LIFECORE BIOMEDICAL INC DE
For the period ended Nov 24, 2024. Filed Jan 2, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Nov 24, 2024 · Filed Jan 2, 2025
LFCR$6.36-0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-08-25; filed 2024-10-04.
0001005286-24-000145
Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-11-24; filed 2025-01-02.
0001005286-25-000012
Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 65 previous paragraphs and 87 current paragraphs.
39 unchanged; 13 reworded; 28 added; 13 removed; 0 previous and 7 current paragraphs rearranged.
Tables are not compared: 4 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (28)
Current report
Results of Operations — Three Months Ended November 24, 2024
Current report
The increase in revenues was primarily due to a $1.9 million increase in CDMO revenues, which increase comprised $3.8 million of higher sales volume from our largest customer, partially offset by $1.9 million of lower sales volume from other CDMO customers. In addition, HA manufacturing revenues increased $0.5 million primarily from increased revenue from a customer due to timing, with increased shipments in the second quarter of 2025.
Current report
The $1.1 million increase in gross profit is primarily due to a $1.6 million increase in CDMO gross profit as a result of price increases to certain customers partially offset by a $0.5 million decrease in HA manufacturing gross profit due to manufacturing variances.
Current report
The increase in SG&A expenses was primarily due to increases in non-cash stock-based compensation expense of $1.8 million, the majority of which was related to new hire performance stock unit grants to our principal executive officers.
Current report
Non-Operating Income or Expense
Current report
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.
Current report
The change in the fair value of debt derivative liability, related party, in 2025 was primarily caused by the absence of significant changes recognized in 2024. Those changes were primarily due to changes in the probability factors related to the timing of a change in control event. Management moved back the estimated timing of that event following the conclusion of a strategic review process at the end of fiscal year 2024.
Current report
Other expense, net decreased $0.7 million primarily due to the end of the accumulation of monetary penalties to the preferred stockholders following the filing of late registration statements in October 2024.
Current report
Income Tax Benefit or Expense
Current report
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.
Current report
Results of Operations — Six Months Ended November 24, 2024
Current report
Revenues and Gross Profit
Current report
The $3.8 million improvement in gross profit is due to a $5.1 million increase in CDMO gross profit which reflected a $3.2 million increase due to price increases to certain customers and a $1.9 million increase due to a favorable sales mix, partially offset by a $1.0 million write-down on existing inventories to their net realizable value and a $0.3 million decrease in HA manufacturing gross profit due to manufacturing variances.
Current report
Operating Expenses
Current report
Research and Development (“R&D”)
Current report
The increase in SG&A expenses was primarily due to a $4.4 million increase in professional fees, including legal fees related to the civil litigation related to Yucatan Foods, and the stockholder activist settlement. Additionally, non-cash stock-based compensation expense increased by $2.7 million, the majority of which was related to new hire performance stock unit grants to our principal executive officers.
Current report
Non-Operating Income or Expense
Current report
Interest Expense, net
Current report
The increase in interest expense, net was primarily a result of increased interest expense of $1.9 million related to the Alcon term loan debt, primarily related to amortization of the debt discount. There were also reductions in capitalized interest of $0.6 million as we consider alternative approaches to generating cash flows from a legacy asset that has not yet generated revenue.
Current report
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.
Current report
The change in the fair value of debt derivative liability, related party, in 2025 was primarily caused by the absence of significant changes recognized in 2024. Those changes were primarily due to changes in the probability factors related to the timing of a change in control event. Management moved back the estimated timing of that event following the conclusion of a strategic review process at the end of fiscal year 2024.
Current report
Other Expense, net
Current report
Other expense, net decreased $0.6 million primarily due to the end of the accumulation of monetary penalties to the preferred stockholders following the filing of late registration statements in October 2024.
Current report
Income Tax Benefit or Expense
Current report
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.
Current report
As of November 24, 2024, the Company had cash of $9.5 millionand had approximately $20.9 million available for borrowing under the Revolving Credit Facility. Under the Revolving Credit Facility, the Company is subject to a springing fixed charge ratio covenant of 1.00:1.00 generally in the event that the Company's available liquidity under the Revolving Credit Facility falls below $2.5 million.
Current report
On October 3, 2024, the Company sold 5.9 million shares of its common stock at $4.10 per share for gross proceeds of $24.3 million. Issuance costs of $0.5 million, primarily related to legal and audit fees, were netted against these proceeds. Also in October 2024, the Company received $2.4 million from the lessor of our second building in Chaska, MN related to a lease amendment incentive.
Current report
Long-term Debt
Removed paragraphs (13)
Previous report
Results of Operations
Previous report
The increase in gross profit for the three months ended August 25, 2024, compared to the same period last year, was due primarily to a favorable sales mix between customers and price increases to our customers within CDMO revenues as evidenced by a favorable rate variance of $2.7 million detailed further below.
Previous report
The 1,068 basis points (“bps”) improvement in the Gross Profit Percentage is due to a $3.6 million or 1,429 bps increase in CDMO revenue gross profit, of which $2.0 million or 887 bps increase results from a favorable sales mix and $1.6 million or 542 bps increase is due to price increases to our customers, both of which are in CDMO revenues and a $0.2 million or 68 bps increase resulting from the increase in HA manufacturing revenues partially offset by a $1.1 million or 429 bps decrease primarily due to writing down inventories to their net realizable value.
Previous report
The increase in total SG&A expenses for the three months ended August 25, 2024, compared to the same period last year, was primarily due to increases in (i) professional fees of $4.7 million, consisting primarily of $2.4 million in audit fees and legal fees of $2.3 million; and (ii) non-cash stock-based compensation expense, primarily due to the impact of performance stock unit grants of $0.9 million.
Previous report
Included within SG&A for the three months ended August 25, 2024 were higher professional fees than we expect to incur on a normalized basis of approximately (a) $3.6 million of reorganization costs consisting primarily of (i) $1.6 million of audit fee overages related to the completion of the Company’s FY 2024 quarterly and annual reporting as a result of switching auditors; (ii) $1.1 million of legal fees related to civil litigation involving the former owners (and sellers) of Yucatan Foods; and (iii) $0.8 million of consulting costs to support the Company’s FY 2024 audit; and (b) $1.2 million of legal fees related to the stockholder activist settlement.
Previous report
Included within SG&A in the prior year three month period ended August 27, 2023 were approximately $2.8 million of costs that we do not expect to incur on a normalized basis consisting primarily of (i) $1.2 million of reorganization costs related to the sale of the food businesses; (ii) $0.8 million of costs related to the Company’s strategic alternatives review that was completed in the 4th quarter of FY 2024; (iii) $0.4 million of audit fee overages primarily related to the Company’s accounting for the sale of the food businesses in FY 2023; and (iv) $0.2 million of consulting costs to support the Company’s FY 2023 audit.
Previous report
Other Non-Operating Items:
Previous report
The change in fair value of debt derivative liability, related party for the three months ended August 25, 2024, compared to the same period last year, was primarily due to the change in the market credit spread. There were no changes in the probability factors related to the timing of a change in control and an event of default on the supply agreement with Alcon for the three months ended August 25, 2024.
Previous report
Other Expense, net included $275 and $250 in monetary penalties related to the late registration statement filings as contained in the Registration Rights Agreement (excluding interest) for the three months ended August 25, 2024 and August 27, 2023, respectively, and was the primary cause of the increase period over period.
Previous report
Income Taxes
Previous report
The income tax provision primarily consist of valuation allowances recorded against certain deferred tax assets, partially offset by the impact of federal and state research and development tax credits and the changes in provisions between the periods were not significant.
Previous report
(1) The primary reasons for this source of cash were a $6.0 million decrease in total accounts receivable and a $3.6 million increase in operating accounts payable, partially offset by an increase in inventories.
Reworded paragraphs (13)
Previous wording
For a discussion of significant related party transactions, refer to Related Party Transactions within Note 1 to the condensed consolidated financial statements elsewhere in this Quarterly Report on Form 10-Q.
Current wording
For a discussion of significant related party transactions, refer to Related Party Transactions within Note 1 to the condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q.
Previous wording
Numerous factors can influence gross profit, including HA manufacturing product mix, customer mix, manufacturing costs, timing of production, volume, sales discounts, and charges for excess or obsolete inventory, among others. Many of these factors influence or are interrelated with other factors. The Company includes in cost of goods sold all of the following costs: raw materials (including packaging, syringes, fermentation and purification supplies), direct labor, overhead (including indirect labor, depreciation, and facility-related costs), and shipping and shipping-related costs.
Current wording
Numerous factors can influence gross profit, including HA manufacturing product mix, customer mix, manufacturing costs, timing of production, volume, sales discounts, and charges for excess or obsolete inventory, among others. Many of these factors influence or are interrelated with other factors. The Company includes in cost of goods sold all of the following costs: 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.
Previous wording
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. R&D expenses for the three months ended August 25, 2024 was consistent with the prior period.
Current wording
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. R&D expenses for the three months ended November 24, 2024 were consistent with the prior period.
Previous wording
Selling, general and administrative 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.
Current wording
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.
Previous wording
The increase in interest expense, net for the three months ended August 25, 2024, compared to the same period last year, was primarily a result of $997 increased interest expense related to Alcon term loan debt, primarily related to amortization of the debt discount. There was also a reduction in capitalized interest of $258 due to completed projects in the current year.
Current wording
The increase in interest expense, net was primarily a result of increased interest expense of $1.0 million related to the Alcon term loan debt, primarily related to amortization of the debt discount. There were also reductions in capitalized interest of $0.3 million as we consider alternative approaches to generating cash flows from a legacy asset that has not yet generated revenue.
Previous wording
The increase in total revenues for the three months ended August 25, 2024, compared to the same period last year, was due to a $1.5 million increase in HA manufacturing revenues from our largest customer due to timing of shipments, partially offset by a $1.3 million decrease in CDMO revenues primarily as a result of one customer working down inventory levels built in the prior year period.
Current wording
The increase in revenues was due to a $2.0 million increase in HA manufacturing revenues primarily due to higher sales volume from our largest customer and a $0.6 million increase in CDMO revenues, which increase comprised $3.3 million of higher sales volume from our largest customer, partially offset by a customer working down inventory levels built in the prior year period of $2.6 million.
Previous wording
As of August 25, 2024 and May 26, 2024, the Company was in compliance with all financial covenants under the Term Loan Credit Facility and Revolving Credit Facility and had approximately $4,500 available for borrowing under the Revolving Credit Facility.
Current wording
As of November 24, 2024, the Company was in compliance with all financial covenants under the Term Loan Credit Facility and Revolving Credit Facility.
Previous wording
As of August 25, 2024, the Company had cash of $5,520, a net decrease of $2,942, from the $8,462 balance as of May 26, 2024. The decrease in cash for the three months ended August 25, 2024 and August 27, 2023, were attributed to the following:
Current wording
The changes in cash for the six months ended November 24, 2024 and November 26, 2023, were attributed to the following:
Previous wording
(2) The primary reason for this use of cash is a $4.2 million decrease in accounts payable.
Current wording
(2) The primary reason for this use of cash is a $4.3 million decrease in accounts payable.
Previous wording
The Company’s future capital requirements will depend on numerous factors, including the progress of its research and development programs; the continued development of marketing, sales and distribution capabilities; the ability of the Company to establish and maintain new licensing arrangements; the costs associated with employment-related claims; any decision to pursue acquisition opportunities; the timing and amount, if any, of payments received under licensing and research and development agreements; the costs involved in preparing, filing, prosecuting, defending, and enforcing intellectual property rights; the ability to comply with regulatory requirements; the emergence of competitive technology and market forces; the effectiveness of product commercialization activities and arrangements; 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 other arrangements with collaborative partners, sale of real estate or other assets, additional debt or bank borrowings and public or private sales of its securities. There can be no assurance that additional funds, if required, will be available to the Company on favorable terms, if at all.
Current wording
The Company’s future capital requirements will depend on numerous factors, including the progress of its research and development programs; the continued development of marketing, sales and distribution capabilities; the ability of the Company to establish and maintain new and existing licensing arrangements; the costs associated with any legal contingencies and employment-related claims; any decision to pursue acquisition opportunities; the timing and amount, if any, of payments received under licensing and research and development agreements; the costs involved in preparing, filing, prosecuting, defending, and enforcing intellectual property rights; the ability to comply with regulatory requirements; the emergence of competitive technology and market forces; the effectiveness of product commercialization activities and arrangements; 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 other arrangements with collaborative partners, sale of real estate or other assets, additional debt or bank borrowings and public or private sales of its securities. There can be no assurance that additional funds, if required, will be available to the Company on favorable terms, if at all.
Previous wording
The Company believes that its cash from operations, potential equity offerings, along with existing cash, availability under its Revolving Credit Facility and the Securities Purchase Agreement executed on October 3, 2024 will be sufficient to finance its operational and capital requirements for at least the next twelve months.
Current wording
The Company believes that its cash from operations, potential equity offerings, sale of other assets, along with existing cash, and availability under its Revolving Credit Facility will be sufficient to finance its operational and capital requirements for at least the next twelve months.
Previous wording
As of August 25, 2024 and May 26, 2024, the Company had $161,245 and $157,313 in borrowings outstanding under the Term Loan Credit Facility, at an effective annual interest rate of 22.5% for both periods.
Current wording
Refer to Note 10 – Long-term Debt and Note 17 – Subsequent Events to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of the terms of the Company outstanding indebtedness, including the Term Loan Credit Facility and Revolving Credit Facility, which is incorporated herein by reference. As of November 24, 2024 and May 26, 2024, the Company had $165,274 and $157,313 in borrowings outstanding under the Term Loan Credit Facility, at an effective annual interest rate of 22.5% for both periods, which includes the amortization of the debt discount. The stated annual interest rate is 10%.
Previous wording
As of August 25, 2024 and May 26, 2024, the Company had $21,605 and $19,691, respectively, in borrowings outstanding under the Revolving Credit Facility, at an effective annual interest rate of 8.35% for both periods.
Current wording
As of November 24, 2024 and May 26, 2024, the Company had $8,500 and $19,691, respectively, in borrowings outstanding under the Revolving Credit Facility, at an effective annual interest rate of approximately 8% for both periods.
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
Lifecore generates revenues from two integrated activities: CDMO and HA manufacturing. Lifecore generates revenues from the development and manufacture of HA products and provides contract development and aseptic manufacturing services to customers.
Current report — wording carried from elsewhere
Numerous factors can influence gross profit, including HA manufacturing product mix, customer mix, manufacturing costs, timing of production, volume, sales discounts, and charges for excess or obsolete inventory, among others. Many of these factors influence or are interrelated with other factors. The Company includes in cost of goods sold all of the following costs: 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.
Current report — wording carried from elsewhere
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. R&D expenses for the six months ended November 24, 2024 were consistent with the prior period.
Current report — wording carried from elsewhere
Selling, General, and Administrative (“SG&A”)
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
Change in fair value of debt derivative liability, related party
Current report — wording carried from elsewhere
(1) The primary reason for this use of cash was a $1.6 million decrease in accrued compensation.