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Organization, Basis of Presentation, and Summary of Significant Accounting Policies | 12 Months Ended
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May 29, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Organization, Basis of Presentation, and Summary of Significant Accounting Policies | Organization, Basis of Presentation, and Summary of Significant Accounting Policies, As Restated Organization Landec Corporation and its subsidiaries (“Landec” or the “Company”) design, develop, manufacture, and sell differentiated products for food and biomaterials markets, and license technology applications to partners. Landec’s biomedical company, Lifecore Biomedical, Inc. (“Lifecore”), is a fully integrated contract development and manufacturing organization (“CDMO”) that offers highly differentiated capabilities in the development, fill and finish of sterile, injectable-grade pharmaceutical products in syringes and vials. As a leading manufacturer of premium, injectable grade Hyaluronic Acid, Lifecore brings 37 years of expertise as a partner for global and emerging biopharmaceutical and biotechnology companies across multiple therapeutic categories to bring their innovations to market. Lifecore recognizes revenue in two different product categories, CDMO and Fermentation. Landec’s natural food company, Curation Foods, Inc. (“Curation Foods”), is focused on innovating and distributing plant-based foods with 100% clean ingredients to retail, club and foodservice channels throughout North America. Its products are sold in natural food, conventional grocery and mass retail stores, primarily in the United States and Canada. The company categorizes revenue in three categories, avocado products, olive oil and wine vinegars and technology which reports revenues for BreatheWay patented supply chain solutions. On November 14, 2022, the Company changed its name from “Landec Corporation” to “Lifecore Biomedical, Inc.” Currently therewith, the Company also changed the name of its wholly owned subsidiary from “Lifecore Biomedical, Inc.” to “Lifecore Biomedical Operating Company, Inc.” Unless context otherwise requires, all references to “Landec Corporation” or “Landec” contained in the Annual Report refer to the Company, and all references to “Lifecore Biomedical, Inc.,” “Lifecore Biomedical,” or “Lifecore” refer to Lifecore Biomedical Operating Company, Inc. Eat Smart Sale and Discontinued Operations On December 13, 2021 (the “Closing Date”), Landec and Curation Foods (together, the “Sellers”), and Taylor Farms Retail, Inc. (“Taylor Farms” and together with the Sellers, the “Parties”) completed the sale (the “Eat Smart Disposition”) of Curation Foods’ Eat Smart business, including its salad and cut vegetable businesses (the “Business”), pursuant to the terms of an asset purchase agreement executed by the Parties on December 13, 2021 (the “Asset Purchase Agreement”). Pursuant to the Asset Purchase Agreement, Taylor Farms acquired the Business for a purchase price of $73.5 million, subject to post-closing adjustments based upon negotiation of the net working capital balances at the Closing Date. As part of the Eat Smart Disposition, Taylor Farms acquired, among other assets and liabilities related to the Business, the manufacturing facility and warehouses (and corresponding equipment) located in Bowling Green, Ohio and Guadalupe, California, as well as inventory, accounts receivable, accounts payable, intellectual property and information related to the Business, and assumed certain liabilities and executory obligations under the Company’s and Curation Foods’ outstanding contracts related to the Business, in each case, subject to the terms of the Asset Purchase Agreement. Following the Eat Smart Disposition, Curation Foods retains its O Olive Oil & Vinegar (“O”) and Yucatan Foods businesses and its rights and interests in BreatheWay, and the Company retains its Lifecore business. During the third quarter of its fiscal year, the Company used net proceeds from the Eat Smart Disposition to repay $67.9 million in borrowings under the Company’s existing credit agreements. The accounting requirements for reporting the Eat Smart business as a discontinued operation were met when the Eat Smart Disposition was completed on the Closing Date. Accordingly, the consolidated financial statements and notes to the consolidated financial statements reflect the results of the Eat Smart business as a discontinued operation for all periods presented. A loss of $0.3 million from the Eat Smart Disposition is included in Loss from discontinued operations, net of tax, within the Consolidated Statements of Operations during the fiscal year ended May 29, 2022. Refer to Note 12 - Discontinued Operations for additional information. Basis of Presentation and Consolidation The consolidated financial statements are presented on the accrual basis of accounting in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and include the accounts of Landec Corporation and its subsidiaries, Curation Foods and Lifecore. All material inter-company transactions and balances have been eliminated. The Company’s fiscal year is the 52- or 53-week period that ends on the last Sunday of May with quarters within each year ending on the last Sunday of August, November, and February; however, in instances where the last Sunday would result in a quarter being 12-weeks in length, the Company’s policy is to extend that quarter to the following Sunday. A 14th week is included in the fiscal year every five or six years to realign the Company’s fiscal quarters with calendar quarters. Arrangements that are not controlled through voting or similar rights are reviewed under the guidance for variable interest entities (“VIEs”). A company is required to consolidate the assets, liabilities and operations of a VIE if it is determined to be the primary beneficiary of the VIE. An entity is a VIE and subject to consolidation, if by design: a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders or b) as a group the holders of the equity investment at risk lack any one of the following three characteristics: (i) the power, through voting rights or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity. The Company reviewed the consolidation guidance and concluded that the equity investment in the non-public company by the Company is not a VIE. Going Concern As of May 29, 2022, the Company had cash and cash equivalents of $1.6 million and outstanding borrowings of $138.2 million, net of issuance costs, and as of November 27, 2022, the Company had cash and cash equivalents of $6.8 million and outstanding borrowings of $147.0 million, net of issuance costs. The Company continues to experience unfavorable market conditions leading to lower than projected sales proceeds from the disposition of its Curation Foods businesses. The Company performed an assessment, which occurred on the date of the filing of this Form 10-K/A, to determine whether there were conditions or events that, considered in the aggregate, raised substantial doubt about the Company’s ability to continue as a going concern within one year following the date the accompanying consolidated financial statements are being re- issued (the “Amended Filing Date”). The Company’s ability to meet its liquidity needs for one year following the Amended Filing Date will largely depend on its ability to generate cash in the future. As of November 27, 2022, the Company incurred net losses of $23.8 million, and the Company’s ability to generate cash in the future is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond the Company’s control. Based on the Company’s financial projections as of the Amended Filing Date, the Company does not believe that it will have adequate liquidity to meet its obligations for at least one year following the Amended Filing Date. The Company further considered how these factors and uncertainties have and could impact its ability to meet the obligations specified in the New Credit Agreements with the Lenders (each as defined in Note 6 - Debt) for at least one year following the Amended Filing Date. As of the Amended Filing Date, the Company determined that it was not in compliance with the covenant under the New Credit Agreements requiring the timely filing of financial statements. In addition, the inclusion of a going concern explanatory paragraph in the auditor’s report issued by Ernst and Young LLP in connection with the restated audited financial statements for the year ended May 29, 2022 included in this Annual Report on Form 10-K/A also violates the covenants under the New Credit Agreements. In addition, based on the Company’s current financial projections for the one-year period following the Amended Filing Date, the Company anticipates that it will not be in compliance with certain financial covenants under the New Credit Agreements during the one-year period following the Amended Filing Date, including the minimum fixed charge coverage ratio covenant for the fiscal quarters ending May 30, 2023 through November 30, 2023; the maximum leverage ratio covenant as of the fiscal quarters ending May 30, 2023 through November 30, 2023; the minimum liquidity covenant for each of the fiscal quarters ended as of February 26, 2023 through May 30, 2024; and the minimum Lifecore gross profit covenant for the fiscal quarters ending February 26, 2023 through August 30, 2023. Pursuant to the terms of the New Credit Agreements, as a result of the Company’s failure to comply with the covenants described above, the agents and the lenders under the New Credit Agreements are entitled to immediately cancel all unfunded commitments and to accelerate the maturity of all of the outstanding debt thereunder, at which time all such outstanding borrowings would become immediately due and payable by the Company. In addition, as a result of such defaults, under the New Credit Agreements, the Company will be subject to increased interest rates for any outstanding borrowings thereunder prior to repayment and, even if the agent and the lenders under the Refinance Revolver (as defined in Note 6 – Debt) do not exercise their rights to immediately accelerate all outstanding obligations, such lenders may refuse to fund additional borrowings thereunder, which the Company relies upon for short-term liquidity needs. Although the Company is currently in default, as of the Amended Filing Date, the agents and the Lenders have not taken any action to accelerate the maturity of the debt under the New Credit Agreements, nor have the Lenders under the Refinance Revolver indicated that they intend to prevent the Company from incurring additional borrowings thereunder. In such an event, however, the Company does not currently have sufficient liquidity to fund payment of the amounts that would be due under the New Credit Agreements nor does management have projected future cash flows to repay these outstanding borrowings under the New Credit Agreements if such amounts were to become payable. The Company’s inability to raise additional capital on acceptable terms in the near future, whether for purposes of funding payments required under the New Credit Agreements or providing additional liquidity needed for its operations, could have a material adverse effect on its business, results of operations, liquidity and financial condition. In response to these conditions, the Company is currently in negotiations with the Lenders to seek a forbearance and amendment agreement to remedy the Company’s current and anticipated noncompliance with its covenants under the New Credit Agreements. The Company also intends to conduct a review of its strategic alternatives, which may involve seeking additional or alternative financing or the sale of all or a portion the Company. These processes are ongoing, however, and there can be no assurances that they will result in the completion of any such amendment, transaction or other alternative that would alleviate such conditions under the New Credit Agreements or the circumstances that give rise to substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period following the Amended Filing Date. Accordingly, the Company determined that it cannot be certain that the Company’s plans and initiatives would be effectively implemented within one year after the Amended Filing Date. Without giving effect to the Company’s plans and initiatives, it is unlikely that the Company will be able to generate sufficient cash flows to meet its required financial obligations, including its debt service and other obligations due to third parties within one year after the Amended Filing Date. The existence of these conditions and events raise substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period following the Amended Filing Date. These audited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities in the normal course of business for one year following the Amended Filing Date. As such, the accompanying audited consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern. As a result, all outstanding borrowings under the New Credit Agreements are classified as short term on the Consolidated Balance Sheet as of May 29, 2022 contained in these audited consolidated financial statements. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. The accounting estimates that require management’s most significant and subjective judgments include revenue recognition; loss contingencies; sales returns and credit losses; recognition and measurement of current and deferred income tax assets and liabilities; the assessment of recoverability and measurement of fair value of long-lived and indefinite lived assets (including intangible assets and goodwill), and inventory; and the valuation and recognition of stock-based compensation. These estimates involve the consideration of complex factors and require management to make judgments. The analysis of historical and future trends can require extended periods of time to resolve and are subject to change from period to period. The actual results may differ from management’s estimates. Concentrations of Risk Cash and cash equivalents and trade accounts receivable are financial instruments that potentially subject the Company to concentrations of credit risk. Our Company policy limits, among other things, the amount of credit exposure to any one issuer and to any one type of investment, other than securities issued or guaranteed by the U.S. government. The Company routinely assesses the financial strength of customers and, as a consequence, believes that trade receivables credit risk exposure is limited. Credit losses for bad debt are provided for in the consolidated financial statements through a charge to operations. A valuation allowance is provided for known and anticipated credit losses. The recorded amounts for these financial instruments approximate their fair value. Several of the raw materials the Company uses to manufacture its products are currently purchased from a single source, including some monomers used to synthesize Intelimer polymers, substrate materials for its breathable membrane products, and raw materials for its HA products. During the fiscal years ended May 29, 2022, May 30, 2021 and May 31, 2020 the Company had sales concentrations of 10% or greater from two customers, accounting for 16% and 13%, 18% and 13%, and 16% and 11%, respectively. The Company’s same two customers had accounts receivable concentrations of 10% or greater, accounting for 26% and 13% of accounts receivable as of May 29, 2022, and 18% and 16%, as of May 30, 2021. Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets is measured by comparison of the carrying amount of the asset to the net undiscounted future cash flow expected to be generated from the asset. If the future undiscounted cash flows are not sufficient to recover the carrying value of the assets, the assets’ carrying value is adjusted to fair value. The Company regularly evaluates its long-lived assets for indicators of possible impairment. Financial Instruments The Company’s financial instruments are primarily composed of commercial-term trade payables, debt instruments, and derivative instruments. For short-term instruments, the historical carrying amount approximates the fair value of the instrument. The fair value of long-term debt and lines of credit approximates their carrying value. Cash Flow Hedges The Company has entered into interest rate swap agreements to manage interest rate risk. These derivative instruments may offset a portion of the changes in interest expense. The Company designates these derivative instruments as cash flow hedges. The Company accounts for its derivative instruments as either an asset or a liability and carries them at fair value in Other assets or Other non-current liabilities. The accounting for changes in the fair value of the derivative instrument depends on the intended use of the derivative instrument and the resulting designation. For derivative instruments that hedge the exposure to variability in expected future cash flows and are designated as cash flow hedges, the entire change in the fair value of the hedging instrument is recorded as a component of Accumulated other comprehensive loss (“AOCL”) in Stockholders’ Equity. Those amounts are subsequently reclassified to earnings in the same line item in the Consolidated Statement of Operations as impacted when the hedged item affects earnings. To receive hedge accounting treatment, cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions. During the third quarter of fiscal year 2021, the Company discontinued its hedge accounting prospectively since it was determined that the derivatives are no longer highly effective in offsetting changes in the net investment. The derivatives continue to be carried at fair value in the accompanying Consolidated Balance Sheets with changes in their fair values from the date of discontinued hedge accounting recognized in current period earnings in Other income (expense), net in the Consolidated Statements of Operations. Amounts previously accumulated in AOCL during the period of effectiveness will continue to be realized over the remaining term of the underlying forecasted debt payments as a component of AOCL in Stockholders’ Equity. Accumulated Other Comprehensive Loss Comprehensive income consists of two components, Net loss and Other comprehensive (loss) income (“OCI”). OCI refers to revenue, expenses, and gains and losses that under GAAP are recorded as a component of stockholders’ equity but are excluded from net loss. The Company’s OCI consists of net deferred gains and losses on its interest rate swap derivative instruments. The components of AOCL, net of tax, are as follows (in thousands):
| AOCL
Balance as of May 30, 2021 | $ | (1,358) |
Amounts reclassified from OCI | 772
Other comprehensive (loss) income, net | 772 |
Balance as of May 29, 2022 | $ | (586) |
The Company expects to reclassify approximately $0.6 million into earnings in the next 12 months. Based on these assumptions, management believes the fair market values of the Company’s financial instruments are not significantly different from their recorded amounts as of May 29, 2022 and May 30, 2021. Accounts Receivable, Sales Returns and Allowance for Credit Losses The Company carries its accounts receivable at their face amounts less an allowance for estimated sales returns and credit losses. Sales return allowances are estimated based on historical sales return amounts. The Company uses the loss rate method to estimate its expected credit losses on trade accounts receivable and contract assets. In order to estimate expected credit losses, the Company assessed recent historical experience, current economic conditions and any reasonable and supportable forecast to identify risk characteristics that are shared within the financial asset. These risk characteristics are then used to bifurcate the loss rate method into risk pools. The risk pools were determined based on the industries in which the Company operates. Historical credit loss for each risk pool is then applied to the current period aging as presented in the identified risk pool to determine the needed reserve allowance. At times when there are no current economic conditions or forecasts that may affect future credit losses, the Company has determined that recent historical experience provides the best basis for estimating credit losses. The information obtained from assessing historical experience, current economic conditions and reasonable and supportable forecasts were used to identify risk characteristics that can affect future credit loss experience. There were no significant risk characteristics identified in the review of historical experiences or in the review of estimates of current economic conditions and forecasts. Estimating credit losses based on risk characteristics requires significant judgment by management. Significant judgments include, but are not limited to: assessing current economic conditions and the extent to which they are relevant to the existing characteristics of the Company’s financial assets, the estimated life of financial assets, and the level of reliance on historical experience in light of economic conditions. The Company will continually review and update, when necessary, its historical risk characteristics that are meaningful to estimating credit losses, any new risk characteristics that arise in the natural course of business, and the estimated life of its financial assets. The changes in the Company’s allowance for sales returns and credit losses are summarized in the following table (in thousands):
| Balance at beginning of period |  |  |  | Provision (benefit) for expected credit losses |  | Write offs, net of recoveries |  | Balance at end of period
Year Ended May 31, 2020 | $ | 644 |  |  |  |  | $ | (460) |  |  | $ | 2 |  |  | $ | 186 |
Year Ended May 30, 2021 | $ | 186 |  |  |  |  | $ | 187 |  |  | $ | (288) |  |  | $ | 85 |
Year Ended May 29, 2022 | $ | 85 |  |  |  |  | $ | (14) |  |  | $ | (6) |  |  | $ | 65 |
Contract Assets and Liabilities Contract assets primarily relate to the Company’s conditional right to consideration for work completed but not billed at the reporting date. The Company’s contract assets as of May 29, 2022, and May 30, 2021, were $10.2 million and $10.6 million, respectively. Contract liabilities primarily relate to payments received from customers in advance of performance under the contract. The Company’s contract liabilities as of May 29, 2022, and May 30, 2021, were $0.9 million and $0.9 million, respectively. Revenue recognized during the fiscal year ended May 29, 2022 that was included in the contract liability balance at the beginning of fiscal year 2022, was $0.4 million. Revenue Recognition The Company follows the five step, principles-based model to recognize revenue upon the transfer of promised goods or services to customers and in an amount that reflects the consideration for which the Company expects to be entitled in exchange for those goods or services. Revenue, net of estimated allowances and returns, is recognized when or as the Company satisfies its performance obligations under a contract and control of the product is transferred to the customer. Lifecore Lifecore generates revenue from two integrated activities: CDMO and Fermentation. CDMO is comprised of aseptic and development services. Lifecore’s standard terms of sale are generally included in its contracts and purchase orders. Shipping and other transportation costs charged to customers are recorded in both revenue and cost of goods sold. Lifecore has elected to account for shipping and handling as fulfillment activities, and not as a separate performance obligation. Lifecore’s standard payment terms with its customers generally range from 30 days to 60 days. Aseptic Lifecore provides aseptic formulation and filling of syringes and vials with precisely formulated medical grade HA and non-HA materials for injectable products used for medical purposes. In instances where our customers contract with us to aseptically fill syringes or vials with our HA, the goods are not distinct in the context of the contract. Lifecore recognizes revenue for these products at the point in time when legal title to the product is transferred to the customer, which is at the time that shipment is made or upon delivery of the product. Development Services Lifecore provides product development services to assist its customers in obtaining regulatory approval for the commercial sale of their drug product. These services include activities such as technology development, material component changes, analytical method development, formulation development, pilot studies, stability studies, process validation and production of materials for use within clinical studies. The Company’s customers benefit from the expertise of its scientists who have extensive experience performing such tasks. Each of the promised goods and services are not distinct in the context of the contract as the goods and services are highly interdependent and interrelated. The services described above are significantly affected by each other because Lifecore would not be able to fulfill its promise by transferring each of the goods or services independently. Revenues generated from development services arrangements are recognized over time as Lifecore is creating an asset without an alternate use as it is unique to the customer. Furthermore, the Company has an enforceable right to payment for the performance completed to date for its costs incurred in satisfying the performance obligation plus a reasonable profit margin. For each of the development activities performed by Lifecore as described above, labor is the primary input (i.e., labor costs represent the majority of the costs incurred in the completion of the services). The Company determined that labor hours are the best measure of progress as it most accurately depicts the effort extended to satisfy the performance obligation over time. Fermentation Lifecore manufactures and sells pharmaceutical-grade sodium hyaluronate (“HA”) in bulk form to its customers. The HA produced is distinct as customers are able to utilize the product provided under HA supply contracts when they obtain control. Lifecore recognizes revenue for these products at the point in time when legal title to the product is transferred to the customer, which is at the time that shipment is made or upon delivery of the product to our customer. Curation Foods Curation Foods’ standard terms of sale, both prior to and following the Eat Smart Disposition, are generally included in its contracts and purchase orders. Revenue is recognized at the time shipment is made or upon delivery as control of the product is transferred to the customer. Shipping and other transportation costs charged to customers are recorded in both revenue and cost of goods sold. Curation Foods has elected to account for shipping and handling as fulfillment activities, and not as a separate performance obligation. Curation Foods’ standard payment terms with its customers generally range from 30 days to 90 days. Certain customers may receive cash-based incentives (including: volume rebates, discounts, and promotions), which are accounted for as variable consideration to Curation Foods’ performance obligations. Curation Foods estimates these sales incentives based on the expected amount to be provided to its customers and reduces revenues recognized towards its performance obligations. The Company has not historically had and does not anticipate significant changes in its estimates for variable consideration. The Company disaggregates its revenue by segment based on how it markets its products and services and reviews results of operations. The following tables disaggregate segment revenue by major product lines and services (in thousands):
| Year Ended
Lifecore: | May 29, 2022 |  | May 30, 2021 |  | May 31, 2020
Contract development and manufacturing organization | $ | 86,313 |  |  | $ | 75,297 |  |  | $ | 64,781 |
Fermentation | 23,007 |  |  | 22,790 |  |  | 21,052 |
Total | $ | 109,320 |  |  | $ | 98,087 |  |  | $ | 85,833 |
| Year Ended
Curation Foods: | May 29, 2022 |  | May 30, 2021 |  | May 31, 2020
Avocado products | $ | 65,269 |  |  | $ | 63,575 |  |  | $ | 62,194 |
Olive oil and wine vinegars | 9,287 |  |  | 7,589 |  |  | 7,783 |
Technology | 1,910 |  |  | 2,295 |  |  | 4,256 |
Total | $ | 76,466 |  |  | $ | 73,459 |  |  | $ | 74,233 |
Shipping and Handling Costs Amounts billed to third-party customers for shipping and handling are included as a component of revenues. Shipping and handling costs incurred are included as a component of cost of products sold and represent costs incurred to ship product from the processing facility or distribution center to the end consumer markets. Cash and Cash Equivalents The Company records all highly liquid securities with three months or less from date of purchase to maturity as cash equivalents. Cash equivalents consist mainly of money market funds. The market value of cash equivalents approximates their historical cost given their short-term nature. Reconciliation of Cash and Cash Equivalents and Cash as presented on the Statements of Cash Flows The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows (in thousands):
| May 29, 2022 |  | May 30, 2021 |  | May 31, 2020
Cash and cash equivalents | $ | 1,643 |  |  | $ | 1,159 |  |  | $ | 360 |
Restricted cash | — |  |  | — |  |  | 193 |
Cash and cash equivalents, discontinued operations | — |  |  | 136 |  |  | — |
Cash, cash equivalents and restricted cash | $ | 1,643 |  |  | $ | 1,295 |  |  | $ | 553 |
Inventories Inventories are stated at the lower of cost (using the first-in, first-out method) or net realizable value. As of May 29, 2022 and May 30, 2021, inventories consisted of the following (in thousands):
| Year Ended
| May 29, 2022 |  | May 30, 2021
Finished goods | $ | 33,029 |  |  | $ | 40,204 |
Raw materials | 24,221 |  |  | 16,644 |
Work in progress | 9,595 |  |  | 6,228 |
Total inventories | $ | 66,845 |  |  | $ | 63,076 |
If the cost of the inventories exceeds their net realizable value, provisions are recorded currently to reduce them to net realizable value. The Company also records a provision for slow moving and obsolete inventories based on the estimate of demand for its products. Advertising Expense Advertising expenditures for the Company are expensed as incurred and included in selling, general, and administrative in the accompanying Consolidated Statements of Operations. Advertising expense for the Company for fiscal years 2022, 2021 and 2020 was $0.2 million, $0.1 million and $0.1 million, respectively. Related Party Transactions The Company sells and licenses its BreatheWay® food packaging technology to Windset Holdings 2010 Ltd. (“Windset”), in which, as further described in Note 2 - Investment in Non-public Company, the Company had a 26.9% ownership interest until it sold that interest on June 1, 2021. During fiscal years 2021 and 2020, the Company recognized revenues of $0.5 million and $0.6 million, respectively, from the sale of products to and license fees from Windset. These amounts have been included in Product sales in the accompanying Consolidated Statements of Operations. The related receivable balance of $0.1 million from Windset is included in Accounts receivable in the accompanying Consolidated Balance Sheets as of May 30, 2021. All related party transactions are monitored quarterly by the Company and approved by the Audit Committee of the Board of Directors. Property and Equipment and Long-Lived Intangible Assets, As Restated Property and equipment and long-lived intangible assets are stated at cost. Expenditures for major improvements are capitalized while repairs and maintenance are charged to expense. Depreciation is expensed on a straight-line basis over the estimated useful lives of the respective assets. Customer relationships are amortized to operating expense on an accelerated basis that reflects the pattern in which the economic benefits are consumed. Leasehold improvements are amortized on a straight-line basis over the lesser of the economic life of the improvement or the life of the lease. The Company capitalizes software development costs for internal use. Capitalization of software development costs begins in the application development stage and ends when the asset is placed into service. The Company amortizes such costs on a straight-line basis over estimated useful lives of three to seven years. Property, plant and equipment and long-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances occur that indicate that the carrying amount of an asset (or asset group) may not be recoverable. The Company’s impairment review requires significant management judgment including estimating the future success of product lines, future sales volumes, revenue and expense growth rates, customer attrition, alternative uses for the assets and estimated proceeds from the disposal of the assets as well as the appropriate discount rates applied to those cash flows to determine fair value. The Company conducts quarterly reviews of idle and underutilized equipment, and reviews business plans for possible impairment indicators. Impairment is indicated when the carrying amount of the asset (or asset group) exceeds its estimated future undiscounted cash flows and the impairment is viewed as other than temporary. When impairment is indicated, an impairment charge is recorded for the difference between the asset’s book value and its estimated fair value. Depending on the asset, estimated fair value may be determined either by use of a discounted cash flow model or by reference to estimated selling values of assets in similar condition. The use of different assumptions would increase or decrease the estimated fair value of assets and would increase or decrease any impairment measurement. During fiscal year 2020, the Company recorded impairment charges of $1.3 million and $0.5 million related to O property and equipment, and long-lived intangible assets (customer relationships), respectively. The impairment was determined using the present value of cash flows method and was primarily a result of the recently updated (lowered) financial outlook for the O reporting unit, related to a recent shift in strategic focus within the Curation Foods business segment. The impairment charge of property and equipment is included in Selling, general and administrative in the Consolidated Statements of Operations. The impairment charge of the customer relationships intangible asset impairment charge is included in the line item Impairment of goodwill and long-lived and indefinite-lived assets on the Consolidated Statements of Operations, and is in the Curation Foods business segment. As discussed in Note 1 - Correction of Error in Previously Reported Fiscal Year 2022 Annual Financial Statements, the Company is restating its previously issued financial statements resulting from errors related to certain impairment charges related to the Company’s Curation Foods. As restated, during fiscal year 2022, the Company recorded impairment charges of $5.8 million and $11.9 million related to Yucatan Foods customer relationships, and property & equipment, respectively. These impairment charges were primarily a result of an indication of a decrease in the fair market values of the Yucatan Foods businesses driven by lower market valuations and a decrease in projected cash flows. The Yucatan Foods related impairment charges are included in the line item Impairment of goodwill and long-lived and indefinite-lived assets on the Consolidated Statements of Operations and are in the Curation Foods business segment. Impairment Review of Goodwill and Indefinite-Lived Intangible Asset, As Restated The Company tests its goodwill and trademarks with indefinite lives annually for impairment in the fiscal fourth quarter or earlier if there are indications during a different interim period that these assets may have become impaired. On a quarterly basis, the Company considers the need to update its most recent annual tests for possible impairment of its indefinite-lived intangible assets and goodwill, based on management’s assessment of changes in its business and other economic factors since the most recent annual evaluation. Such changes, if significant or material, could indicate a need to update the most recent annual tests for impairment of the indefinite-lived intangible assets during the current period. The results of these tests could lead to write-downs of the carrying values of these assets in the current period. With respect to goodwill, the Company has the option to first assess qualitative factors such as macro-economic conditions, industry and market environment, cost factors, overall financial performance of the Company, cash flow from operating activities, market capitalization, litigation, and stock price. If the result of a qualitative test indicates a potential for impairment of a reporting unit, a quantitative test is performed. The quantitative test compares the carrying amount of a reporting unit that includes goodwill to its fair value. The Company determines the fair value using an income approach. To determine the fair value of a reporting unit as part of its quantitative test, the Company uses a discounted cash flow (“DCF”) method under the income approach, as it believes that this approach is the most reliable indicator of the fair value of its businesses and the fair value of their future earnings and cash flows. Under this approach, which requires significant judgments, the Company estimates the future cash flows of each reporting unit and discounts these cash flows at a rate of return that reflects their relative risk and rate of return an outside investor could expect to earn. The cash flows used in the DCF method are consistent with those the Company uses in its internal planning, which gives consideration to actual business trends experienced, and the broader business strategy for the long term. The other key estimates and factors used in the DCF method include, but are not limited to, future volumes, net sales and expense growth rates, and gross margin and gross margin growth rates. Changes in such estimates or the application of alternative assumptions could produce different results. A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. For trademarks/tradenames and other intangible assets with indefinite lives, the Company has the option to first assess qualitative factors such as macro-economic conditions, industry and market environment, cost factors, overall financial performance of the Company, litigation, and changes in the business in its annual, qualitative analysis to test for impairment. If the results of a qualitative test indicate a potential for impairment of an intangible asset with an indefinite life, a quantitative test is performed. The quantitative test compares the estimated fair value of an asset to its carrying amount. If the carrying amount of such asset exceeds its estimated fair value, an impairment charge is recorded for the difference between the carrying amount and the estimated fair value. The Company uses the royalty savings method to estimate the fair value of its trademarks/tradenames. This approach requires significant judgments in determining the royalty rates and the assets’ estimated cash flows as well as the appropriate discount rates applied to those cash flows to determine fair value. Changes in such estimates or the use of alternative assumptions could produce different results. During fiscal year 2020, the Company recorded an impairment charge of $1.1 million and $3.5 million related to its O and Yucatan Foods trademarks, respectively. The Company also recorded an impairment charge of $5.2 million and $2.7 million related to its O and Yucatan Foods goodwill, respectively. The O impairment charges were primarily a result of the recently updated (lowered) financial outlook for the O reporting unit, related to a recent shift in strategic focus within the Curation Foods business segment. The Yucatan Foods impairment charges were primarily a result of an increase in the Yucatan Foods carrying value and an increase in the discount rate, as a result of uncertainty in forecasting the effects of COVID-19 and general economic uncertainties. These impairment charges are included in the line item “impairment of goodwill and long-lived and indefinite-lived assets” on the Consolidated Statements of Operations, and both are in the Curation Foods business segment. As discussed in Note 1 - Correction of Error in Previously Reported Fiscal Year 2022 Annual Financial Statements, the Company is restating its previously issued financial statements resulting from errors related to certain impairment charges related to the Company's Curation Foods. As restated, during fiscal year 2022, the Company recorded impairment charges of $32.1 million and $20.0 million related to its Eat Smart business and Yucatan Foods goodwill, respectively. The Company also recorded an impairment charge of $8.4 million related to its Yucatan Foods trademarks/tradenames. These impairment charges were primarily a result of an indication of a decrease in the fair market values of the Eat Smart and Yucatan Foods businesses driven by lower market valuations and a decrease in projected cash flows. The goodwill impairment charge related to the Eat Smart business goodwill is included in Loss from discontinued operations within the Consolidated Statements of Operations. The Yucatan Foods related impairment charges are included in the line item Impairment of goodwill and long-lived and indefinite-lived assets on the Consolidated Statements of Operations and are in the Curation Foods business segment. Other than the goodwill and intangibles write-offs discussed above, there were no other impairment losses for goodwill or intangibles during fiscal years 2022, 2021 and 2020. Investment in Non-Public Company On February 15, 2011, the Company made an investment in Windset which is reported at fair value in the accompanying Consolidated Balance Sheets as of May 30, 2021. The Company has elected to account for its investment in Windset under the fair value option. See Note 2 – Investment in Non-public Company for further information. On June 1, 2021, the Company sold all of its equity interest in Windset to the Newell Capital Corporation and Newell Brothers Investment 2 Corp. Business Interruption Insurance Recoveries In the third quarter of fiscal year 2019, the Company recalled five SKUs of Eat Smart single-serve Salad Shake-Ups™. In the fourth quarter of fiscal year 2019, the Company submitted a product recall claim. In fiscal year 2020, the Company recognized $3.0 million of business interruption insurance recoveries. Amounts received on insurance recoveries related to business interruption are recorded when amounts are realized and are included within Loss from discontinued operations in the Consolidated Statement of Operations and as operating cash flows. Deferred Revenue Cash received in advance of services performed are recorded as deferred revenue. Income Taxes The Company accounts for income taxes in accordance with accounting guidance which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. The Company maintains valuation allowances when it is likely that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the Company’s income tax provision in the period of change. In determining whether a valuation allowance is warranted, the Company takes into account such factors as prior earnings history, expected future earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset, carryback and carryforward periods and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. In addition to valuation allowances, the Company establishes accruals for uncertain tax positions. The tax-contingency accruals are adjusted in light of changing facts and circumstances, such as the progress of tax audits, case law and emerging legislation. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. The Company’s effective tax rate includes the impact of tax-contingency accruals as considered appropriate by management. A number of years may elapse before a particular matter, for which the Company has accrued, is audited and finally resolved. The number of years with open tax audits varies by jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes its tax-contingency accruals are adequate to address known tax contingencies. Favorable resolution of such matters could be recognized as a reduction to the Company’s effective tax rate in the year of resolution. Unfavorable settlement of any particular issue could increase the Company's effective tax rate in the year of resolution. Any resolution of a tax issue may require the use of cash in the year of resolution. The Company’s tax-contingency accruals are recorded in Other accrued liabilities in the accompanying Consolidated Balance Sheets. Per Share Information, As Restated Accounting guidance requires the presentation of basic and diluted earnings per share. Basic earnings per share excludes any dilutive effects of options, warrants and convertible securities and is computed using the weighted average number of common shares outstanding. Diluted earnings per share reflect the potential dilution as if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted common equivalent shares consist of stock options and restricted stock units, calculated using the treasury stock method. The following table sets forth the computation of basic and diluted net loss per share:
| Year Ended
| As restated |  |  |  |
(in thousands, except per share amounts) | May 29, 2022 |  | May 30, 2021 |  | May 31, 2020
Numerator: |  |  |  |  |
Net loss | $ | (114,679) |  |  | $ | (32,665) |  |  | $ | (38,191) |
Denominator: |  |  |  |  |
Weighted average shares for basic net loss per share | 29,466 |  |  | 29,294 |  |  | 29,162 |
Effect of dilutive securities: |  |  |  |  |
Stock options and restricted stock units | — |  |  | — |  |  | — |
Weighted average shares for diluted net loss per share | 29,466 |  |  | 29,294 |  |  | 29,162 |
Basic and diluted net loss per share | $ | (3.90) |  |  | $ | (1.12) |  |  | $ | (1.31) |
Due to the Company’s net loss in fiscal years 2022, 2021, and 2020 the net loss per share includes only the weighted average shares outstanding and thus excludes restricted stock unit awards ("RSUs") and stock options, as such impact would be antidilutive. See Note 5 - Stock Based Compensation and Stockholders' Equity for more information on outstanding RSUs and stock options. Research and Development Expenses Costs related to both research and development contracts and Company-funded research is included in research and development expenses. Research and development costs are primarily comprised of salaries and related benefits, supplies, travel expenses, consulting expenses and corporate allocations. Accounting for Stock-Based Compensation The Company’s stock-based awards include stock option grants and RSUs. The Company records compensation expense for stock-based awards issued to employees and directors in exchange for services provided based on the estimated fair value of the awards on their grant dates and is recognized over the required service periods, generally the vesting period. The estimated fair value for stock options, which determines the Company’s calculation of stock-based compensation expense, is based on the Black-Scholes option pricing model. The use of Black-Scholes requires the Company to make estimates and assumptions, such as expected volatility, expected term, and risk-free interest rate. RSUs are valued at the closing market price of the Company’s common stock on the date of grant. The Company uses the straight-line single option method to calculate and recognize the fair value of stock-based compensation arrangements. Employee Savings and Investment Plans The Company sponsors a 401(k) plan (“Landec Plan”), which is available to all full-time Landec employees and allows participants to contribute from 1% to 50% of their salaries, up to the Internal Revenue Service limitation into designated investment funds. The Company matches 100% on the first 3% and 50% on the next 2% contributed by an employee. Employee and Company contributions are fully vested at the time of the contributions. The Company retains the right, by action of the Board of Directors, to amend, modify, or terminate the plan. For fiscal years 2022, 2021 and 2020, the Company contributed $1.4 million, $1.1 million and $1.1 million, respectively, to the Landec Plan. Fair Value Measurements The Company uses fair value measurement accounting for financial assets and liabilities and for financial instruments and certain other items measured at fair value. The Company has elected the fair value option for its investment in a non-public company. The Company has not elected the fair value option for any of its other eligible financial assets or liabilities. Applicable accounting guidance establishes a three-tier hierarchy for fair value measurements, which prioritizes the inputs used in measuring fair value as follows: Level 1 – observable inputs such as quoted prices for identical instruments in active markets. Level 2 – inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data. Level 3 – unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions. As of May 29, 2022 and May 30, 2021, the Company held certain assets and liabilities that were required to be measured at fair value on a recurring basis, including its interest rate swap, and its minority interest investment in Windset. The fair value of the Company’s interest rate swap contracts is determined based on model inputs that can be observed in a liquid market, including yield curves, and is categorized as a Level 2 fair value measurement and is included in Other assets or Other non-current liabilities in the accompanying Consolidated Balance Sheets. As of May 29, 2022, related to the assets of Curation Foods’ BreatheWay packaging technology business, the Company had $1.0 million in Prepaid expenses and other current assets within the Consolidated Balance Sheets meeting the criteria of held for sale. As of May 30, 2021, related to Curation Foods’ distribution facility in Rock Hill, South Carolina the Company had $0.5 million in Current assets, discontinued operations within the Consolidated Balance Sheets meeting the criteria of assets held for sale. These assets are recognized at the lower of cost or fair value less cost to sell using market approach. The fair value of these assets are classified as level 3 in the fair value hierarchy due to a mix of unobservable inputs utilized such as independent research in the market as well as actual quotes from market participants. See Note 3 - Property and Equipment and Note 13 - Restructuring Costs for additional information. The Company elected the fair value option of accounting for its investment in Windset. The calculation of fair value utilized significant unobservable inputs, including projected cash flows, growth rates, and discount rates. As a result, the Company’s investment in Windset was considered to be a Level 3 measurement investment. The Company sold its entire investment in Windset on June 1, 2021 for $45.1 million. No gain or loss was recorded upon the sale of the Company’s investment in Windset. In determining the fair value of the Company's investment in Windset, the Company utilizes the following significant unobservable inputs in the discounted cash flow models:
|  |  | May 30, 2021 Range (Weighted Average)
Revenue growth rates |  |  | 7% (6.9%)
Expense growth rates |  |  | 0% to 8% (5.5%)
Discount rates |  |  | 10%
Imprecision in estimating unobservable market inputs can affect the amount of gain or loss recorded for a particular position. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The following table summarizes the fair value of the Company’s assets and liabilities that are measured at fair value on a recurring and non-recurring basis (in thousands):
| Fair Value at May 29, 2022 |  | Fair Value at May 30, 2021
Assets: | Level 1 |  | Level 2 |  | Level 3 |  | Level 1 |  | Level 2 |  | Level 3
Assets held for sale - nonrecurring | $ | — |  |  | $ | — |  |  | $ | 1,027 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Current assets, discontinued operations |  |  |  |  |  |  |  |  |  |  |
Assets held for sale - nonrecurring | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 515 |
Other assets, discontinued operations |  |  |  |  |  |  |  |  |  |  |
Investment in non-public company | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 45,100 |
Property & equipment, as restated | — |  |  | 3,500 |  |  | — |  |  | — |  |  | — |  |  | — |
Customer relationships, as restated | — |  |  | — |  |  | 1,400 |  |  | — |  |  | — |  |  | — |
Tradenames, as restated | — |  |  | — |  |  | 4,000 |  |  | — |  |  | — |  |  | — |
Total assets | $ | — |  |  | $ | 3,500 |  |  | $ | 6,427 |  |  | $ | — |  |  | $ | — |  |  | $ | 45,615 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |
Interest rate swap contracts | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,736 |  |  | $ | — |
Total liabilities | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,736 |  |  | $ | — |
The following table reflects the fair value roll forward reconciliation of Level 3 assets and liabilities measured at fair value for the twelve months ended May 29, 2022 (in thousands):
| Windset Investment |  |
Balance as of May 30, 2021 | $ | 45,100 |  |  |
Sale of Investment in non-public company | (45,100) |  |  |
Balance as of May 29, 2022 | $ | — |  |  |
Impairment valuation for Yucatan Foods As disclosed in Note 1 - Correction of Error in Previously Reported Fiscal Year 2022 Annual Financial Statements, the Company is restating its previously issued financial statements to record an impairment of the property & equipment, trademarks/tradenames and customer relationships intangible assets in the Curation Foods business segment for Yucatan Foods that resulted in the write-down of those assets to their respective fair value as of May 29, 2022. We performed the impairment valuation using a quantitative assessment using a discounted cash flow to value goodwill, royalty savings method to value the trademarks/tradenames, multi-period excess earnings method to value the customer relationships, and orderly liquidation valuation to value property and equipment. The results of our impairment test resulted in the fair value of property & equipment, trademarks/tradenames and customer relationships intangible assets exceeding the respective carrying amounts as of the assessment date. The calculation of fair value utilized significant unobservable inputs, including projected cash flows, growth rates, royalty rates, attrition rates, and discount rates. As a result, the Company’s trademarks/tradenames and customer relationships intangible assets for Yucatan were considered to be a Level 3 measurement. Property & equipment was determined to be a Level 2 measurement as fair value was determined to be equal to Orderly Liquidation Value and assumes “a reasonable period of time to find a purchaser” over a period of approximately six to 12 months. In determining the fair value of the Company’s trademarks/tradenames and customer relationships intangible assets for Yucatan, the Company utilizes the following significant unobservable inputs in the discounted cash flow models:
| May 29, 2022 Range (Average)
Total Enterprise Value |
Revenue growth rates | 2.5% - 7.3% (3.4%)
Gross profit rates | 6.0% - 15.5% (14.5%)
Discount rate | 8.7%
Customer Relationship Value |
Attrition rate | 10%
Discount rate | 19%
Tradenames Value |
Royalty rate | 1%
Discount rate | 19%
Correction of Error in Previously Reported Fiscal Year 2022 Annual Financial Statements The Company is restating its previously issued audited consolidated financial statements as of and for the year ended May 29, 2022 ("Prior Financial Statements") in the fiscal year 2022 Annual Report on Form 10-K originally filed with the Securities and Exchange Commission on September 14, 2022 (the “Original Report”). The Restatement results from the identification of errors related to certain non-cash impairment charges related to the Company’s Curation Foods business contained in the Original Report. The Company has assessed the materiality of these errors in accordance with the U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 99 (“SAB”), Materiality and SAB No. 108, Quantifying Financial Statement Misstatements, and has concluded that the errors are material to the financial statements and therefore the Prior Financial Statements should be restated. The Restatement did not impact or require corrections to the financial information related to the Lifecore segment in the Prior Financial Statements. The effects of these errors on our previously reported consolidated balance sheet as presented in the Original Report are as follows:
| As reported |  |  |  | As restated
(in thousands) | May 29, 2022 |  | Adjustment |  | May 29, 2022
ASSETS |  |  |  |  |
Property and equipment, net | $ | 130,435 |  |  | $ | (11,904) |  |  | $ | 118,531 |
Trademarks/tradenames, net | $ | 8,400 |  |  | $ | 300 |  |  | $ | 8,700 |
Customer relationships, net | $ | 7,150 |  |  | $ | (5,750) |  |  | $ | 1,400 |
Total Assets | $ | 295,160 |  |  | $ | (17,354) |  |  | $ | 277,806 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |
Deferred taxes, net | $ | 232 |  |  | $ | (106) |  |  | $ | 126 |
Total Liabilities | $ | 187,215 |  |  | $ | (106) |  |  | $ | 187,109 |
Retained earnings (accumulated deficit) | $ | (58,851) |  |  | $ | (17,248) |  |  | $ | (76,099) |
Total Stockholders’ Equity | $ | 107,945 |  |  | $ | (17,248) |  |  | $ | 90,697 |
Total Liabilities and Stockholders’ Equity | $ | 295,160 |  |  | $ | (17,354) |  |  | $ | 277,806 |
The effects of this error on our previously reported consolidated statement of operations and statement of comprehensive (loss) income for the year ended May 29, 2022 as reported in the Original Report are as follows:
| Year Ended
| As reported |  |  |  | As restated
(in thousands, except per share amounts) | May 29, 2022 |  | Adjustment |  | May 29, 2022
Product sales | $ | 185,786 |  |  | $ | — |  |  | $ | 185,786 |
Cost of product sales | 135,416 |  |  | — |  |  | 135,416 |
Gross profit | 50,370 |  |  | — |  |  | 50,370 |
Operating costs and expenses: |  |  |  |  |
Research and development | 7,841 |  |  | — |  |  | 7,841 |
Selling, general and administrative | 46,127 |  |  | — |  |  | 46,127 |
Impairment of goodwill and long-lived and indefinite-lived assets | 28,735 |  |  | 17,354 |  |  | 46,089 |
Restructuring costs | 8,961 |  |  | — |  |  | 8,961 |
Total operating costs and expenses | 91,664 |  |  | 17,354 |  |  | 109,018 |
Operating loss | (41,294) |  |  | (17,354) |  |  | (58,648) |
Interest income | 81 |  |  | — |  |  | 81 |
Interest expense, net | (17,357) |  |  | — |  |  | (17,357) |
Transition services income | 5,814 |  |  | — |  |  | 5,814 |
Other income (expense), net | 641 |  |  | — |  |  | 641 |
Net loss from continuing operations before taxes | (52,115) |  |  | (17,354) |  |  | (69,469) |
Income tax benefit | 5,839 |  |  | 106 |  |  | 5,945 |
Net loss from continuing operations | (46,276) |  |  | (17,248) |  |  | (63,524) |
Discontinued operations: |  |  |  |  |
Loss from discontinued operations | (51,276) |  |  | — |  |  | (51,276) |
Income tax benefit | 121 |  |  | — |  |  | 121 |
Loss from discontinued operations, net of tax | (51,155) |  |  | — |  |  | (51,155) |
Net loss | $ | (97,431) |  |  | $ | (17,248) |  |  | $ | (114,679) |
Basic net loss per share: |  |  |  |  |
Loss from continuing operations | $ | (1.57) |  |  | $ | (0.59) |  |  | $ | (2.16) |
Loss from discontinued operations | (1.74) |  |  | — |  |  | (1.74) |
Total basic net loss per share | $ | (3.31) |  |  | $ | (0.59) |  |  | $ | (3.90) |
Diluted net loss per share: |  |  |  |  |
Loss from continuing operations | $ | (1.57) |  |  | $ | (0.59) |  |  | $ | (2.16) |
Loss from discontinued operations | (1.74) |  |  | — |  |  | (1.74) |
Total diluted net loss per share | $ | (3.31) |  |  | $ | (0.59) |  |  | $ | (3.90) |
Total comprehensive loss | $ | (96,659) |  |  | $ | (17,248) |  |  | $ | (113,907) |
The effects of this error on our previously reported consolidated statement of changes in stockholders’ equity for the year ended May 29, 2022 as reported in the Original Report are as follows:
|  | As reported |  | As reported |  | Adjustment |  | As restated |  | As restated |  |
|  | Retained Earnings (Accumulated Deficit) |  | Total Stockholders’ Equity |  |  |  | Retained Earnings (Accumulated Deficit) |  | Total Stockholders’ Equity |  |
(In thousands) |  |  |  |  |  |  |
Balance at May 30, 2021 |  | $ | 38,580 |  |  | $ | 202,784 |  |  | $ | — |  |  | $ | 38,580 |  |  | $ | 202,784 |  |  |
Issuance of stock under stock plans, net of shares withheld |  | — |  |  | 1 |  |  | — |  |  | — |  |  | 1 |  |  |
Taxes paid by Company for employee stock plans |  | — |  |  | (789) |  |  | — |  |  | — |  |  | (789) |  |  |
Stock-based compensation |  | — |  |  | 2,608 |  |  | — |  |  | — |  |  | 2,608 |  |  |
Net loss |  | (97,431) |  |  | (97,431) |  |  | (17,248) |  |  | (114,679) |  |  | (114,679) |  |  |
Other comprehensive income, net of tax |  | — |  |  | 772 |  |  | — |  |  | — |  |  | 772 |  |  |
Balance at May 29, 2022 |  | $ | (58,851) |  |  | $ | 107,945 |  |  | $ | (17,248) |  |  | $ | (76,099) |  |  | $ | 90,697 |  |  |
The effects of this error on our previously reported consolidated statement of cash flows for the year ended May 29, 2022 as reported in the Original Report are as follows:
| As reported |  |  |  | As restated
(in thousands) | May 29, 2022 |  | Adjustment |  | May 29, 2022
Cash flows from operating activities: |  |  |  |  |
Net loss | $ | (97,431) |  |  | $ | (17,248) |  |  | $ | (114,679) |
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |
Impairment of goodwill and long-lived and indefinite-lived assets | $ | 60,792 |  |  | $ | 17,354 |  |  | $ | 78,146 |
Deferred taxes | $ | (6,884) |  |  | $ | (106) |  |  | $ | (6,990) |
Net cash used in operating activities | $ | (24,399) |  |  | $ | — |  |  | $ | (24,399) |
The effects of this error on our previously reported basic and diluted earnings per share for the year ended May 29, 2022 as presented in Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies - Per Share information of the audited financial statements reported in the Original Report are as follows:
| Year Ended |
| As reported |  |  |  | As restated |
(in thousands, except per share amounts) | May 29, 2022 |  | Adjustment |  | May 29, 2022 |
Numerator: |  |  |  |  |  |
Net loss | $ | (97,431) |  |  | $ | (17,248) |  |  | $ | (114,679) |  |
Denominator: |  |  |  |  |  |
Weighted average shares for basic and diluted net loss per share | 29,466 |  |  | — |  |  | 29,466 |  |
Basic and diluted net loss per share | $ | (3.31) |  |  | $ | (0.59) |  |  | $ | (3.90) |  |
The effects of this error on our previously reported property and equipment as of May 29, 2022 as presented in Note 3 - Property and Equipment of the audited financial statements reported in the Original Report, to record the impairment of property and equipment related to Yucatan as an adjustment to the historical cost, are as follows:
| As reported |  |  |  | As restated
(in thousands) | May 29, 2022 |  | Adjustment |  | May 29, 2022
Land | $ | 3,710 |  |  | $ | — |  |  | $ | 3,710 |
Buildings | 60,271 |  |  | (1,912) |  |  | 58,359 |
Leasehold improvements | 6,793 |  |  | (1,650) |  |  | 5,143 |
Computers, capitalized software, machinery, equipment and autos | 88,936 |  |  | (13,962) |  |  | 74,974 |
Furniture and fixtures | 2,290 |  |  | (191) |  |  | 2,099 |
Construction in process | 22,935 |  |  | (149) |  |  | 22,786 |
Gross property and equipment | $ | 184,935 |  |  | $ | (17,864) |  |  | $ | 167,071 |
Less accumulated depreciation and amortization | (54,500) |  |  | 5,960 |  |  | (48,540) |
Property and equipment, net | $ | 130,435 |  |  | $ | (11,904) |  |  | $ | 118,531 |
The effects of this error on our previously reported intangible assets for the year ended May 29, 2022 as presented in Note 4 - Goodwill and Intangible Assets of the audited financial statements reported in the Original Report are as follows:
| Gross Carrying Amount |  | Accumulated Amortization
| As reported |  |  |  | As restated |  | As reported |  |  |  | As restated
| May 29, 2022 |  | Adjustment |  | May 29, 2022 |  | May 29, 2022 |  | Adjustment |  | May 29, 2022
Customer relationships |  |  |  |  |  |  |  |  |  |  |
Yucatan Foods (Curation Foods) | $ | 11,000 |  |  | $ | (9,600) |  |  | $ | 1,400 |  |  | $ | 3,850 |  |  | $ | (3,850) |  |  | $ | — |
Total customer relationships | $ | 14,700 |  |  | $ | (9,600) |  |  | $ | 5,100 |  |  | $ | 7,550 |  |  | $ | (3,850) |  |  | $ | 3,700 |
Trademarks/tradenames |  |  |  |  |  |  |  |  |  |  |
Yucatan Foods (Curation Foods) | $ | 3,700 |  |  | $ | 300 |  |  | $ | 4,000 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Total trademarks/tradenames | $ | 8,400 |  |  | $ | 300 |  |  | $ | 8,700 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Total intangible assets | $ | 23,100 |  |  | $ | (9,300) |  |  | $ | 13,800 |  |  | $ | 7,550 |  |  | $ | (3,850) |  |  | $ | 3,700 |
The amortization expense for each year presented are as follows (in thousands):
| As reported |  | Adjustment |  | As restated
Fiscal year 2023 | $ | 1,100 |  |  | $ | (885) |  |  | $ | 215 |
Fiscal year 2024 | 1,100 |  |  | (885) |  |  | 215 |
Fiscal year 2025 | 1,100 |  |  | (885) |  |  | 215 |
Fiscal year 2026 | 1,100 |  |  | (885) |  |  | 215 |
Fiscal year 2027 | 1,100 |  |  | (885) |  |  | 215 |
Total | $ | 5,500 |  |  | $ | (4,425) |  |  | $ | 1,075 |
The effects of this error on our previously reported income taxes for the year ended May 29, 2022 as presented in Note 7 - Income Taxes of the audited financial statements reported in the Original Report are as follows:
| Year Ended
| As reported |  |  |  | As restated
(in thousands) | May 29, 2022 |  | Adjustment |  | May 29, 2022
Deferred: |  |  |  |  |
Federal | (5,562) |  |  | (108) |  |  | (5,670) |
State | (656) |  |  | 2 |  |  | (654) |
Total | (6,218) |  |  | (106) |  |  | (6,324) |
Income tax benefit | $ | (5,839) |  |  | $ | (106) |  |  | $ | (5,945) |
(in thousands) | Year Ended
| As reported |  |  |  | As restated
| May 29, 2022 |  | Adjustment |  | May 29, 2022
Tax at U.S. statutory rate | $ | (10,904) |  |  | $ | (3,644) |  |  | $ | (14,548) |
State income taxes, net of federal benefit | (1,639) |  |  | (556) |  |  | (2,195) |
Tax reform/CARES Act | — |  |  | — |  |  | — |
Change in valuation allowance | 6,040 |  |  | 4,094 |  |  | 10,134 |
Tax credit carryforwards | (436) |  |  | — |  |  | (436) |
Other compensation-related activity | 234 |  |  | — |  |  | 234 |
Impairment of goodwill | 2,347 |  |  | — |  |  | 2,347 |
Foreign rate differential | (496) |  |  | — |  |  | (496) |
Other | (985) |  |  | — |  |  | (985) |
Income tax benefit | $ | (5,839) |  |  | $ | (106) |  |  | $ | (5,945) |
Effective Tax Rate | 11.20 | % |  | (2.64) | % |  | 8.56 | %
(in thousands) | Year Ended
| As reported |  |  |  | As restated
| May 29, 2022 |  | Adjustment |  | May 29, 2022
Deferred tax assets: |  |  |  |  |
Accruals and reserves | $ | 867 |  |  | $ | — |  |  | $ | 867 |
Net operating loss carryforwards | 28,558 |  |  | — |  |  | 28,558 |
Stock-based compensation | 880 |  |  | — |  |  | 880 |
Research and AMT credit carryforwards | 5,611 |  |  | — |  |  | 5,611 |
Lease liability | 2,874 |  |  | — |  |  | 2,874 |
Limitations on business interest expense | 4,245 |  |  | — |  |  | 4,245 |
Goodwill and other indefinite life intangibles | 1,426 |  |  | 1,319 |  |  | 2,745 |
Other | 750 |  |  |  |  | 750 |
Gross deferred tax assets | 45,211 |  |  | 1,319 |  |  | 46,530 |
Valuation allowance | (31,848) |  |  | (4,094) |  |  | (35,942) |
Net deferred tax assets | 13,363 |  |  | (2,775) |  |  | 10,588 |
Deferred tax liabilities: |  |  |  |  |
Depreciation and amortization | (11,495) |  |  | 2,881 |  |  | (8,614) |
Right of use asset | (2,100) |  |  | — |  |  | (2,100) |
Deferred tax liabilities | (13,595) |  |  | 2,881 |  |  | (10,714) |
Net deferred tax liabilities | $ | (232) |  |  | $ | 106 |  |  | $ | (126) |
The effects of this error on our previously reported operations by business segment for the year ended May 29, 2022 as presented in Note 10 - Business Segment Reporting of the audited financial statements reported in the Original Report are as follows:
(In Thousands) |  | Lifecore |  | Curation Foods |  | Other |  | Total
Net income (loss) from continuing operations, as reported |  | $ | 16,675 |  |  | $ | (30,429) |  |  | $ | (32,522) |  |  | $ | (46,276) |
Adjustment |  | — |  |  | (17,354) |  |  | 106 |  |  | (17,248) |
Net income (loss) from continuing operations, as restated |  | $ | 16,675 |  |  | $ | (47,783) |  |  | $ | (32,416) |  |  | $ | (63,524) |
Income tax (benefit) expense, as reported |  | $ | 5,266 |  |  | $ | (13,831) |  |  | $ | 2,726 |  |  | $ | (5,839) |
Adjustment |  | — |  |  | — |  |  | (106) |  |  | (106) |
Income tax (benefit) expense, as restated |  | $ | 5,266 |  |  | $ | (13,831) |  |  | $ | 2,620 |  |  | $ | (5,945) |
Identifiable assets, as reported |  | $ | 213,969 |  |  | $ | 76,948 |  |  | $ | 4,243 |  |  | $ | 295,160 |
Adjustment |  | — |  |  | (17,354) |  |  | — |  |  | (17,354) |
Identifiable assets, as restated |  | $ | 213,969 |  |  | $ | 59,594 |  |  | $ | 4,243 |  |  | $ | 277,806 |
(in million) | Year Ended
| As reported |  |  |  | As restated
Property and equipment, net | May 29, 2022 |  | Adjustment |  | May 29, 2022
United States | $ | 115.0 |  |  | $ | — |  |  | $ | 115.0 |
Mexico | $ | 15.4 |  |  | $ | (11.9) |  |  | $ | 3.5 |
Total property and equipment, net | $ | 130.4 |  |  | $ | (11.9) |  |  | $ | 118.5 |
The effects of this error on our previously reported quarterly consolidated financial information as of May 29, 2022 as presented in Note 11 - Quarterly Consolidated Financial Information (unaudited) of the audited financial statements reported in the Original Report are as follows:
|  | As reported |  | As reported |  |  |  | As restated |  | As restated
Fiscal Year 2022 |  | 4th Quarter |  | Annual |  | Adjustment |  | 4th Quarter |  | Annual
Net (loss) income from continuing operations |  | (34,436) |  |  | (46,276) |  |  | (17,248) |  |  | (51,684) |  |  | (63,524) |
Net (loss) income per basic and diluted share from continuing operations |  | $ | (1.16) |  |  | $ | (1.57) |  |  | $ | (0.59) |  |  | $ | (1.75) |  |  | $ | (2.16) |

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI https://asc.fasb.org/topic&trid=2122149 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI https://asc.fasb.org/topic&trid=2197479 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI https://asc.fasb.org/topic&trid=2122369 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI https://asc.fasb.org/topic&trid=2134479 + Details
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