Lifecore Biomedical, Inc. De 10-Q for FY2024 Q3

Lifecore Biomedical, Inc. De (LFCR)

10-Q 2024-08-09 For: 2024-02-25

Added on April 12, 2026

About this 10-Q

Lifecore Biomedical, Inc. De filed this 10-Q on August 9, 2024, covering the quarter ended February 25, 2024 (FY2024 Q3).

Headline figures

Quarter ended February 25, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $35.7M; up 34.5% from $26.54M a year earlier
Net income: $15.63M; compared with a net loss of $36.51M a year earlier
Diluted EPS: $0.42; compared with -$1.20 a year earlier

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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)


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


			Page




Part I.	Financial Information

Item 1.	Financial Statements (Unaudited)

	a)	Condensed Consolidated Balance Sheets as of February 25, 2024 and May 28, 2023	1

	b)	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended February 25, 2024 and February 26, 2023	2

	c)	Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ (Deficit) Equity for the Three and Nine Months Ended February 25, 2024 and February 26, 2023	3

	d)	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended February 25, 2024 and February 26, 2023	4

	e)	Notes to the Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		29

Item 4.	Controls and Procedures		29

Part II.	Other Information		31

Item 1.	Legal Proceedings		31

Item 1A.	Risk Factors		31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		37

Item 3.	Defaults Upon Senior Securities		37

Item 4.	Mine Safety Disclosures		37

Item 5.	Other Information		37

Item 6.	Exhibits		38

	Signatures		39


	February 25, 2024		May 28, 2023
	(unaudited)
ASSETS
Current Assets:
Cash	$	3,073	$	19,091
Accounts receivable, less allowance for credit losses	19,427		19,907
Accounts receivable, related party	12,018		9,117
Inventories, net	39,670		40,841
Prepaid expenses and other current assets	1,969		4,919

Total Current Assets	76,157		93,875


Property and equipment, net	145,367		134,390
Operating lease right-of-use assets	2,510		4,282
Goodwill	13,881		13,881
Intangible assets	4,200		4,200

Other long-term assets	4,126		2,917

Total Assets	$	246,241	$	253,545

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable	$	15,685	$	22,097
Accrued compensation	4,070		4,145
Other accrued liabilities	8,892		7,142
Current portion of lease liabilities	4,159		1,270
Deferred revenues	839		552
Deferred revenues, related party	2,392		3,503

Current portion of long-term debt, net, related party	773		580

Total Current Liabilities	36,810		39,289

Long-term debt, less current portion, net, related party	96,336		84,256
Revolving credit facility	19,913		16,809
Debt derivative liability, related party	23,000		64,900
Long-term lease liabilities, less current portion	5,088		9,709
Deferred taxes, net	607		380
Deferred revenues, less current portion, related party	—		2,940
Other non-current liabilities	5,053		174

Total Liabilities	186,807		218,457

Commitments and Contingencies, see Note 1

Convertible Preferred Stock, $0.001 par value; 2,000 shares authorized; 42 and 39 shares issued and outstanding at February 25, 2024 and May 28, 2023, respectively	41,748		39,318

Stockholders’ Deficit:
Common Stock, $0.001 par value; 50,000 shares authorized; 30,547 and 30,322 shares issued and outstanding at February 25, 2024 and May 28, 2023, respectively	30		30
Additional paid-in capital	177,096		174,276
Accumulated deficit	(159,440)		(178,536)

Total Stockholders’ Deficit	17,686		(4,230)
Total Liabilities, Convertible Preferred Stock, and Stockholders’ Deficit	$	246,241	$	253,545


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


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


	Three Months Ended				Nine Months Ended
	February 25, 2024		February 26, 2023		February 25, 2024		February 26, 2023
Revenues	$	17,054	$	26,536	$	54,528	$	72,123
Revenues, related party	18,650		—		35,847		—
Total Revenues	35,704		26,536		90,375		72,123
Cost of goods sold	23,810		17,988		65,797		51,917
Gross profit	11,894		8,548		24,578		20,206

Operating costs and expenses:
Research and development	2,170		2,234		6,414		6,621
Selling, general and administrative	9,848		10,279		28,239		26,675

Gain on sale of divested business	—		—		—		(2,108)

Restructuring costs	771		2,566		918		4,176
Total operating costs and expenses	12,789		15,079		35,571		35,364
Operating loss	(895)		(6,531)		(10,993)		(15,158)



Interest expense, net	(921)		(4,833)		(2,546)		(11,672)
Interest expense, related party	(3,368)		—		(9,754)		—
Change in fair value of debt derivative liability, related party	21,000		—		41,900		—
Other income (expense), net	(814)		104		(1,950)		(330)
Net income (loss) from continuing operations before taxes	15,002		(11,260)		16,657		(27,160)
Provision for income tax expense	(217)		(70)		(240)		(78)
Net income (loss) from continuing operations	14,785		(11,330)		16,417		(27,238)

Discontinued operations:
Income (loss) from discontinued operations	$	850	$	(25,177)	$	2,700	$	(33,041)
Income tax (expense) benefit	(3)		—		(21)		—
Income (loss) from discontinued operations, net of tax	847		(25,177)		2,679		(33,041)
Net income (loss)	$	15,632	$	(36,507)	$	19,096	$	(60,279)

Basic net income (loss) per share:
Income (loss) from continuing operations	$	0.48	$	(0.37)	$	0.54	$	(0.91)
Income (loss) from discontinued operations	0.03		(0.83)		0.09		(1.11)
Total basic net income (loss) per share	$	0.51	$	(1.20)	$	0.63	$	(2.02)

Diluted net income (loss) per share:
Income (loss) from continuing operations	$	0.40	$	(0.37)	$	0.45	$	(0.91)
Income (loss) discontinued operations	0.02		(0.83)		0.07		(1.11)
Total diluted net income (loss) per share	$	0.42	$	(1.20)	$	0.52	$	(2.02)

Shares used in per share computation:
Basic	30,488		30,304		30,450		29,838
Diluted	36,609		30,304		36,469		29,838

Other comprehensive income (loss), net of tax:
Net income (loss)	$	15,632	$	(36,507)	$	19,096	$	(60,279)
Net unrealized gain on interest rate swaps (net of tax effect of $16)	$	—	$	—	$	—	$	586
Total comprehensive income (loss)	$	15,632	$	(36,507)	$	19,096	$	(59,693)


Three and Nine Months Ended February 25, 2024
	Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity

	Shares	Amount		Shares	Amount
Balance at May 28, 2023	39	$	39,318	30,322	$	30	$	174,276	$	(178,536)	$	—	$	(4,230)
Issuance of stock under stock plans, net of shares withheld	—	—		134	—		724		—		—		724
Convertible Preferred Stock paid-in-kind (“PIK”) dividend	1	748		—	—		(748)		—		—		(748)
Accretion of Convertible Preferred Stock	—	48		—	—		(48)		—				(48)
Taxes paid by Company for employee stock plans	—	—		—	—		(45)		—		—		(45)
Stock-based compensation	—	—		—	—		1,541		—		—		1,541
Net loss	—	—		—	—		—		(10,754)		—		(10,754)

Balance at August 27, 2023	40	$	40,114	30,456	$	30	$	175,700	$	(189,290)	$	—	$	(13,560)
Issuance of stock under stock plans, net of shares withheld	—	—		3	—		—		—		—		—
Convertible Preferred Stock PIK dividend	1	763		—	—		(763)		—		—		(763)
Accretion of Convertible Preferred Stock	—	47					(47)						(47)
Taxes paid by Company for employee stock plans	—	—		—	—		(12)		—				(12)
Stock-based compensation	—	—		—	—		1,585		—				1,585
Net income	—	—		—	—		—		14,218				14,218


Balance at November 26, 2023	41	$	40,924	30,459	$	30	$	176,463	$	(175,072)	$	—	$	1,421
Issuance of stock under stock plans, net of shares withheld				88	—		—		—		—		—

Convertible Preferred Stock PIK dividend	1	776		—	—		(776)		—		—		(776)
Accretion of Convertible Preferred Stock	—	48		—	—		(48)		—		—		(48)
Taxes paid by Company for employee stock plans	—	—		—	—		(42)		—		—		(42)
Stock-based compensation	—	—		—	—		1,499		—		—		1,499
Net income	—	—		—	—		—		15,632		—		15,632

Balance at February 25, 2024	42	$	41,748	30,547	$	30	$	177,096	$	(159,440)	$	—	$	17,686


Three and Nine Months Ended February 26, 2023
							Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Convertible Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount

Balance at May 29, 2022	—	—		29,513	30		167,352		(78,973)		(586)		87,823
Issuance of stock under stock plans, net of shares withheld	—	—		80	—		—		—		—		—
Taxes paid by Company for employee stock plans	—	—		—	—		(67)		—		—		(67)
Stock-based compensation	—	—		—	—		785		—		—		785
Net loss	—	—		—	—		—		(10,966)		—		(10,966)
Other comprehensive income, net of tax	—	—		—	—		—		—		300		300
Balance at August 28, 2022	—	$	—	29,593	$	30	$	168,070	$	(89,939)	$	(286)	$	77,875
Issuance of stock under stock plans, net of shares withheld	—	—		76	—		—		—		—		—
Taxes paid by Company for employee stock plans	—	—		—	—		(142)		—		—		(142)
Stock-based compensation	—	—		—	—		1,108		—		—		1,108
Net loss	—	—		—	—		—		(12,806)		—		(12,806)
Other comprehensive income, net of tax	—	—		—	—		—		—		286		286
Issuance of shares to Wynnefield Capital, Inc.	—	—		628	—		4,822		—		—		4,822
Balance at November 27, 2022	—	$	—	30,297	$	30	$	173,858	$	(102,745)	$	—	$	71,143
Issuance of stock under stock plans, net of shares withheld	—	—		22	—		—		—		—		—
Proceeds of Convertible Preferred Stock, net of issuance costs	39	38,082		—	—		—		—		—		—
Accretion of Convertible Preferred Stock	—	25		—	—		(25)		—		—		(25)
Convertible Preferred Stock PIK dividend	—	428		—	—		(428)		—		—		(428)
Taxes paid by Company for employee stock plans	—	—		—	—		(65)		—		—		(65)
Stock-based compensation	—	—		—	—		903		—		—		903
Net loss	—	—		—	—		—		(36,507)		—		(36,507)

Balance at February 26, 2023	39	$	38,535	30,319	$	30	$	174,243	$	(139,252)	$	—	$	35,021


	Three Months Ended				Nine Months Ended
(In thousands)	February 25, 2024		February 26, 2023		February 25, 2024		February 26, 2023
Contact development and manufacturing organization	$	22,306	$	18,015	$	67,522	$	52,488
HA manufacturing	13,398		8,521		22,853		19,635

Total	$	35,704	$	26,536	$	90,375	$	72,123


	Fair Value at February 25, 2024			Fair Value at May 28, 2023
	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3








Liabilities:
Debt derivative liability(1)	—	—	23,000	—	—	64,900
Total liabilities	—	—	23,000	—	—	64,900


	February 25, 2024	May 28, 2023
Assumptions
Discount rate	21.3% — 24.2%	22.3% — 24.5%
Implied spread	17.0%	18.5%
Risk free rate	4.3% — 7.2%	3.8% — 6.0%


	Debt Derivative Liability
Balance as of May 29, 2022	$	—
Fair value on issuance(1)	$	64,900
Balance as of May 28, 2023	64,900
Decrease in fair value(2)	(41,900)
Balance as of February 25, 2024	$	23,000


	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
Options outstanding at May 28, 2023	2,374,325	$	10.88
Options granted	6,300	$	7.51
Options exercised	(95,800)	$	9.38	$	115

Options expired	(119,850)	$	11.79
Options outstanding at February 25, 2024	2,164,975	$	10.88			1.21	$	—
Options exercisable at February 25, 2024	1,712,287	$	10.95			1.90	$	—


(In thousands)	February 25, 2024		May 28, 2023
Finished goods	$	13,113	$	13,141
Raw materials	18,686		17,735
Work in process	8,802		10,349
Inventory reserve	(931)		(384)
Total	$	39,670	$	40,841


	Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value Per Share
Restricted stock units outstanding at May 28, 2023	336,791	$	9.70
Granted	1,058,556	$	8.25
Vested	(155,942)	$	8.03

Restricted stock units outstanding at February 25, 2024	1,239,405	$	8.67


Remainder of Fiscal year 2024	$	193
Fiscal year 2025	773
Fiscal year 2026	773
Fiscal year 2027	773
Fiscal year 2028	773
Thereafter	157,535
Total	$	160,820


	Total
(in thousands)
Asset write-off costs, net	$	13,893
Employee severance and benefit costs	4,314
Lease costs	4,814
Other restructuring costs	7,853
Total restructuring costs	$	30,874


	Three Months Ended				Nine Months Ended
(In thousands, except per share amounts)	February 25, 2024		February 26, 2023		February 25, 2024		February 26, 2023
Numerator:
Net income (loss) from continuing operations	$	14,785	$	(11,330)	$	16,417	$	(27,238)

Income (loss) from discontinued operations, net of tax	847		(25,177)		2,679		(33,041)
Net income (loss)	$	15,632	$	(36,507)	$	19,096	$	(60,279)

Denominator:
Weighted average shares for basic income (loss) per share	30,488		30,304		30,450		29,838
Potential preferred stock conversion to common stock	5,899		—		5,792		—
Dilutive stock options and RSUs	222		—		227		—
Weighted average shares for diluted income (loss) per share	36,609		30,304		36,469		29,838

Basic net income (loss) per share:
Income (loss) from continuing operations	$	0.48	$	(0.37)	$	0.54	$	(0.91)
Income (loss) from discontinued operations	$	0.03	$	(0.83)	$	0.09	$	(1.11)
Total basic net income (loss) per share	$	0.51	$	(1.20)	$	0.63	$	(2.02)

Diluted net income (loss) per share:
Income (loss) from continuing operations	$	0.40	$	(0.37)	$	0.45	$	(0.91)
Income (loss) from discontinued operations	$	0.02	$	(0.83)	$	0.07	$	(1.11)
Total diluted net income (loss) per share	$	0.42	$	(1.20)	$	0.52	$	(2.02)


(in thousands)	May 28, 2023		Expense		Payments		February 25, 2024
Employee severance and benefit costs	$	1,600	$	215	$	(1,300)	$	515
Lease costs	257		700		(128)		829
Other restructuring costs	1,140		3		(923)		220
	$	2,997	$	918	$	(2,351)	$	1,564


(In thousands, except percentages)	Three Months Ended				Change				Nine Months Ended				Change
	February 25, 2024		February 26, 2023		Amount		%		February 25, 2024		February 26, 2023		Amount		%
Total Revenues	$	35,704	$	26,536	$	9,168	35	%	$	90,375	$	72,123	$	18,252	25	%
Gross Profit	$	11,894	$	8,548	$	3,346	39	%	$	24,578	$	20,206	$	4,372	22	%


Exhibit Number			Exhibit Title



















10.1			Limited Waiver and First Amendment to that certain Credit and Guaranty Agreement, dated May 22, 2023, by and among Lifecore Biomedical, Inc., Curation Foods, Inc. and Lifecore Biomedical Operating Company, Inc., as borrowers, certain other subsidiaries of Lifecore Biomedical, Inc. party thereto, as guarantors, and Alcon Research, LLC, as lender, administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Company on January 5, 2024).
10.2			Limited Waiver and Sixth Amendment to that certain Credit Agreement, dated December 31, 2020, by and among Lifecore Biomedical, Inc., Curation Foods, Inc. and Lifecore Biomedical Operating Company, Inc., as borrowers, certain other subsidiaries of Lifecore Biomedical, Inc. party thereto, as guarantors, and BMO Harris Bank, N.A., as lender and administrative agent (incorporated by reference to Exhibit 10.2 to the Form 8-K filed by the Company on January 5, 2024).
10.3			Amended and Restated Contract Manufacturing Agreement, dated December 31, 2023, by and between Lifecore Biomedical, Inc. and Alcon Research, LLC (incorporated by reference to Exhibit 10.3 to the Form 8-K filed by the Company on January 5, 2024).
10.4			Amendment No. 1 to that certain Amended and Restated Supply Agreement, dated May 3, 2023, by and between Lifecore Biomedical, Inc. and Alcon Research, LLC (incorporated by reference to Exhibit 10.4 to the Form 8-K filed by the Company on January 5, 2024).
31.1+			Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2+			Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**			Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**			Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS+			Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH+			Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104+			Cover Page Interactive Data File (embedded within the Inline XBRL document)
*			The schedules and other attachments to this exhibit have been omitted. The Company agrees to furnish a copy of any omitted schedules or attachments to the SEC upon request.
**			Information is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
+			Filed herewith.


			LIFECORE BIOMEDICAL, INC.

			By:			/s/ John D. Morberg
						John D. Morberg
						Executive Vice-President, Chief Financial Officer and Secretary
						(Principal Financial and Accounting Officer)


			/s/ Paul Josephs
			Paul Josephs
			President and Chief Executive Officer (Principal Executive Officer)


			/s/ John D. Morberg
			John D. Morberg
			Chief Financial Officer
			(Principal Financial Officer)


*			The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.