 986 ) Other ( 985 ) ( 86 ) 83 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 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 74 Ta ble of Contents 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. 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. Additionally, the CARES Act accelerates the Company’s ability to receive refunds of alternative minimum tax credits generated in prior tax years. In fiscal year 2020, the Company was able to benefit net operating losses generated in fiscal year 2019 and fiscal year 2020 at the 21% federal statutory rate in effect for those years and carried back to tax years with a 35% federal statutory rate thus recognizing a tax provision benefit of $ 2.8 million during the year ended May 31, 2020. Significant components of deferred tax assets and liabilities reported in the accompanying Consolidated Balance Sheets consisted of the following: (in thousands) Year Ended May 29, 2022 May 30, 2021 Deferred tax assets: Accruals and reserves $ 867 $ 3,366 Net operating loss carryforwards 28,558 21,916 Stock-based compensation 880 1,123 Research and AMT credit carryforwards 5,611 5,150 Lease liability 2,874 5,902 Limitations on business interest expense 4,245 2,411 Goodwill and other indefinite life intangibles 1,426 — Other 750 927 Gross deferred tax assets 45,211 40,795 Valuation allowance ( 31,848 ) ( 10,460 ) Net deferred tax assets 13,363 30,335 Deferred tax liabilities: Depreciation and amortization ( 11,495 ) ( 16,600 ) Goodwill and other indefinite life intangibles — ( 13,406 ) Basis difference in investment in non-public company — ( 1,382 ) Right of use asset ( 2,100 ) ( 5,087 ) Deferred tax liabilities ( 13,595 ) ( 36,475 ) Net deferred tax liabilities $ ( 232 ) $ ( 6,140 ) 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 75 Ta ble of Contents losses expire in different periods through 2032, if not utilized. The Company acquired additional net operating losses through the acquisition of Greenline. Utilization of these acquired net operating losses in a specific year is limited due to the “change in ownership” provision of the Internal Revenue Code of 1986 and similar state provisions. The net operating losses presented above for federal and state purposes is net of any such limitation. 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 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. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: (in thousands) Year Ended May 29, 2022 May 30, 2021 May 31, 2020 Unrecognized tax benefits – beginning of the period $ 942 $ 827 $ 616 Gross increases – tax positions in prior period — — 101 Gross decreases – tax positions in prior period — — ( 11 ) Gross increases – current-period tax positions 83 115 121 Unrecognized tax benefits – end of the period $ 1,025 $ 942 $ 827 As of May 29, 2022 the total amount of net unrecognized tax benefits is $ 1.0 million, of which, $ 0.9 million, if recognized, would affect the effective tax rate. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. The total amount of penalties and interest is not material as of May 29, 2022. The Company does not expect its unrecognized tax benefits to decrease within the next twelve months. Due to tax attribute carryforwards, the Company is subject to examination for tax years 2013 forward for U.S. tax purposes. The Company was also subject to examination in various state jurisdictions for tax years 2012 forward, none of which were individually material. 8. Leases Operating Leases The Company has entered into various non-cancellable operating lease agreements for manufacturing and distribution facilities, vehicles, equipment and office space. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. 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 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. Finance Leases On September 3, 2015, Lifecore leased an 80,950 square foot building in Chaska, MN, two miles from its current facility. The initial term of the lease is seven years with two five-year renewal options. 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 29, 2022 and 76 Ta ble of Contents 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. 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. The components of lease cost were as follows: Year Ended Year Ended (In thousands, except term and discount rate) May 29, 2022 May 30, 2021 Finance lease cost: Amortization of leased assets $ 113 $ 117 Interest on lease liabilities 335 348 Operating lease cost 2,212 2,291 Variable lease cost and other 134 15 Sublease income ( 90 ) ( 90 ) Total lease cost $ 2,704 $ 2,681 Weighted-average remaining lease term: Operating leases 7.41 14.35 Finance leases 0.59 1.60 Weighted-average discount rate: Operating leases 4.78 % 5.00 % Finance leases 10.00 % 10.00 % The Company’s leases have original lease periods ending between 2022 and 2033. The Company’s maturity analysis of operating and finance lease liabilities as of May 29, 2022 are as follows: (in thousands) Operating Leases Finance Leases Total 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 Total lease payments 13,705 3,485 17,190 Less: interest ( 1,991 ) ( 190 ) ( 2,181 ) Present value of lease liabilities 11,714 3,295 15,009 Less: current obligation of lease liabilities ( 1,743 ) ( 3,283 ) ( 5,026 ) Total long-term lease liabilities $ 9,971 $ 12 $ 9,983 Supplemental cash flow information related to leases are as follows: Year Ended Year Ended (in thousands) May 29, 2022 May 30, 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2,454 $ 2,089 Operating cash flows from finance leases 335 348 Financing cash flows from finance leases 129 110 Lease liabilities arising from obtaining right-of-use assets: Operating leases $ 37 $ 3,137 77 Ta ble of Contents 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 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. 9. Commitments and Contingencies Purchase Commitments 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 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, 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. Claims Alleging Unfair Labor Practices Curation Foods has been the target of a union organizing campaign which has included three unsuccessful attempts to unionize Curation Foods’ Guadalupe, California processing plant. The campaign has involved a union and over 100 former and current employees of Pacific Harvest, Inc. and Rancho Harvest, Inc. (collectively “Pacific Harvest”), Curation Foods’ former labor contractors at its Guadalupe, California processing facility, bringing legal actions before various state and federal agencies, the California Superior Court, and initiating over 100 individual arbitrations against Curation Foods and Pacific Harvest. The legal actions consisted of various claims, all of which were settled in fiscal year 2017. Under the settlement agreement, the plaintiffs were to be paid in three installments. The Company and Pacific Harvest each agreed to pay one half of the settlement payments. The Company paid the entire first two installments and Pacific Harvest agreed to reimburse the Company for its $ 2.1 million portion. As of May 30, 2021, the outstanding balance of the receivable was $ 1.2 million. The Company makes ongoing estimates relating to the collectability of receivables. A reserve is established for any note when there is reasonable doubt that the principal or interest will be collected in full. The Company may write-off uncollectable receivables after collection efforts are exhausted. 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 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). Compliance Matters On December 1, 2018, the Company acquired all of the voting interests and substantially all of the assets of Yucatan Foods (the “Yucatan Acquisition”), which owns a guacamole manufacturing plant in Mexico called Procesadora Tanok, S de RL de C.V. (“Tanok”). On October 21, 2019, the Company retained Latham & Watkins, LLP to conduct an internal investigation relating to potential environmental and Foreign Corrupt Practices Act (“FCPA”) compliance matters associated with regulatory permitting at the Tanok facility in Mexico. The Company subsequently disclosed to the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) the conduct under investigation, and these agencies have commenced an investigation. 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 78 Ta ble of Contents 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 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. On November 3, 2020, the Company filed an answer and cross-complaint against the Plaintiff and other parties for fraud, indemnification, and other claims, and seeking no less than $ 80 million in damages. At this stage, the ultimate outcome of these or any other investigations, legal actions, or potential claims that may arise from the matters under investigation is uncertain and the Company cannot reasonably predict the timing or outcomes, or estimate the amount of net loss after indemnification, or its effect, if any, on its financial statements. Separately, there are indemnification provisions in the purchase agreement that may allow the Company to recover costs for fraud or breach of the purchase agreement from the seller. Because recovery of amounts are contingent upon a legal settlement, no amounts have been recorded as recoverable costs through May 29, 2022. During the third quarter of fiscal year 2021 the Company reached a resolution with its insurance carrier that resulted in a recovery of $ 1.6 million which is recorded as a reduction of selling, general and administrative in the Consolidated Statements of Operations for the fiscal year ended May 30, 2021. Absent further material developments in the investigation, the Company does not expect additional material recovery from the insurance carrier. Other Litigation Matters On February 10, 2020, a complaint was filed against Curation Foods in the United States District Court for the Northern District of Georgia, Printpack, Inc. v. Curation Foods, Inc. , alleging breach of contract pertaining to Curation Foods’ purchase of certain poly film packaging from the plaintiff. The plaintiff was seeking an unspecified amount of monetary damages, litigation expenses, and interest. Through several negotiations and discussions between the Company and Printpack, an agreement was reached and a Notice of Voluntary Dismissal was filed on May 29, 2020. This dismisses the case against the Company with no other further legal action required. On February 14, 2020, a complaint was filed against the Company, Curation Foods, the Company's current CEO Albert Bolles, and the Company’s former CFO Gregory Skinner (collectively, the “Landec Parties”), and other defendants in Santa Barbara County Superior Court, entitled Pacific Harvest, Inc., et al. v. Curation Foods, Inc., et al. (No. 20CV00920). The case was brought by Pacific Harvest, Inc. (“Pacific”) and Rancho Harvest, Inc. (“Rancho”), two related companies that have provided labor and employee staffing services to Curation Foods. Among other things, Pacific and Rancho allege that Curation Foods wrongfully decreased its use of Pacific’s staffing services and misappropriated Pacific’s trade secrets when Curation Foods increased its use of another staffing company and transitioned Pacific’s employees to the other staffing company. Pacific and Rancho also allege that Curation Foods breached agreements between the parties related to a loan from Curation Foods, on which Pacific and Rancho have ceased making payments. Pacific Harvest and Rancho asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, intentional interference with contracts and potential economic advantage, misappropriation of trade secrets under California’s Uniform Trade Secrets Act, business practices in violation of California Unfair Competition Law, fraud, defamation, violation of California Usury Law, breach of fiduciary duty, and declaratory relief regarding the parties’ rights and obligations under certain of the parties’ contracts. On March 15, 2021, the Company executed a settlement agreement related to this matter. In connection with the settlement agreement, the Company recorded a $ 1.8 million charge after considering the total settlement amount and insurance recoveries, and this amount is included in Legal settlement charge in the Consolidated Statements of Operations for the fiscal year ended May 30, 2021. The final settlement amount was paid to the plaintiffs by Curation Foods, its co-defendants, and insurers on April 14, 2021. 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. 79 Ta ble of Contents 10. 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 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 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 its Yucatan production facility in Mexico. The following table presents our property and equipment, net by geographic region (in millions): Year Ended Property and equipment, net May 29, 2022 May 30, 2021 United States $ 115.0 $ 105.3 Mexico 15.4 15.0 Total property and equipment, net $ 130.4 $ 120.3 The Company’s international sales by geography are based on the billing address of the customer and were as follows (in millions): Year Ended May 29, 2022 May 30, 2021 May 31, 2020 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 80 Ta ble of Contents Operations by segment consisted of the following (in thousands): Year Ended May 29, 2022 Lifecore Curation Foods Other Total Product sales $ 109,320 $ 76,466 $ — $ 185,786 Gross profit 43,746 6,624 — 50,370 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 Depreciation and amortization 6,673 4,004 80 10,757 Capital expenditures 23,552 2,674 — 26,226 Interest income 72 — 9 81 Interest expense, net — ( 299 ) ( 17,058 ) ( 17,357 ) Income tax (benefit) expense 5,266 ( 13,831 ) 2,726 ( 5,839 ) Corporate overhead allocation 4,484 1,092 ( 5,576 ) — Year Ended May 30, 2021 Product sales $ 98,087 $ 73,459 $ — $ 171,546 Gross profit 38,265 12,206 — 50,471 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 Depreciation and amortization 5,502 2,972 97 8,571 Capital expenditures 16,222 3,042 — 19,264 Interest income — — 48 48 Interest expense, net — ( 545 ) ( 9,842 ) ( 10,387 ) Income tax (benefit) expense 4,568 ( 3,020 ) ( 3,451 ) ( 1,903 ) Corporate overhead allocation 4,773 946 ( 5,719 ) — Year Ended May 31, 2020 Product sales $ 85,833 $ 74,233 $ — $ 160,066 Gross profit 32,883 6,504 — 39,387 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 Depreciation and amortization 5,008 3,282 96 8,386 Capital expenditures 10,612 1,472 130 12,214 Interest income — 6 66 72 Interest expense, net — ( 547 ) ( 4,099 ) ( 4,646 ) Income tax (benefit) expense 3,346 ( 8,686 ) ( 3,434 ) ( 8,774 ) Corporate overhead allocation 4,190 868 ( 5,058 ) — 81 Ta ble of Contents 11. Quarterly Consolidated Financial Information (unaudited) The following is a summary of the unaudited quarterly results of operations for fiscal years 2022 and 2012 (in thousands, except for per share amounts): As restated Fiscal Year 2022 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Annual Product sales $ 41,632 $ 43,452 $ 53,074 $ 47,628 $ 185,786 Gross profit 10,403 14,635 13,220 12,112 50,370 Net (loss) income from continuing operations ( 7,214 ) 3,675 ( 8,301 ) ( 34,436 ) ( 46,276 ) 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 Product sales $ 41,995 $ 39,945 $ 44,690 $ 44,916 $ 171,546 Gross profit 7,849 13,601 14,441 14,580 50,471 Net (loss) income from continuing operations ( 4,957 ) ( 2,367 ) ( 1,465 ) ( 780 ) ( 9,569 ) 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. 12. Discontinued Operations 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. 82 Ta ble of Contents 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): Year Ended May 29, 2022 May 30, 2021 May 31, 2020 Product sales $ 186,755 $ 372,615 $ 430,300 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 ) Income tax benefit 121 5,898 4,342 Loss from discontinued operations, net of tax $ ( 51,155 ) $ ( 23,096 ) $ ( 16,320 ) 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. 83 Ta ble of Contents 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): May 30, 2021 ASSETS 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 LIABILITIES 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 13. Restructuring Costs During fiscal year 2020, the Company announced a 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. This includes a reduction-in-force, a reduction in leased office spaces and the sale of non-strategic assets. The following table summarizes the restructuring costs recognized in the Company’s Consolidated Statements of Operations, by Business Segment for the fiscal year ended May 29, 2022: (In thousands) Year Ended May 29, 2022 Curation Foods Other Total Asset write-off costs $ 3,693 $ — $ 3,693 Employee severance and benefit costs 371 — 371 Lease costs 2,072 — 2,072 Other restructuring costs 289 2,536 2,825 Total restructuring costs $ 6,425 $ 2,536 $ 8,961 84 Ta ble of Contents Asset Write-off Costs Asset write-off costs are costs related to impairment or disposal of property and equipment as part of 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. These costs are 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, 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, and Los Angeles, California office. Lease Costs 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. 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 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 29, 2022, excluding discontinued operations : (In thousands) Curation Foods Other Total Asset write-off costs $ 7,552 $ 418 $ 7,970 Employee severance and benefit costs 559 784 1,343 Lease costs 2,218 26 2,244 Other restructuring costs 323 4,898 5,221 Total restructuring costs $ 10,652 $ 6,126 $ 16,778 The total expected cost related to the restructuring plan is approxim ately $ 23.0 million. 85 Ta ble of Contents 14. Subsequent Events 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. The Company expects to record a gain of $ 2.0 in the first quarter of fiscal year 2023 related to this transaction. 86 Ta ble of Contents (b) Index of Exhibits. Exhibit 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. 3.2 Amended and Restated By-Laws of the Registrant, incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on October 16, 2012. 3.3 Amendment No. 1 to By-Laws of the Registrant, incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 7, 2019. 3.4 Amendment No. 2 to By-Laws of the Registrant, incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 24, 2019. 3.5 Amendment No. 3 to By-Laws of the Registrant, incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on October 19, 2020. 4.1+ Description of Capital Stock. 10.1 Form of Indemnification Agreement incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 17, 2018. 10.2* Landec Corporation Nonqualified Deferred Compensation Plan, incorporated herein by reference to the Registrant’s Annual Report on Form 10-K filed on August 7, 2013. 10.3* Landec Corporation 2013 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K filed on October 11, 2013. 10.4* First Amendment to the Landec Corporation 2013 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed on October 23, 2017. 10.5* Form of Stock Grant Agreement for the Landec Corporation 2013 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K filed on October 11, 2013. 10.6* Form of Notice of Stock Option Grant and Stock Option Agreement for the Landec Corporation 2013 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K filed on October 11, 2013. 10.7* Form of Stock Unit Agreement for the Landec Corporation 2013 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K filed on October 11, 2013. 10.8* Form of Notice of Grant of Stock Appreciation Right and Stock Appreciation Right Agreement for the Landec Corporation 2013 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K filed on October 11, 2013. 10.9* Landec Corporation 2019 Stock Incentive Plan, including the forms of awards attached thereto, incorporated herein by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K filed on October 21, 2019. 2019 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K dated October 21, 2019. 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. 87 Ta ble of Contents Exhibit 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. 10.12 Settlement Agreement amongst the Registrant, Apio, Inc., Rancho Harvest, Inc. and Pacific Harvest, Inc. 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. 10.13 Purchase Agreement dated as of April 26, 2018, by and between Apio, Inc. Michael R. Mills, San Ysidro Farms, Inc., B&D Farms, Mahoney Brothers, and RCM Farms, LLC, incorporated herein by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on May 2, 2018. 10.14 Letter Agreement dated May 22, 2018 among the Registrant, Nelson Obus and Wynnefield Capital, Inc. incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 25, 2018. 10.15 Capital Contribution and Partnership Interest and Stock Purchase Agreement dated December 1, 2018 by and among Apio, Inc., a Delaware Corporation, Yucatan Foods, L.P., a Delaware limited partnership (“Yucatan”), Camden Fruit Corporation, a California corporation, Landec Corporation, a Delaware corporation, in its capacity as guarantor, Ardeshir Haerizadeh, as an equityholder representative, and the equityholders of Camden and Yucatan, incorporated herein by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on December 6, 2018. 10.16 Landec Corporation Executive Change in Control Severance Plan. 10.17 Credit and Guaranty Agreement, dated December 31, 2020, by and among Landec Corporation, Curation Foods, Inc. and Lifecore Biomedical, Inc., as borrowers, certain other subsidiary parties thereto, as guarantors, Goldman Sachs Specialty Lending Group, L.P., as lender, administrative agent and collateral agent, and certain affiliates of Guggenheim Credit Services, LLC, as lenders, incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 5, 2021. 10.18 Credit Agreement, dated December 31, 2020, by and among Landec Corporation, Curation Foods, Inc. and Lifecore Biomedical, Inc., as borrowers, certain other subsidiary parties thereto, as guarantors, and BMO Harris Bank., N.A., a slender and administrative agent, incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on January 5, 2021. 10.19 Pledge and Security Agreement, dated December 31, 2020, by and among Landec Corporation, Curation Foods, Inc., Lifecore Biomedical, Inc. and certain other subsidiary parties thereto, as grantors, and Goldman Sachs Specialty Lending Group, L.P., as collateral agent, incorporated herein by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on January 5, 2021 10.2 Pledge and Security Agreement, dated December 31, 2020, by and among Landec Corporation, Curation Foods, Inc., Lifecore Biomedical, Inc. and certain other subsidiary parties thereto, as grantors, and BMO Harris Bank., N.A., as administrative agent, incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on January 5, 2021. 10.21 Employment Agreement, dated January 18, 2021, by and between Landec Corporation and John Morberg, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 20, 2021. 10.22 Separation and General Release by and between Landec Corporation and Brian McLaughlin, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 2, 2021. 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 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 . 88 Ta ble of Contents Exhibit 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. Bolles, Ph.D., effective as of July 23, 2020, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on October 7, 2020. . 21.1+ Subsidiaries of the Registrant 23.1+ Consent of Independent Registered Public Accounting Firm 24.1+ Power of Attorney – See signature page 31.1+ CEO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 31.2+ CFO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 32.1** CEO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002 32.2** CFO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002 101.INS** XBRL Instance 101.SCH** XBRL Taxonomy Extension Schema 101.CAL** XBRL Taxonomy Extension Calculation 101.DEF** XBRL Taxonomy Extension Definition 101.LAB** XBRL Taxonomy Extension Labels 101.PRE** XBRL Taxonomy Extension Presentation * Represents a management contract or compensatory plan or arrangement ** Information is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing + Filed herewith. 89 Ta ble of Contents SIGNATURES 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 September 13, 2022. LANDEC CORPORATION By: /s/ John D. Morberg John D. Morberg Chief Financial Officer (Principal Financial and Accounting Officer) POWER OF ATTORNEY 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/ James G. Hall James G. Hall President and Chief Executive Officer (Principal Executive Officer) and Director September 13, 2022 /s/ John D. Morberg John D. Morberg Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) September 13, 2022 /s/ Craig Barbarosh Craig Barbarosh Director September 13, 2022 /s/ Deborah Carosella Deborah Carosella Director September 13, 2022 /s/ Raymond Diradoorian Raymond Diradoorian Director September 13, 2022 /s/ Jeffrey Edwards Jeffrey Edwards Director September 13, 2022 /s/ Katrina Houde Katrina Houde Director September 13, 2022 /s/ Nelson Obus Nelson Obus Director September 13, 2022 /s/ Tonia Pankopf Tonia Pankopf Director September 13, 2022 /s/ Andrew K. Powell Andrew K. Powell Director September 13, 2022 /s/ Joshua E Schechter Joshua E. Schechter Director September 13, 2022 /s/ Catherine A. Sohn Catherine A. Sohn Director September 13, 2022 90