LIFECORE BIOMEDICAL, INC. DE 10-Q

Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15(b) of 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 Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the 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 have concluded that our disclosure controls and procedures were not effective as of November 24, 2024, due to the material weaknesses in internal control over financial reporting that were disclosed in the 2024 Annual Report. The Company is in the process of determining a plan for the remediation of the material weaknesses in internal control over financial reporting. Management’s Plan for Remediation of the Material Weaknesses Management, with the oversight of the Audit Committee, is committed to remediating the control deficiencies. The remediation efforts are intended to both address the identified material weaknesses and to enhance our overall control environment. Steps taken by management to date include the following: • Engaged a third-party consultant to assist with remediation efforts, including enhancing our risk assessment, evaluating gaps in current processes and controls, and developing a remediation plan. • We have committed to adding a sufficient number of qualified personnel within our accounting and finance team with the appropriate qualified experience in financial reporting, consolidations, technical accounting, and application of U.S. GAAP. In addition to the above efforts undertaken, the Company plans to initiate the following steps intended to remediate the material weaknesses described above and strengthen its internal control over financial reporting: • Performing an updated risk assessment responsive to changes in the business and establishing processes to update timely for future changes. -28- Table of Contents • Implementing new and enhanced controls and procedures responsive to our risk assessment at an appropriate level of precision related to management review and the completeness of controls required to support the financial reporting framework. • Conducting broad-based training over the application of the 2013 COSO Framework for key process owners and control operators. • Implementing a Section 302 sub-certification program by business leadership and process owners to reinforce the Company’s culture of compliance. • Evaluating accounting policies and procedures by performing a detailed review of the Company’s policies against GAAP and SEC reporting checklists. • Establishing and implementing a SOX Steering Committee. • Implementing a process to identify and maintain the information required to support the functioning of internal controls over financial reporting. • Enhancing reviews of non-recurring transactions, including preparing technical accounting memos and consulting with subject matter experts, as needed. • Expanding the Internal Audit function to perform timely assessment of design and operating effectiveness of controls and evaluation of remediation of control deficiencies. The material weaknesses will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective. As we continue to evaluate operating effectiveness and monitor improvements to our internal control over financial reporting, we may take additional measures to address control deficiencies or modify the remediation plan described above. Changes in Internal Control over Financial Reporting Except for the remediation planning efforts described above, there have been no changes in our system of internal control over financial reporting during the three months ended November 24, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. -29- Table of Contents PART II. OTHER INFORMATION Item 1. Legal Proceedings In the ordinary course of business, the Company is involved in various legal proceedings and claims. For further discussion, see the disclosures contained in Note 1 – Organization, Basis of Presentation, and Summary of Significant Accounting Policies - Legal Contingencies, which are incorporated herein by reference.