| Organization, Basis of Presentation, and Summary of Significant Accounting Policies | Organization, Basis of Presentation, and Summary of Significant Accounting Policies Organization Lifecore Biomedical, Inc. and its subsidiaries (“Lifecore” or the “Company”) is a fully integrated contract development and manufacturing organization (“CDMO”) that offers capabilities in the development, fill and finish of complex sterile injectable pharmaceutical products in syringes, vials and cartridges. The Company previously operated a natural food company, through its wholly-owned subsidiary, Curation Foods, Inc. (“Curation”), which was previously focused on the distribution of plant-based foods to retail, club, and food service channels throughout North America. However, upon the sale of the Divested Businesses (as defined below), the Company has ceased to operate the Curation foods business. 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 Lifecore and its subsidiaries. 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. Discontinued Operations During the year ended May 28, 2023, the Company entered into agreements for the sale or disposition of its subsidiaries within the Curation business (a former segment), specifically O Olive Oil and Vinegar® (“O Olive”), Yucatan Foods, LLC (“Yucatan”), and BreatheWay® (“BreatheWay”, and together with O Olive, Yucatan, and BreatheWay, the “Divested Businesses”). The Company completed the disposition of Yucatan and O Olive on February 7, 2023 and April 6, 2023, respectively. On April 6, 2023, the Company completed the sale of its O Olive Oil and Vinegar Business (“O Olive Sale”) for an aggregate sale price of $6.4 million, subject to certain customary post-closing adjustments, consisting of approximately $3.3 million in cash and a $3.1 million seller’s note. The seller’s note matures on March 31, 2026, accrues interest at a rate of 12% payable in kind beginning on October 31, 2023, and is prepayable by the buyer at any time. Net proceeds from the transaction, $1.7 million, were used to repay borrowings under the Company’s credit facilities. The Company recognized a loss on the O Olive Sale amounting to $0.3 million in the fourth quarter of fiscal year ended May 28, 2023, which is recorded in loss from discontinued operations in the Consolidated Statements of Operations. On September 28, 2023, December 11, 2023 and February 22, 2024, the Company received cash payments of $2.4 million, $0.3 million, and $18.0 thousand, respectively, toward the $3.1 million seller’s note. On February 7, 2023 (the “Yucatan Closing Date”), the Company, Camden Fruit Corp., a direct wholly owned subsidiary of Curation Foods and an indirect wholly owned subsidiary of the Company (“Camden” and together with the Curation Foods and the Company, the “Yucatan Sellers”), Yucatan Foods, LLC, a wholly owned subsidiary of the Camden (“Yucatan”), and Yucatan Acquisition Holdings LLC, a wholly owned subsidiary of Flagship Food Group LLC (“Buyer” and together with Yucatan and the Sellers, the “Parties”) completed the sale (the “Yucatan Disposition”) of the Company’s avocado products business, including its Yucatan® and Cabo Fresh® brands, as well as the associated manufacturing facility and operations in Guanajuato, Mexico (the “Business”), pursuant to the terms of a securities purchase agreement executed by the Parties on February 7, 2023 (the “Securities Purchase Agreement”). Pursuant to the Securities Purchase Agreement, Buyer acquired all of the outstanding equity securities of Yucatan for a purchase price of $17.5 million in cash, subject to certain post-closing adjustments at closing, including selling costs, net working capital and other adjustments amounting to $5.0 million. The Company recognized a loss on the Yucatan Disposition of $20.7 million in the third quarter ended February 26, 2023. The loss on the Yucatan Disposition is recorded in loss from discontinued operations in the Consolidated Statement of Operations. On June 2, 2022, the Company and Curation entered into and closed an Asset Purchase Agreement (the “BreatheWay Purchase Agreement”) with Hazel Technologies, Inc. (the “BreatheWay Purchaser”), pursuant to which Curation sold all of its assets related to BreatheWay packaging technology business to the BreatheWay Purchaser in exchange for an aggregate purchase price of $3.2 million (the “BreatheWay Disposition”). The BreatheWay Purchase Agreement included various representations, warranties and covenants of the parties generally customary for a transaction of this nature. In connection with the BreatheWay Disposition, the Company received net proceeds of $3.1 million and recorded a gain of $2.1 million in the Consolidated Statement of Operations for the year ended May 28, 2023. On December 13, 2021, the Company and Curation (together, the “Eat Smart Sellers”), and Taylor Farms Retail, Inc. (“Taylor Farms” and together with the Eat Smart Sellers, the “Parties”) completed the sale (the “Eat Smart Disposition”) of Curation Foods’ Eat Smart business, including its salad and cut vegetable businesses (the “Eat Smart Business”), pursuant to the terms of an asset purchase agreement executed by the Parties on December 13, 2021 (the “Eat Smart Asset Purchase Agreement”). Pursuant to the Eat Smart Asset Purchase Agreement, Taylor Farms acquired the Business for a purchase price of $73.5 million in cash, subject to post-closing adjustments based upon net working capital at closing. As part of the Eat Smart Disposition, Taylor Farms acquired, among other assets related to the Eat Smart Business, the manufacturing facility and warehouses (and corresponding equipment) located in Bowling Green, Ohio and Guadalupe, California, as well as inventory, accounts receivable and accounts payable, intellectual property and information related to the Eat Smart Business, and assumed certain liabilities and executory obligations under the Company’s and Curation Foods’ outstanding contracts related to the Eat Smart Business, in each case, subject to the terms of the Eat Smart Asset Purchase Agreement. Upon the sale, the Company received net proceeds of $73.5 million and recorded a loss of $0.3 million, which is recorded in loss from discontinued operations in the Consolidated Statements of Operations. The accounting requirements for reporting the Divested Businesses as discontinued operations were met when the Eat Smart Disposition, Yucatan Disposition and O Olive Sale were completed on each respective closing date. The BreatheWay Disposition did not meet the requirements for reporting the business as discontinued operations. Accordingly, the consolidated financial statements and notes to the consolidated financial statements reflect the results of the Eat Smart, Yucatan and O Olive businesses as a discontinued operation for the applicable periods. Refer to Note 11 - Discontinued Operations. In connection with the sale of the Eat Smart, Yucatan and O Olive businesses, the Company entered into transition services agreements with each respective buyer to provide for a customary and orderly transition of the business, and such fees earned, and costs incurred for such transition services are included in continuing operations in subsequent periods. In fiscal year 2022, the Company earned $5.8 million of transition services income related to transition services provided related to the Eat Smart Disposition which is meant to defray costs incurred to provide the transition services which are reported within Selling, general and administrative costs. In fiscal year 2023, the Company earned similar transition services income of $0.3 million related to the Yucatan and O Olive dispositions. No transition services income was recorded during fiscal year 2024. 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; recognition and measurement of current and deferred income tax assets and liabilities; the assessment of recoverability of long-lived and indefinite lived assets (including intangible assets and goodwill) and inventories; the valuation and recognition of stock-based compensation; and the valuation of debt derivative liability. 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. Reportable Segments The Company operates as one reportable segment: Lifecore. This is based on the objectives of the business and how our chief operating decision maker, the President and Chief Executive Officer, regularly reviews and manages the business, monitors operating performance and allocates resources. Concentrations of Risk Cash 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 maintains cash in U.S. bank accounts, the balance of which may at times exceed the federally insured limit. During the fiscal years ended May 26, 2024 and May 28, 2023, the Company had sales concentrations of 10% or greater from two customers, and for May 29, 2022, three customers had sales concentrations of 10% or greater, accounting for 39% and 19%; 39% and 18%; and 26%, 22% and 14%, respectively. Two of the Company’s same customers had accounts receivable concentrations of 10% or greater, accounting for 34% and 18% of accounts receivable as of May 26, 2024, and 31% and 18%, as of May 28, 2023. Cash and Cash Equivalents The Company records all highly liquid securities with original maturities of three months or less from date of purchase 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. Impairment of Long-Lived Assets Long-lived assets (groups) are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets (groups) 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 (group). If the future undiscounted cash flows are not sufficient to recover the carrying value of the assets (group), 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 financial instruments, the historical carrying amounts approximate the fair value of the instruments. Derivative Financial Instruments The Company accounts for put and call options embedded in the term debt in accordance with ASC Topic 815, Derivatives and Hedging. ASC Topic 815 generally requires companies to bifurcate put and call options embedded in the Term Loan Credit Facility (as defined in Note 6 - Debt) from their host instruments and to account for them as free standing derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument that is required to be bifurcated, the bifurcated derivative instruments are accounted for as separate derivative instruments. The fair value of the embedded features are accounted for as a derivative debt liability in the Company’s consolidated balance sheets and adjusted to fair value each reporting period. The change in fair value of derivatives is recorded as a component of other income (expense) in the Company’s Consolidated Statements of Operations. Accumulated Other Comprehensive Income (Loss) Comprehensive income (loss) consists of two components, Net income (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 interest rate swap matured in November 2022. The components of accumulated other comprehensive income (“AOCI”), net of tax, are as follows (in thousands): AOCI May 30, 2021 $ (1,358) Amounts reclassified from OCI 772 Other comprehensive income, net of tax effect of $(430) 772 May 29, 2022 (586) Amounts reclassified from OCI 586 Other comprehensive income, net of tax effect of $16 586 May 28, 2023 — Debt The Company incurred debt origination costs related to the financing transactions (see Note 6 - Debt) and amortizes these costs over the life of the related debt using the straight-line method, which approximates the effective interest method, except for the Term Loan Credit Facility, related party, which amortizes the costs using the effective interest method. The unamortized portion of debt origination costs is recorded on the consolidated balance sheets as an offset to its related debt. Amortization of debt origination costs is included as a component of interest expense in the consolidated statements of operations. 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 Company makes all reasonable efforts to collect outstanding balances due from customers; however, trade receivables and contract assets are written off when the related balances are no longer deemed collectible. 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 accounts receivable balances are as follows (in thousands): Year Ended May 26, 2024 May 28, 2023 May 29, 2022 Accounts receivable $ 31,864 $ 29,509 $ 38,836 Less: Allowance for credit losses (711) (485) (522) Accounts receivable, less allowance for credit losses $ 31,153 $ 29,024 $ 38,314 The changes in the allowance for credit losses related to accounts receivable are as follows (in thousands): Year Ended May 26, 2024 May 28, 2023 May 29, 2022 Beginning balance $ 485 $ 522 $ 522 Provision 263 163 — Charge-offs (37) (200) — Ending Balance $ 711 $ 485 $ 522 Contract Assets and Liabilities Contract assets primarily relate to the Company’s unconditional right to consideration for work completed but not billed at the reporting date. The Company’s contract assets as of May 26, 2024, May 28, 2023 and May 29, 2022 were $4.1 million, $3.2 million and $10.4 million, respectively, and are included within accounts receivable in the Consolidated Balance Sheets. The related party portion of these contract assets as of May 26, 2024, May 28, 2023 and May 29, 2022 were $0.2 million, $0.1 million, and $0.0 million, respectively. Any incremental costs of obtaining a contract are expensed as incurred. Contract liabilities primarily relate to payments received from customers in advance of performance under the contract. Contract liabilities consisted of the following (in millions): May 26, 2024 May 28, 2023 May 29, 2022 Current deferred revenues: Non related party (1) $1.1 $0.6 $0.3 Related party (1) 1.0 3.5 0.6 Non-current deferred revenues: Related party (1) 4.7 2.9 — Non-current customer deposit (2) 0.3 — — Total contract liabilities $7.1 $7.0 $0.9 (1) These are separate lines on the consolidated balance sheet for these deferred revenues. (2) This is with a non-related party and is included within other non-current liabilities on the consolidated balance sheet. The increase as of May 28, 2023 as compared to May 29, 2022 relates to increased revenue with our largest customer. As of May 26, 2024, the Company had a $3.5 million contract liability related to customer-owned equipment purchased by the Company, which the customer paid in advance. The increase in current deferred revenue, non related party, is due to increased payments from customers in advance of performance under the contract. The net decrease in current deferred revenue, related party, relates to revenue recognized during fiscal year 2024. The $1.8 million increase in non-current deferred revenue, related party, is due to the $5.5 million prepayment (as discounted to $4.7 million) offset by $2.9 million that became current. Revenues recognized during the fiscal years ended May 26, 2024, May 28, 2023 and May 29, 2022, that were included in the contract liability balance at the beginning of fiscal year 2024, 2023 and 2022, respectively, were $6.8 million, $0.6 million and $0.4 million, respectively. Deferred Revenue Cash received in advance of services performed are recorded as deferred revenue. 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 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. CDMO - Aseptic Lifecore provides aseptic formulation and filling of syringes, vials and cartridges 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, vials or cartridges with our HA, the goods (syringes, vials, cartridges and HA) are distinct in the context of the contract. Lifecore generally recognizes revenue for these products at the point in time when the product is released through the completion of the certificate of analysis or at the time the shipment is made or upon delivery of the product. CDMO - Development Services Lifecore provides product development services to assist its customers in obtaining regulatory approval for the commercial sale of their device or drug product. These services include activities such as technology development, material component changes, analytical method development, formulation development, pilot studies, stability studies, process validation, production of proprietary materials for use within clinical studies and the transfer of proprietary process documentation and results of validation to the customers. Lifecore’s customers benefit from the expertise of the Company’s scientists who have extensive experience performing such tasks and from the proprietary documentation and validation of processes that are received upon completion of the services that can be used by the customers. 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 and therefore recognizes development services revenue over time based on the proportion of labor hours incurred compared to total estimated hours for an individual arrangement. Fermentation Lifecore manufactures and sells pharmaceutical-grade, sterile and non-sterile 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. The Company is party to a bill-and-hold arrangement with a customer under which $2.7 million and $3.2 million of revenues were recognized in the years ended May 26, 2024 and May 28, 2023, respectively. Revenue for bill-and-hold arrangements is recognized when control transfers to the customer, even though the customer does not have physical possession of the goods. Control transfers when the bill-and-hold arrangement has been determined to have substantive reason, the product is identified as belonging to the customer, the product is ready for physical transfer to the customer and the product cannot be used or directed to another customer. The Company disaggregates its revenue based on how it markets its products and services and reviews results of operations. The following tables disaggregates revenue by major product lines and services (in thousands): Year Ended May 26, 2024 May 28, 2023 May 29, 2022 CDMO $ 96,616 $ 76,378 $ 86,353 Fermentation 31,645 26,891 23,007 Other — — 1,910 Total $ 128,261 $ 103,269 $ 111,270 CDMO - Development Services revenues recognized over time were $29.4 million, $28.6 million and $35.8 million for the years ended May 26, 2024, May 28, 2023 and May 29, 2022, respectively. Revenues recognized for product sales at a point in time were $98.9 million, $74.6 million and $73.6 million for the years ended May 26, 2024, May 28, 2023 and May 29, 2022, respectively. The Company identified certain elements of its agreements with customers for CDMO - Development Services in which the Company is the principal in those contracts, and therefore, recognizes revenues on a gross basis. 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 products from the processing facility or distribution center to the end consumer markets. Amended and Restated Supply Agreement On December 22, 2023, the Company entered into an amended and restated supply agreement with a customer (the “Amended Supply Agreement”). The key provisions of the Amended Supply Agreement included an extension of the agreement’s term for certain products through March 31, 2024, revised pricing for certain product purchase orders dated November 1, 2023, and the payment of a $5.0 million working capital deposit to the Company. The working capital deposit was received on December 22, 2023 and (i) may be used for any corporate purpose; (ii) will not accrue interest; and (iii) is required to be repaid, subject to certain defined provisions, upon the termination of the Amended Supply Agreement. On March 14, 2024, this agreement was amended and extended through December 31, 2026. Inventories, net Inventories primarily consist of in-process and finished goods related to sterile injectable pharmaceutical products in syringes, vials and cartridges. This includes premium, pharmaceutical grade HA in bulk form as well as formulated and filled syringes, vials and cartridges for injectable products used in treating a broad spectrum of medical conditions and procedures. Inventories are stated at the lower of cost (using the first-in, first-out method) or net realizable value. As of May 26, 2024 and May 28, 2023, inventories consisted of the following (in thousands): Year Ended May 26, 2024 May 28, 2023 Finished goods $ 14,924 $ 13,141 Raw materials 14,555 17,735 Work in process 11,915 10,349 Inventory reserve (1,415) (384) Total inventories $ 39,979 $ 40,841 The Company has costs adjustments of $0.8 million and $4.9 million to reduce inventory to its net realizable value as of May 26, 2024 and May 28, 2023, respectively. The amounts reflected in cost of goods sold to record inventory to its net realizable value were income of $4.1 million and expenses of $0.3 million and $3.5 million for fiscal years 2024, 2023 and 2022, respectively. The Company’s inventories serve as part of the collateral for certain of the Company’s debt arrangements. Refer to Note 6 - Debt for additional discussion on the Company’s debt arrangements and related collateral. 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 1 – Organization, Basis of Presentation, and Summary of Significant Accounting Policies 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. 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 expenses for the Company for fiscal years ended May 28, 2023 and May 29, 2022 was $5.1 thousand and $5.6 thousand, respectively. There were no advertising expenses for fiscal year ended 2024. Related Party Transactions The Company has reflected the related party balances on the face of its financial statements beginning in the period which Alcon Research, LLC (“Alcon”) became a related party, which was as of May 22, 2023 at the time Alcon provided financing to the Company. Prior to providing financing, and continuing subsequently, Alcon was/is a significant customer of the Company. Refer to Note 6 - Debt for additional discussion on the Company’s debt agreements with Alcon. Securities Purchase Agreement On November 25, 2022, the Company entered into a Securities Purchase Agreement (the “Wynnefield Purchase Agreement”) with entities affiliated with Wynnefield Capital, Inc. and controlled by the Company’s director, Nelson Obus (the “Wynnefield Purchasers”). Pursuant to the Wynnefield Purchase Agreement, the Company agreed to sell an aggregate of 627,746 shares of its Common Stock (the “Shares”) for aggregate gross proceeds of $5.0 million (the “Offering”). The purchase price for each Share was $7.97. The Offering closed on November 25, 2022. Pursuant to the Wynnefield Purchase Agreement, the Company granted the Wynnefield Purchasers certain piggyback registration rights and agreed, among other things, to indemnify such parties under any registration statement filed that includes the Shares from certain losses, claims, damages and liabilities. Series A Convertible Preferred Share Purchase Agreement On January 9, 2023, the Company simultaneously signed and closed the Preferred Share Purchase Agreement with a group of qualified investors (the “Purchasers”), including, among others, entities controlled by the Company’s directors Christopher Kiper and Nelson Obus. Pursuant to the Preferred Share Purchase Agreement, the Company issued and sold an aggregate of 38,750 shares of a new series of convertible preferred stock of the Company designated as Series A Convertible Preferred Shares, par value $0.001 per share (the “Convertible Preferred Stock”) for aggregate proceeds of $38.8 million. Each share of Convertible Preferred Stock has the powers, designations, preferences and other rights as are set forth in the Certificate of Designations of the Series A Preferred Stock filed by the Company with the Delaware Secretary of State on January 9, 2023 (the “Certificate of Designations”). The Convertible Preferred Stock ranks senior to the Company’s Common Stock with respect to dividends, distributions, and payments on liquidation, winding up and dissolution. Upon a liquidation, dissolution, winding up or change of control of the Company, each share of Convertible Preferred Stock will be entitled to receive an amount per share of Convertible Preferred Stock equal to the greater of (i) the purchase price paid by the Purchaser, plus all accrued and unpaid dividends (the “Liquidation Preference”) and (ii) the amount that the holder of Convertible Preferred Stock (each, a “Holder” and collectively, the “Holders”) would have been entitled to receive at such time if the Convertible Preferred Stock had been converted into Common Stock immediately prior to such liquidation event. The Holders will be entitled to dividends on the Liquidation Preference at the rate of 7.5% per annum, payable in-kind. The Company may, at its option, pay such dividends in cash from and after the earlier of June 29, 2026, or the termination or waiver of the restriction on cash dividends and/or redemptions that is set forth in the Credit A |
