LFCR 10-K & 10-Q changes, risk factors and insider trading
Lifecore Biomedical, Inc. \de\ · Nasdaq · Pharmaceutical Preparations · CIK 1005286 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risks related to our internal controls and financial reporting”
New heading “Risks related to our financial and cash position”
New heading “Risks related to our business and operations”
New heading “Risks related to ownership of our Common Stock”
New heading “Risks related to our financial and cash position”
New heading “We have a history of losses. We may need additional capital and any additional capital we seek may not be available in the amount we need, at the time we need it or on terms favorable to us.”
New heading “Risks related to our business and operations”
New heading “If we are unable to retain existing customers, attract new customers and sell additional products and services to our existing and new customers, our revenue growth and profitability will be adversely affected.”
New heading “Our success as a stand-alone CDMO will be subject to customer demand based on factors beyond our control.”
New heading “A significant portion of our revenue has been concentrated on a few large customers, including Alcon, one of our primary lenders, and terminations of agreements or cancellations or delays of orders by these customers may adversely affect our business.”
New heading “Our profitability is dependent upon our ability to obtain appropriate pricing for our products and to control our cost structure or to pass along costs to our customers.”
New heading “Our customers’ failure to receive or maintain regulatory approval for product candidates or products could negatively impact our revenue and profitability.”
New heading “Our business is highly regulated and our operations are subject to laws, regulations and standards that directly impact our business.”
New heading “Loss or compromise of our HA bacterial cell bank assets could materially impact our business operations, product quality and competitive position.”
New heading “Our development and manufacturing activities may expose us to product liability claims.”
New heading “Future resales, or the perception of future resales, of our Common Stock may cause the market price of our Common Stock to drop significantly, even if our business is doing well.”
New heading “Our stockholders will experience significant dilution as a result of the issuance of shares of our Common Stock upon conversion of the Redeemable Convertible Preferred Stock.”
New heading “We are implementing a new enterprise resource planning system, and challenges with the implementation of the system may impact our business and operations.”
New heading “Third parties may claim that our services or our customers’ products infringe their intellectual property rights.”
New heading “We may be unable to protect our intellectual property and proprietary processes from infringement or claims of ownership or rights by third parties, which could materially and adversely affect the Company.”
Removed heading “We have limited capital and will need to raise additional capital in the immediate future.”
Removed heading “Our failure to timely file certain periodic reports with the SEC and our prior restatements have had, and may in the future have further, material adverse consequences to our business, our financial condition, results of operations and our cash flows.”
Removed heading “A significant portion of our revenue has been concentrated on a few large customers, including Alcon, one of our primary lenders. Cancellations or delays of orders by our customers may adversely affect our business and the sophistication and buying power of our customers could have a negative impact on profits.”
Removed heading “Actions of activist stockholders could be disruptive and costly, and the possibility that activist stockholders may seek changes that conflict with our strategic direction could cause uncertainty about the strategic direction of our business.”
Removed heading “Our sale of some products may expose us to product liability claims.”
Removed heading “Our operations are subject to regulations that directly impact our business.”
Removed heading “Our stockholder value creation program may not have the anticipated results we intended, expose us to additional restructuring costs and operational risks, and may be negatively perceived in the markets.”
Removed heading “We may not be able to achieve acceptance of our new products in the marketplace.”
Removed heading “Potential indemnification obligations related to divestitures made in connection with the sale transactions related to Project SWIFT may have a material adverse effect on our business, financial condition and results of operations.”
Removed heading “Our profitability is dependent upon our ability to obtain appropriate pricing for our products and to control our cost structure.”
Removed heading “We depend on our infrastructure to have sufficient capacity to handle our on-going production needs.”
Removed heading “We depend on strategic partners and licenses for future development.”
Removed heading “Our future operating results are likely to fluctuate, which may cause our stock price to decline.”
Removed heading “We have never paid any dividends on our Common Stock.”
Removed heading “Our business and operations could be negatively affected if it becomes subject to any securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of business and growth strategy and impact its stock price.”
Removed heading “Our Common Stock may be delisted from Nasdaq, which could significantly adversely affect us, our business, and the value and liquidity of our Common Stock.”
Removed heading “We may be subject to unionization, work stoppages, slowdowns or increased labor costs.”
Removed heading “We depend on our intellectual property, and we may be unable to adequately protect our intellectual property rights or may infringe intellectual property rights of others.”
Removed heading “The global economy is experiencing continued volatility, which may have an adverse effect on our business.”
Removed heading “Litigation costs and the outcome of litigation could have a material adverse effect on our business.”
Removed heading “Increasing attention to Environmental, Social, and Governance (“ESG”) matters may impact our business, financial results or stock price.”
Largest changes
“Our failure to timely file certain periodic reports with the SEC and our prior restatements have subjected us to, and may in the future, subject us to further, stockholder litigation or governmental or regulatory investigations. For example, as further described “Note 9 – Commitments and Contingencies - SEC Subpoena” to our unaudited consolidated financial statements contained in this Annual Report on Form 10-K, on February 16, 2024, the Chicago Regional Office of the SEC issued a subpoena to the Company seeking documents and information concerning the Restatement. …”see in full comparison
“As previously disclosed, we were delinquent in filing certain of our past periodic reports with the SEC, and we have restated previously issued financial statements for several periods, which have subjected us to, and may in the future, subject us to further, governmental or regulatory investigations or stockholder litigation. For example, on February 16, 2024, the Chicago Regional Office of the SEC issued a subpoena to the Company seeking documents and information concerning the restatements. …”see in full comparison
“Our failure to timely file certain periodic reports with the SEC and our prior restatements have had, and may in the future have further, material adverse consequences to, and pose significant risk to, our business, which could materially and adversely affect our business, our financial condition, our results of operations and our cash flows. …”see in full comparison
“There can be no assurance as to whether the Company will remain compliant with the Nasdaq Listing Rules. …”see in full comparison
“In addition, our two credit agreements contain a number of covenants that limit our ability and our subsidiaries’ ability to, among other things, incur additional indebtedness, pay dividends, create liens, engage in transactions with affiliates, merge or consolidate with other companies, or sell substantially all of our assets. …”see in full comparison
see in full comparisonInAfteraddition,approvalmost ofby theexistingFDA or other regulatory agencies, these productsbeingaresold by Lifecore and its customers aregenerally subject to continued regulation by the FDA, various state agencies and foreign regulatory agencies,whichincludingregulateregulation of the design, nonclinical and clinical research studies, manufacturing, labeling, distribution, post-marketing product modifications, advertising, promotion, import, export, adverse event and other reporting, andrecord keepingrecord-keeping procedures for such products.Aseptic processing and shared equipment manufacturing require specific quality controls.Ifweour customers fail toachieve andmaintaintheseregulatorycontrols,approval of products that wemaymanufacturehavefor them, lose the ability torecallmarketproduct,the products we manufacture for them, ormayifhave to reduce or suspend production while we address any deficiencies. Marketing clearances or approvals bythe regulatory agenciescan be withdrawn due to failure to comply with regulatory standards or the occurrence of unforeseen problems following initial clearance or approval. These agencies can alsootherwise limit or prevent the manufacture or distribution of Lifecore’s products or changeor increasetheregulatorymanufacturing requirementsapplicablerelating to suchproducts.products,AourdeterminationrevenuethatandLifecore is in violation of such regulationsprofitability couldleadbetoadverselythe issuance of adverse inspectional observations, a warning letter, imposition of civil penalties, including fines, product recalls or product seizures, preclusion of product import or export, a hold or delay in pending product approvals, withdrawal of marketing authorizations, injunctions against product manufacture and distribution, and, in extreme cases, criminal sanctions.affected.
Full comparison: every changed paragraph (251)
Our business is subject to numerous risks and uncertainties, including those highlighted in this section titled “Risk Factors” and summarized below. We have various categories of risks, including risks related to our internal controls and financial reporting, our financial and cash position, our business and operations, risks related toand ownership of our Common Stock, and general risks, which are discussed more fully below. As a result, this risk factor summary does not contain all of the information that may be important to you, and you should read this risk factor summary together with the more detailed discussion of risks and uncertainties set forth following this summary, as well as elsewhere in this Annual Report on Form 10-K. These risks include, but are not limited to, the following:
Risks related to our internal controls and financial reporting
•We have identified material weaknesses in our internal control over financial reporting,reporting whichthat ifhave notaffected remediated,the couldreliability adversely affectof our business.financial statements and have had, and may continue to have, other adverse consequences.
Risks related to our financial and cash position
•We are highly leveraged,leveraged and oursubject contractualto obligationssignificant interest, volatile fair market value fluctuations, and certain credit agreement obligations, some of which are expected to grow. These may limitnegatively impact our operational flexibilityresults and limit cash flow available to invest in the ongoing needs of our businessbusiness, as well as our operational flexibility, or otherwise adversely affect our results of operations.
•We have a history of losses. We may need additional capital and any additional capital we seek may not be available in the amount we need, at the time we need it or on terms favorable to us.
Risks related to our business and operations
•If we are unable to retain existing customers, attract new customers and sell additional products and services to our existing and new customers, our revenue growth and profitability will be adversely affected.
•Our success as a stand-alone CDMO will be subject to customer demand based on factors beyond our control.
•We have limited capital and will need to raise additional capital in the immediate future.
•Our failure to timely file certain periodic reports with the SEC and our prior restatements have had, and may in the future have further, material adverse consequences to our business, our financial condition, results of operations and our cash flows.
•A significant portion of our revenue has been concentrated on a few large customers, including Alcon, one of our primary lenders.lenders, Cancellationsand terminations of agreements or cancellations or delays of orders by ourthese customers may adversely affect our business and the sophistication and buying power of our customers could have a negative impact on profits.business.
•Actions of activist stockholders could be disruptive and costly, and the possibility that activist stockholders may seek changes that conflict with our strategic direction could cause uncertainty about the strategic direction of our business.
•Our sale of some products may expose us to product liability claims.
•Our profitability is dependent upon our ability to obtain appropriate pricing for our products and to control our cost structure or to pass along costs to our customers.
•If we are unable to secure contract manufacturers with capabilities to produce the products that we require, ourOur CDMO services are highly complexcomplex, and our failure to provide quality and timely services to our CDMO customers,customers could adversely impact our business.
•Our customers’ failure to receive or maintain regulatory approval for product candidates or products could negatively impact our revenue and profitability.
•Our business is highly regulated and our operations are subject to laws, regulations and standards that directly impact our business.
•Loss or compromise of our HA bacterial cell bank assets could materially impact our business operations, product quality and competitive position.
•Our development and manufacturing activities may expose us to product liability claims.
•Our stockholder value creation program may not have the anticipated results we intended, expose us to additional restructuring costs and operational risks, and may be negatively perceived in the markets.
•We may not be able to achieve acceptance of our new products in the marketplace.
•We have a concentration of manufacturingfacilities and mayunforeseen haveevents could materially disrupt our ability to dependprovide onservices third parties toand manufacture products for our products.customers.
•Potential indemnification obligations related to divestitures made in connection with the sale transactions related to Project SWIFT may have a material adverse effect on our business, financial condition and results of operations.
•Our profitability is dependent upon our ability to obtain appropriate pricing for our products and to control our cost structure.
•We depend on our infrastructure to have sufficient capacity to handle our on-going production needs.
•We depend on strategic partners and licenses for future development.
•AnyWe may need to consider new business acquisitions to achieve our growth strategy, and any such acquisition willwould involve substantial effort and costs to complete and uncertainty relating to integration.
Risks related to ownership of our Common Stock
•Future resales, or the perception of future resales, of our Common Stock may cause the market price of our Common Stock to drop significantly, even if our business is doing well.
•Our future operating results are likely to fluctuate which may cause our stock price to decline.
•Our Redeemable Convertible Preferred Stock has rights, preferences, and privileges that are not held by, and are preferential to, the rights of holders of our Common Stock.
•Our stockholders will experience significant dilution as a result of the issuance of shares of our Common Stock upon conversion of the Redeemable Convertible Preferred Stock.
•We have never paid any dividends on our Common Stock.
General risks
•Our business and operations could be negatively affected if it becomes subject to any securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of business and growth strategy and impact its stock price.
•Our Common Stock may be delisted from Nasdaq, which could significantly adversely affect us, our business, and the value and liquidity of our Common Stock.
•WeThe mayoutcome beof exposed to employment-related claimsexisting and future litigation and regulatory proceedings and the related fees, costs thatand penalties could materiallyhave adverselya affectmaterial adverse effect on our business.
•We may be subject to unionization, work stoppages, slowdowns or increased labor costs.
•We are dependent on our key employees and if one or more of them were to leave, we could experience difficulties in replacing them,them or effectively transitioning their replacements and our operating results could suffer.
•We are implementing a new enterprise resource planning system, and challenges with the implementation of the system may impact our business and operations.
•Third parties may claim that our services or our customers’ products infringe their intellectual property rights.
•We depend on our intellectual property, and we may be unable to adequately protect our intellectual property rights or may infringe intellectual property rights of others.
•We may be unable to protect our intellectual property and proprietary processes from infringement or claims of ownership or rights by third parties, which could materially and adversely affect the Company.
•The global economy is experiencing continued volatility, which may have an adverse effect on our business.
•Litigation costs and the outcome of litigation could have a material adverse effect on our business.
•Increasing attention to Environmental, Social, and Governance (“ESG”) matters may impact our business, financial results or stock price.
Risks Relatedrelated to Ourour Businessinternal controls and Operationsfinancial reporting
We have identified material weaknesses in our internal control over financial reporting,reporting whichthat ifhave notaffected remediated,the couldreliability adversely affectof our business.financial statements and have had, and may continue to have, other adverse consequences.
As previouslydiscussed disclosed,in “Part IV, Item 9A. – Controls and Procedures,” in this Annual Report on Form 10-K, we have identified material weaknesses in our internal control over financial reporting have been identified, which have not been remediated. In addition, as previouslyof disclosed,May material25, weaknesses have been identified in our internal control over financial reporting in the past, which have not been remediated.2025. A “material weakness” is a deficiency, or a combination of deficiencies, in internal controls over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses we identified led to errors in prior year consolidated financial statements as of and for the fiscal years ended May 29, 2022 and May 30, 2021 and certain interim periods. While these errors were corrected through restatements of our consolidated financial statements, the material weaknesses underlying those restatements have not yet all been remediated. We have adopted a plan to remediate these material weaknesses, and we are taking actions to achieve our remediation, but those actions are not yet complete. The material weaknesses and the remediation thereof have caused us to incur significant accounting, legal, and other advisory costs and expenses, and substantial time from our management and employees, and may cause us to incur additional costs and time in the future.
Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls or fraud. Even effective internal controls over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls or if we experience difficulties in their implementation, our business and financial results could be harmed, and we could fail to meet our financial reporting obligations. Management assessed the effectiveness of our internal control over financial reporting as of May 26, 2024. In making this assessment, we identified deficiencies in the internal control over financial reporting that aggregated to material weaknesses in certain components of the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) framework. As a result, our control activities were ineffective and represent a material weakness. Additionally, material errors in the Company's financial statements were identified in the 2023 Annual Report, primarily relating to the areas of inventory valuation, the capitalization of interest on assets under construction, recording of development revenue and related cost of sales, the presentation of certain operating costs and expenses of continuing operations and discontinued operations, and the write off of other receivables of the Company’s former Curation Foods businesses that were not collectible prior to the fiscal year periods presented in the consolidated financial statements. If the steps we take do not remediate the material weakness in a timely manner, we may be unable to conclude in the future that we maintain effective internal control over financial reporting. The material weaknesses and the remediation thereof have caused, and are expected in the future to cause, us to incur significant accounting, legal, and other advisory costs and expenses, and substantial time from our management time and employees. See Item 9A., “Controls and Procedures,” in this Annual Report on Form 10-K for additional information regarding the identified material weaknesses and our actions to date to remediate the material weaknesses.
The implementationactions ofwe proceduresare totaking remediatein theaccordance materialwith weaknessesour isremediation ongoingplan andmay will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles. We cannot be certain that these measures willnot successfully remediate the identified material weaknessesweaknesses. orIn thataddition, other material weaknesses and control deficiencies will notmay be identified in the future. If our effortswe are notunable successfulto correct material weaknesses in a timely manner or prevent other material weaknesses orfrom control deficiencies occuroccurring in the future, we may be unable to report our financial results accurately and/or on a timely basis or help prevent fraud,basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence orin our reported financial information, subject us to civil and criminal investigations and penalties, as well contractual penalties, make us a target for activists, result in the delisting of our Common Stock from Nasdaq, and/or cause the liquidity of and the market price offor our securitiesCommon Stock to decline.
See “Part IV, Item 9A. – Controls and Procedures” in this Annual Report on Form 10-K for additional information regarding the identified material weaknesses and our actions to date to remediate the material weaknesses.
Risks related to our financial and cash position
We are highly leveraged,leveraged and oursubject contractualto obligationssignificant interest, volatile fair market value fluctuations, and certain credit agreement obligations, some of which are expected to grow. These may limitnegatively impact our operational flexibilityresults and limit cash flow available to invest in the ongoing needs of our businessbusiness, as well as our operational flexibility, or otherwise adversely affect our results of operations.
We are highly leveraged. As of May 26,25, 2024,2025, we had approximately $164.5$176.0 million in total indebtedness with Alcon Research, LLC (“Alcon”), with $173.5 million outstanding under our Credit and $12.3Guaranty Agreement (the “Term Loan Credit Facility”). We also had $2.5 million outstanding and $27.3 million available for borrowing under our revolving credit facility.agreement (“Revolving Credit Facility”) with BMO.
We are party to two credit agreements, which contain a number of covenants that limit our ability and our subsidiaries’ ability to, among other things, incur additional indebtedness, pay dividends, create liens, engage in transactions with affiliates, merge or consolidate with other companies, or sell substantially all of our assets. In addition, the holders of our Convertible Preferred Stock have certain consent rights over our ability to incur indebtedness above certain thresholds, which could further limit our ability to incur additional indebtedness. The New Term Loan Credit Facility with Alcon also contains certain operational requirements and limitations, including that the Company’s material uncured violation of the Alcon Supply Agreement constitutes an event of default under the New Term Loan Credit Facility. The terms of our credit agreements may restrict our current and future operations and could adversely affect our ability to finance our future operations or capital needs or to execute preferred business strategies. In addition, complying with these covenants may make it more difficult for us to successfully execute our business strategy and compete against companies who are not subject to such restrictions. Our credit agreements also contain covenants related to maintaining current financial reporting and going concern maintenance. As previously disclosed, we have, in the past, determined we were not in compliance with the covenants under our credit agreements, including with respect to our timely financial reporting and going concern, which were subsequently remediated. In addition, although we have received waivers from our lenders regarding our current financial reporting delays, there can be no assurances that we will not be in non-compliance in the future.
A failure by us to comply with the covenants specified in our credit agreements, as amended, could result in an event of default under the agreements, which would give the lenders the right to terminate their commitments to provide additional loans under our credit agreements and to declare all borrowings outstanding, together with accrued and unpaid interest, to be immediately due and payable. In addition, the lenders would have the right to proceed against the collateral we granted to them, which consists of substantially all of our assets. As previously disclosed, we have been in noncompliance with our credit agreements in the past, and we cannot guarantee that we will be able to remain in compliance with all applicable covenants under the credit agreements in the future, that our lenders will elect to provide waivers or enter into amendments in the future, or, if the lenders do provide waivers, that those waivers will not be conditioned upon additional costs or restrictions that could materially or adversely impact our business, cash flows, results of operations, and financial condition. In addition, if the debt under our credit agreements were to be accelerated, we may not have sufficient cash or be able to borrow sufficient funds to refinance the debt or sell sufficient assets to repay the debt, which could immediately, materially and adversely affect our business, cash flows, results of operations, and financial condition, and there would be no guarantee that we would be able to find alternative financing. Even if we were able to obtain alternative financing, it may not be available on commercially reasonable terms or on terms that are acceptable to us.
The degree to which we are leveraged now and/or in the future (including due to the payable-in-kind interest accruing on our outstanding debt under the Term Loan Credit Facility) could have important adverse consequences to holders of our securities,consequences, including the following:
Management's Discussion & Analysis (MD&A)
New heading “Financial overview”
New heading “Results of operations – Fiscal year ended May 25, 2025 compared to year ended May 26, 2024”
New heading “Revenues and gross profit”
New heading “Other expense, net”
New heading “Revenue recognition for development services”
New heading “Qualitative impairment reviews of goodwill and other indefinite-lived intangible assets”
Removed heading “Establish strategic relationships with market leaders:”
Removed heading “Expand medical applications for HA:”
Removed heading “Utilize manufacturing infrastructure to meet customer demand:”
Removed heading “Maintain flexibility in product development and supply relationships:”
Removed heading “Deliver consistent quality:”
Removed heading “Reportable Segments”
Removed heading “Related Party Transactions”
Removed heading “Results of Operations”
Removed heading “Year Ended May 26, 2024 Compared to May 28, 2023”
Removed heading “Revenues and Gross Profit:”
Removed heading “Transition Services Income”
Removed heading “Loss on Debt Extinguishment”
Removed heading “Other (Expense) Income, net”
Removed heading “Income Tax (Provision) Benefit”
Removed heading “Non-GAAP Financial Information and Reconciliations”
Removed heading “Cash Flows from Operating Activities”
Removed heading “Cash Flows from Investing Activities”
Removed heading “Cash Flows from Financing Activities”
Removed heading “Capital Expenditures”
Removed heading “Use of Estimates”
Removed heading “Revenue Recognition”
Removed heading “Impairment Review of Goodwill and Indefinite-Lived Intangible Asset”
Removed heading “Performance Share Units Valuation”
Largest changes
“The increase of $3.6 million in SG&A expenses was primarily due to a $3.7 million increase in stock-based compensation, the majority of which was related to new hire performance stock unit grants to our executive officers. Also included in SG&A expenses for the current period is $11.6 million primarily related to legal expenses related to legacy matters including the SEC subpoena, an activist investor and a securities class action claim, as well as costs associated with the legacy financial restatement. …”see in full comparison
“On January 9, 2023, the Company entered into further amendments to the Prior Credit Facilities to, among other things, provide for the limited waiver from events of default under the Prior Credit Facilities related to certain financial covenant requirements, as well as a waiver of certain existing terms and covenants under the Prior Term Loan Facility, including with respect to the fixed coverage ratio leverage ratio and minimum liquidity covenants, 2% increase of annual interest rate, which was payable in kind, and a one-time amendment fee in an amount equal to 3% of the principal amount as …”see in full comparison
“The loans under the New Term Loan Credit Facility have a fixed interest rate equal to 10% per annum. Interest is payable-in-kind until the third anniversary of the closing date and following the third anniversary of the closing date is payable at a rate equal to 3% per annum in cash with the remainder payable-in-kind, in each case, unless otherwise elected by the Borrowers to pay a greater proportion in cash. …”see in full comparison
“The Equipment Lease Agreement contains terms and provisions (including representations, covenants and conditions) 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 Equipment Lease Agreement in the event of insolvency, liquidation or bankruptcy, and its remedies for other breaches of the Equipment Lease Agreement are otherwise limited to monetary damages.”see in full comparison
“Qualitative impairment reviews of goodwill and other indefinite-lived intangible assets”see in full comparison
“Impairment Review of Goodwill and Indefinite-Lived Intangible Asset”see in full comparison
Full comparison: every changed paragraph (181)
The following discussion should be read in conjunction with the Company’s Consolidatedconsolidated Financialfinancial Statementsstatements and notes contained in Part IV, Item 15 of this report.Annual ExceptReport foron theForm 10-K. In addition to historical information contained herein, the matters discussed ininformation, this reportdiscussion areand analysis contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. These forward-looking statementsthat involve certainrisks, risksuncertainties and uncertaintiesassumptions and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. PotentialPlease risks and uncertainties include, without limitation, those mentioned in this report and, in particular, the factors described insee “Part I, Item 1A. Risk Factors”. Please seeand “Cautionary Note About Forward-Looking Statements”. contained in this Annual Report on Form 10-K.
Corporate Overview
The CompanyLifecore is a fully integrated CDMO that offers highly differentiated clinical and commercial capabilities in the development, fillcGMP manufacturing and finishaseptic filling of complex formulations and highly viscous sterile injectable pharmaceutical drug or medical device products in syringessyringes, vials and vials.cartridges, Asacross a leadingwide manufacturervariety of premium,modalities. injectableWe grademanufacture HA in bulk form as well as for use in formulated and filled syringes and vials for our customers’ injectable products used in treating a broad spectrum of medical conditions and procedures.procedures, Lifecoreincluding uses its fermentation processophthalmic and asepticorthopedic formulationapplications. andWe fillingalso expertise to be a leader in the development of HA-based products for multiple applications and to take advantage of non-HA device and drug opportunities which leverage its expertise in manufacturing and aseptic syringe filling capabilities. Lifecore CDMO providesoffer product development servicesservice capabilities to itsour partnerscustomers for HA-based, as well as non-HA based, aseptically formulated and filled products. These servicesthat include activities such as technology development, material component changes, analytical method development,development and validation, formulation development, sterile filtration, process scale-up, pilot studies, stability studies, process validation and production of materials for clinical studies. The Company brings more than 40 years of expertise as a partner for global and emerging biopharmaceutical and biotechnology companies across multiple therapeutic categories to bring their innovations to market.
During fiscal year 2025, Lifecore continued to execute on the previously announced strategic initiatives to support higher performance as a CDMO. We have made significant improvements to our revenue generating capacity, financial position, management team, governance, financial reporting and stock exchange compliance, and business development efforts. In addition, we implemented various process improvements to ensure improved productivity and discipline in key areas of our business. Based on all of these improvements, together with our competitive advantages and our strategic plan described below, we believe that we are well-positioned for future growth.
For additional information, see “Part I, Item 1. Business” of this Annual Report on Form 10-K.
Financial overview
Lifecore generates revenues from two activities within a single, integrated segment: CDMO and HA manufacturing. CDMO includes aseptic formulation and filling of syringes, vials and cartridges for injectable products used for medical purposes and product development services to assist its customers in obtaining regulatory approval for the commercial sale of their device or drug product. HA manufacturing includes the production and sale of pharmaceutical-grade, non-animal-sourced HA using our proprietary, fermentation-based HA process in bulk form.
Built over many years of experience, Lifecore separates itself from its competition based on its five areas of expertise, including but not limited to Lifecore’s ability to:
Establish strategic relationships with market leaders:
Lifecore continues to develop applications for products with partners who have strong marketing, sales, and distribution capabilities to end-user markets. Through its strong reputation and history of providing pharmaceutical grade HA and products, Lifecore has established long-term relationships with global and emerging biopharmaceutical and biotechnology companies across multiple therapeutic categories and leverages those partnerships to attract new relationships in other medical markets.
Expand medical applications for HA:
Due to the growing knowledge of the unique characteristics of HA and Lifecore’s unique strength and history as a trusted manufacturer of pharmaceutical injectable grade HA products, Lifecore continues to identify and pursue opportunities for the use of HA in other medical applications, such as wound care, aesthetic surgery, drug delivery, next generation orthopedics and device coatings, and through sales to academic and corporate research customers. Further applications may involve expanding process development activity and/or additional licensing of technology.
Utilize manufacturing infrastructure to meet customer demand:
Lifecore has made strategic capital investments in its CDMO business focusing on extending its aseptic filling capacity and capabilities to meet increasing partner demand and to attract new contract filling opportunities outside of HA markets. Lifecore is using its manufacturing capabilities to provide contract manufacturing and development services to its partners in the area of sterile pre-filled syringes and vials, as well as fermentation and purification requirements.
Maintain flexibility in product development and supply relationships:
Lifecore’s vertically integrated development and manufacturing capabilities allow it to establish a variety of contractual relationships with global corporate partners. Lifecore’s role in these relationships extends from supplying HA raw materials to providing technology transfer and development services to manufacturing aseptically filled, finished sterile products, and assuming full supply chain responsibilities.
Deliver consistent quality:
Lifecore has built a world class quality and regulatory system that is demonstrated in its results, processes and customer relationships. With over 38 years of a superior track record with global regulatory bodies (FDA, EMA, ANVISA, etc.), Lifecore is the partner of choice for companies looking for proven experience in delivering QbD, cGMP compliance, and manufacturing excellence with pharmaceutical elegance and quality. Lifecore’s world class quality and regulatory system and excellent track record with the global regulatory bodies ensure partners that they will safely bring innovative therapies to market.
Reportable Segments
The Company operates in one reportable segment: Lifecore, which is described in further detail below. This is based on the objectives of the business and how our CODM, the President and Chief Executive Officer, regularly reviews and manages the business, monitors operating performance and allocates resources.
Related Party Transactions
For a discussion of significant related party transactions, refer to “Part IV, Item 15. Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies” elsewhere in this Annual Report on Form 10-K.
Results of Operations
A discussion of changes in our results of operations and cash flows from fiscal year 2023 to fiscal year 2022 has been omitted from this Annual Report on Form 10-K, but may be found in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended May 28, 2023, filed with the SEC on March 20, 2024, which is available free of charge on the SEC’s website at www.sec.gov and at www.lifecore.com, by clicking “Investors” located at the top of the page. The content of any website referred to in this document is not incorporated by reference into this document.
Year Ended May 26, 2024 Compared to May 28, 2023
Revenues and Gross Profit:
Lifecore generates revenues from the development and manufacture of HA products and providing contract development and aseptic manufacturing services to customers. Lifecore generates revenues from two integrated activities: (1) CDMO and (2) fermentation.
ThereThe following costs are numerous factors that can influence gross profit including product mix, customer mix, manufacturing costs, volume, sales discounts, and charges for excess or obsolete inventory, to name a few. Many of these factors influence or are interrelated with other factors. The Company includesincluded in cost of salesgoods all of the following costssold: raw materials (including packaging, syringes, fermentation supplies and purification supplies), direct labor, overhead (including indirect labor, depreciation, and facility-related costs), and shipping and shipping-related costs.
Numerous factors can influence gross profit, including product mix, customer mix, manufacturing costs, timing of production, production yields, volume, sales discounts, contractual provisions, and charges for excess or obsolete inventory, among others. Many of these factors influence or are interrelated with other factors.
R&D expenses consist primarily of product development and commercialization initiatives.
SG&A expenses consist of salaries and related costs for administrative, public company and business development functions as well as legal fees, and consulting fees. Public company costs include compliance, audit, tax, insurance and investor relations.
The debt derivative liability, related party, is a set of embedded derivatives recorded at fair value each period. The derivatives represent certain call and put premiums contained in the credit facility that can be exercised upon qualifying events of default or changes in control. Changes in the fair value are recorded as non-operating income or expense.
Results of operations – Fiscal year ended May 25, 2025 compared to year ended May 26, 2024
Revenues and gross profit
The increase in revenues was due to a $7.1 million increase in HA manufacturing demand primarily due to our largest customer's supply chain initiatives. The HA manufacturing revenue increase was partially offset by the $6.5 million decline in CDMO revenues that is primarily due to $6.2 million lower development revenue due to completion of a discrete development project in the prior comparable period, timing of customer project lifecycles, $4.3 million of reduced volumes primarily driven by a customer working down inventory levels built in the prior fiscal year period, and $3.2 million of lower sales volume from a customer termination, partially offset by $5.4 million of value focused customer pricing initiatives and $1.8 million from a contractual take-or-pay arrangement recognized in fiscal year 2025.
The $1.6 million decrease in gross profit is due to a $5.9 million decrease in CDMO gross profit, partially offset by a net $4.3 million increase in HA manufacturing gross profit due to increased volumes and manufacturing variances. There were a combination of factors within CDMO gross profit including a $3.3 million fluctuation on the adjustment of inventories to their net realizable value primarily due to the absence of a favorable adjustment in the prior fiscal year due to an improvement in sales prices, a $2.1 million decrease due to a customer termination that also resulted in a write-off of inventory and equipment, and an otherwise consistent overall sales mix that included a contractual take-or-pay arrangement and pricing improvements that offset the margin on lower development revenues described above.
The increase in revenues for fiscal year 2024, compared to fiscal year 2023, was due to (i) a $20.2 million increase in CDMO revenues consisting of a $9.9 million increase related to the launch of a new commercial product and a $10.3 million increase primarily due to increased order volume from existing customers; and (ii) a $4.8 million increase in fermentation revenues due to increased order volume from existing customers.
The increase in gross profit for fiscal year 2024 compared to fiscal year 2023 was primarily due to increased revenues resulting in a favorable volume variance of $6.8 million and a favorable sales mix and adjustments to write down inventories to their net realizable value in the comparable periods driving a favorable rate variance of $7.1 million.
Gross profit margin percentage increased from 27.1% to 32.6%. The 553 basis points (“bps”) improvement is due to a 380 bps increase in CDMO gross profit margin percentage as a result of a favorable sales mix and increased customer pricing and a 189 bps increase primarily due to adjustments to write down inventories to their net realizable value in the comparable periods partially offset by a slight decrease of 16 bps in fermentation gross profit margin percentage.
Operating Expenses:expenses
R&D expenses consist primarily of product development and commercialization initiatives. R&D expenses are focused on new products and applications for HA-based and non-HA biomaterials.
The decrease of $0.3 million in R&D expenses was primarily due to fewer headcount for the fiscal year 2024ended May 25, 2025 compared to fiscalthe yearprior 2023 was not significant.period.
Selling, Generalgeneral, and Administrativeadministrative (“SG&A”)
The increase of $3.6 million in SG&A expenses was primarily due to a $3.7 million increase in stock-based compensation, the majority of which was related to new hire performance stock unit grants to our executive officers. Also included in SG&A expenses for the current period is $11.6 million primarily related to legal expenses related to legacy matters including the SEC subpoena, an activist investor and a securities class action claim, as well as costs associated with the legacy financial restatement. The prior period included $10.2 million primarily related to incremental audit and consulting fees for the legacy financial restatement, expenses related to strategic alternatives and the divestiture of Curation Foods, and $1.7 million of other one-time costs associated with becoming a standalone CDMO.
SG&A expenses consist primarily of sales and marketing expenses associated with Lifecore’s product sales and services, business development expenses, and staff and administrative expenses.
The increase in SG&A expenses for fiscal year 2024 compared to fiscal year 2023 was primarily due to increases in non-cash stock-based compensation expense due to the higher mix of restricted stock units (“RSUs”) grants over stock options of $2.6 million, a non-cash right-of-use impairment for the Santa Maria building (a divested business office) of $1.4 million, partially off-set by a reduction in consulting fees of $0.9 million incurred in completing the year-end audit.
GainLoss on sale or disposal of Divested Businessesassets
The $7.0 million loss on sale or disposal of assets was primarily due to a $6.4 million loss on the sale of certain excess equipment that was primarily related to the write-off of historically capitalized interest costs, as well as $0.6 million related to capital projects that were abandoned.
On June 2, 2022, the Company and Curation Foods entered into an asset purchase agreement and consummated the transactions contemplated thereby, pursuant to which Curation Foods sold all of its assets related to BreatheWay packaging technology business in exchange for an aggregate purchase price of $3.1 million. Upon the sale, the Company recorded a gain of $2.1 million.
The $1.7 million net recovery for the current fiscal year includes a recovery of $3.2 million following the favorable reversal of a historical lease obligation of the divested Curation Foods business, for which we recorded $1.0 million of expense in the prior fiscal year. The current fiscal year recovery was partially offset by $1.4 million of severance expense related to the transformation of the finance and accounting department.
Beginning in fiscal year 2020, the Company announced a restructuring plan to drive enhanced profitability, focus the business on its strategic assets and redesign the organization to be the appropriate size to compete and thrive. This included a reduction in force, a reduction in leased office spaces and the sale of non-strategic assets. The Company recorded $1.7 million and $4.2 million during the years ended May 26, 2024 and May 28, 2023, respectively, related to the restructuring plan. Restructuring costs for the year ended May 26, 2024 decreased $2.5 million compared to the prior year period due as a result of the restructuring plan to divest the Curation Foods businesses being substantially complete. Refer to “Part IV, Item 15. Note 10 - Restructuring Costs” in the notes for more information.
OtherNon-operating Incomeincome (Expenses):or expense
The increase in interest expense, net of interest income, was primarily from $3.8 million more interest related to the Alcon term loans, which will continue to grow due to accumulating interest paid-in-kind and amortization of the debt discount.
The decrease in Interest Expense, net for fiscal year 2024 compared to fiscal year 2023 was primarily a result of fluctuations in the principal balance under the Company’s revolving credit facility.
Transition Services Income
In fiscal year 2023, the Company earned $0.3 million of transition services income related to the BreatheWay Disposition. No such transition services income was present during fiscal year 2024.
Loss on Debt Extinguishment
The loss on debt extinguishment of $23.7 million in fiscal year 2023 was due to the New Term Loan Credit Facility with Alcon entered into in May 2023, including the $12.9 million prepayment fee to Goldman Sachs Specialty Lending Group, L.P. (“Goldman”), the prior lender, write-off unamortized deferred financing fees related to the Prior Term Loan Facility (defined below) of $7.6 million and third-party fees of $3.3 million. Refer to “Part IV, Item 15. Note 6 - Debt” for additional information.
Other (Expense) Income, net
Other (expense) income, net for fiscal year 2024 includes $3.3 million in monetary penalties related to Convertible Preferred Stock, partially offset by sub-lease rental income of $0.2 million.
What changed in the latest 10-Q
Risk Factors
You should carefully consider the risks described in Part I, Item 1A, “Risk Factors” of the 2025 Transition Report, as our business, financial condition and results of operations could be adversely affected by any of the risks and uncertainties described therein and herein. There have been no material changes to our risk factors as previously disclosed under Part I, Item 1A “Risk Factors” in the 2025 Transition Report.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Restructuring recovery”
New heading “Other non-operating income or expense”
New heading “Results of operations – six months ended June 30, 2026”
New heading “Revenues and gross profit”
New heading “Operating expenses”
New heading “Research and development”
New heading “Selling, general, and administrative”
New heading “Restructuring recovery”
New heading “Non-operating income or expense”
New heading “Interest expense, net”
Removed heading “Other expense, net”
Largest changes
Full comparison: every changed paragraph (55)
•our ability to maintain or expand our relationships with our current customers, including the impact of changes in consumer demand or prices for the products we manufacture for our customers;
•our ability to fund any redemptions of shares of the outstanding Series A Redeemable Convertible Preferred Stock if requested by holders in accordance with their terms;
•We have strengthened our financial position through, among other actions, (i) raising $24.3 million in a private placement of Lifecore common stock in October 2024, (ii) a three-year term extension of our existing asset-based lending revolving credit facility with BMO in November 2024, (iii) the sale of certain excess capital equipment for $17 million in January 2025, (iv) the repayment of $19.7 million of borrowings on our outstanding revolving credit facility over the past 18 months, (v) reduced obligations with the payment of an aggregate amount of $4.7 million to the holders of the Redeemable Convertible Preferred Stock in full satisfaction of outstanding registration delay fees in November 2025, and (vi) the implementation of operational cost reductions, including overhead costs and professional fees associated with legal, accounting and consulting spend.spend; and (vii) in October 2024 we regained compliance with SEC reporting requirements and have been maintaining those requirements.
•We enhanced our business development strategy, increased our investment in sales and marketing to support brand visibility, and expanded our business development team with sales talent who will focus on key drug development geographies in the United States and internationally. We have signed a total of 13 programs over the last 12 months, including eight late-stage programs.
Lifecore expects to further improve efficiencies and productivity through additional procurement and operational strategies that will build upon the new capabilities and information available from our ERP system. Lifecore expects this system to strengthen inventory control, support sharper financial management, and help reduce costs as the company grows. To further advance the Company’s efficiency objectives, Lifecorethe recentlyCompany’s hiredsenior management team includes a seasoned industry executive in the role of head of business transformation.transformation Thiswho newlyis created position will championchampioning the Company’s efforts to improve its cost structure, to drive productivity, and gain efficiencies. Through June 30, 2026, the Company has progressed more than 40 projects intended to promote cost reductions or productivity improvements.
On August 1, 2025, our Board of Directors approved achanging change in the Company’sour fiscal year from a fiscal year ending on the last Sunday of May to a calendar year ending on December 31.31, Since September 30, 2025,and the Company has been reportingreported calendar periods insince itsSeptember quarterly30, periodic reports.2025. In accordance with SEC rules, the Company is presenting current period results compared to the most closely-comparable prior periods that can be derived from previously-reported three-monthresults, periodwhich through June 30, 2026. Forfor this report,report were the mostthree closely-comparableand previously-reportedsix periodmonths isended May 25, 2025. With the three-monthexception periodof certain statements of operations, the Company did not previously report these periods on a standalone basis; rather, those periods were generally derived from the audited financial statements in the Company’s Form 10-K for the year ended May 25, 2025, less the unaudited results reported in its Forms 10-Q for the nine months ended February 23, 2025.2025 and the six months ended November 24, 2024, respectively. In deriving the comparative period results, the Company reclassified certain amounts from previously-reported results to present them on a basis consistent with the current period presentation and, in some cases, the previously audited annual results. It iswas not practicable or cost-justifiable for the Company to prepare equivalent calendar-based comparative periods because the Company’s previous fiscal calendar does not align to the new calendar periods. BeginningThe Company will begin providing calendar-based comparative periods beginning with its reporting as of and for the periods ended September 30, 2026, the Company will provide calendar-based comparative periods.2026.
Numerous factors can influence gross profit, including product mix, customer mix, manufacturing costs, timing of production, production yields, volume, sales discounts, contractual provisions, and charges forto state inventories at their net realizable value, including as that relates to excess or obsolete inventory, among others. Many of these factors influence or are interrelated with other factors.
The income tax benefit or expense primarily consists of current state income tax obligations and a schedule of net deferred federal tax attributes that are substantially offset by valuation allowances and net operating loss carryforwards. Changes in the income tax benefit or expense are generally driven by the mix of these various items and are generally not material.
ThreeResults of operations – three months ended MarchJune 31,30, 2026
The decrease in revenues of $12.0$2.3 million was primarily due to a $6.9$8.0 million decrease in HA manufacturing revenues primarily from the absence of increased demand in the prior period from a customer due to its supply chain initiatives. In addition, CDMO revenues decreased $5.0 million,revenue, which was primarily from $2.9$5.9 million of lower sales volumes, $1.3$1.2 million of lower development revenue due to completion of discrete development projects in the prior comparable period and timing of customer project lifecycles, and a $0.9 million contractual take-or-pay arrangement in the prior period. The CDMO decline was partially offset by a $5.7 million increase in HA manufacturing revenues primarily due to timing.
The decrease of $1.9 million in gross profit is due to a $4.5 million decrease in CDMO gross profit due to lower commercial and development sales, unfavorable adjustments for net realizable value, revaluation, process loss, manufacturing variances, and a $0.9 million contractual take-or-pay arrangement in the prior period, partially offset by favorable labor and overhead absorption and lower departmental expenses. The CDMO decline was partially offset by a $2.6 million increase in HA manufacturing gross profit due to increased sales volume.
The decrease of $5.4 million in gross profit is due a $5.7 million decrease in HA manufacturing gross profit due to decreased sales volume and manufacturing absorption, partially offset by a $0.2 million increase in CDMO gross profit. The CDMO increase was due to mix and costing and $0.9 million of higher prior year costs due to a customer termination resulting in write-off of inventory and equipment, partially offset by a $0.9 million contractual take-or-pay arrangement in the prior period.
R&D expenses declined primarily due to lowerincreased costutilization of salesR&D allocations,personnel on revenue-generating development projects as well as a headcount reduction following an internal reorganization. These were offset in part by increased stock-based compensation.
The $2.1$1.0 million decrease in SG&A expenses includes $1.6$0.5 million of lower recurring legal and accounting expenses, lower compensation and lower credit losses,compensation, as well as a $0.5$0.6 million netof reduction inlower non-recurring expenses primarily related to legacy legal matters.matters and prior period restructuring.
Restructuring recovery
The three months ended May 25, 2025 included a credit of $2.6 million for the favorable reversal of a historical lease obligation of the divested Curation Foods business.
Included in SG&A for the current period is $1.6 million of non-recurring costs primarily related to legal expenses related to legacy matters and business transformation expenses. The prior period included $2.1 million of non-recurring expenses primarily related to legal expenses related to legacy matters.
LossThe loss on sale or disposal of assets was immaterial.
The $6.9 million loss on sale or disposal of assets in the prior period was primarily due to a $6.4 million loss on the sale of certain excess equipment that was primarily related to the write-off of historically capitalized interest costs, as well as $0.5 million related to capital projects that were abandoned.
The increase in interest expense, net of interest income, included an increase of $1.4 million related to the Alcon term loans, which will continue to grow due to accumulating interest paid-in-kind and amortization of the debt discount.discount and $0.7 million more interest expense caused by the completion of certain capital expenditure projects where interest was previously capitalized to property, plant and equipment.
Other non-operating income or expense
None of the other income or expense categories changed materially period over period.
Results of operations – six months ended June 30, 2026
Revenues and gross profit
The decrease of $14.2 million in revenues was primarily due to a $13.0 million decrease in CDMO revenue, which was primarily from $8.8 million of overall lower sales volumes, $2.5 million of lower development revenue, and a $1.7 million take-or-pay arrangement in the prior period. In addition, HA manufacturing revenues decreased $1.3 million, $3.1 million of which was primarily due to timing of revenues from Lifecore’s largest customer’s supply chain initiatives, partially offset by $1.8 million of increased demand from other customers and pricing initiatives.
The decrease of $7.3 million in gross profit is due to a $4.3 million decrease in CDMO gross profit due to lower commercial and development sales, unfavorable adjustments for net realizable value, revaluation, process loss, manufacturing variances, and a $1.7 million contractual take-or-pay arrangement in the prior period, partially offset by favorable labor and overhead absorption, lower departmental expenses, and $0.9 million of higher prior year costs due to a customer termination resulting in write-off of inventory and equipment. In addition, HA manufacturing gross profit declined $3.2 million due to lower sales and unfavorable absorption.
Operating expenses
Research and development
R&D expenses declined primarily due to increased utilization of R&D personnel on revenue-generating development projects, as well as a headcount reduction following an internal reorganization.
Selling, general, and administrative
The $3.2 million decrease in SG&A expenses includes a reduction of $1.4 million in recurring accounting and legal expenses, and lower compensation, a $0.4 million reduction in stock-based compensation, and a $1.3 million reduction in non-recurring expenses primarily related to legacy matters and prior period restructuring.
Restructuring recovery
The six months ended May 25, 2025 included a credit of $2.6 million for the favorable reversal of a historical lease obligation of the divested Curation Foods business.
The $6.9 million loss on sale or disposal of assets in the prior period was primarily due to a $6.4 million loss on the sale of certain excess equipment. That loss was primarily related to the write-off of historically capitalized interest costs, as we recovered substantially all of the cash originally paid to purchase the equipment from the sale proceeds.
Non-operating income or expense
Interest expense, net
The increase in interest expense, net of interest income, of $3.8 million was primarily from $2.8 million more interest related to the Alcon term loans, which will continue to grow due to accumulating interest paid-in-kind and amortization of the debt discount and $1.5 million more interest expense caused by the completion of certain capital expenditure projects where interest was previously capitalized to property, plant and equipment. These increases were partially offset from various other small items.
Other expense, net
The decrease in other expense, net was immaterial.
IncomeOther taxnon-operating benefitincome or expense
None of the other income or expense categories changed materially period over period.
The income tax benefit or expense primarily consists of current state income tax obligations and a schedule of net deferred federal tax attributes that are substantially offset by valuation allowances and net operating loss carryforwards. Changes in the income tax benefit or expense are driven by the mix of these various items and were not significant for the periods presented.
As of MarchJune 31,30, 2026, the Company had cash of $20.8$17.2 million and $17.3$21.6 million available for borrowing (together, “consolidated liquidity”) under its $40.0 million Revolving Credit Facility, with no amounts outstanding as of MarchJune 31,30, 2026. As of MarchJune 31,30, 2026, the Company had approximately $194.2$198.1 million in total indebtedness with Alcon, with $188.6$192.7 million outstanding under the Term Loan Credit Facility. The Company is subject to minimum liquidity covenants under its credit agreements, the most restrictive of which requires the Company to maintain at least $4.0 million of consolidated liquidity, as adjusted for any excess payables, at the end of each fiscal quarter. As of MarchJune 31,30, 2026, the Company was in compliance with all financial covenants under the Term Loan Credit Facility and Revolving Credit Facility. See “Part I, Item 1. Note 9 – Debt” in this Quarterly Report on Form 10-Q for a summary of the Term Loan Credit Facility and Revolving Credit Facility.
The following table presents comparative summary cash flows for the threesix months ended MarchJune 31,30, 2026 and FebruaryMay 23,25, 2025:
Cash flow improved by $7.4$1.0 million in the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended FebruaryMay 23,25, 2025 for the following reasons:
•Operating cash flows decreased $4.0 million primarily due to the decline in revenue period over period. In the 2026 period, the combined effect of net loss and the non-working capital adjustments to reconcile net loss to operating cash flows generated $5.6 million of cash, which was partially offset by changes in working capital of $3.1 million primarily related to an increase in accounts receivable. In the 2025 period, the combined effect of net loss and the non-working capital adjustments to reconcile net loss to operating cash flows generated $10.0 million, which was partially offset by $3.5 million of net working capital changes;
•Operating cash flows improved $3.5 million. In the 2025 period, earnings as adjusted for non-cash items generated $3.6 million, which was partially offset by $2.4 million of net working capital changes. In contrast, in the 2026 period, earnings as adjusted for non-cash items used $0.8 million of cash, offset by changes in working capital of $5.5 million primarily related to receivable collections;
•Investing cash flowsoutflows decreased by $2.7$1.1 million due to the absence of $7.0 million cash from the sale of certain excess equipment in the 2025 period, partially offset by lower capital spending in the 2026 period compared to the 2025 period; and
The Company’s future capital requirements will depend on numerous factors, including our future capital expenditure requirements; development, production and manufacturing activities; administrative requirements (including salaries, insurance expenses and legal compliance costs); ability to establish and maintain new and existing customer arrangements; the costs associated with any legal proceedings and claims; any decision to pursue acquisition opportunities; the timing and amount of amounts payable or payments owed under customer agreements; the ability to comply with regulatory requirements; the emergence of competitive technology and market forces; the effectiveness of customers’ activities and arrangements; anythe redemptions of the Redeemable Convertible Preferred Stock and any payment of the accrued and unpaid liquidation preference on shares of the Redeemable Convertible Preferred Stock, if required; payments required under the Term Loan Credit Facility and Revolving Credit Facility; and other factors. If the Company’s currently available funds, together with the internally generated cash flow from operations are not sufficient to satisfy its capital needs, the Company would be required to seek additional funding through various financing transactions or arrangements, including equity financing, debt financing, collaborations, strategic alliances or licensing arrangements, or other means. There can be no assurance that additional funds, if required, will be available to the Company on favorable terms, if at all.
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 MarchJune 31,30, 2026, there were $0.9 million of dividends in arrears that had not yet been paid-in-kind in the form of additional shares of Redeemable Convertible Preferred Stock, representing $18.75 per preferred share.
Each holder of outstanding shares of Redeemable Convertible Preferred Stock hashad the right to requirerequest that the Company to redeem all or part of such holder’s outstanding Redeemable Convertible Preferred Stock beginning on June 29, 2026. To make such cash redemption payments the Company would be required to obtain a consent to such cash redemption payments or waiver of the restriction on cash dividends and/or redemptions set forth in each of the Company’s credit agreements. To the extent consents or waivers are not obtained under each of the Company’s credit agreements, the Company would be in breach thereof if such payments in cash were made. The redemption price for each share of Redeemable Convertible Preferred Stock is an amount equal to its liquidation preference.preference of $1,000 per share of Redeemable Convertible Preferred Stock to be redeemed plus accrued and unpaid dividends on such shares through the date of redemption. As of MarchJune 31,30, 2026 and December 31, 2025, the aggregate liquidation preference of the Redeemable Convertible Preferred Stock was $49.3$50.2 million and $48.4 million, respectively. TheAs of June 30, 2026, the Company estimateshad thatreceived thenotices accruedof and unpaid liquidation preferenceredemption for all such49,263 shares of Redeemable Convertible Preferred Stock. Pursuant to the terms of the Redeemable Convertible Preferred Stock, assumingthe noredemption earlierdate conversionsand orpayment redemptions,of willthe beredemption $50.2price millionfor all shares of the Redeemable Convertible Preferred Stock would occur on JuneDecember 29,28, 2026. IfTo the extent that the Company does not or cannot redeem all shares of Redeemable Convertible Preferred Stock that are submitted for redemption, we mustwould paybe subject to interest on the holderunpaid cash interestbalance at a rate of 1% per month (equivalent to 12% per annum) in respect of that holder’s unredeemed shares of Redeemable Convertible Preferred Stock from the redemption date until paid in full.full in addition to our continuing obligation to accrue dividends paid in kind at 7.5% per annum.
Lifecore’s internally generated cash is not expected to be sufficient to fund all or any significant redemptions of the Redeemable Convertible Preferred Stock. The Company has previously begun and continues to evaluate a range of strategic alternatives to facilitate the redemptions, including use of cash on hand, potential debt or equity financing transactions, and/or other possible strategic transactions, and to seek the requisite consents from the Company’s lenders. The Company intends to seek alternatives that it believes will improve its capital structure for what it expects to be its next phase of growth, and the Company’s Board of Directors remains committed to maximizing value for the Company’s stockholders, while remaining committed to serving the Company’s customers, supporting the Company’s employees and growing the business.
Lifecore’s internally generated cash is not expected to be sufficient to fund all or any significant redemptions of the Redeemable Convertible Preferred Stock. Lifecore’s financing alternatives would be dependent upon the amount of any redemptions and may include supplementing any cash generated from operations and borrowing under its existing credit facilities with financing transactions such as equity financing, debt financing, collaborations, strategic alliances or licensing arrangements, or other means.
As of MarchJune 31,30, 2026 the Company had $188.6$192.7 million in borrowings outstanding under the Term Loan Credit Facility at an effective annual interest rate of 20.9%, which includes the amortization of the debt discount. The stated annual interest rate is 10%, which is payable-in-kind until May 2026, following which interest is payable at a fixed rate of 3% per annum in cash with the remainder payable-in-kind. The obligations under the Term Loan Credit Facility mature on May 22, 2029. Interest paid-in-kind under the Term Loan Credit Facility for the threesix months ended MarchJune 31,30, 2026 was $4.5$8.6 million. In June 2026, the Company made its first quarterly payment of 3% cash interest for the first month following the third anniversary of entering into the Term Loan Credit Facility in the amount of $0.6 million.
As of MarchJune 31,30, 2026, the Company had no outstanding borrowings under the Revolving Credit Facility. The obligations under the Revolving Credit Facility mature on November 26, 2027. Interest paid under the Revolving Credit Facility for the threesix months ended MarchJune 31,30, 2026 was negligible.
LFCR insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-06-04 | Legion Partners, L.p. I |
Grant/award | 25,907 | — | — |
| 2026-06-04 | Obus Nelson |
Grant/award | 25,907 | — | — |
| 2026-06-04 | Aryeh Jason |
Grant/award | 25,907 | — | — |
| 2026-06-04 | Schechter Joshua |
Grant/award | 25,907 | — | — |
| 2026-06-04 | Korenberg Matthew E |
Grant/award | 25,907 | — | — |
| 2026-06-04 | Antunes Humberto Calheiros |
Grant/award | 25,907 | — | — |
| 2026-06-04 | Johnson Paul Harold |
Grant/award | 25,907 | — | — |
| 2026-06-04 | Houde Lovas Katrina |
Grant/award | 25,907 | — | — |
| 2026-05-20 | Josephs Paul |
Shares withheld for tax | 40,413 | $4.57 | $184.7K |
| 2026-04-14 | Salus Thomas D. |
Shares withheld for tax | 24,645 | $5.20 | $128.2K |
Well-known investors holding LFCR (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Millennium Management (Israel Englander) | 2026-06-30 | 133,305 | $699.9K | 0.0% | Reduced 15% |
| Renaissance Technologies | 2026-06-30 | 104,859 | $550.5K | 0.0% | New position |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 98,870 | $519.1K | 0.0% | New position |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 55,613 | $292.0K | 0.0% | Added 250% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 52,520 | $275.7K | 0.0% | Added 107% |