What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-04-03 compared with 2025-01-02 · 649 added, 473 removed, 210 unchanged (84% of the section changed)

Financial statements (unaudited)

Condensed Consolidated Balance Sheets as of February 23, 2025 and May 26, 2024

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended February 23, 2025 and February 25, 2024

Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended February 23, 2025 and February 25, 2024

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended February 23, 2025 and February 25, 2024

Notes to the Condensed Consolidated Financial Statements

Organization, basis of presentation and summary of significant accounting policies

Income or loss per share

Discontinued operations

Accounts and note receivable

Inventories, net

Property, plant, and equipment, net

Accrued expenses and other liabilities

Restructuring costs

Commitments and contingencies

Stock-based compensation

Fair value measurements

Related party transactions

Subsequent events

LIFECORE BIOMEDICAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

November 24, 2024 May 26, 2024

(in thousands, except share and per share amounts) February 23,

ASSETS (unaudited)

Current assets:

Cash and cash equivalents $ 5,417 $ 8,462

Accounts receivable, less allowance for credit losses 20,177 20,343

Accounts receivable, net of allowance for credit losses of $ 897 and $ 711

11,364 16,985

Accounts receivable, related party 16,136 10,099

Current portion of note receivable

Contract assets 6,150 4,069

Inventories, net 34,596 39,979

1 unchanged sentence

Total current assets 84,211 81,033

Property, plant, and equipment, net 150,576 149,165

Property, plant, and equipment, net of accumulated depreciation of $ 55,498 and $ 50,334

128,223 149,165

Operating lease right-of-use assets 2,233 2,442

Goodwill 13,881 13,881

Intangible assets, net 4,200 4,200

Other long-term assets 2,567 3,239

Intangible assets, net of accumulated amortization of $ 3,700

Other assets 4,945 3,239

Total assets $ 237,693 $ 253,960

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable $ 7,405 $ 16,334

Accrued compensation 4,631 6,165

Other accrued liabilities 9,866 9,354

Current portion of lease liabilities 4,116 4,133

Deferred revenues 426 1,088

Deferred revenues, related party 511 1,025

Current portion of long-term debt, related party 773 773

Current portion of operating lease liabilities

Accrued expenses and other current liabilities

19,745 18,575

Total current liabilities 31,116 38,872

Long-term debt, less current portion, net, related party 110,528 100,819

Revolving credit facility 8,500 19,691

Debt, net of current portion

Debt, net of current portion, related party

115,663 100,819

Debt derivative liability, related party 23,900 25,400

Long-term lease liabilities, less current portion 7,423 4,944

Deferred taxes, net 552 543

Deferred revenues, less current portion, related party 4,880 4,703

Other non-current liabilities 5,153 5,086

Operating lease liabilities, net of current portion

Other liabilities

Total liabilities 190,267 200,058

Commitments and contingencies, see note 9

Convertible Preferred Stock, $ 0.001 par value;

Series A Redeemable Convertible Preferred Stock, $ 0.001 par value;

2,000,000 shares authorized;

3 unchanged sentences

Common Stock, $ 0.001 par value;

75,000,000 and 50,000,000 shares authorized;

75,000,000 shares authorized;

37,025,331 and 30,562,961 shares issued and outstanding

2 unchanged sentences

Total stockholders’ equity

Total liabilities, redeemable convertible preferred stock, and stockholders’ equity

$ 237,693 $ 253,960

Total Liabilities, Convertible Preferred Stock, and Stockholders’ Equity $ 255,386 $ 253,960

See accompanying notes to the condensed consolidated financial statements

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) (In thousands, except share and per share values)

Three Months Ended Six Months Ended

November 24, 2024 November 26, 2023 November 24, 2024 November 26, 2023

Three months ended Nine months ended

(in thousands)

2025 February 25,

2024 February 23,

2025 February 25,

Revenues $ 16,233 $ 17,054 $ 52,560 $ 54,528

3 unchanged sentences

Gross profit 9,845 11,894 26,316 24,578

Operating costs and expenses:

Research and development 1,924 2,098 4,110 4,244

Selling, general, and administrative 11,119 9,342 25,904 18,538

Total operating costs and expenses 13,043 11,440 30,014 22,782

Research and development expenses 2,045 2,170 6,155 6,414

Selling, general, and administrative expenses 10,093 9,848 35,066 28,237

Loss on sale or disposal of assets, net of portion classified as cost of sales

6,851 — 6,895 2

Restructuring (recovery) costs

( 115 ) 771 772 918

Operating loss ( 9,029 ) ( 895 ) ( 22,572 ) ( 10,993 )

1 unchanged sentence

Interest expense, related party ( 4,840 ) ( 3,368 ) ( 13,756 ) ( 9,754 )

( 4,623 ) ( 3,241 ) ( 9,023 ) ( 6,385 )

Change in fair value of debt derivative liability, related party ( 600 ) 21,000 1,500 41,900

Other expense, net ( 304 ) ( 967 ) ( 507 ) ( 1,138 )

Other income (expense), net

333 ( 814 ) ( 174 ) ( 1,950 )

(Loss) income from continuing operations before income taxes ( 14,777 ) 15,002 ( 37,560 ) 16,657

Income tax (expense) benefit ( 43 ) 65 ( 18 ) ( 23 )

Income tax benefit (expense) 8 ( 217 ) ( 10 ) ( 240 )

(Loss) income from continuing operations ( 14,769 ) 14,785 ( 37,570 ) 16,417

(Loss) income from discontinued operations — ( 24 ) — 1,832

Income from discontinued operations — 847 — 2,679

Net (loss) income $ ( 14,769 ) $ 15,632 $ ( 37,570 ) $ 19,096

See accompanying notes to the condensed consolidated financial statements

LIFECORE BIOMEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

Three months ended Nine months ended

(in thousands, except share and per share amounts)

2025 February 25,

2024 February 23,

2025 February 25,

Net (loss) income $ ( 14,769 ) $ 15,632 $ ( 37,570 ) $ 19,096

Preferred stock dividends ( 2,466 ) — ( 2,466 ) —

Accretion of preferred stock to redemption value

( 144 ) — ( 144 ) —

Fair value of conversion ratio improvement to preferred stockholders

— — ( 2,132 ) —

(Loss) income available to common stockholders $ ( 17,379 ) $ 15,632 $ ( 42,312 ) $ 19,096

7 unchanged sentences

Diluted (loss) income per share $ ( 0.47 ) $ 0.42 $ ( 1.24 ) $ 0.52

Shares used in income or loss per share computations:

Weighted average shares outstanding:

Basic 37,020,570 30,487,596 34,080,062 30,449,673

2 unchanged sentences

LIFECORE BIOMEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY OR DEFICIT

(Unaudited) (Dollars in thousands)

Convertible Preferred Stock Common Stock Additional

Capital Accumulated Deficit

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Redeemable Convertible Preferred Stock

Common Stock Additional

capital Accumulated deficit Total

stockholders’

equity (deficit)

Shares Amount Shares

Balance at May 26, 2024 42,461 $ 42,587 30,562,961 $ 30 $ 177,808 $ ( 166,523 ) $ 11,315

(dollars in thousands) Shares Amount Shares Amount

Balance at November 24, 2024 44,068 $ 44,312 36,980,790 $ 37 $ 204,736 $ ( 189,324 ) $ 15,449

Issuance of stock, net of fees — — — — 16 — 16

Dividends paid-in-kind 826 837 — — ( 837 ) — ( 837 )

Accretion of issuance costs — 48 — — ( 48 ) — ( 48 )

Issuance of stock under stock plans, net of shares withheld — — 335,294 1 — — 1

Payments related to employee stock plans — — — — ( 589 ) — ( 589 )

Accretion to redemption value — 48 — — ( 48 ) — ( 48 )

Settlement of stock-based awards — — 44,541 — ( 134 ) — ( 134 )

Stock-based compensation — — — — 2,552 — 2,552

Net loss — — — — — ( 14,769 ) ( 14,769 )

Balance at August 25, 2024 43,257 $ 43,441 30,898,255 $ 31 $ 178,784 $ ( 182,753 ) $ ( 3,938 )

Issuance of common stock, net of fees — 5,928,775 6 23,835 — 23,841

Conversion ratio improvement provided to preferred stockholders — — — — 2,132 ( 2,132 ) —

Balance at February 23, 2025 44,894 $ 45,197 37,025,331 $ 37 $ 206,285 $ ( 204,093 ) $ 2,229

Balance at May 26, 2024 42,461 $ 42,587 30,562,961 $ 31 $ 177,807 $ ( 166,523 ) $ 11,315

Issuance of stock, net of fees — — 5,928,775 6 23,852 — 23,858

Dividends paid-in-kind 2,433 2,466 — — ( 2,466 ) — ( 2,466 )

Accretion of issuance costs — 144 — — ( 144 ) — ( 144 )

Issuance of stock under stock plans, net of shares withheld — — 153,760 — — — —

Payments related to employee stock plans — — — — ( 385 ) — ( 385 )

Settlement of stock-based awards — — 533,595 — ( 1,107 ) — ( 1,107 )

Stock-based compensation — — — — 8,343 — 8,343

Net loss — — — — — ( 37,570 ) ( 37,570 )

Balance at November 24, 2024 44,068 $ 44,311 36,980,790 $ 37 $ 206,868 $ ( 191,456 ) $ 15,449

Balance at February 23, 2025 44,894 $ 45,197 37,025,331 $ 37 $ 206,285 $ ( 204,093 ) $ 2,229

See accompanying notes to the condensed consolidated financial statements

LIFECORE BIOMEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY OR DEFICIT (CONTINUED)

(Unaudited) (Dollars in thousands)

Convertible Preferred Stock Common Stock Additional

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)

Redeemable Convertible Preferred Stock

Common Stock Additional

Accumulated deficit

1 unchanged sentence

equity (deficit)

Shares Amount Shares Amount

Balance at May 28, 2023 39,420 $ 39,318 30,322,169 $ 30 $ 174,276 $ ( 178,536 ) $ ( 4,230 )

(dollars in thousands) Shares Amount Shares Amount

Balance at November 26, 2023 40,912 $ 40,924 30,458,621 $ 30 $ 176,463 $ ( 175,072 ) $ 1,421

Issuance of stock, net of fees — — — — — — —

Dividends paid-in-kind 767 776 — — ( 776 ) — ( 776 )

Accretion of issuance costs — 48 — — ( 48 ) — ( 48 )

Issuance of stock under stock plans, net of shares withheld — — 133,469 — 724 — 724

Payments related to employee stock plans — — — — ( 45 ) — ( 45 )

Accretion to redemption value — 48 — — ( 48 ) — ( 48 )

Settlement of stock-based awards — — 88,315 — ( 42 ) — ( 42 )

Stock-based compensation — — — — 1,499 — 1,499

Net loss — — — — — ( 10,754 ) ( 10,754 )

Balance at August 27, 2023 40,159 $ 40,114 30,455,638 $ 30 $ 175,700 $ ( 189,290 ) $ ( 13,560 )

— — — — — 15,632 15,632

Balance at February 25, 2024 41,679 $ 41,748 30,546,936 $ 30 $ 177,096 $ ( 159,440 ) $ 17,686

Balance at May 28, 2023 39,420 $ 39,318 30,322,169 $ 30 $ 174,276 $ ( 178,536 ) $ ( 4,230 )

Issuance of stock, net of fees — — — — —

Dividends paid-in-kind 2,259 2,287 — — ( 2,287 ) — ( 2,287 )

Accretion of issuance costs — 47 — — ( 47 ) — ( 47 )

Issuance of stock under stock plans, net of shares withheld — — 2,983 — — — —

Payments related to employee stock plans — — — — ( 12 ) — ( 12 )

Accretion to redemption value — 143 — — ( 143 ) — ( 143 )

Settlement of stock-based awards — — 224,767 — 625 — 625

Stock-based compensation — — — — 4,625 — 4,625

Net income — — — — — 14,218 14,218

Balance at November 26, 2023 40,912 $ 40,924 30,458,621 $ 30 $ 176,463 $ ( 175,072 ) $ 1,421

— — — — — 19,096 19,096

Balance at February 25, 2024 41,679 $ 41,748 30,546,936 $ 30 $ 177,096 $ ( 159,440 ) $ 17,686

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

(Unaudited) (In thousands)

Six Months Ended

November 24, 2024 November 26, 2023

Nine months ended

2025 February 25,

Cash flows from operating activities:

3 unchanged sentences

Stock-based compensation 8,343 4,603

Deferred taxes 9 36

Non-cash interest expense 825 518

Non-cash interest expense, related party

Non-cash interest expense 1,404 812

Change in debt derivative liability, related party ( 1,500 ) ( 41,900 )

(Reversal of) provision for expected credit losses ( 150 ) 37

Net loss on disposal of property, plant, and equipment 49 19

Loss on sale or disposal of assets

Other, net 193 1,706

Changes in operating assets and liabilities:

Accounts receivable ( 602 ) ( 2,711 )

Accounts receivable, related party 684 ( 6,861 )

Contract assets

( 2,081 ) 213

Inventories 5,384 1,171

1 unchanged sentence

Accounts payable ( 2,714 ) ( 4,617 )

Accrued compensation ( 1,534 ) ( 779 )

Other liabilities 64 ( 2,776 )

Deferred revenues ( 662 ) 421

Deferred revenues, related party ( 514 ) 3,778

Accrued expenses and other liabilities ( 2,420 ) ( 4,183 )

Net cash used in operating activities ( 5,553 ) ( 8,459 )

1 unchanged sentence

Purchases of property, plant, and equipment ( 11,318 ) ( 15,682 )

Proceeds from sale of equipment

Net cash used in investing activities ( 4,318 ) ( 15,682 )

1 unchanged sentence

Issuance of common stock, net of fees 23,858 —

Payments of debt principal ( 699 ) ( 482 )

Payments for debt issuance costs ( 435 ) ( 124 )

Proceeds from noncurrent customer deposit — 5,000

Proceeds from exercise of stock options — 724

2 unchanged sentences

Payments related to employee stock plans ( 1,107 ) ( 99 )

Principal payments on equipment financing, related party ( 386 ) ( 193 )

Principal payments on finance leases ( 82 ) ( 57 )

Net cash provided by financing activities 6,826 8,123

Net increase (decrease) in cash and cash equivalents 993 ( 15,870 )

Net decrease in cash and cash equivalents

( 3,045 ) ( 16,018 )

Cash and cash equivalents, beginning of period 8,462 19,091

Cash and cash equivalents, end of period $ 5,417 $ 3,073

Supplemental disclosure of cash flow information:

Cash paid for income taxes 127 70

Cash paid for interest 1,298 1,255

Purchases of property, plant, and equipment in accounts payable 5,700 8,132

Increases to property, plant and equipment financed by finance leases 2,737 —

Capitalization of non-cash interest to property, plant, and equipment 1,456 2,063

Dividends paid in kind on Convertible Preferred Stock 1,628 1,511

See accompanying notes to the condensed consolidated financial statements.

4 unchanged sentences

Lifecore Biomedical, Inc.

and its subsidiaries (“Lifecore” or the “Company”) is a fully integrated contract development and manufacturing organization (“CDMO”) that offers capabilities in the development, fill and finish of complex sterile injectable pharmaceutical products in syringes, vials, and cartridges.

Discontinued Operations

The Company previously operated a natural food company through its wholly-owned subsidiary, Curation Foods, Inc.

(“Curation Foods”).

During the year ended May 28, 2023, the Company entered into agreements for the sale or disposition of all subsidiaries within the Curation Foods business, which was completed during the year ended May 26, 2024.

Upon completion of the dispositions, it ceased to operate the Curation Foods business.

and its subsidiaries (“Lifecore” or the “Company”) is a fully integrated contract development and manufacturing organization (“CDMO”) that provides services in the development, fill and finish of complex sterile injectable pharmaceutical products in syringes, vials, and cartridges.

Basis of presentation

The accompanying condensed consolidated balance sheet as of May 26, 2024, which has been derived from audited financial statements, and the accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S.

Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X.

In the opinion of management, all adjustments (consisting of normal recurring accruals) have been made which are necessary to present fairly the financial position of the Company at November 24, 2024, and the results of operations and cash flows for all periods presented.

Although the Company believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information normally included in financial statements and related footnotes prepared following GAAP have been condensed or omitted per the rules and regulations of the Securities and Exchange Commission (the “SEC”).

Generally Accepted Accounting Principles (“GAAP”) for interim financial information, the instructions for Form 10-Q and Regulation S-X of the Securities and Exchange Commission (the “SEC”).

In the opinion of management, all adjustments (consisting of normal recurring accruals) have been made which are necessary to present fairly the financial position of the Company at February 23, 2025, and the results of operations and cash flows for all periods presented.

The accompanying financial data should be reviewed in conjunction with the audited financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended May 26, 2024.

3 unchanged sentences

The results reported in these interim condensed consolidated financial statements are not necessarily indicative of the results that may be reported for the entire year.

During the second quarter of 2025, the Company changed the basis of presentation for certain items to improve the usefulness of the financial statements, none of which had a material effect to any of the periods presented:

(i) in Note 8 – Inventories, the Company previously presented certain adjustments used to state inventory at net realizable value as a standalone caption titled "inventory reserve" and now presents those adjustments directly to raw materials;

(ii) in the balance sheet and Note 9 – Property, Plant and Equipment, net, the Company previously presented the carrying value of certain types of software not yet placed into service as a component of other long-term assets and now presents those within the construction in process category of property, plant and equipment, with additions to that software presented as purchases of property, plant and equipment on the statement of cash flows;

(iii) in the statement of cash flows, non-cash interest for periods ended in fiscal year 2024 were previously presented within both depreciation and amortization as well as the change in working capital and are now presented as a standalone caption for non-cash interest;

and (iv) on the balance sheet, certain types of accrued liabilities were previously presented as accrued other liabilities and are now presented as accrued compensation, with changes to those liabilities reclassified to the applicable lines within operating activities on the statement of cash flows.

Statement of Comprehensive Income or Loss

In accordance with Financial Accounting Standards Board Accounting Standard Codification Topic 220, Comprehensive Income, a statement of comprehensive income has not been included as the Company has no items of other comprehensive income or loss.

Comprehensive income or loss is the same as net income or loss for all periods presented.

During the nine months ended February 23, 2025, the Company changed the basis of presentation for certain items to simplify and improve the usefulness of the financial statements, none of which had a material effect to any of the periods presented.

Basis of consolidation

8 unchanged sentences

and the valuation of the debt derivative liability.

For these areas, it is at least reasonably possible that a change in estimate could occur over the next twelve months.

These estimates involve the consideration of complex factors and require management to make judgments.

1 unchanged sentence

The actual results may differ from management’s estimates.

Supplemental disclosures of cash flow information

The following table presents supplemental cash flow information:

Nine months ended

2025 February 25,

Cash paid for income taxes $ 127 $ 70

Cash paid for interest 1,886 2,065

Non-cash investing and financing activities:

Purchases of property, plant, and equipment in accounts payable 1,643 5,433

Non-cash portion of sale of property, plant and equipment via note receivable

Increases to property, plant and equipment from finance leases

Capitalization of non-cash interest to property, plant, and equipment 2,254 3,250

Dividends paid-in-kind on Redeemable Convertible Preferred Stock

Reportable segments

1 unchanged sentence

This is based on the objectives of the business and how our chief operating decision maker, the President and Chief Executive Officer, regularly reviews and manages the business, monitors operating performance and allocates resources.

Concentrations of Risk

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

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

The Company maintains cash in U.S.

bank accounts, the balance of which may at times exceed the federally insured limit.

During the three and six months ended November 24, 2024 and November 26, 2023, the company had significant sales concentrations with certain customers.

The Company also had accounts receivable concentrations at November 24, 2024 and May 26, 2024.

See Note 2 – Revenue and Note 7 – Accounts Receivable, for the quantification of these concentrations.

Per Share Information

Income or loss per share

Accounting guidance requires the presentation of basic and diluted earnings per share.

1 unchanged sentence

Diluted earnings per share reflects the potential dilution as if securities or other contracts to issue the Company’s common stock, par value $ 0.001 per share (“Common Stock”) were exercised or converted into Common Stock.

The Company’s diluted common equivalent shares consist of convertible preferred stock, stock options, restricted stock units (“RSUs”), and performance share units (“PSUs”).

The Company’s diluted common equivalent shares consist of Redeemable Convertible Preferred Stock, stock options, restricted stock units (“RSUs”), and performance share units (“PSUs”).

Dilution related to stock options, RSUs and PSUs is calculated using the treasury stock method, which includes the assumed repurchase of common shares from cash received upon stock option exercises, and unrecognized compensation expense.

The potential dilutive effect of the Convertible Preferred Stock is calculated using the if-converted method assuming the conversion as of the earliest period reported or at the date of issuance, if later, but are excluded if their effect is anti-dilutive.

The potential dilutive effect of the Redeemable Convertible Preferred Stock is calculated using the if-converted method assuming the conversion as of the earliest period reported or at the date of issuance, if later, but are excluded if their effect is anti-dilutive.

Fair value measurements

5 unchanged sentences

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

Related Party Transactions

The Company has reflected related party balances on the face of its financial statements beginning in the period which Alcon Research, LLC (“Alcon”) became a related party, which was as of May 22, 2023 at the time Alcon provided financing to the Company.

Prior to providing financing, and continuing subsequently, Alcon was a customer of the Company.

Refer to Note 10 – Long-term Debt for additional discussion on the Company’s debt agreement with Alcon.

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

The following table disaggregates revenues by major product lines and services:

Three Months Ended Six Months Ended

November 24, 2024 November 26, 2023 November 24, 2024 November 26, 2023

CDMO $ 25,610 $ 23,678 $ 45,790 $ 45,217

HA manufacturing 6,954 6,472 11,479 9,455

Total $ 32,564 $ 30,150 $ 57,269 $ 54,672

The following table disaggregates revenues by the timing of revenue recognition:

Three Months Ended Six Months Ended

November 24, 2024 November 26, 2023 November 24, 2024 November 26, 2023

Revenues recognized over time $ 6,122 $ 5,827 $ 11,998 $ 12,208

Revenues recognized at a point in time 26,442 24,323 45,271 42,464

Total $ 32,564 $ 30,150 $ 57,269 $ 54,672

During the three months ended November 24, 2024, the Company had revenues concentrations of 10% or greater from three customers, accounting for 40 %, 18 %, and 18 %.

During the three months ended November 26, 2023, the Company had revenues concentrations of 10% or greater from three customers, accounting for 32 %, 22 %, and 22 %.

During the six months ended November 24, 2024, the Company had revenues concentrations of 10% or greater from three customers, accounting for 37 %, 20 % and 14 %.

During the six months ended November 26, 2023, the Company had revenues concentrations of 10% or greater from three customers, accounting for 31 %, 22 %, and 14 %.

Restructuring Costs

During fiscal year 2020, the Company commenced a multi-year restructuring plan to improve profitability and to redesign the organization to focus on strategic assets so that it could compete and thrive as a standalone public CDMO business.

We expect to finish incurring expenses under this plan by the end of fiscal year 2025.

Types of costs associated with this plan include:

(i) employee termination costs, as a result of multiple reductions-in-force;

and (ii) other costs related to the sale of non-strategic assets, including contract termination costs and asset write-offs.

These costs are included within selling, general, and administrative costs on the consolidated statements of operations.

The following table presents the restructuring expenses incurred during the period:

Three Months Ended Six Months Ended

November 24, 2024 November 26, 2023 November 24, 2024 November 26, 2023

Employee termination costs $ 396 $ 157 $ 835 $ 139

Other costs 8 — 52 8

Total restructuring costs $ 404 $ 157 $ 887 $ 147

The following table presents a reconciliation of the beginning and ending restructuring liability balances:

Employee termination costs Other costs Total

Balance as of May 26, 2024 $ 217 $ 4,554 $ 4,771

Expense 835 52 887

Payments ( 725 ) ( 58 ) ( 783 )

Balance as of November 24, 2024 $ 327 $ 4,548 $ 4,875

The following table presents actual and expected expenses incurred or to be incurred under the plan:

Incurred through November 24, 2024 Expected remaining costs to be incurred Total expected costs

Employee termination costs $ 5,168 $ 513 $ 5,681

Other costs 13,438 — 13,438

Asset write-off costs not included in the restructuring liability 13,893 — 13,893

Total restructuring costs $ 32,499 $ 513 $ 33,012

Earnings Per Share

The following table sets forth the weighted average shares used in the computation of basic and diluted earnings per share:

Three Months Ended Six Months Ended

November 24, 2024 November 26, 2023 November 24, 2024 November 26, 2023

Recent accounting pronouncements

In November 2024, a new accounting standards update 2024-03 was issued that requires more detailed disclosures related to certain costs and expenses.

The guidance requires entities to disclose amounts of certain expense categories included in expense captions presented on the face of the income statement, including purchases of inventory, employee compensation, depreciation, and intangible asset amortization.

This update is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted.

The disclosure requirements may be applied either prospectively or retrospectively.

Management is currently evaluating the impact that the adoption of this update will have on its financial statements.

In December 2023, a new accounting standards update 2023-09 was issued to improve income tax disclosures.

This update includes disclosure of disaggregated information about both the effective tax rate reconciliation and income taxes paid.

This update is effective for annual periods beginning after December 15, 2024, which will be our fiscal year ending May 23, 2026, with early adoption permitted.

The amendments in this update may be applied prospectively or retrospectively.

Management is currently evaluating the impact that the adoption of this update will have on its financial statements.

In November 2023, a new accounting standards update 2023-07 was issued to enhance disclosure of significant expenses that are regularly provided to the chief operating decision maker and are included with each reported measure of segment profit and loss.

The update also specifies that companies with a single reportable segment are subject to this standard.

The update is effective for annual reporting periods beginning after December 15, 2023, which will be our fiscal year ending May 25, 2025, and interim reporting periods thereafter, with early adoption permitted.

The amendments in this update must be applied retrospectively to all periods presented.

Management is currently evaluating the impact that the adoption of this update will have on its financial statements.

Income or loss per share

The following table sets forth the weighted average shares used in the computation of basic and diluted income or loss per share:

Three months ended

Nine months ended

February 23, 2025 February 25, 2024 February 23, 2025 February 25, 2024

Weighted average shares for basic income or loss per share 37,020,570 30,487,596 34,080,062 30,449,673

Effect of dilutive securities:

Convertible preferred stock — 5,790,810 — 5,737,685

Redeemable convertible preferred stock

— 5,899,388 — 5,791,809

Stock options, RSUs and PSUs — 221,920 — 227,389

Weighted average shares for diluted income or loss per share 37,020,570 36,608,904 34,080,062 36,468,871

Due to the Company’s net loss for the three and six months ended November 24, 2024, the diluted income or loss per share is calculated using only the basic weighted average common shares outstanding and thus excludes the following, as such impact would be antidilutive:

Three Months Ended Six Months Ended

November 24, 2024 November 24, 2024

Convertible Preferred Stock 6,769,985 6,707,861

Due to the Company’s net loss for the three and nine months ended February 23, 2025, the diluted income or loss per share is calculated using only the basic weighted average common shares outstanding and thus excludes the following securities on an as-converted basis as of February 23, 2025.

Redeemable Convertible Preferred Stock

Stock options 1,418,355

2 unchanged sentences

Total 12,000,279

(1) PSUs are not considered dilutive until performance targets are met.

See Note 13 – Convertible Preferred Stock and Common Stock for more information on outstanding Convertible Preferred Stock and Note 12 – Stock-based Compensation for more information on outstanding stock options, RSUs and PSUs.

Fair Value Measurements

Cash and cash equivalents

Cash and cash equivalents represent cash in banks and highly liquid short-term investments that have maturities of three months or less when acquired.

These highly liquid short-term investments are both readily convertible to known amounts of cash and so near to their maturity that they present insignificant risk of changes in value due to changes in interest rates.

Term Loan Credit Facility and debt derivative liability

The Term Loan Credit Facility (as defined in Note 10 – Long-term Debt) contains embedded derivatives requiring bifurcation.

These embedded derivatives were initially recorded at fair value as a noncurrent liability (“debt derivative liability”) offset by a discount to the carrying value of the Term Lean Credit Facility that is being amortized to interest expense over the term of that facility.

The debt derivative liability is being subsequently remeasured at fair value every reporting period with changes in fair value recognized as a component of other expense, net.

The fair value of the debt derivative liability is estimated using a discounted cash flow model that includes annually weighted probabilities that certain call and put premiums contained in the Term Loan Credit Facility are exercised upon qualifying events of default or changes in control.

The Term Loan Credit Facility, including the embedded derivatives, has an aggregate fair value of $ 143,000 as of November 24, 2024, a Level 3 measurement.

The key inputs to the valuation model are (i) the probability and timing of a change in control event occurring over the remaining term of the debt;

and (ii) the discount rate for the valuation of that scenario, which can be influenced by in changes in the risk-free rate and the credit spread, which in turn can be influenced by the Company's credit rating as well as changes in the credit market.

Factors that can affect the estimate of fair value at each reporting date, and therefore the amount of gain or loss recorded for a particular period, include imprecision in estimating unobservable market inputs and the selection of particular methodologies and assumptions used to determine the fair value.

During the second quarter of 2025, we adjusted certain key assumptions by increasing the probability of a 2028 change in control and lowering the discount rate due to an improvement in the Company's credit rating.

Revolving Credit Facility

Outstanding borrowings under the Company's Revolving Credit Facility are carried at cost, which approximates their fair value as of November 24, 2024 and May 26, 2024, due to their short duration and variable rates of interest.

Conversion ratio improvement provided to preferred stockholders

During the three months ended November 24, 2024, we performed a non-recurring fair value measurement to record the value of a conversion ratio improvement provided to preferred stockholders as a result of the October 3, 2024 Securities Purchase Agreement referenced in Note 13 – Convertible Preferred Stock and Common Stock.

The fair value of the conversion feature was recorded as an increase to both additional paid in capital and accumulated deficit and was calculated using an as-converted method based on the contractual conversion ratio of the preferred shares and the closing price of our common stock, a level 1 measurement.

The following table summarizes the fair value of the Company’s balance sheet components that are measured at fair value on a recurring and non-recurring basis:

Type of measurement Measurement date Type of measurement

Level 1 Level 2 Level 3

Debt derivative liability Recurring November 24, 2024 $ — $ — $ 23,300

Debt derivative liability Recurring May 26, 2024 — — 25,400

Stockholders' equity:

Conversion ratio improvement provided to preferred stockholders Non- recurring October 3, 2024 2,132 — —

Key inputs used to develop the discount rate for the fair value measurements at the balance sheet dates were as follows:

November 24, 2024 May 26, 2024

Probability of change in control event 80 % 80 %

Discount rates used in change in control scenario:

Total range 18.8 % — 19.2 %

21.3 % — 22.3 %

Credit spread 14.5 %

Risk-free rate range 4.3 % — 4.7 %

4.5 % — 5.5 %

The following table reflects the roll forward reconciliation of Level 3 recurring fair value measurements:

Three Months Ended Six Months Ended

November 24, 2024 November 26, 2023 November 24, 2024 November 26, 2023

Balance at beginning of period $ 24,500 $ 64,700 $ 25,400 $ 64,900

Decrease in fair value (1)

( 1,200 ) ( 20,700 ) ( 2,100 ) ( 20,900 )

Balance at end of period $ 23,300 $ 44,000 $ 23,300 $ 44,000

(1) For the three and six months ended November 24, 2024 and November 26, 2023, the decreases in fair value are recorded in the “Change in fair value of debt derivative liability, related party” line within the condensed consolidated statement of operations.

Contract Assets and Liabilities

Contract assets primarily relate to the Company’s unconditional right to consideration for work completed but not billed at the reporting date.

Contract liabilities primarily relate to payments received from customers in advance of performance under a contract.

Description Balance Sheet Presentation November 24, 2024 May 26, 2024

Receivables not yet billed Accounts receivable, less allowance for credit losses $ 5,216 $ 3,885

Related party receivables not yet billed Accounts receivable, related party 482 184

Total contract assets $ 5,698 $ 4,069

Current Liabilities:

Advances on customer-owned equipment Other accrued liabilities $ 3,014 $ 3,509

Non related parties deferred revenue Deferred revenues 426 1,088

Related party deferred revenue Deferred revenues, related party 511 1,025

Non-Current Liabilities:

Related party deferred revenue Deferred revenues, less current portion, related party 4,880 4,703

Non-current customer deposit Other non-current liabilities 176 257

Total contract liabilities $ 9,007 $ 10,582

Revenues recognized during the three and six months ended November 24, 2024 that were included in the contract liability balance at the beginning of fiscal year 2025, were $ 328 and $ 1,911 .

We receive payments from customers based on billing schedules as established in our contracts.

The contract assets relate to our conditional right to consideration for our completed performance under the contract.

Accounts receivable are recorded when the right to consideration becomes unconditional.

Contract liabilities relate to payments received in advance of performance under the contract.

Contract liabilities are recognized as revenue as we perform under the statements of work.

Accounts Receivable

Accounts receivable balances are as follows:

November 24, 2024 May 26, 2024

Accounts receivable $ 30,864 $ 31,864

Allowance for credit losses ( 561 ) ( 711 )

Accounts receivable, less allowance for credit losses $ 30,303 $ 31,153

Gross receivable by bill type are as follows:

November 24, 2024 May 26, 2024

Billed $ 25,166 $ 27,795

Unbilled 5,698 4,069

See note 11 for more information about Series A Redeemable Convertible Preferred Stock and note 13 for more information about stock options, restricted stock units and performance share units.

Discontinued operations

The Company previously operated a food business through its wholly-owned subsidiary, Curation Foods, Inc.

(“Curation Foods”).

Upon completion of the dispositions, it ceased to operate the Curation Foods business.

Interest and income tax expense are not allocated to discontinued operations for periods presented due to their immateriality.

During the nine months ended February 25, 2024, the Company reached settlement agreements related to the Curation Foods business that resulted in the receipt of cash payments totaling $ 2,679 , which were recognized as income from discontinued operations in the nine months ended February 25, 2024.

The $ 2,679 cash received is included in net cash from operating activities on the consolidated statement of cash flows.

Accounts and note receivable

Accounts receivable

Three of the Company’s customers had accounts receivable concentrations of 10% or greater as of November 24, 2024, accounting for 33 %, 19 % and 13 % of accounts receivable.

Two of the Company’s customers had accounts receivable concentrations of 10% or greater as of May 26, 2024, accounting for 34 % and 18 %.

Two of the Company’s customers had accounts receivable concentrations of 10% or greater as of February 23, 2025, accounting for 47 % and 19 % of accounts receivable.

Two of the Company’s customers had accounts receivable concentrations of 10% or greater as of May 26, 2024, accounting for 34 % and 18 % of accounts receivable.

Changes in the allowance for credit losses related to accounts receivable are as follows:

Six Months Ended

November 24, 2024 November 26, 2023

Nine months ended

2025 February 25,

Beginning balance $ 711 $ 485

Provision (Reduction) ( 150 ) 37

Charge-offs — ( 37 )

Ending Balance $ 561 $ 508

The Company’s accounts receivable serves as part of the collateral for certain of the Company’s debt arrangements.

Refer to Note 10 – Long-term Debt for additional discussion on the Company’s debt arrangements and related collateral.

Balance at February 23, 2025 $ 897 $ 525

Factors that are currently influencing our estimate of expected credit losses includes knowledge of certain customers whose development projects are awaiting additional funding.

Note receivable

On January 7, 2025, the Company accepted a $ 10,000 note as a portion of the proceeds for the sale of the isolator-filler described in note 6.

The note matures on July 7, 2026 and may be paid in whole or in part at any time prior to maturity without penalty or premium.

Otherwise, the note is scheduled to be paid as follows:

$ 4,000 on July 7, 2025, $ 4,000 on January 7, 2026 and $ 2,000 on July 7, 2026.

The note is interest-free through July 7, 2025 and thereafter principal bears interest at the U.S.

prime rate plus 1 % until repayment.

Management concluded that interest should be imputed for the full duration of the note at an effective interest rate of 8.5 %, representing the stated rate as of February 23, 2025.

As a result, the Company recorded an initial discount of $ 410 as an offset to the noncurrent portion of the note based on its maturity date.

As of February 23, 2025, the note receivable of $ 10,000 , net of discount of $ 305 , is classified on our balance sheet as follows:

$ 8,000 as a standalone current asset and $ 1,695 as a component of other assets.

Interest income of $ 105 is included on our statement of operations within interest expense, net.

Inventories, net

2 unchanged sentences

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

Inventory costs include the purchase price of raw materials, and additionally for work in process and finished goods, direct labor costs and allocated portions of indirect labor, property, plant and equipment costs needed in the manufacturing process.

Inventories consisted of the following:

November 24, 2024 May 26, 2024

Finished goods $ 13,483 $ 14,924

4 unchanged sentences

Factors influencing inventory obsolescence include changes in demand, product life cycle, product pricing, physical deterioration, and quality concerns.

The Company’s inventory serves as part of the collateral for certain of the Company’s debt arrangements.

Refer to Note 10 – Long-term Debt for additional discussion on the Company’s debt arrangements and related collateral.

Property, plant, and equipment, net

All property, plant and equipment is located in the United States.

Property, plant, and equipment, net, consists of the following:

November 24, 2024 May 26, 2024

Land and land improvements $ 3,739 $ 3,739

4 unchanged sentences

Construction in process 40,196 39,151

Idle construction in process

Property, plant, and equipment, gross 183,721 199,499

Less accumulated depreciation and amortization ( 54,371 ) ( 50,334 )

accumulated depreciation and amortization

( 55,498 ) ( 50,334 )

Property, plant, and equipment, net $ 128,223 $ 149,165

The major components of the construction in process are related to aseptic filler production to significantly increase manufacturing capacity.

Depreciation and amortization expense for property, plant, and equipment for the three months ended November 24, 2024 and November 26, 2023 was $ 2,044 and $ 1,987 , respectively.

Depreciation and amortization expense for property, plant, and equipment for the six months ended November 24, 2024 and November 26, 2023 was $ 4,037 and $ 3,934 , respectively.

Interest is capitalized based on the average outstanding construction in process balance, excluding previously capitalized interest, using a 10 % interest rate.

Capitalized interest on construction projects was $ 745 and $ 1,094 for three months ended November 24, 2024 and November 26, 2023, respectively.

Capitalized interest on construction projects was $ 1,456 and $ 2,063 for six months ended November 24, 2024 and November 26, 2023, respectively.

Capitalized interest has decreased as we consider alternative approaches to generating cash flows from a legacy asset that has not yet generated revenue.

Property, plant, and equipment acquisitions that provide a benefit over several years, and exceed five thousand dollars, are capitalized.

The depreciation policy for property, plant, and equipment is as follows:

Depreciable Lives

Land improvements 10 — 40

Buildings and building improvements 7 — 40

Machinery and equipment 7 — 25

Transportation equipment 5 — 12

Computer hardware and software 3 — 10

Furniture, fixtures, and office equipment 5 — 10

Tools, molds, and dies 3

Long-term Debt

Long-term debt, net consists of the following:

November 24, 2024 May 26, 2024

Term loan credit facility $ 165,274 $ 157,313

Equipment financing 6,764 7,150

Total principal amount of long-term debt 172,038 164,463

unamortized debt issuance costs ( 453 ) ( 504 )

debt discount ( 60,284 ) ( 62,367 )

Total long-term debt, net of issuance costs and discount 111,301 101,592

Current portion of long-term debt, related party

On January 7, 2025, the Company entered into an agreement for the sale of the Company's previously purchased, but not yet installed, isolator-filler.

The aggregate purchase price was $ 17,000 .

Lifecore received $ 7,000 cash and paid fees of $ 752 at closing .

Lifecore also accepted a note for the remainder of the proceeds (see note 4) and recorded current and noncurrent payables of $ 800 and $ 200 , respectively, for remaining selling fees to be paid to a third-party broker.

The sale resulted in a $ 21,239 reduction in idle construction in process.

The Company recorded a loss on the sale of the equipment of $ 6,400 , which is included with other losses of $ 451 and $ 495 for the three and nine months ended February 23, 2025, respectively, in loss on sale or disposal of assets, net of portion classified as cost of sales, within the statement of operations.

The Company also recognized other losses on disposal of assets of $ 790 as cost of sales within the statement of operations.

Depreciation and amortization expense for property, plant, and equipment for the three months ended February 23, 2025 and February 25, 2024 was $ 2,076 and $ 2,006 , respectively.

Depreciation and amortization expense for property, plant, and equipment for the nine months ended February 23, 2025 and February 25, 2024 was $ 6,113 and $ 5,940 , respectively.

Accrued expenses and other current liabilities

The following table presents the components of accrued expenses and other current liabilities:

Accrued compensation

$ 5,843 $ 6,165

Long-term debt, less current portion, net, related party $ 110,528 $ 100,819

Revolving credit facility $ 8,500 $ 19,691

The future minimum principal payments under the Company’s term loan credit facility and equipment financing liability for each year presented are as follows:

Remainder of Fiscal year 2025 $ 387

Fiscal year 2026 773

Fiscal year 2027 773

Fiscal year 2028 773

Fiscal year 2029 166,047

Fiscal year 2030 773

Thereafter 2,512

Total $ 172,038

Term Loan Credit Facility

On May 22, 2023, the Company, Curation Foods, and Lifecore Biomedical Operating Company, Inc.

(the “Borrowers”), certain of the Company’s other subsidiaries, as guarantors, and Alcon Research, LLC (“Alcon”), as administrative agent, collateral agent and lender, entered into a Credit and Guaranty Agreement (the “Term Loan Credit Facility”).

The Term Loan Credit Facility refinanced in full all obligations of the Company and their subsidiaries under its prior term loan credit facility.

Upon entry into the Term Loan Credit Facility, the prior term loan credit facility was terminated and all noncompliance with debt covenants were thereby cured.

The Term Loan Credit Facility provided for up to $ 142,270 in term loans, excluding PIK interest added to the outstanding balance.

The obligations under the Term Loan Credit Facility mature on May 22, 2029, and is secured by the same collateral that secures the Revolving Credit Facility (as defined below).

As of November 24, 2024 and May 26, 2024, the Company’s effective annual interest rate under the Term Loan Credit Facility was 22.5 % for both periods.

The annual stated rate is 10.0 %.

On November 26, 2024, the Company entered into certain amendments to the Term Loan Credit Facility.

Refer to Note 17 - Subsequent Events for additional information.

Equipment Financing

On May 22, 2023, the Company entered into an equipment financing agreement with Alcon, totaling $ 7,730 .

The agreement calls for 40 quarterly principal payments of $ 193 , plus 6 % interest.

Revolving Credit Facility

On May 22, 2023, the Borrowers and certain of the Company’s other subsidiaries, as guarantors, entered into a Limited Waiver, Consent and Fifth Amendment to the credit agreement with BMO, as lender (the “Revolving Credit Facility”).

As of November 24, 2024 and May 26, 2024, the Company’s effective annual interest rate under the Revolving Credit Facility was linked to the Secured Overnight Financing Rate (SOFR), and was approximately 8 % for both periods.

On November 26, 2024, the Company entered into certain amendments to the Revolving Credit Facility.

Refer to Note 17 - Subsequent Events for additional information.

Financial Covenants Compliance Status and Borrowing Capacity

As of November 24, 2024, the Company was in compliance with all financial covenants under the Term Loan Credit Facility and Revolving Credit Facility.

As of November 24, 2024, the Company had approximately $ 20,900 available for borrowing under our Revolving Credit Facility and the Term Loan Credit Facility was fully drawn.

Finance Leases

In September 2015, Lifecore executed a lease for an 80,950 square foot building in Chaska, MN, two miles from its headquarters facility.

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

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

The initial term of the lease was seven years with two five-year renewal options.

In December 2022, Lifecore exercised one of the options to renew the lease for an additional five years , which extended the lease to December 31, 2027.

That lease amendment contained a buyout option at any time during the renewal period with the purchase price equal to the mortgage balance on the lessor’s loan secured by the building.

The finance lease obligation at May 26, 2024 assumed the buyout option would be exercised during fiscal year 2028, which was estimated to be $ 2,568 .

On August 9, 2024, Lifecore amended this lease to provide for a $ 2,400 cash payment to the Company in exchange for a revised rent payment schedule and an updated purchase option.

This cash payment was received in October 2024, which made the amendment fully effective, and increased the future lease payments by $ 2,637 .

The amendment extended the lease term to September 30, 2034 , and the future payment obligations were discounted at the Company’s incremental borrowing rate of 9 %.

The finance lease obligation at November 24, 2024 assumed the amended buyout option would be exercised on September 30, 2034 , which is estimated to be $ 3,100 .

The only other finance lease that Lifecore has relates to a truck that was executed during fiscal year 2024.

The truck lease runs for three years and had an initial capitalized amount of $ 196 .

Operating Leases

Lifecore 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.

The only active operating real estate lease relates to a 21,384 square foot building in Chanhassen, Minnesota, containing a warehouse and office space.

The lease commenced on September 1, 2020 with an initial term of seven years , plus an option to extend it for an additional five years .

The extension period was included in the lease obligation at inception since it was reasonably certain to be exercised.

Prior to occupancy, $ 1,922 in improvements were made to the building, which was funded by the lessor.

Lifecore is reimbursing the lessor for costs over 84 months.

The future lease payments under this lease, which extend through 2033, total $ 2,056 as of November 24, 2024.

An operating lease for the Curation Foods former headquarters located in Santa Maria, California was terminated in December 2023.

The property was vacated and surrendered to the lessor on February 29, 2024.

The only other Lifecore operating leases relate to printer/copiers, with terms ranging from 36 to 60 months.

The future lease payments under these leases, which extend through March 2027, totaled $ 49 as of November 24, 2024.

Stock-based Compensation

Stock-Based Compensation Activity

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 and risk-free interest rate which have a significant impact on the fair value estimates.

The following table displays the estimated fair value of stock options granted and the weighted average assumptions utilized:

Three Months Ended Six Months Ended

November 24, 2024 November 24, 2024

Weighted-average grant date fair value $ 2.13 $ 2.33

Expected life (in years) 4.35 4.35

Risk-free interest rate 3.87 % 3.88 %

Volatility 52 % 53 %

Dividend yield — % — %

A summary of the activity under the Company’s stock option plans as of November 24, 2024 and changes during the fiscal quarter then ended is presented below:

Options Outstanding Weighted-Average Exercise Price Per Share Total Intrinsic Value of Options Exercised

(in thousands) Weighted-Average Remaining Contractual Term in Years Aggregate Intrinsic Value

(in thousands)

Options outstanding at May 26, 2024 2,112,591 $ 10.88 2.44 $ —

Options granted 95,525 5.00

Options exercised — — $ —

Options forfeited ( 30,488 ) 9.16

Options expired ( 272,066 ) 12.09

Options outstanding at November 24, 2024 1,905,562 10.44 1.79 $ 214

Options exercisable at November 24, 2024 1,726,328 10.74 1.37 214

The intrinsic values presented in the table above were calculated as the excess, if any, of the market price or closing price of the Company’s common stock over the exercise price of the options multiplied by the number of options exercised, outstanding or exercisable, as applicable.

RSUs are valued using the closing price of the Company’s common stock on their grant date and expensed ratably over the requisite vesting period of one to three years .

All vesting is subject to continued service.

A summary of the Company’s RSU award activity as of November 24, 2024 and changes during the fiscal quarter then ended is presented below:

Restricted Stock Units Outstanding Weighted-Average Grant Date Fair Value Per Share

RSUs outstanding at May 26, 2024 1,622,004 $ 7.83

Granted 651,630 4.83

Vested ( 588,366 ) 8.32

Forfeited ( 183,994 ) 7.03

RSUs outstanding at November 24, 2024 1,501,274 6.43

Currently, the PSUs outstanding vest upon achievement of certain stock price hurdles and continued employment thereafter of our CEO.

The PSUs have a 5-year term and any unvested awards at the end of the term will be forfeited.

PSUs subject to market

conditions are valued using a Monte Carlo simulation model and expensed on an accelerated attribution basis over the derived service period.

If the stock price hurdles are not met, expense is not reversed as long as the requisite service period has been met.

A summary of the Company’s PSU award activity as of November 24, 2024 and changes during the fiscal quarter then ended is presented below:

Performance Share Units Outstanding Weighted-Average Grant Date Fair Value Per Share

PSUs outstanding at May 26, 2024 1,500,000 $ 4.66

Granted 750,000 3.36

Vested ( 75,000 ) 4.24

Forfeited — —

PSUs outstanding at November 24, 2024 2,175,000 4.23

Stock-Based Compensation Expense

The following table summarizes stock-based compensation by income statement line item:

Three Months Ended Six Months Ended

November 24, 2024 November 26, 2023 November 24, 2024 November 26, 2023

Cost of product sales $ 105 $ 178 247 $ 362

Research and development ( 135 ) 42 ( 123 ) 84

Selling, general and administrative 3,402 1,357 5,667 2,664

Stock-based compensation expense 3,372 1,577 5,791 3,110

Amount capitalized into property, plant, and equipment — 7 — 16

Total stock-based compensation costs $ 3,372 $ 1,584 $ 5,791 $ 3,126

As of November 24, 2024, there was $ 13,006 of total unrecognized compensation expense related to unvested equity compensation awards granted under the Lifecore incentive stock plans.

This total expense is expected to be recognized over a weighted-average period of 2.16 years.

Convertible Preferred Stock and Common Stock

On October 3, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain entities.

Pursuant to the Purchase Agreement, the Company agreed to sell an aggregate of 5,928,775 shares of its common stock (the “Shares”) for aggregate gross proceeds of approximately $ 24,300 (the “Offering”).

The purchase price for each Share was $ 4.10 .

The Offering closed on October 3, 2024.

The issuance costs of $ 467 were recorded as an offset to the Offering proceeds within additional paid-in capital.

The issuance of these common shares triggered an anti-dilution provision of the Convertible Preferred Stock, resulting in a $ 2,132 increase in Additional Paid-in Capital and an offsetting increase in Accumulated Deficit.

This was determined by the additional 453,117 common shares the Preferred Stockholders could obtain upon conversion as of November 24, 2024, multiplied by the October 3, 2024 Lifecore closing stock price of $ 4.705 per share.

On January 9, 2023, the Company issued 38,750 shares of the Series A Convertible Preferred Stock, par value $ 0.001 per share (the “Convertible Preferred Stock”), all of which are convertible into shares of Common Stock at the election of the holders of the Convertible Preferred Stock.

The Convertible Preferred Stock ranks senior to the Common Stock with respect to dividends, distributions and payments on liquidation, winding-up and dissolution.

The Company recorded the Convertible Preferred Stock proceeds of $ 38,750 , as well as issuance costs of $ 668 .

The issuance costs are being reduced over the period ending June 29, 2026 as a charge to additional paid-in capital.

The holders of Convertible Preferred Stock are entitled to dividends on the liquidation preference at the rate of 7.5 % per annum, payable in-kind.

The holders are also entitled to participate in dividends declared or paid on the Common Stock on an as-converted basis.

As of November 24, 2024 and May 26, 2024, the aggregate liquidation preference of the Convertible Preferred Stock was $ 44,619 and $ 42,991 , respectively.

Each holder has the right, at its option, to convert its Convertible Preferred Stock, in whole or in part, into fully paid and non-assessable shares of Common Stock at an initial conversion price equal to $ 7.00 per share.

The conversion price is subject to customary anti-dilution adjustments, including in the event of any stock split, stock dividend, recapitalization or similar events, and is also subject to adjustment in the event of subsequent offerings of Common Stock or convertible securities by the Company for less than the conversion price.

The issuance of 5,928,775 shares of Common Stock on October 3, 2024 triggered an anti-dilution feature of the Convertible Preferred Stock, resulting the conversion price being reduced to $ 6.53 per share.

Each holder is entitled to vote with the holders of the shares of Common Stock on all matters submitted for a vote of holders of shares of Common Stock.

Each holder is entitled the whole number of votes equal to the number of shares of Common Stock into which such holder’s shares of Convertible Preferred Stock would be convertible on the record date for the vote or consent.

Registration Rights Agreement

The Registration Rights Agreement contains monetary penalties if the Company fails to maintain the effectiveness of the registration statement.

As of November 24, 2024, the Company has incurred $ 4,795 in cumulative monetary penalties and interest under the Registration Rights Agreement due to the delinquent filing of the Company’s annual and quarterly reports with the SEC.

In October 2024, the Company completed SEC filings to regain the effectiveness of the registration statement.

This terminated the further accrual of monetary penalties;

however, the interest accruals will continue until the prior monetary penalties are settled.

The Company paid $ 535 of these monetary penalties in the year ended May 28, 2023.

The accrual for these liabilities was $ 4,260 as of November 24, 2024, which is included in other accrued liabilities.

The effective tax rate was approximately 1% or less for all periods presented.

The effective tax rates were lower than the U.S.

federal statutory tax rate in all periods due to the Company’s valuation allowance on its deferred tax assets.

Accrued payable to Series A preferred stockholders

Accrued customer pass-through expenditures 2,101 3,509

Accrued professional fees

Contract liabilities, related party

Current portion of debt

Contract liabilities

Accrued expenses and other current liabilities $ 19,745 $ 18,575

Restructuring costs

We expect to finish incurring expenses under this plan by the end of fiscal year 2025.

Types of costs associated with this plan include:

(i) employee termination costs, as a result of multiple reductions-in-force;

and (ii) other costs related to the sale of non-strategic assets, including contract termination costs and asset write-offs.

These costs are included as a separate caption on the statements of operations.

The following table presents the restructuring costs or recovery recognized during the period:

Three months ended

Nine months ended

February 23, 2025 February 25, 2024 February 23, 2025 February 25, 2024

Employee termination costs $ 472 $ 76 $ 1,307 $ 215

Other (recoveries) costs

( 587 ) 695 ( 535 ) 703

$ ( 115 ) $ 771 $ 772 $ 918

The following table presents a reconciliation of the beginning and ending restructuring liabilities:

Employee termination costs Other costs Total

Balance at May 26, 2024 $ 217 $ 4,554 $ 4,771

Expense (recoveries)

1,307 ( 535 ) 772

Payments ( 1,204 ) ( 59 ) ( 1,263 )

Balance at February 23, 2025 $ 320 $ 3,960 $ 4,280

The following table presents the balance sheet classification of restructuring liabilities:

Current portion of operating lease liabilities

$ 3,575 $ 3,575

Accrued expenses and other current liabilities – accrued compensation

Accrued expenses and other current liabilities – other

Restructuring liabilities

$ 4,280 $ 4,771

The following table presents actual and expected expenses incurred or to be incurred under the plan:

Incurred through February 23, 2025 Expected remaining costs to be incurred Total expected costs

Employee termination costs $ 5,640 $ 535 $ 6,175

Other costs (recoveries) 12,850 ( 2,506 ) 10,344

$ 18,490 $ ( 1,971 ) $ 16,519

Commitments and contingencies

4 unchanged sentences

Legal fees are expensed in the period in which they are incurred.

Because recovery of amounts is contingent upon a legal settlement, no amounts have been recorded as recoverable costs through November 24, 2024.

Because recovery of amounts is contingent upon a legal settlement, no amounts have been recorded as recoverable costs through February 23, 2025.

Investor dispute

On December 23, 2024, 22NW Fund, L.P.

(“22NW”), a holder of shares of the Company’s Common Stock and Series A Redeemable Convertible Preferred Stock, filed a complaint against the Company, two former officers, and five former or current directors in the Commercial Division of the Supreme Court of the State of New York, New York County.

The complaint seeks money damages (including compensatory damages, court costs, and attorneys’ fees) for (i) alleged material misrepresentations by the Company on which 22NW allegedly relied when purchasing shares of the Series A Redeemable Convertible Preferred Stock and Common Stock, (ii) alleged breaches of certain express representations in the stock purchase agreement through which 22NW acquired its shares, and (iii) registration delay fees owed under a registration rights agreement entered into in connection with the issuance of the Series A Redeemable Convertible Preferred Stock.

The complaint also seeks the equitable remedy of specific performance under the aforementioned stock purchase agreement, requesting an order compelling the Company to file a proxy statement with the SEC and to hold a stockholder meeting to seek the approval of the removal of the current cap on the conversion of Series A Redeemable Convertible Preferred Stock into Common Stock as set forth in the Certificate of Designations related to the Redeemable Convertible Preferred Stock (the “Issuance Proposal”).

The Company has accrued for the registration delay fees (see note 11 ) , and the Company has both filed a proxy statement with the SEC on February 27, 2025, and has scheduled a stockholder meeting for April 10, 2025, to seek the approval of the Issuance Proposal.

Otherwise, the Company believes that the claims are without merit and intends to vigorously defend against them, and any potential loss arising from these other claims is not currently probable or estimable.

On February 24, 2025, the Company and the individual defendants filed separate motions to dismiss the complaint.

The motions are not yet fully briefed.

On March 27, 2025, the Court issued an order setting forth an initial schedule for discovery.

Class action complaint

2 unchanged sentences

The complaint seeks compensatory damages, court costs, and attorneys’ fees.

On November 15, 2024, the Court appointed purported stockholders David Carew and Hugh Robert Homes as co-lead plaintiffs and appointed their respective counsel.

plaintiffs must file an amended complaint by January 24, 2025.

On November 15, 2024, the Court appointed co-lead plaintiffs and their respective counsel.

The co-lead plaintiffs filed an amended complaint on January 24, 2025 which contained substantially similar allegations and claims as those set forth in the original complaint.

The Company filed a motion to dismiss the complaint on March 25, 2025.

The Company continues to believe that the claims are without merit and intends to vigorously defend against them.

1 unchanged sentence

On February 16, 2024, the Chicago Regional Office of the SEC issued a subpoena to the Company seeking documents and information concerning the financial statement restatement.

The Company is in the process of responding to the subpoena and intends to cooperate with the SEC.

The Company is in the process of responding to the subpoena and cooperating with the SEC.

We cannot predict the duration or outcome of this matter at this time.

4 unchanged sentences

Landlord has filed an amended complaint against both Curation Foods and the Company seeking to recover all rent which will accrue through the expiration of the lease, less any sums landlord collects from a replacement tenant.

No trial date has been set yet, although a mediation has been scheduled for February 13, 2025 and a continued case management conference is set for April 21, 2025 .

On January 12, 2024, a landlord for a different property leased by Curation Foods delivered to the Company a pay or quit notice related to such property, seeking payment of past due rent of approximately $ 87 .

On February 29, 2024, Curation Foods surrendered possession of the premises to the landlord.

The Company has accrued past due rents, but the ultimate exposure to loss will depend on future events and is not reasonably certain at this time.

See note 18 for additional developments subsequent to the balance sheet date.

Compliance matters

7 unchanged sentences

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 sought 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 former equity holders of Yucatan for fraud, indemnification, and other claims, and seeking no less than $ 80 million in damages.

The Plaintiff sought over $ 10,000 in damages, including delivery of shares of his stock held in escrow for the indemnification claims described above.

In fiscal 2022, 2023 and 2024, the Company reached settlements with several of the cross-defendants, pursuant to which the settling cross-defendants agreed that certain of the shares of stock they received when the Company acquired Yucatan either be sold and the proceeds paid to the Company, or that those shares be released to the Company.

The trial for the remaining defendants was severed into two trials by the Court, and the first trial involved claims by and against one defendant only.

The first trial concluded on October 18, 2024, and there were offsetting verdicts.

The jury awarded the defendant $ 375 in damages and awarded the Company $ 1,011 against the defendant.

No final judgment has been entered, and there are additional issues to be resolved by the Court before any judgment can be entered.

The trial for the other defendants will involve only the Company’s claims against them, and there are no claims made by those defendants against the Company.

The trial for the remaining defendants was severed into two trials by the Court:

• The first trial involved claims by and against one defendant only.

This trial concluded on October 18, 2024, and final judgment was entered on March 21, 2025, with offsetting verdicts that resulted in a net award in the Company’s favor of $ 902 against the defendant in addition to the opportunity to recover costs currently estimated at $ 270 .

The defendant has 15 days to file motions and until May 20, 2025 to file an appeal.

• The second trial for the other defendants will involve only the Company’s claims against them, and there are no claims made by those defendants against the Company.

That second trial has been stayed by the Court pending a final judgment, including any appeal, in the first trial.

The ultimate outcome of these or any other investigations, legal actions, or potential claims that may arise from the matters related to the litigation remains uncertain.

The Company cannot reasonably predict the timing or outcomes, or estimate the amount final judgments, or the effect, if any, they may have on its financial statements.

Separately, future rulings from the Court will affect pending claims against the severed defendants for indemnification under provisions in the purchase agreement.

Because recovery of amounts is still contingent upon the resolution of certain issues, no amounts have been recorded as recoverable costs through February 23, 2025.

On November 16, 2023, the Company and the DOJ executed a letter (“Declination Letter”) in which the DOJ has declined to prosecute the Company for violations of the FCPA involving the Company’s formerly-held subsidiary, Yucatan Foods L.P.

Pursuant to the Declination Letter, in connection with the DOJ’s declination to prosecute, in fiscal 2023 the

Company agreed to pay disgorgement in the amount of $ 407 , and to continue to fully cooperate with any ongoing government investigations and any prosecutions that might result in the future.

Pursuant to the Declination Letter, in connection with the DOJ’s declination to prosecute, in fiscal 2023 the Company agreed to pay disgorgement in the amount of $ 407 , and to continue to fully cooperate with any ongoing government investigations and any prosecutions that might result in the future.

The Company paid the disgorgement amount in full in fiscal 2024.

At this stage, the ultimate outcome of these or any other investigations, legal actions, or potential claims that may arise from the matters related to the litigation is uncertain and the Company cannot reasonably predict the timing or outcomes, or estimate the amount final judgments, or the effect, if any, they may have on its financial statements.

Separately, future rulings from the Court will affect pending claims against the severed defendants for indemnification under provisions in the purchase agreement.

Because recovery of amounts is contingent upon resolution of many issues in connection with these legal proceedings, no amounts have been recorded as recoverable costs through November 24, 2024.

Discontinued Operations

On August 24, 2023, the Company reached a confidential settlement and release agreement with a third-party insurance underwriter as a result of a claim filed by the Curation Foods business.

In connection with this settlement agreement, the Company received a cash payment of $ 1,850 on September 19, 2023, which was recognized as income from discontinued operations in the six months ended November 26, 2023.

The $ 1,850 cash received is included in net cash from operating activities on the consolidated statement of cash flows.

The following table presents the components of debt:

Debt principal:

Term loan credit facility with related party $ 169,287 $ 157,313

Revolving credit facility 2,500 19,691

Leaseback liability with related party 6,571 7,150

Finance lease liability 6,003 3,385

Debt principal 184,361 187,539

Unamortized debt discount on term loan credit facility with related party ( 59,422 ) ( 62,871 )

Total debt, net of discounts $ 124,939 $ 124,668

Classification on consolidated balance sheet:

Accrued expenses and other current liabilities $ 930 $ 943

Debt, net of current portion 8,346 22,906

Debt, net of current portion, related party 115,663 100,819

Total debt, net of discounts $ 124,939 $ 124,668

The following table presents future minimum principal payments:

Remainder of fiscal year 2025 $ 231

Thereafter 7,348

Debt principal $ 184,361

The following table presents the classification of interest in the consolidated financial statements:

Three months ended Nine months ended

February 23, 2025 February 25, 2024 February 23, 2025 February 25, 2024

Expensed in statement of operations

5,481 4,289 16,314 12,300

Capitalized to property, plant and equipment

798 1,187 2,254 3,250

Total interest incurred $ 6,279 $ 5,476 $ 18,568 $ 15,550

As of February 23, 2025, the Company was in compliance with all financial covenants under the Term Loan Credit Facility and Revolving Credit Facility.

Term Loan Credit Facility

On May 22, 2023, the Company entered into a Credit and Guaranty Agreement with Alcon Research, LLC ("Alcon," collectively the “Term Loan Credit Facility”).

The Term Loan Credit Facility refinanced in full all obligations of the Company and their subsidiaries under its prior term loan credit facility.

This facility has been amended three times for the purpose of (i) enhancing and clarifying certain reporting requirements;

and (ii) most recently on November 26, 2024, to provide limited waivers of potential events of default and permit the Company to retain cash proceeds from the recent sale of the isolator-filler (see note 6).

The Company initially made $ 142,270 of term loan borrowings under the facility.

The term loans bear interest at a fixed rate of 10 % per annum payable-in-kind until the third anniversary of the closing date, following which interest is payable at a fixed rate of 3 % per annum in cash with the remainder payable-in-kind.

The Company may elect to pay any amounts of interest in cash instead of in-kind.

The obligations under the Term Loan Credit Facility mature on May 22, 2029.

Term loan principal generally cannot be repaid prior to the maturity date except as follows:

(i) the Company is permitted to make voluntary prepayments beginning May 22, 2028 at a rate of 110 %;

(ii) Alcon or the Company can require prepayment upon a change in control at a rate of 115 %;

(iii) Alcon can require prepayment upon uncured material default of its supply agreement with the Company at a rate of 120 %;

(iv) sales of certain collateral assets, with specific exception, require the Company to prepay the term loans in the amount of proceeds received.

The Term Loan Credit Facility contains customary affirmative covenants including, but not limited to, financial reporting requirements and maintenance of existence requirements and negative covenants, including, but not limited to, limitations on the incurrence of debt, liens, investments, restricted payments, restricted debt payments, and affiliate transactions.

The Term Loan Credit Facility contains one financial covenant, a minimum liquidity covenant, requiring $ 4,000 of Consolidated Liquidity (as defined in the Term Loan Credit Facility) as of May 28, 2023 and as of the end of the first, second and third fiscal quarters of 2024 of the Company.

During the fourth quarter of fiscal year 2024, the minimum liquidity covenant was increased to $ 4,500 .

As of February 23, 2025, the Company’s effective annual interest rate under the Term Loan Credit Facility was 20.9 %.

Borrowings are guaranteed and secured by substantially all of the Company’s consolidated assets.

Pursuant to an intercreditor agreement between Alcon and BMO (as defined below), Alcon is generally entitled to a priority claim with respect to property, plant and equipment, intellectual property and all other collateral to which BMO does not have a priority claim, as described further below.

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

Revolving Credit Facility

On December 31, 2020, the Company entered into a revolving credit agreement with BMO Harris Bank, N.A.

("BMO," collectively the "Revolving Credit Facility").

The Revolving Credit Facility has been amended nine times for the purpose of (i) providing limited waivers from historical events of default;

(ii) as a result of discontinued operations, reducing the maximum committed amount to its current level of $ 40,000 ;

(iii) creating an additional $ 2,500 borrowing tranche beyond the maximum committed amount that must be repaid prior to any other borrowings (the "FILO Tranche");

and (iv) most recently on November 26, 2024.

extending the maturity date to November 26, 2027, reducing the applicable interest rates and making certain other changes to the financial and reporting covenants.

The Company can make ordinary borrowings under the facility in an amount up to the lesser of (i) the maximum committed amount and (ii) a specified borrowing base calculated as of the end of each month.

The monthly borrowing base is determined using specified percentages of qualifying accounts receivable and inventory that serve as collateral under the facility, net of reserves.

As of February 23, 2025, the Company's borrowing base was $ 25,500 , and the Company had no outstanding borrowings.

These borrowings, when outstanding, bear interest based on an average daily SOFR rate plus a spread of 2.50 % per annum for a total interest rate of 8.67 % as of February 23, 2025.

The facility also bears a commitment fee on unused availability of 0.375 % per annum.

As of February 23, 2025, the Company has a $ 2,500 borrowing under the FILO Tranche.

This borrowing bears interest at the same rate as ordinary borrowings as described above.

The following table presents average borrowings and interest rates for the periods presented:

Three months ended Nine months ended

2025 February 25,

2024 February 23,

2025 February 25,

Average borrowings $ 4,500 $ 18,757 $ 12,023 $ 19,551

Weighted average interest rate 8.72 % 10.97 % 9.08 % 10.32 %

Borrowings are guaranteed and secured by substantially all of the Company’s consolidated assets.

Pursuant to an intercreditor agreement between Alcon and BMO, BMO is generally entitled to a priority claim with respect to cash and cash equivalents, accounts receivable and inventory, subject to certain specific exclusions.

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

Leaseback liability with related party

On May 22, 2023, the Company entered into an equipment sale and leaseback transaction with Alcon.

The sale and leaseback did not meet the requirements for sale-leaseback accounting, which resulted in the creation of a $ 7,730 leaseback liability representing the Company's total payment obligation under the lease.

The lease expires on the earlier of May 22, 2033 or the date on which the Company exercises its option to repurchase the leased equipment, at which time the Company shall automatically repurchase the equipment for a nominal amount.

During the lease term, the Company is obligated to make quarterly principal payments to Alcon of $ 193 plus interest at a rate of 6 % per annum on the unpaid principal balance.

The lease contains terms and provisions that are generally customary for a commercial lease of this nature, including obligations relating to the use, operation and maintenance of the equipment.

During the term of the lease, Alcon is not permitted to sell or encumber the equipment.

Alcon is only entitled to cancel the lease in the event of insolvency, liquidation or bankruptcy;

its remedies for other breaches of the lease are limited to monetary damages.

The Company is authorized to issue up to 75,000,000 shares of common stock, $ 0.001 par value.

The Company is generally not permitted to pay cash dividends to common stockholders due to restrictions arising from the Term Loan Credit Facility, the Revolving Credit Facility and the Redeemable Convertible Preferred Stock.

On October 3, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain entities.

The purchase price for each Share was $ 4.10 .

The Offering closed on October 3, 2024.

The issuance costs of $ 467 were recorded as an offset to the Offering proceeds within additional paid-in capital.

The issuance of these common shares triggered an anti-dilution provision of the Redeemable Convertible Preferred Stock, resulting in a $ 2,132 adjustment to loss attributable to common stockholders.

Redeemable Convertible Preferred Stock

On January 9, 2023, the Company issued 38,750 shares of Series A Redeemable Convertible Preferred Stock, par value $ 0.001 per share, that is in certain cases redeemable at the option of the holder as discussed further below (the “Redeemable Convertible Preferred Stock”).

The Redeemable Convertible Preferred Stock is convertible into shares of Common Stock at the election of the holders of the Redeemable Convertible Preferred Stock.

The Redeemable Convertible Preferred Stock ranks senior to the Common Stock with respect to dividends, distributions and payments on liquidation, winding-up and dissolution.

The Company recorded Redeemable Convertible Preferred Stock proceeds of $ 38,750 , net of issuance costs of $ 668 .

The deduction for issuance costs is being amortized through June 29, 2026 as a charge to additional paid-in capital.

The holders of Redeemable Convertible Preferred Stock are entitled to dividends at a rate of 7.5 % per annum, or $ 75 per share, payable in-kind and compounding quarterly.

The holders are also entitled to participate in dividends declared or paid on the Common Stock on an as-converted basis.

At February 23, 2025, there were $ 561 of dividends in arrears that had not yet been paid-in-kind in the form of additional shares of Redeemable Convertible Preferred Stock, representing $ 12.50 per preferred share.

As of February 23, 2025 and May 26, 2024, the aggregate liquidation preference of the Redeemable Convertible Preferred Stock was $ 45,455 and $ 42,991 , respectively.

Each holder has the right, any time at its option, to convert its Redeemable Convertible Preferred Stock, in whole or in part, into fully paid and non-assessable shares of Common Stock at an initial conversion price equal to $ 7.00 per share.

The conversion is also capped at a maximum of 6,056,284 as a result of an exchange listing rule (the "Exchange Cap").

The issuance of 5,928,775 shares of Common Stock on October 3, 2024 triggered an adjustment to the conversion price to $ 6.53 per share.

As of February 23, 2025, the Redeemable Convertible Preferred Stock would have been convertible into 6,875,074 shares of common stock if not for the Exchange Cap.

The Company may also elect to convert the Redeemable Convertible Preferred Stock, subject to certain conditions, once the Company's closing stock price equals or exceeds $ 10.50 per share.

The Redeemable Convertible Preferred Stock is redeemable by the holders after June 29, 2026.

Until such date, it is redeemable contingent upon the occurrence of certain events that may be outside of the control of the Company.

As a result, the Company has presented the Redeemable Convertible Preferred Stock as temporary equity on the consolidated balance sheets.

Each holder is entitled to vote with the holders of the shares of Common Stock on all matters submitted for a vote of holders of shares of Common Stock, with certain limited exceptions.

Each holder is entitled to the whole number of votes equal to the number of shares of Common Stock into which such holder’s shares of Redeemable Convertible Preferred Stock would be convertible on the record date for the vote.

The holders of the Redeemable Convertible Preferred Stock are also entitled to elect two directors to serve on the Company's board of directors so long as at least 30 % of the initial shares of Redeemable Convertible Preferred Stock remain outstanding.

Registration rights

The holders of the Redeemable Convertible Preferred Stock also entered into a registration rights agreement with the Company.

This agreement required the Company to file an initial registration statement covering sufficient shares of Common Stock into which the Redeemable Convertible Preferred Stock may be converted, which the Company filed in 2023.

The agreement contains monetary penalties if the Company fails to maintain the effectiveness of that registration statement.

The agreement has no specified termination date and no specified maximum amount of penalties.

As of February 23, 2025, the Company had accumulated $ 4,912 o f monetary penalties and interest under the registration rights agreement.

The penalties accumulated because of delinquent filings of the Company’s annual and quarterly reports with the SEC, which caused the initial registration statement to cease to be effective.

In October 2024, the Company completed the necessary SEC filings to regain the effectiveness of the registration statement.

This caused monetary penalties to stop accruing.

Meanwhile, interest continues to accrue on the penalty amount at a rate of 12 % per annum until paid.

Penalties are recorded in other expense, net, and interest is recorded in interest expense, net, on the consolidated statements of operations.

The Company paid $ 535 of these monetary penalties during fiscal year 2023.

The accrual for penalties and interest was $ 4,377 as of February 23, 2025, which is included in accrued expenses and other accrued liabilities (see note 7).

Revenue recognition

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

The following table disaggregates revenues by major product lines and services:

Three months ended

Nine months ended

2025 February 25,

2024 February 23,

2025 February 25,

CDMO $ 20,789 $ 22,306 $ 66,579 $ 67,522

HA manufacturing 14,365 13,398 25,844 22,853

Total $ 35,154 $ 35,704 $ 92,423 $ 90,375

The following table disaggregates revenues by the timing of revenue recognition:

Three months ended

Nine months ended

2025 February 25,

2024 February 23,

2025 February 25,

Revenues recognized over time $ 5,505 $ 7,022 $ 17,503 $ 19,229

Revenues recognized at a point in time 29,649 28,682 74,920 71,146

Total $ 35,154 $ 35,704 $ 92,423 $ 90,375

During the three months ended February 23, 2025, the Company had revenues concentrations of 10% or greater from two customers, accounting for 54 % and 18 %.

During the three months ended February 25, 2024, the Company had revenues concentrations of 10% or greater from two customers, accounting for 52 % and 14 %.

During the nine months ended February 23, 2025, the Company had revenues concentrations of 10% or greater from three customers, accounting for 43 %, 20 % and 11 %.

During the nine months ended February 25, 2024, the Company had revenues concentrations of 10% or greater from three customers, accounting for 40 %, 19 %, and 10 %.

Contract assets primarily relate to the Company’s unconditional right to consideration for work completed but not billed at the reporting date.

Contract liabilities primarily relate to payments received from customers in advance of performance under a contract.

The following table presents changes in contract assets and liabilities:

Contract assets, current

Contract liabilities, current

Contract liabilities, noncurrent

Balance at May 26, 2024 $ 4,069 $ ( 2,113 ) $ ( 4,960 )

Changes to the beginning balance arising from:

Amounts billed as accounts receivable as the result of rights to consideration becoming unconditional

( 3,923 ) — —

Recognition of revenue as the result of performance obligations satisfied

Reclassification of scheduled satisfaction of performance obligations from noncurrent to current due to passage of time

Net change to contract balances recognized after the beginning of the period due to amounts billed, recognition of revenue, changes in estimate, reclassifications from noncurrent to current, and interest from significant financing component

6,004 ( 2,565 ) ( 377 )

Balance at February 23, 2025 $ 6,150 $ ( 2,565 ) $ ( 4,419 )

Stock-based compensation

The Company provides stock-based compensation to its employees under two plans:

• The 2019 Stock Incentive Plan became effective on October 16, 2019.

This plan provides for the grant of stock options, stock grants, stock units and stock appreciation rights to employees, consultants and directors.

Under the plan, no recipient may receive awards during any fiscal year that exceed 500,000 stock options, 250,000 stock grants or stock units, or 500,000 stock appreciation rights, nor may any non-employee director be granted awards in excess of $ 120 .

As of February 23, 2025, the Company had 1,547,216 common shares reserved for new awards under the plan.

• The Equity Inducement Plan became effective on March 20, 2024.

This plan provides for the grant of equity awards to individuals that were not previously employees or directors of the Company as an inducement material to the individual’s entry into employment with the Company.

As of February 23, 2025, the Company had 336,374 common shares reserved for new awards under the plan.

Most of the stock-based compensation expense arises from recent awards to our two principal executive officers under the Equity Inducement Plan.

Those awards include (i) an RSU award, a small portion of which vested immediately with the remainder vesting on each of the first five anniversaries of the grant date;

and (ii) PSU awards divided into ten equal tranches that will vest, if at all, based upon closing stock price milestones over a five-year performance period, and to the extent a PSU award tranche vests based on performance, 50 % of the shares for each tranche will be issued immediately, and 50 % of the shares will be issued on the one-year anniversary of the performance vesting date.

The Company uses the Black-Scholes option pricing model to calculate the grant date fair value of stock option awards.

The following table displays information about stock-based awards:

Nine months ended

2025 February 25,

Weighted-average grant date fair value per share:

Stock options $ 3.18 $ 3.91

RSUs and PSUs 4.39 8.25

Intrinsic value of stock options exercised — 115

Fair value of RSUs and PSUs vested $ 5.88 $ 7.74

Tax benefit of options exercised — 35

Weighted-average assumptions to value stock option grants:

Expected life

4.4 years 4.4 years

Risk-free interest rate 4.0 % 4.3 %

Volatility 53 % 58 %

Dividend yield — % — %

A summary of the activity under the Company’s stock option plans as of February 23, 2025 and changes during the fiscal quarter then ended is presented below:

Shares Weighted-average exercise price per share Weighted-average remaining contractual term Aggregate intrinsic value

(in thousands)

Outstanding at May 26, 2024 2,112,591 $ 10.88

Granted 545,775 6.83

Forfeited ( 75,676 ) 7.38

Expired ( 1,164,335 ) 11.06

Outstanding at February 23, 2025 1,418,355 9.35 3.9 years $ 45

Exercisable at February 23, 2025 864,223 10.70 2.2 years —

RSUs are valued using the closing price of the Company’s common stock on their grant date and expensed ratably over the requisite vesting period of one to three years .

All vesting is subject to continued service.

Currently, the PSUs outstanding vest upon achievement of certain stock price hurdles and continued employment thereafter of our CEO and CFO.

The PSUs have a five-year term and any unvested awards at the end of the term will be forfeited.

PSUs subject to market conditions are valued using a Monte Carlo simulation model and expensed on an accelerated attribution basis over the derived service period.

If the stock price hurdles are not met, expense is not reversed as long as the requisite service period has been met.

A summary of the Company’s RSU award activity and PSU award activity as of February 23, 2025 and changes during the fiscal quarter then ended is presented below.

Shares Weighted-average grant date fair value per share Shares Weighted-average grant date fair value per share

Outstanding at May 26, 2024 1,622,004 $ 7.83 1,500,000 $ 4.66

Granted 823,287 5.33 750,000 3.36

Vested ( 651,547 ) 8.22 ( 75,000 ) 4.24

Forfeited ( 261,894 ) 7.28 — —

Outstanding at February 23, 2025 1,531,850 6.41 2,175,000 4.23

Stock-based compensation expense

The following table summarizes stock-based compensation by income statement line item:

Nine months ended

2025 February 25,

Cost of product sales $ 431 $ 549

Research and development expense ( 123 ) 126

Selling, general and administrative expense 8,035 3,928

Stock-based compensation expense $ 8,343 $ 4,603

As of February 23, 2025, there was $ 12,473 of total unrecognized compensation expense related to unvested equity compensation awards granted under the Lifecore incentive stock plans.

This total expense is expected to be recognized over a weighted-average period of 2.1 years.

The effective tax rate was approximately 1 % or less for all periods presented.

The effective tax rates were lower than the U.S.

federal statutory tax rate in all periods due to the Company’s valuation allowance on its deferred tax assets.

Fair value of financial instruments

The following table presents the carrying value and fair value of financial liabilities:

February 23, 2025 May 26, 2024

Carrying value Fair value Carrying value Fair value

Term loan credit facility with related party $ 109,865 $ 128,600 $ 94,442 $ 124,700

Debt derivative liability 23,900 23,900 25,400 25,400

Leaseback liability with related party 6,571 * 7,150 *

Contract liability, related party

4,971 * 4,703 *

Customer deposit

4,140 * 4,576 *

* Fair value approximates carrying value

All fair value measurements presented in the table above were level 3 measurements.

Cash and cash equivalents

Cash and cash equivalents represent cash in banks and highly liquid short-term investments that have maturities of three months or less when acquired.

All of our cash is deposited in the United States with a single financial institution, almost all of which exceeds amounts covered by Federal Deposit Insurance Corporation.

Term Loan Credit Facility and debt derivative liability

The Term Loan Credit Facility (as defined in note 10) contains various features that meet the definition of an embedded derivative and require bifurcation.

These features, which were necessary for the Company to accept in order for Alcon to agree to provide the term loan financing, comprise three options for early prepayment of the term loans at stated premiums above par in the event of certain future scenarios occurring, as described more fully in note 10.

These embedded derivatives were initially recorded at fair value as a noncurrent liability (“debt derivative liability”) offset by a discount to the carrying value of the Term Loan Credit Facility that is being amortized to interest expense over the term of that facility.

The debt derivative liability is being subsequently remeasured at fair value every reporting period with changes in fair value recognized as a component of other expense, net.

The key inputs to the valuation model are (i) the probability and timing of a change in control event occurring over the remaining term of the debt;

and (ii) the discount rate for the valuation of that scenario, which can be influenced by changes in the risk-free rate and the credit spread, which in turn can be influenced by the Company's credit rating as well as changes in the credit market.

Revolving Credit Facility

Outstanding borrowings under the Company's Revolving Credit Facility are carried at cost, which approximates their fair value as of February 23, 2025 and May 26, 2024, due to their short duration and variable rates of interest.

Contract liability with related party and customer deposit

Alcon, a related party, and another significant customer of the Company each agreed to provide upfront deposits due back after a certain number of years in order to finance the initial working capital requirements of their amended commercial supply agreements.

Management determined that the Alcon deposit represents a noncurrent contract liability that includes a significant financing component while the other deposit represents an ordinary noncurrent liability.

The deposits were initially recorded at fair value, and the resulting discounts are being amortized to interest expense through the contractual repayment date.

Conversion ratio improvement provided to preferred stockholders

The fair value of the conversion feature was recorded as $ 2,132 adjustment to loss attributable to common stockholders.

The fair value was calculated using an as-converted method based on the contractual conversion ratio of the preferred shares and the closing price of our common stock, a level 1 measurement.

The following table summarizes the fair value of the Company’s balance sheet components that are measured at fair value on a recurring and non-recurring basis:

Type of measurement Measurement date Type of measurement

Level 1 Level 2 Level 3

Debt derivative liability Recurring February 23, 2025 — — 23,900

Debt derivative liability Recurring May 26, 2024 — — 25,400

Key inputs used to develop the discount rate for the fair value measurements at the balance sheet dates were as follows:

Probability of change in control event 80 % 80 %

Weighted average discount rate 18.0 % 21.4 %

The weighted average discount rate was calculated based on the individual discount rate used for each future payment and weighted by both the present value of the future payments and the probability of each scenario.

The following table reflects the roll forward reconciliation of Level 3 recurring fair value measurements:

Three months ended Nine months ended

2025 February 25,

2024 February 23,

2025 February 25,

Balance at beginning of period $ 23,300 $ 44,000 25,400 $ 64,900

Change in fair value 600 ( 21,000 ) ( 1,500 ) ( 41,900 )

Balance at end of period $ 23,900 $ 23,000 $ 23,900 $ 23,000

(1) For the three and nine months ended February 23, 2025 and February 25, 2024, the decreases in fair value are recorded in the “Change in fair value of debt derivative liability, related party” line within the condensed consolidated statement of operations.

Operating lease right-of-use assets and liabilities are classified as standalone captions on the consolidated balance sheets, finance lease assets are classified as property, plant and equipment, and finance lease liabilities are classified as debt.

The components of lease cost were as follows:

Nine months ended

2025 February 25,

Finance lease cost:

Amortization of leased assets $ 120 $ 101

Interest on lease liabilities 324 280

Operating lease cost 253 260

Variable lease cost — 306

Sublease income — ( 148 )

Total lease cost $ 697 $ 799

Weighted-average remaining lease term:

Operating leases 7.9 years 8.5 years

Finance leases 9.5 years 3.7 years

Weighted-average discount rate:

Operating leases 3.02 % 3.04 %

Finance leases 8.91 % 11.10 %

As most of the leases do not provide an implicit rate, the Company determines its incremental borrowing rate based on information available at the lease commencement date.

The relatively lower discount rates for operating leases reflect favorable market rates of interest and company credit ratings in 2020 when the largest operating lease for its Chanhassen, Minnesota lease commenced (as described further below).

Likewise, the relatively higher discount rates for finance leases reflect the less favorable market rates of interest and company credit ratings in 2024 when the largest finance lease for its Chaska, Minnesota lease commenced (as described further below).

The Company’s leases have original lease periods ending through 2033.

The Company’s maturity analysis of operating and finance lease liabilities as of February 23, 2025 are as follows:

leases Finance

Remainder of fiscal year 2025 $ 3,685 $ 170

Thereafter 436 6,396

Total lease payments 5,568 10,115

interest ( 166 ) ( 4,112 )

Present value of lease liabilities $ 5,402 $ 6,003

Current portion $ 3,966 $ 157

Noncurrent portion 1,436 5,846

Present value of lease liabilities $ 5,402 $ 6,003

Most of the amount shown above as due during the remainder of 2025 relates to overdue payments for a leased facility in California.

The Company anticipates settling these obligations in the fourth quarter of fiscal 2025.

See section entitled "Landlord complaints" in note 9 and note 18 for additional details.

Supplemental cash flow information related to leases are as follows:

Nine months ended

2025 February 25,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 334 $ 644

Operating cash flows from finance leases 311 288

Financing cash flows from finance leases ( 2,267 ) 86

Lease liabilities arising from obtaining right-of-use assets:

Finance leases

In September 2015, Lifecore executed a lease for a building in Chaska, Minnesota near its headquarters facility.