LIFECORE BIOMEDICAL INC DE

13. Convertible Preferred Stock and Common Stock

On January 9, 2023, the Company issued 38,750 shares of the Series A Convertible Preferred Stock, par value $0.001 per share (the “Convertible Preferred Stock”), all of which are convertible into shares of Common Stock at the election of the holders of the Convertible Preferred Stock. The Convertible Preferred Stock ranks senior to the Common Stock with respect to dividends, distributions and payments on liquidation, winding-up and dissolution. The Company recorded the Convertible Preferred Stock proceeds of $38,750, as well as issuance costs of $668. The issuance costs are being reduced over the period ending June 29, 2026 as a charge to additional paid-in capital.

Dividends

The holders of Convertible Preferred Stock are entitled to dividends on the liquidation preference at the rate of 7.5% per annum, payable in-kind. The holders are also entitled to participate in dividends declared or paid on the Common Stock on an as-converted basis. As of August 25, 2024 and May 26, 2024, the aggregate liquidation preference of the Convertible Preferred Stock was $43,797 and $42,991, respectively.

Conversion

Each holder has the right, at its option, to convert its Convertible Preferred Stock, in whole or in part, into fully paid and non-assessable shares of Common Stock at an initial conversion price equal to $7.00 per share. The conversion price is subject to customary anti-dilution adjustments, including in the event of any stock split, stock dividend, recapitalization or similar events, and is also subject to adjustment in the event of subsequent offerings of Common Stock or convertible securities by the Company for less than the conversion price.

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Voting

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

Registration Rights Agreement

The Registration Rights Agreement contains monetary penalties if the Company fails to maintain the effectiveness of the registration statement. As of August 25, 2024, the Company has incurred $4,377 in cumulative monetary penalties and interest under the Registration Rights Agreement due to the delinquent filing of the Company’s annual and quarterly reports with the SEC. The amounts expensed within non-operating other expense, net for monetary penalties during the three months ended August 25, 2024 and August 27, 2023 were $275 and $250, respectively. The Company also incurred $95 in interest on the monetary penalties for the three months ended August 25, 2024, andnone for the prior year first quarter. The accrual for these liabilities was $3,841 as of August 25, 2024, which is included in other accrued liabilities.