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Correction of Error in Previously Reported Fiscal Year 2022 Interim Financial Statements (Unaudited) | 12 Months Ended
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May 29, 2022
Accounting Changes and Error Corrections [Abstract] |
Correction of Error in Previously Reported Fiscal Year 2022 Interim Financial Statements (Unaudited) | Correction of Error in Previously Reported Fiscal Year 2022 Interim Financial Statements (Unaudited) This note is repeated, unchanged, from what previously was reported in Note 1 - Correction of Error in Previously Reported Fiscal Year 2022 Annual Financial Statements to our consolidated financial statements included in Part IV, Item 15 of the Annual Report on Form 10-K. The Company is restating (the “Prior Restatement”) its previously issued (i) unaudited consolidated balance sheets as of February 27, 2022 and May 30, 2021, (ii) unaudited consolidated statements of comprehensive (loss) income for the three and nine months ended February 27, 2022, (iii) unaudited consolidated statement of cash flows for the nine months ended February 27, 2022, (iv) unaudited consolidated statement of changes in stockholders' equity, and (v) unaudited Note 4, Note 7, Note 8, and Note 9 to the consolidated financial statements, in each case, as previously reported in our Quarterly Report on Form 10-Q for the period ended February 27, 2022 (the “Prior Q3 Interim Financial Statements”). We assessed the materiality of this error in accordance with the U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 99, Materiality and have concluded that the Q3 Interim Prior Financial Statements should be restated. This restatement reflected in the tables below results from corrections by us primarily related to: (i) the classification of certain expenses and the recording of accruals related to the Company’s recent disposition activities and the Company’s corporate transition of Landec Corporation to Lifecore Biomedical, which were previously classified as restructuring expenses from continuing operations in our Prior Q3 Interim Financial Statements, but which the Company intends to correct to classify as selling, general and administrative expenses, and cost of goods sold within continuing operations; (ii) the treatment of the fees received and costs incurred by the Company pursuant to the transition services agreement related to the sale of the Curation Foods’ Eat Smart business (the “TSA”), for which the Company had previously recognized the net of the TSA fees received and costs incurred as loss on sale of Eat Smart within discontinued operations, but for which the Company intends to correct to classify the TSA fees received by the Company within transition services income and the TSA costs incurred by the Company as selling, general and administrative expenses within continuing operations; and (iii) the classification of certain costs and expenses related to the Company’s recent disposition activities and the Company’s corporate transition of Landec Corporation to Lifecore Biomedical, which were previously classified as loss on sale of Eat Smart within discontinued operations, but which the Company intends to correct to classify as selling, general and administrative expenses within continuing operations. The effects of this error on our previously reported February 27, 2022 and May 30, 2021 consolidated balance sheets as presented in the Company’s fiscal year 2022 third quarter Form 10-Q are as follows:
| As reported |  |  |  | As restated
(in thousands) | February 27, 2022 |  | Adjustment |  | February 27, 2022
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |
Other accrued liabilities | $ | 13,735 |  |  | $ | 348 |  |  | $ | 14,083 |
Total Current Liabilities | 90,065 |  |  | 348 |  |  | 90,413 |
Total Liabilities | 181,510 |  |  | 348 |  |  | 181,858 |
Retained earnings (accumulated deficit) | (22,188) |  |  | (348) |  |  | (22,536) |
Total Stockholders’ Equity | 144,072 |  |  | (348) |  |  | 143,724 |
Total Liabilities and Stockholders’ Equity | $ | 325,582 |  |  | $ | — |  |  | $ | 325,582 |
| As reported |  |  |  | As restated
(in thousands) | May 30, 2021 |  | Adjustment |  | May 30, 2021
ASSETS |  |  |  |  |
Property and equipment, net | $ | 112,770 |  |  | $ | 7,516 |  |  | $ | 120,286 |
Operating lease right-of-use assets | 7,480 |  |  | 9,618 |  |  | 17,098 |
Other assets, discontinued operations | 171,274 |  |  | (17,134) |  |  | 154,140 |
Total Assets | 502,924 |  |  | — |  |  | 502,924 |
LIABILITIES |  |  |  |  |
Current portion of lease liabilities | 1,465 |  |  | 135 |  |  | 1,600 |
Current liabilities, discontinued operations | 42,779 |  |  | (135) |  |  | 42,644 |
Total Current Liabilities | 101,888 |  |  | — |  |  | 101,888 |
Long-term lease liabilities | 9,581 |  |  | 10,778 |  |  | 20,359 |
Non-current liabilities, discontinued operations | 14,759 |  |  | (10,778) |  |  | 3,981 |
Total Liabilities | $ | 300,140 |  |  | $ | — |  |  | $ | 300,140 |
The effects of this error on our previously reported fiscal year 2022 interim consolidated statements of comprehensive (loss) income for the three-month period ended February 27, 2022 are as follows:
| As reported |  |  |  | As restated
(in thousands, except per share amounts) | February 27, 2022 |  | Adjustment |  | February 27, 2022
Product sales | $ | 53,074 |  |  | $ | — |  |  | $ | 53,074 |
Cost of product sales | 39,179 |  |  | 675 |  |  | 39,854 |
Gross profit | 13,895 |  |  | (675) |  |  | 13,220 |
Operating costs and expenses: |  |  |  |  |
Research and development | 2,056 |  |  | — |  |  | 2,056 |
Selling, general and administrative | 9,725 |  |  | 6,625 |  |  | 16,350 |
Restructuring cost | 5,865 |  |  | (595) |  |  | 5,270 |
Total operating costs and expenses | 17,646 |  |  | 6,030 |  |  | 23,676 |
Operating loss | (3,751) |  |  | (6,705) |  |  | (10,456) |
Interest income | 20 |  |  | — |  |  | 20 |
Interest expense | (4,105) |  |  | — |  |  | (4,105) |
Transition services income | — |  |  | 5,473 |  |  | 5,473 |
Other income (expense), net | 454 |  |  | — |  |  | 454 |
Net loss from continuing operations before taxes | (7,382) |  |  | (1,232) |  |  | (8,614) |
Income tax benefit | 276 |  |  | 37 |  |  | 313 |
Net loss from continuing operations | (7,106) |  |  | (1,195) |  |  | (8,301) |
Loss from discontinued operations, net of tax | (5,744) |  |  | 959 |  |  | (4,785) |
Net loss | $ | (12,850) |  |  | $ | (236) |  |  | $ | (13,086) |
Basic and diluted net loss per share: |  |  |  |  |
Loss from continuing operations | $ | (0.24) |  |  | $ | (0.04) |  |  | $ | (0.28) |
Loss from discontinued operations | (0.19) |  |  | 0.03 |  |  | (0.16) |
Total basic and diluted net loss per share | $ | (0.43) |  |  | $ | (0.01) |  |  | $ | (0.44) |
Other comprehensive income (loss), net of tax: |  |  |  |  |
Net unrealized gain (losses) on interest rate swaps (net of tax effect) | $ | 104 |  |  | $ | — |  |  | $ | 104 |
Other comprehensive income (loss), net of tax | 104 |  |  | — |  |  | 104 |
Total comprehensive loss | $ | (12,746) |  |  | $ | (236) |  |  | $ | (12,982) |
The effects of this error on our previously reported fiscal year 2022 interim consolidated statements of comprehensive (loss) income for the nine-month period ended February 27, 2022 are as follows:
| As reported |  |  |  | As restated
(in thousands, except per share amounts) | February 27, 2022 |  | Adjustment |  | February 27, 2022
Product sales | $ | 138,158 |  |  | $ | — |  |  | $ | 138,158 |
Cost of product sales | 99,113 |  |  | 787 |  |  | 99,900 |
Gross profit | 39,045 |  |  | (787) |  |  | 38,258 |
Operating costs and expenses: |  |  |  |  |
Research and development | 5,785 |  |  | — |  |  | 5,785 |
Selling, general and administrative | 27,207 |  |  | 6,906 |  |  | 34,113 |
Restructuring costs | 8,406 |  |  | (876) |  |  | 7,530 |
Total operating costs and expenses | 41,398 |  |  | 6,030 |  |  | 47,428 |
Operating loss | (2,353) |  |  | (6,817) |  |  | (9,170) |
Interest income | 66 |  |  | — |  |  | 66 |
Interest expense | (13,877) |  |  | — |  |  | (13,877) |
Transition services income | — |  |  | 5,473 |  |  | 5,473 |
Other income (expense), net | 642 |  |  | — |  |  | 642 |
Net loss from continuing operations before taxes | (15,522) |  |  | (1,344) |  |  | (16,866) |
Income tax benefit | 5,012 |  |  | 14 |  |  | 5,026 |
Net loss from continuing operations | (10,510) |  |  | (1,330) |  |  | (11,840) |
Loss from discontinued operations, net of tax | (50,258) |  |  | 982 |  |  | (49,276) |
Net loss | $ | (60,768) |  |  | $ | (348) |  |  | $ | (61,116) |
Basic and diluted net loss per share: |  |  |  |  |
Loss from continuing operations | $ | (0.36) |  |  | $ | (0.05) |  |  | $ | (0.41) |
Loss from discontinued operations | (1.71) |  |  | 0.03 |  |  | (1.68) |
Total basic and diluted net loss per share | $ | (2.07) |  |  | $ | (0.02) |  |  | $ | (2.09) |
Other comprehensive income (loss), net of tax: |  |  |  |  |
Net unrealized gain (losses) on interest rate swaps (net of tax effect) | $ | 646 |  |  | $ | — |  |  | $ | 646 |
Other comprehensive income (loss), net of tax | 646 |  |  | — |  |  | 646 |
Total comprehensive loss | $ | (60,122) |  |  | $ | (348) |  |  | $ | (60,470) |
The effects of this error on our previously reported fiscal year 2022 consolidated statements of changes in stockholders' equity for the nine-month period ended February 27, 2022 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 |  |  |
Net loss |  | (9,477) |  |  | (9,477) |  |  | (32) |  |  | (9,509) |  |  | (9,509) |  |  |
Balance at August 29, 2021 |  | 29,103 |  |  | 193,865 |  |  | (32) |  |  | 29,071 |  |  | 193,833 |  |  |
Net loss |  | (38,441) |  |  | (38,441) |  |  | (80) |  |  | (38,521) |  |  | (38,521) |  |  |
Balance at November 28, 2021 |  | (9,338) |  |  | 156,202 |  |  | (112) |  |  | (9,450) |  |  | 156,090 |  |  |
Net loss |  | (12,850) |  |  | (12,850) |  |  | (236) |  |  | (13,086) |  |  | (13,086) |  |  |
Balance at February 27, 2022 |  | $ | (22,188) |  |  | $ | 144,072 |  |  | $ | (348) |  |  | $ | (22,536) |  |  | $ | 143,724 |  |  |
The effects of this error on our previously reported fiscal year 2022 consolidated statements of cash flows for the nine-month period ended February 27, 2022 are as follows:
| As reported |  |  |  | As restated
(in thousands) | February 27, 2022 |  | Adjustment |  | February 27, 2022
Cash flows from operating activities: |  |  |  |  |
Net loss | $ | (60,768) |  |  | $ | (348) |  |  | $ | (61,116) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |  |  |  |  |
Impairment of goodwill | 32,057 |  |  | — |  |  | 32,057 |
Depreciation, amortization of intangibles, debt costs and right-of-use assets | 14,488 |  |  | — |  |  | 14,488 |
Loss on disposal of property and equipment related to restructuring, net | 5,185 |  |  | — |  |  | 5,185 |
Deferred taxes | (5,471) |  |  | — |  |  | (5,471) |
Loss on sale of Eat Smart | 4,354 |  |  | (4,119) |  |  | 235 |
Stock-based compensation expense | 1,928 |  |  | — |  |  | 1,928 |
Net loss on disposal of property and equipment held and used | 25 |  |  | — |  |  | 25 |
Provision (benefit) for expected credit losses | (14) |  |  | — |  |  | (14) |
Other, net | (551) |  |  | — |  |  | (551) |
Changes in current assets and current liabilities: |  |  |  |  |
Accounts receivable, net | (7,525) |  |  | — |  |  | (7,525) |
Inventories | (11,910) |  |  | — |  |  | (11,910) |
Prepaid expenses and other current assets | (1,448) |  |  | — |  |  | (1,448) |
Accounts payable | 13,055 |  |  | 452 |  |  | 13,507 |
Accrued compensation | (3,849) |  |  | 1,822 |  |  | (2,027) |
Other accrued liabilities | (4,195) |  |  | 4,125 |  |  | (70) |
Deferred revenue | 204 |  |  | 458 |  |  | 662 |
Net cash (used in) provided by operating activities | (24,435) |  |  | 2,390 |  |  | (22,045) |
Cash flows from investing activities: |  |  |  |  |
Proceeds from sale of Eat Smart | 73,500 |  |  | — |  |  | 73,500 |
Sale of Investment in non-public company | 45,100 |  |  | — |  |  | 45,100 |
Purchases of property and equipment | (18,539) |  |  | — |  |  | (18,539) |
Proceeds from sales of property and equipment | 1,096 |  |  | — |  |  | 1,096 |
Eat Smart sale net working capital adjustment and cash sale expenses | — |  |  | (2,390) |  |  | (2,390) |
Net cash provided by investing activities | 101,157 |  |  | (2,390) |  |  | 98,767 |
Net cash used in financing activities | (76,163) |  |  | — |  |  | (76,163) |
Net increase in cash, cash equivalents and restricted cash | 559 |  |  | — |  |  | 559 |
Cash, cash equivalents and restricted cash, beginning of period | 1,295 |  |  | — |  |  | 1,295 |
Cash, cash equivalents and restricted cash, end of period | $ | 1,854 |  |  | $ | — |  |  | $ | 1,854 |
The effects of this error on our previously reported fiscal year 2022 diluted earnings per share for the three- and nine-month periods ended February 27, 2022 as presented in the Company’s fiscal year 2022 third quarter Form 10-Q Note 4 - Diluted Earnings per share are as follows:
| Three Months Ended |  | Nine Months Ended
| As reported |  |  |  | As restated |  | As reported |  |  |  | As restated
(in thousands, except per share amounts) | February 27, 2022 |  | Adjustment |  | February 27, 2022 |  | February 27, 2022 |  | Adjustment |  | February 27, 2022
Numerator: |  |  |  |  |  |  |  |  |  |  |
Net loss | $ | (12,850) |  |  | $ | (236) |  |  | $ | (13,086) |  |  | $ | (60,768) |  |  | $ | (348) |  |  | $ | (61,116) |
Denominator: |  |  |  |  |  |  |  |  |  |  |
Weighted average shares for diluted net loss per share | 29,482 |  |  | 29,482 |  |  | 29,482 |  |  | 29,459 |  |  | 29,459 |  |  | 29,459 |
Diluted net loss per share | $ | (0.43) |  |  | $ | (0.01) |  |  | $ | (0.44) |  |  | $ | (2.07) |  |  | $ | (0.02) |  |  | $ | (2.09) |
The effects of this error on our previously reported fiscal year 2022 operations by business segment for the three- and nine-month periods ended February 27, 2022 as presented in the Company’s fiscal year 2022 third quarter Form 10-Q Note 7 - Business Segment Reporting are as follows:
(In Thousands) |  | Lifecore |  | Curation Foods |  | Other |  | Total
Three Months Ended February 27, 2022 |  |  |  |  |  |  |  |
Gross profit, as reported |  | $ | 12,905 |  |  | $ | 990 |  |  | $ | — |  |  | $ | 13,895 |
Adjustment |  | — |  |  | (675) |  |  | — |  |  | (675) |
Gross profit, as restated |  | 12,905 |  |  | 315 |  |  | — |  |  | 13,220 |
Net income (loss) from continuing operations, as reported |  | 5,054 |  |  | (5,848) |  |  | (6,312) |  |  | (7,106) |
Adjustment |  | — |  |  | (1,195) |  |  | — |  |  | (1,195) |
Net income (loss) from continuing operations, as restated |  | 5,054 |  |  | (7,043) |  |  | (6,312) |  |  | (8,301) |
Loss from discontinued operations, as reported |  | — |  |  | (2,703) |  |  | (3,041) |  |  | (5,744) |
Adjustment |  | — |  |  | 959 |  |  | — |  |  | 959 |
Loss from discontinued operations, as restated |  | — |  |  | (1,744) |  |  | (3,041) |  |  | (4,785) |
Nine Months Ended February 27, 2022 |  |  |  |  |  |  |  |
Gross profit, as reported |  | $ | 30,384 |  |  | $ | 8,661 |  |  | $ | — |  |  | $ | 39,045 |
Adjustment |  | — |  |  | (787) |  |  | — |  |  | (787) |
Gross profit, as restated |  | 30,384 |  |  | 7,874 |  |  | — |  |  | 38,258 |
Net income (loss) from continuing operations, as reported |  | 11,317 |  |  | 5,513 |  |  | (27,340) |  |  | (10,510) |
Adjustment |  | — |  |  | (1,330) |  |  | — |  |  | (1,330) |
Net income (loss) from continuing operations, as restated |  | 11,317 |  |  | 4,183 |  |  | (27,340) |  |  | (11,840) |
Loss from discontinued operations, as reported |  | — |  |  | (47,217) |  |  | (3,041) |  |  | (50,258) |
Adjustment |  | — |  |  | 982 |  |  | — |  |  | 982 |
Loss from discontinued operations, as restated |  | — |  |  | (46,235) |  |  | (3,041) |  |  | (49,276) |
The effects of this error on our previously reported fiscal year 2022 restructuring costs for the three- and nine-month periods ended February 27, 2022 as presented in the Company’s fiscal year 2022 third quarter Form 10-Q Note 8 - Restructuring Costs are as follows:
(In thousands) |  |  |  |  |  |  |
Three Months Ended February 27, 2022 | Lifecore |  | Curation Foods |  | Other |  | Total
Total restructuring costs, as reported | $ | 271 |  |  | $ | 5,344 |  |  | $ | 250 |  |  | $ | 5,865 |
Adjustment | (271) |  |  | (124) |  |  | (200) |  |  | (595) |
Total restructuring costs, as restated | $ | — |  |  | $ | 5,220 |  |  | $ | 50 |  |  | $ | 5,270 |
(In thousands) |  |  |  |  |  |  |
Nine Months Ended February 27, 2022 | Lifecore |  | Curation Foods |  | Other |  | Total
Total restructuring costs, as reported | $ | 271 |  |  | $ | 5,810 |  |  | $ | 2,325 |  |  | $ | 8,406 |
Adjustment | (271) |  |  | (124) |  |  | (481) |  |  | (876) |
Total restructuring costs, as restated | $ | — |  |  | $ | 5,686 |  |  | $ | 1,844 |  |  | $ | 7,530 |
The effects of this error on our previously reported May 30, 2021 carrying amounts of the major classes of assets and liabilities of the Eat Smart business included in assets and liabilities of discontinued operations as presented in the Company’s fiscal year 2022 third quarter Form 10-Q Note 9 - Discontinued Operations are as follows:
| As reported |  |  |  | As restated
(in thousands) | May 30, 2021 |  | Adjustment |  | May 30, 2021
ASSETS |  |  |  |  |
Property and equipment, net | $ | 66,789 |  |  | $ | (7,516) |  |  | $ | 59,273 |
Operating lease right-of-use assets | 13,347 |  |  | (9,618) |  |  | 3,729 |
Other assets, discontinued operations | 171,274 |  |  | (17,134) |  |  | 154,140 |
LIABILITIES |  |  |  |  |
Current portion of lease liabilities | 2,424 |  |  | (135) |  |  | 2,289 |
Current liabilities, discontinued operations | 42,779 |  |  | (135) |  |  | 42,644 |
Long-term lease liabilities | 14,030 |  |  | (10,778) |  |  | 3,252 |
Non-current liabilities, discontinued operations | 14,759 |  |  | (10,778) |  |  | 3,981 |
The effects of this error on our previously reported fiscal year 2022 components of loss from discontinued operations for the three-month period ended February 27, 2022 as presented in the Company’s fiscal year 2022 third quarter Form 10-Q Note 9 - Discontinued Operations are as follows:
| As reported |  |  |  | As restated
(in thousands) | February 27, 2022 |  | Adjustment |  | February 27, 2022
Operating costs and expenses: |  |  |  |  |
Loss on sale of Eat Smart | $ | 4,354 |  |  | $ | (4,119) |  |  | $ | 235 |
Restructuring cost | 86 |  |  | 3,123 |  |  | 3,209 |
Total operating costs and expenses | 5,601 |  |  | (996) |  |  | 4,605 |
Operating loss | (5,762) |  |  | 996 |  |  | (4,766) |
Income tax benefit | 222 |  |  | (37) |  |  | 185 |
Loss from discontinued operations, net of tax | $ | (5,744) |  |  | $ | 959 |  |  | $ | (4,785) |
The effects of this error on our previously reported fiscal year 2022 components of loss from discontinued operations for the nine-month period ended February 27, 2022 as presented in the Company’s fiscal year 2022 third quarter Form 10-Q Note 9 - Discontinued Operations are as follows:
| As reported |  |  |  | As restated
(in thousands) | February 27, 2022 |  | Adjustment |  | February 27, 2022
Operating costs and expenses: |  |  |  |  |
Loss on sale of Eat Smart | $ | 4,354 |  |  | $ | (4,119) |  |  | $ | 235 |
Restructuring cost | 1,519 |  |  | 3,123 |  |  | 4,642 |
Total operating costs and expenses | 53,198 |  |  | (996) |  |  | 52,202 |
Operating loss | (47,998) |  |  | 996 |  |  | (47,002) |
Income tax benefit | 422 |  |  | (14) |  |  | 408 |
Loss from discontinued operations, net of tax | $ | (50,258) |  |  | $ | 982 |  |  | $ | (49,276) |

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