lfcr-20240825

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Quarter Ended August 25, 2024, or


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period for _________ to _________.

Commission file number: 000-27446

LIFECORE BIOMEDICAL, INC.

(Exact name of registrant as specified in its charter)


Delaware			94-3025618
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification Number)


3515 Lyman Boulevard
Chaska,	Minnesota	55318
(Address of principal executive offices)		(Zip Code)

(952) 368-4300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, par value $0.001 per share	LFCR	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☐

Accelerated Filer

☒

Emerging Growth Company

☐

Non Accelerated Filer

☐

Smaller Reporting Company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of September 27, 2024, there were 30,898,255 shares of common stock outstanding.

Table of Contents

LIFECORE BIOMEDICAL, INC.

FORM 10-Q

INDEX


				Page



Part I.	Financial Information

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of August 25, 2024 and May 26, 2024			1
	Condensed Consolidated Statements of Operations for the Three Months Ended August 25, 2024 and August 27, 2023			2
	Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Shareholders’ Equity (Deficit) for the Three Months Ended August 25, 2024 and August 27, 2023			3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended August 25, 2024 and August 27, 2023			4
	Notes to the Condensed Consolidated Financial Statements			5

		1	Organization, Basis of Presentation and Summary of Significant Accounting Policies	5
		2	Revenue	7
		3	Restructuring Costs	7
		4	Earnings Per Share	8
		5	Fair Value Measurements	8
		6	Contract Assets and Liabilities	9
		7	Accounts Receivable	10
		8	Inventories	11
		9	Property, Plant, and Equipment	12
		10	Debt	13
		11	Leases	14
		12	Stock-based Compensation	15
		13	Convertible Preferred Stock and Common Stock	16
		14	Income Taxes	17
		15	Commitments and Contingencies	17
		16	Discontinued Operations	18
		17	Subsequent Events	18

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			25
Item 4.	Controls and Procedures			25

Part II.	Other Information			27

Item 1.	Legal Proceedings			27
Item 1A.	Risk Factors			27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			27
Item 3.	Defaults Upon Senior Securities			27
Item 4.	Mine Safety Disclosures			27
Item 5.	Other Information			27
Item 6.	Exhibits			28
	Signatures			29

Table of Contents

LIFECORE BIOMEDICAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par values)


	August 25, 2024		May 26, 2024
	(unaudited)
ASSETS
Current Assets:
Cash	$	5,520	$	8,462
Accounts receivable, less allowance for credit losses	17,674		20,343
Accounts receivable, related party	7,471		10,810
Inventories, net	41,642		39,979
Prepaid expenses and other current assets	1,876		1,439
Total Current Assets	74,183		81,033

Property, plant, and equipment, net	148,756		148,598
Operating lease right-of-use assets	2,373		2,442
Goodwill	13,881		13,881
Intangible assets, net	4,200		4,200
Other long-term assets	3,431		3,806
Total Assets	$	246,824	$	253,960

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	18,010	$	16,334
Accrued compensation	5,565		5,533
Other accrued liabilities	11,380		9,986
Current portion of lease liabilities	4,141		4,133
Deferred revenues	339		1,088
Deferred revenues, related party	315		1,025
Current portion of long-term debt, net, related party	773		773
Total Current Liabilities	40,523		38,872

Long-term debt, less current portion, net, related party	105,545		100,819
Revolving credit facility	21,605		19,691
Debt derivative liability, related party	24,500		25,400
Long-term lease liabilities, less current portion	4,800		4,944
Deferred taxes, net	443		543
Deferred revenues, less current portion, related party	4,791		4,703
Other non-current liabilities	5,114		5,086
Total Liabilities	207,321		200,058

Commitments and Contingencies, see Note 15

Convertible Preferred Stock, $0.001 par value; 2,000,000 shares authorized; 43,257 and 42,461 shares issued and outstanding at August 25, 2024 and May 26, 2024, respectively	43,441		42,587

Shareholders’ Equity:
Common Stock, $0.001 par value; 75,000,000 and 50,000,000 shares authorized; 30,898,255 and 30,562,961 shares issued and outstanding at August 25, 2024 and May 26, 2024, respectively	31		30
Additional paid-in capital	178,784		177,808
Accumulated deficit	(182,753)		(166,523)
Total Shareholders’ (Deficit) Equity	(3,938)		11,315
Total Liabilities, Convertible Preferred Stock, and Shareholders’ Equity	$	246,824	$	253,960

See accompanying notes to the condensed consolidated financial statements.

-1-

Table of Contents

LIFECORE BIOMEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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


	Three Months Ended
	August 25, 2024		August 27, 2023
Revenues	$	16,793	$	16,953
Revenues, related party	7,912		7,569
Total Revenues	24,705		24,522
Cost of goods sold	19,318		21,794
Gross profit	5,387		2,728

Operating costs and expenses:
Research and development	2,186		2,146
Selling, general, and administrative	14,785		9,196

Total operating costs and expenses	16,971		11,342
Operating loss	(11,584)		(8,614)

Interest expense, net	(968)		(793)
Interest expense, related party	(4,400)		(3,145)
Change in fair value of debt derivative liability, related party	900		200
Other expense, net	(203)		(170)
Net loss from continuing operations before taxes	(16,255)		(12,522)
Provision for income tax benefit (expense)	25		(88)
Net loss from continuing operations	(16,230)		(12,610)

Discontinued operations:
Income from discontinued operations	—		1,850
Income tax benefit	—		6
Income from discontinued operations, net of tax	—		1,856
Net loss	$	(16,230)	$	(10,754)

Basic and diluted net income (loss) per share:
Loss from continuing operations	$	(0.53)	$	(0.41)
Income from discontinued operations	—		0.06
Total basic and diluted net loss per share	$	(0.53)	$	(0.35)






Shares used in per share computation:
Basic and Diluted	30,855,742		30,403,392

See accompanying notes to the condensed consolidated financial statements.

-2-

Table of Contents

LIFECORE BIOMEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY (DEFICIT)

(Unaudited) (Dollars in thousands)


	Three Months Ended August 25, 2024
	Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Shareholders’ Equity (Deficit)

	Shares	Amount		Shares	Amount
Balance at May 26, 2024	42,461	$	42,587	30,562,961	$	30	$	177,808	$	(166,523)	$	11,315
Issuance of stock under stock plans, net of shares withheld	—	—		335,294	1		—		—		1
Convertible Preferred Stock paid-in-kind (“PIK”) dividend	796	806		—	—		(806)		—		(806)
Accretion of Convertible Preferred Stock issuance costs	—	48		—	—		(48)		—		(48)
Taxes paid by the Company for employee stock plans	—	—		—	—		(589)		—		(589)
Stock-based compensation costs	—	—		—	—		2,419		—		2,419
Net loss	—	—		—	—		—		(16,230)		(16,230)
Balance at August 25, 2024	43,257	$	43,441	30,898,255	$	31	$	178,784	$	(182,753)	$	(3,938)


	Three Months Ended August 27, 2023
							Additional Paid-in Capital		Accumulated Deficit		Total Shareholders’ Equity (Deficit)
	Convertible Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount
Balance at May 28, 2023	39,420	$	39,318	30,322,169	$	30	$	174,276	$	(178,536)	$	(4,230)
Issuance of stock under stock plans, net of shares withheld	—	—		133,469	—		724		—		724
Convertible Preferred Stock PIK dividend	739	748		—	—		(748)		—		(748)
Accretion of Convertible Preferred Stock issuance costs	—	48		—	—		(48)		—		(48)
Taxes paid by the Company for employee stock plans	—	—		—	—		(45)		—		(45)
Stock-based compensation costs	—	—		—	—		1,541		—		1,541
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)

See accompanying notes to the condensed consolidated financial statements.

-3-

Table of Contents

LIFECORE BIOMEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)


	Three Months Ended
	August 25, 2024		August 27, 2023
Cash flows from operating activities:
Net loss	$	(16,230)	$	(10,754)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,993		2,168
Stock-based compensation	2,419		1,533
Deferred taxes	(100)		76
Non-cash interest expense	423		—
Non-cash interest expense, related party	4,296		3,025
Change in debt derivative liability, related party	(900)		(200)
Provision for expected credit losses	(11)		21
Other, net	—		3
Changes in operating assets and liabilities:
Accounts receivable	2,680		9,241
Accounts receivable, related party	3,339		(6,855)
Inventories	(1,663)		(849)
Other assets	(244)		(2,426)
Accounts payable	3,628		(4,202)
Accrued compensation	32		371
Other liabilities	1,154		(2,530)
Deferred revenues	(749)		(451)
Deferred revenues, related party	(710)		3,500
Net cash used in operating activities	(643)		(8,329)

Cash flows from investing activities:
Purchases of property, plant, and equipment	(3,392)		(5,054)
Net cash used in investing activities	(3,392)		(5,054)

Cash flows from financing activities:
Issuance of common stock under stock-based compensation plans	1		—
Proceeds from exercise of stock options	—		724
Proceeds from revolving credit facility, net	1,914		2,281

Taxes paid by the Company for employee stock plans	(589)		(45)
Principal payments on equipment financing, related party	(193)		—
Principal payments on finance leases	(40)		(26)
Net cash provided by financing activities	1,093		2,934

Net decrease in cash	(2,942)		(10,449)

Cash, beginning of period	8,462		19,091
Cash, end of period	$	5,520	$	8,642

Supplemental disclosure of non-cash investing and financing activities:
Purchases of property, plant, and equipment in accounts payable	$	5,906	$	4,741
Capitalized interest	$	711	$	969
Convertible Preferred Stock PIK dividend	$	806	$	748

See accompanying notes to the condensed consolidated financial statements.

-4-

Table of Contents

LIFECORE BIOMEDICAL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1. Organization, Basis of Presentation, and Summary of Significant Accounting Policies

Organization

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.

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 August 25, 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”). 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.

The Company’s fiscal year is the 52- or 53-week period that ends on the last Sunday of May with quarters within each year ending on the last Sunday of August, November, and February; however, in instances where the last Sunday would result in a quarter being 12-weeks in length, the Company’s policy is to extend that quarter to the following Sunday. A 14th week is included in the fiscal year every five or six years to realign the Company’s fiscal quarters with calendar quarters.

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.

Statement of Comprehensive Income

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 220, Comprehensive Income, a statement of comprehensive income has not been included as the Company has no items of other comprehensive income. Comprehensive loss is the same as net loss for all periods presented.

Basis of Consolidation

The condensed consolidated financial statements are presented on the accrual basis of accounting in accordance with GAAP and include the accounts of the Company and its subsidiaries. All material inter-company transactions and balances have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. The accounting estimates that require management’s most significant and subjective judgments include revenue recognition; recognition and measurement of current and deferred income tax assets and liabilities; the recoverability assessment of inventories; the valuation and recognition of stock-based compensation; and the valuation of the debt derivative liability.

-5-

Table of Contents

These estimates involve the consideration of complex factors and require management to make judgments. The analysis of historical and future trends can require extended periods of time to resolve and are subject to change from period to period. The actual results may differ from management’s estimates.

Reportable Segments

The Company operates as one reportable segment: Lifecore. 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. government. The Company maintains cash in U.S. bank accounts, the balance of which may at times exceed the federally insured limit.

During the three months ended August 25, 2024 and August 27, 2023, the company had significant sales concentrations with certain customers. The Company also had accounts receivable concentrations at August 25, 2024 and May 26, 2024. See Note 2 – Revenue and Note 7 – Accounts Receivable, for the quantification of these concentrations.

Per Share Information

Accounting guidance requires the presentation of basic and diluted earnings per share. Basic earnings per share is computed using the weighted average number of common shares outstanding during the reporting period. 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”). 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.

Fair Value Measurements

The Company uses fair value measurement accounting for financial assets and liabilities and for financial instruments and certain other items measured at fair value. The Company has not elected the fair value option for any of its other eligible financial assets or liabilities.

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

Level 1 – observable inputs such as quoted prices for identical instruments in active markets.

Level 2 – inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data.

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

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 – Debt for additional discussion on the Company’s debt agreement with Alcon.

-6-

Table of Contents

2. Revenue

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
	August 25, 2024		August 27, 2023
CDMO	$	20,180	$	21,539
Fermentation	4,525		2,983
Total	$	24,705	$	24,522

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


	Three Months Ended
	August 25, 2024		August 27, 2023
CDMO - Developmental Services revenue recognized over time	$	5,876	$	6,381
Revenues recognized at a point in time	18,829		18,141
Total	$	24,705	$	24,522

During the three months ended August 25, 2024, the Company had revenues concentrations of 10% or greater from two customers, accounting for 32% and 24%. During the three months ended August 27, 2023, the Company had revenues concentrations of 10% or greater from three customers, accounting for 31%, 21%, and 15%.

3. Restructuring Costs

The following table summarizes the restructuring costs recognized in the Company’s Condensed Consolidated Statements of Operations, in connection with the previously announced restructuring plan. These costs are included within selling, general, and administrative costs on the consolidated statements of operations.


	Three Months Ended
	August 25, 2024		August 27, 2023
Employee severance and benefit costs	$	439	$	(18)
Lease costs	—		7
Other restructuring costs	44		1
Total restructuring costs	$	483	$	(10)

The following table presents the movement of the restructuring costs liability from May 26, 2024 through August 25, 2024, excluding discontinued operations, within current liabilities in the Condensed Consolidated Balance Sheet:


	May 26, 2024		Expense		Payments		August 25, 2024
Employee severance and benefit costs	$	217	$	439	$	(397)	$	259
Lease costs	4,290		—		—

SEC Form 10-Q filed by Lifecore Biomedical Inc.