Lifecore Biomedical (LFCR) Risk Analysis

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Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

Lifecore Biomedical disclosed 30 risk factors in its most recent earnings report. Lifecore Biomedical reported the most risks in the “Finance & Corporate” category.

Risk Overview Q2, 2025

Risk Distribution

33% Finance & Corporate

20% Tech & Innovation

20% Ability to Sell

10% Legal & Regulatory

10% Production

7% Macro & Political

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

S&P500 Average

Sector Average

Risks removed

Risks added

Risks changed

Lifecore Biomedical Risk Factors

New Risk (0)

Risk Changed (0)

Risk Removed (0)

No changes from previous report

The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q2, 2025

Main Risk Category

Finance & Corporate

With 10 Risks

Finance & Corporate

With 10 Risks

Number of Disclosed Risks

-8

From last report

S&P 500 Average: 31

-8

From last report

S&P 500 Average: 31

Recent Changes

11Risks added

18Risks removed

10Risks changed

Since May 2025

11Risks added

18Risks removed

10Risks changed

Since May 2025

Number of Risk Changed

+10

From last report

S&P 500 Average: 3

+10

From last report

S&P 500 Average: 3

See the risk highlights of Lifecore Biomedical in the last period.

Risk Word Cloud

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 30

Finance & Corporate

Total Risks: 10/30 (33%)Above Sector Average

Share Price & Shareholder Rights5 | 16.7%

Share Price & Shareholder Rights - Risk 1

Added

Future resales, or the perception of future resales, of our Common Stock may cause the market price of our Common Stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our Common Stock in the public market could occur at any time, including shares of Common Stock issuable upon conversion of our Redeemable Convertible Preferred Stock. Each holder of Redeemable Convertible Preferred Stock is entitled to convert all or any portion of their Redeemable Convertible Preferred Stock into Common Stock at any time. Additionally, Lifecore may from time to time, at its option, require conversion of all or any portion of the outstanding shares of Redeemable Convertible Preferred Stock to Common Stock if, for at least 20 consecutive trading days during the respective measuring period the closing price of the Common Stock was at least $10.50. Sales of our Common Stock, or a perception in the market that such sales may occur, could reduce the market price of our Common Stock, increase the volatility in the market price of our Common Stock, and adversely affect our ability to raise equity capital.

Share Price & Shareholder Rights - Risk 2

Added

Our stockholders will experience significant dilution as a result of the issuance of shares of our Common Stock upon conversion of the Redeemable Convertible Preferred Stock.

Our outstanding shares of Redeemable Convertible Preferred Stock were initially convertible into an aggregate of over 5.5 million shares of common stock, subject to increase pursuant to applicable anti-dilution adjustments. In April 2025, we held a Special Meeting of Stockholders at which stockholders approved the removal of the 19.99% "Exchange Cap" on the issuance of Common Stock underlying the Redeemable Convertible Preferred Stock. Furthermore, the Redeemable Convertible Preferred Stock accrues dividends on a quarterly basis at a rate of 7.5% per annum, thereby increasing the number of shares of common stock issuable upon conversion. The conversion of some or all of the Redeemable Convertible Preferred Stock will result in the issuance of a substantial number of shares of common stock and, as a result, the percentage ownership and voting power held by our existing stockholders will be significantly reduced and our stockholders will experience significant dilution. As of May 25, 2025, an aggregate of 7,000,626 shares of Common Stock were issuable upon conversion of the then-outstanding Redeemable Convertible Preferred Stock, including all PIK dividends accrued as of such date.

Share Price & Shareholder Rights - Risk 3

Changed

Our Redeemable Convertible Preferred Stock has rights, preferences, and privileges that are not held by, and are preferential to, the rights of holders of our Common Stock.

We have issued Redeemable Convertible Preferred Stock, which have rights, preferences and privileges that are not held by, and are preferential to, the Company's Common Stock, including with respect to dividends, distributions and payments on liquidation, winding up and dissolution, which could adversely impact the rights of the holders of the Company's Common Stock. In addition, subject to the terms of the Certificate of Designations, the holders of Redeemable Convertible Preferred Stock are entitled to designate two members of the Board, to vote on an as-converted basis with the Company's Common Stock, and to separate consent rights over certain matters. These rights, combined with the fact that ownership of the Redeemable Convertible Preferred Stock is highly concentrated, provide the holders of the Redeemable Convertible Preferred Stock with significant influence over the Company. This influence may increase over time, as the Redeemable Convertible Preferred Stock entitles the holders thereof to dividends that are paid-in-kind ("PIK"), which increases the holders' ownership of Redeemable Convertible Preferred Stock, and thus, beneficial ownership of the Company. The holders of the Redeemable Convertible Preferred Stock may have interests that are different from those of the holders of Common Stock, and could adversely impact the Company's ability to effectuate its strategic initiatives and operate its business. In addition, the conversion price of the Redeemable Convertible Preferred Stock has been, and in the future may be, adjusted in connection with certain dilutive events, including in the event of subsequent equity offerings at a price below the current conversion price. For example, as a result of our private placement of Common Stock on October 3, 2024, the conversion price was adjusted from the initial price of $7.00 per share to approximately $6.53 per share. These rights could adversely impact the Company's access to equity capital, and otherwise compound the dilutive effects of future equity raises by the Company. Further, on or after the Applicable Date, each holder of our Redeemable Convertible Preferred Stock has the right to require us to redeem all or any part of such holder's Redeemable Convertible Preferred Stock for an amount equal to the liquidation preference, which is equal to the purchase price paid by the purchaser at issuance, plus all accrued and unpaid dividends with dividends accruing at a rate of 7.5% per annum, payable in-kind. The "Applicable Date" is 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 our credit agreements. If some or all of the holders of the Redeemable Convertible Preferred Stock demand redemption of their shares, we may need to obtain additional capital to fund such redemptions and there can be no assurance that we will be able to do so on favorable terms, or at all. The holders of the Redeemable Convertible Preferred Stock also entered into a registration rights agreement with the Company. This agreement required the Company to file an initial registration statement covering sufficient shares of Common Stock into which the Redeemable Convertible Preferred Stock may be converted, which the Company filed in 2023. The agreement contains monetary penalties if the Company fails to maintain the effectiveness of that registration statement, including the timely filing of our periodic reports with the SEC, which the Company has failed to file timely in the past and could fail to maintain in the future, potentially subjecting the Company to even additional penalties. See "Note 11 – Equity – Redeemable Convertible Preferred Stock – Registration rights" to our consolidated financial statements contained in this Annual Report on Form 10-K for information regarding monetary penalties and interest that we have incurred and accrued. The Board may issue additional preferred stock in the future, or could authorize the issuance of new securities with priority as to dividends, distributions and payments on liquidation, winding up and dissolution over the rights of the holders of our Common Stock, all of which could further enhance or expand the risks described above.

Share Price & Shareholder Rights - Risk 4

Our stock price may fluctuate in response to various conditions, many of which are beyond our control.

The market price of our Common Stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including the following: - technological innovations applicable to our products;- customer demand for our services;- fluctuations in our operating results;- our attainment of (or failure to attain) milestones in the development of products for our customers;- the development of new products by our competitors or competitors of our customers;- our acquisition of new businesses or the sale or disposal of a part of our business;- development of new collaborative arrangements by us, our competitors, or other parties;- changes in government regulations, interpretation, or enforcement applicable to our business;- changes in investor perception of our business;- securities litigation and stockholder activism;- conversions or redemptions of the Redeemable Convertible Preferred Stock;- changes in financial estimates and recommendations by securities analysts;- the operating and stock price performance of other companies that investors may deem comparable to us; and - changes in the general market conditions in our industry. These broad market and industry fluctuations may adversely affect the price of our Common Stock, regardless of our operating performance. Further, any failure by us to meet or exceed the expectations of financial analysts or investors is likely to cause a decline in our Common Stock price. Further, recent macroeconomic conditions have resulted in significant fluctuations in stock prices for many companies, including Lifecore, and it is not possible to predict when the stock markets may stabilize. In addition, although our Common Stock is listed on Nasdaq, our Common Stock has at times experienced low trading volume in the past. Limited trading volume subjects our Common Stock to greater price volatility and may make it difficult for our stockholders to sell shares at an attractive price.

Share Price & Shareholder Rights - Risk 5

Our corporate organizational documents and Delaware law have anti-takeover provisions that may inhibit or prohibit a takeover of us and the replacement or removal of our management.

The anti-takeover provisions under Delaware law, as well as the provisions contained in our corporate organizational documents, may make an acquisition of us more difficult. In addition to the consent rights of the holders of Redeemable Convertible Preferred Stock with an anti-takeover effect, other examples of anti-takeover provisions include: - our certificate of incorporation includes a provision authorizing our Board of Directors to issue blank check preferred stock without stockholder approval, which, if issued, would increase the number of outstanding shares of our capital stock and could make it more difficult for a stockholder to acquire us;- our amended and restated bylaws limit the number of directors that may serve on the Board of Directors without the majority approval of all of the outstanding shares of our Common Stock;- our amended and restated bylaws require advance notice of stockholder proposals and director nominations;- our Board of Directors has the right to implement additional anti-takeover protections in the future, including stockholder rights plans and other amendments to our organizational documents, without stockholder approval; and - Section 203 of the Delaware General Corporation Law may prevent large stockholders from completing a merger or acquisition of us. These measures could discourage or prevent a takeover of us or changes in our management, even if an acquisition or such changes would be beneficial to our stockholders. This may have a negative effect on the price of our Common Stock.

Accounting & Financial Operations1 | 3.3%

Accounting & Financial Operations - Risk 1

Changed

We have identified material weaknesses in our internal control over financial reporting that have affected the reliability of our financial statements and have had, and may continue to have, other adverse consequences.

As discussed in "Part IV, Item 9A. – Controls and Procedures," in this Annual Report on Form 10-K, we have identified material weaknesses in our internal control over financial reporting as of May 25, 2025. A "material weakness" is a deficiency, or a combination of deficiencies, in internal controls over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses we identified led to errors in prior year consolidated financial statements as of and for the fiscal years ended May 29, 2022 and May 30, 2021 and certain interim periods. While these errors were corrected through restatements of our consolidated financial statements, the material weaknesses underlying those restatements have not yet all been remediated. We have adopted a plan to remediate these material weaknesses, and we are taking actions to achieve our remediation, but those actions are not yet complete. The material weaknesses and the remediation thereof have caused us to incur significant accounting, legal, and other advisory costs and expenses, and substantial time from our management and employees, and may cause us to incur additional costs and time in the future. The actions we are taking in accordance with our remediation plan may not successfully remediate the identified material weaknesses. In addition, other material weaknesses may be identified in the future. If we are unable to correct material weaknesses in a timely manner or prevent other material weaknesses from occurring in the future, we may be unable to report our financial results accurately and/or on a timely basis, which could result in the loss of investor confidence in our reported financial information, subject us to civil and criminal investigations and penalties, as well contractual penalties, make us a target for activists, result in the delisting of our Common Stock from Nasdaq, and/or cause the liquidity of and the market price for our Common Stock to decline. See "Part IV, Item 9A. – Controls and Procedures" in this Annual Report on Form 10-K for additional information regarding the identified material weaknesses and our actions to date to remediate the material weaknesses.

Debt & Financing3 | 10.0%

Debt & Financing - Risk 1

Added

We have a history of losses. We may need additional capital and any additional capital we seek may not be available in the amount we need, at the time we need it or on terms favorable to us.

We incurred a net loss of $38.7 million for the year ended May 25, 2025, and as of May 25, 2025 we had an accumulated deficit of $205.2 million. We do not anticipate reporting net income in any future periods. We have been financing our operations through the issuance of debt and equity and through operations. We anticipate the ongoing need for additional capital to execute on our strategies for growth and to fund our operations and capital expenditures. Our capital needs are based upon management estimates as to future revenue and expense. Future capital expenditures, our development, production and manufacturing activities, and our administrative requirements (including salaries, insurance expenses and legal compliance costs) have required, and are anticipated to continue to require, a substantial amount of additional capital and cash flow. In addition, each holder of our Series A Redeemable Convertible Preferred Stock, par value $0.001 per share (the "Redeemable Convertible Preferred Stock") has the right to require us to redeem all or any part of such holder's Redeemable Convertible Preferred Stock on or after the "Applicable Date" for an amount equal to the liquidation preference, which is equal to the purchase price paid by the purchaser at issuance, plus all accrued and unpaid dividends with dividends accruing at a rate of 7.5% per annum, payable in-kind. The "Applicable Date" is 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 our credit agreements, and at June 29, 2026, we estimate that the accrued and unpaid liquidation preference for all shares of Redeemable Convertible Preferred Stock, assuming no earlier conversions or redemptions, will be $50.2 million, which does not include $4.5 million for registration rights monetary penalties that have accrued as of May 25, 2025. If we are not able to increase revenue, if our expenses are higher than anticipated or do not correspond to our rate of revenue growth, or if holders of our Redeemable Convertible Preferred Stock demand redemption, we may require additional capital sooner than we expect or in a greater amount than we currently expect. As discussed above, if we are unable to raise sufficient capital or otherwise fund the redemption of the Redeemable Convertible Preferred Stock, we will be required to pay substantial additional cash interest. We may pursue sources of additional capital through various financing transactions or arrangements, including equity financing, debt financing, collaborations, sale of assets or real estate, strategic alliances or licensing arrangements, or other means. We may not be successful in identifying suitable financing transactions in the time period required or at all, and we may not obtain the capital we require (on acceptable terms or at all. Also, our efforts to raise additional funds may be hampered by the terms of our Redeemable Convertible Preferred Stock. The holders of our Redeemable Convertible Preferred Stock are entitled to certain anti-dilutive protections and participation rights with respect to any equity financing and certain consent rights related to further increases in indebtedness or other material transactions, in each case, as further described under the applicable documents related thereto. If we raise additional equity financing, our common stockholders may experience significant dilution of their ownership interests and the value of shares of our Common Stock could decline. In addition, the terms of securities we issue in future capital transactions may be more favorable to our new investors and equity securities we issue in the future may carry rights, preferences, or privileges that are senior to those of the Common Stock. Our efforts to raise funds by incurring additional indebtedness may be hampered by our current high leverage, by the covenants and restrictions of our existing outstanding indebtedness, and the fact that our assets are pledged to our lenders to secure existing debt. In addition, we may face challenges in securing additional debt financing if our future cash flow from operations is not sufficient to support debt service payments. Debt financing from third parties, if available, would result in increased fixed payment obligations, may be subject to consent requirements from our lenders and holders of Redeemable Convertible Preferred Stock and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt or making capital expenditures. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may be required to agree to economic or other terms or covenants that are not favorable to us, including relinquishing certain rights to intellectual property or future revenue streams. Regardless of the type of future capital financing, we may incur substantial costs and expenses to obtain such financing, which depending on the financing could include original discount issue fees, warrants, investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may incur these costs even if we do not obtain the additional capital. If we cannot timely raise any needed funds, we may be forced to make substantial reductions in our operating expenses, which could limit our sales and marketing efforts, adversely affect our ability to attract and retain qualified personnel, limit our ability to enhance our CDMO capabilities, undermine our efforts to retain and expand customer relationships, make it more difficult for us to respond to competitive pressures or unanticipated working capital requirements, and otherwise adversely affect our ability to pursue our growth objectives. If we cannot timely raise any needed funds, third parties may be reluctant to provide the goods and services we need in order to operate and fulfill our obligations to customers. We also may be forced to divest our assets at unattractive prices in order to obtain additional capital. Our ability to raise additional capital will depend on financial, economic and market conditions, our business performance and other factors, many of which are beyond our control.

Debt & Financing - Risk 2

Changed

We are highly leveraged and subject to significant interest, volatile fair market value fluctuations, and certain credit agreement obligations, some of which are expected to grow. These may negatively impact our results and limit cash flow available to invest in the ongoing needs of our business, as well as our operational flexibility, or otherwise adversely affect our results of operations.

We are highly leveraged. As of May 25, 2025, we had approximately $176.0 million in total indebtedness with Alcon Research, LLC ("Alcon"), with $173.5 million outstanding under our Credit and Guaranty Agreement (the "Term Loan Credit Facility"). We also had $2.5 million outstanding and $27.3 million available for borrowing under our revolving credit agreement ("Revolving Credit Facility") with BMO. The degree to which we are leveraged now and/or in the future (including due to the payable-in-kind interest accruing on our outstanding debt under the Term Loan Credit Facility) could have important adverse consequences, including the following: - our flexibility in planning for, or reacting to, changes in the markets in which we compete may be limited;- our ability to obtain additional financing or refinancing in the future for working capital or other purposes may be limited;- we may be at a competitive disadvantage relative to our competitors with less indebtedness; and - we are rendered more vulnerable to general adverse economic and industry conditions. The Term Loan Credit Agreement contains various features for early prepayment of the term loans at stated premiums above par if certain future events were to occur, including a change in control or upon any uncured material default of the supply agreement with Alcon, as further described in "Note 10 – Debt – Term Loan Credit Facility" to our consolidated financial statements contained in this Annual Report on Form 10-K. These features could require the Company to pay substantial amounts of cash in excess of the stated principal amount of the term loans, and could limit or prevent us from refinancing our indebtedness or engaging in mergers and acquisitions that could benefit shareholders. These features meet the definition of an embedded derivative, which we record on our balance sheet as the debt derivative liability. This derivative requires accounting at fair value with changes recorded in earnings. The measurement of fair value depends upon various assumptions determined by management, including the annual probability that the specified future events discussed above will occur, and that the corresponding prepayment options are exercised. Changes to those assumptions have previously caused us to report significant fluctuations in our results, and may continue to cause us to report additional fluctuations in future periods. For example, during the fiscal years ended May 25, 2025 and May 26, 2024, the Company recorded gains of $0.4 million and $39.5 million, respectively, related to changes in fair value of the debt derivative liability. The degree of volatility caused by accounting for the debt derivative liability in our earnings could hamper investor confidence in our results, and if the volatility takes the form of a loss, could significantly reduce our future financial results. Our interest expense and cash payable for interest are rapidly growing, and even though the Term Loan Credit Facility bears interest at a fixed 10% rate: - Interest is currently payable-in-kind, but beginning in May 2026, a portion of the interest will become payable in cash at a rate of 3% per year through maturity of the Term Loan Credit Facility in May 2029;- If the Redeemable Convertible Preferred Stock has not converted into Common Stock by June 29, 2026 (or by an earlier "Applicable Date" as defined below), the holders may elect to redeem their holdings in cash by providing 180-day advance notice anytime on or after such date. If we are unable to fund such a redemption by the end of the notice period, the Redeemable Convertible Preferred Stock will automatically convert into an interest-bearing instrument with principal in the amount of the redemption price at a rate of 12% per annum payable in cash; and - The accounting method for the embedded derivative described above required us to discount our term loan to approximately half of its stated principal value at inception. As the discount amortizes, and as the stated principal of the debt grows from interest payable-in-kind, we anticipate that interest expense will nearly triple by the time the term loans mature, which will negatively impact our reported financial results. Cash paid for interest, net, was $1.9 million for the fiscal year ended May 25, 2025. Should any or all of the above events occur, the Company may not have the capital necessary to fulfill these obligations or will be required to dedicate a substantial portion of cash flows from operations, if available, to the payment of principal and interest on applicable indebtedness which, in turn, reduces funds available for operations, capital expenditures and growth. In addition, our two credit agreements contain a number of covenants that limit our ability and our subsidiaries' ability to, among other things, incur additional indebtedness, pay dividends, create liens, engage in transactions with affiliates, merge or consolidate with other companies, or sell substantially all of our assets. The Term Loan Credit Facility, under which Alcon is the lender, also contains certain operational requirements and limitations, including that any material uncured breach by us of our Amended and Restated Supply Agreement relating to the supply of HA to Alcon (the "Alcon Supply Agreement") would constitutes an event of default. The terms of our credit agreements may restrict our current and future operations and could adversely affect our ability to finance our future operations or capital needs or to execute preferred business strategies. In addition, complying with these covenants may make it more difficult for us to successfully execute our business strategy and compete against companies who are not subject to such restrictions. Our credit agreements also contain covenants related to maintaining current financial reporting and going concern maintenance. A failure by us to comply with the covenants specified in our credit agreements could result in an event of default under the agreements, which would give the lenders the right to terminate their commitments to provide additional loans under our credit agreements and to declare all borrowings outstanding, together with accrued and unpaid interest (including the payable-in-kind interest under our Term Loan Credit Facility), to be immediately due and payable. In addition, the lenders would have the right to proceed against the collateral we granted to them, which consists of substantially all of our assets. As previously disclosed, we have been in noncompliance with our credit agreements in the past, and we cannot guarantee that we will be able to remain in compliance with all applicable covenants under the credit agreements in the future, that our lenders will elect to provide waivers or enter into amendments in the future, or, if the lenders do provide waivers, that those waivers will not be conditioned upon additional costs or restrictions that could materially or adversely impact our business, cash flows, results of operations, and financial condition. In addition, if the debt under our credit agreements were to be accelerated, we may not have sufficient cash or be able to borrow sufficient funds to refinance the debt or sell sufficient assets to repay the debt, which could immediately, materially and adversely affect our business, cash flows, results of operations, and financial condition, and there would be no guarantee that we would be able to find alternative financing. Even if we were able to obtain alternative financing, it may not be available on commercially reasonable terms or on terms that are acceptable to us.

Debt & Financing - Risk 3

We may be adversely impacted by the terms of our refinancing transactions with Alcon and by Alcon's concentrated relationship with us as a significant customer of ours and as our lender.

In May 2023, we entered into various financing transactions with Alcon, a significant customer of the Company, pursuant to which Alcon agreed to become the Company's lender under the Term Loan Credit Facility, the Company's largest form of indebtedness with a principal balance of $173.5 million as of May 25, 2025. Also in May 2023, we entered into an equipment sale and leaseback transaction with Alcon relating to equipment we use for manufacture of product for Alcon, as well as the Alcon Supply Agreement, and in December 2023, we entered into an amended and restated contract manufacturing agreement with Alcon ("Alcon CMA"), which amended and restated the agreement relating to our manufacture and supply of aseptic products to Alcon. As a result of these transactions, the Company may be subject to risks related to the nature and significance of this relationship. For example, given the scope of the customer relationship and the relative customer concentration, the Company's revenues and operational results currently are significantly reliant on the success and health of that relationship, including on Alcon's continued ability and desire to use the Company for the manufacture and supply of HA and aseptic products. These relationships give Alcon greater influence over our operations generally. The Alcon Supply Agreement includes annual committed capacity obligations on the Company without minimum purchase obligations on Alcon, and the Alcon CMA also includes annual committed capacity obligations on the Company, and both agreements permit Alcon to source from other third parties. Additionally, Alcon has not traditionally acted as a lender, and, as a result, the Company may be subject to risks related to the unique nature of the relationship between the Company and Alcon, including the fact that Alcon may not have the same motivations, incentives and practices as a traditional lender. For example, pursuant to the terms of the Term Loan Credit Facility, any material uncured violation of the Alcon Supply Agreement constitutes an event of default under the Term Loan Credit Facility. Any of those effects could have a material adverse effect on the Company's business, prospects, financial condition, results of operations, and cash flows.

Corporate Activity and Growth1 | 3.3%

Corporate Activity and Growth - Risk 1

Added

We may need to consider new business acquisitions to achieve our growth strategy, and any such acquisition would involve substantial effort and costs to complete and uncertainty relating to integration.

We may need to consider acquisitions of businesses to achieve our growth strategy. The completion and then successful integration of new business acquisitions would require substantial effort from the Company's management, as well as substantial cost and expense. The diversion of the attention of management and any difficulties encountered in the acquisition and transition process could have a material adverse effect on the Company's ability to realize the anticipated benefits of the acquisitions. The successful combination of new businesses also requires coordination of research and development activities, manufacturing, sales and marketing efforts. In addition, the process of combining organizations located in different geographic regions could cause the interruption of, or a loss of momentum in, the Company's activities. There can be no assurance that the Company will be able to retain key management, technical, sales and other key personnel, or that the Company will realize the anticipated benefits of any acquisitions, and the failure to do so would have a material adverse effect on the Company's business, results of operations and financial condition

Tech & Innovation

Total Risks: 6/30 (20%)Above Sector Average

Innovation / R&D1 | 3.3%

Innovation / R&D - Risk 1

Changed

Our development and manufacturing activities may expose us to product liability claims.

We develop and manufacture products intended for use in humans, so our activities involve an inherent risk of allegations of product liability. Product liability claims might be brought against us by consumers, health care providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. If any of the products that we manufacture are determined or alleged to be contaminated or defective or to have caused an illness, injury or harmful accident to a consumer, we could incur substantial costs in responding to complaints or litigation regarding our products, and our brand image could be materially damaged. Such events may have a material adverse effect on our business, operating results and financial condition. In addition, we may be required to participate in product recalls, even if a product that we manufacture is not alleged to be contaminated or defective. Although we have taken and intend to continue to take what we consider to be appropriate precautions to minimize exposure to product liability claims, we may not be able to avoid significant liability. We seek to reduce our potential liability through measures such as contractual indemnification provisions with customers (the scope and limitations of which may vary by customer and are subject to the financial viability of the customer) and product liability insurance maintained by us and our customers. Our contractual indemnification provisions and product liability insurance may not be adequate or, in the case of product liability insurance, may not continue to be available at an acceptable cost, if at all. A product liability claim, product recall or other claim with respect to liabilities not covered by or in excess of insurance coverage or indemnification rights could have a material adverse effect on our business, operating results and financial condition.

Trade Secrets3 | 10.0%

Trade Secrets - Risk 1

Added

Third parties may claim that our services or our customers' products infringe their intellectual property rights.

We may receive notices from third parties, including some of our competitors, claiming that our services infringe their patent or other proprietary rights. Regardless of their merit, responding to any such claim could result in costly litigation and may divert the efforts and attention of our management and technical personnel. If a successful claim is made against us and we fail to develop or license a substitute technology or process, we could be required to alter our processes and/or cease manufacturing a particular product. In addition, our customers' products may be subject to claims of intellectual property infringement, which could require us to cease our development or manufacturing services for the customer.

Trade Secrets - Risk 2

Changed

We may be unable to protect our intellectual property and proprietary processes from infringement or claims of ownership or rights by third parties, which could materially and adversely affect the Company.

We rely upon trade secrets, technical know-how and continuing technological innovation to develop and maintain our competitive position, and we typically require our employees, consultants and advisors to execute confidentiality and/or assignment of inventions agreements in connection with their employment, consulting or advisory relationships. In addition, we include provisions in our agreements with customers seeking to preserve our rights to the technology we utilize. There can be no assurance, however, that these agreements will not be breached, third parties or our contractual counterparties will not claim ownership or rights to technology we utilize, our agreements will adequately protect our proprietary processes, our proprietary processes will not be infringed or misappropriated or that we will have adequate remedies for any breaches. The loss of protection of our intellectual property, technology or proprietary processes and assets, our inability to secure or enforce such protections or the development by third parties of intellectual property or processes competitive to ours would impact our ability to remain competitive as a CDMO.

Trade Secrets - Risk 3

We have access to certain intellectual property and information of our customers and suppliers, and failure to protect that intellectual property or information could adversely affect our future growth and success.

We have access to sensitive intellectual property and confidential information of our customers and suppliers, including formulations used and processes developed by us in the manufacture of our customers' products. We rely on nondisclosure agreements with our employees, information technology security systems and other measures to protect certain customer and supplier information and intellectual property that we have in our possession or to which we have access. Our efforts to protect such intellectual property and proprietary rights may not be sufficient, which could subject us to judgments, penalties and significant litigation costs, reputational harm, or temporarily or permanently disrupt our sales and marketing of the affected products or services, which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

Cyber Security1 | 3.3%

Cyber Security - Risk 1

Our reputation and business may be harmed if our computer network security or any of the databases containing our trade secrets, proprietary information or the personal information of our employees, or those of third parties, are compromised.

Cyberattacks or security breaches could compromise our confidential business information, cause a disruption in the Company's operations or harm our reputation. We maintain numerous information assets, including intellectual property, trade secrets, banking information and other sensitive information critical to the operation and success of our business on computer networks, and such information may be compromised in the event that the security of such networks is breached. We also maintain confidential information regarding our employees and job applicants, including personal identification information. The protection of employee and company data in the information technology systems we utilize (including those maintained by third-party providers) is critical. Despite the efforts by us to secure computer networks utilized for our business, security could be compromised, confidential information, such as Company information assets and personally identifiable employee information, could be misappropriated, or system disruptions could occur, and there can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information. In addition, cyberattacks on our customers or vendors could disrupt our ability to procure product from our vendors or our customers' ability to order our products, and may negatively impact our reputation. Any of these occurrences could disrupt our business, result in potential liability or reputational damage, or otherwise have an adverse effect on our financial results. In addition, we may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyberattacks. Attacks may be targeted at us, our customers, or others who have entrusted us with information. Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants. Advances in computer capabilities, new technological discoveries or other developments may result in the technology used by us to protect sensitive Company data being breached or compromised. Furthermore, actual or anticipated cyberattacks or data breaches may cause significant disruptions to our network operations, which may impact our ability to deliver shipments or respond to customer needs in a timely or efficient manner. Data and security breaches could also occur as a result of non-technical issues, including an intentional or inadvertent breach by our employees or by persons with whom we have commercial relationships that result in the unauthorized release of confidential information related to our business or personal information of our employees. Any compromise or breach of our computer network security could result in a violation of applicable privacy and other laws, costly investigations and litigation, and potential regulatory or other actions by governmental agencies. As a result of any of the foregoing, we could experience adverse publicity, the compromise of valuable information assets, loss of sales, the cost of remedial measures and/or significant expenditures to reimburse third parties for resulting damages, any of which could adversely impact our brand, our business and our results of operations.

Technology1 | 3.3%

Technology - Risk 1

Added

We are implementing a new enterprise resource planning system, and challenges with the implementation of the system may impact our business and operations.

We are implementing a new enterprise resource planning system ("ERP"). ERP implementations are complex, time-consuming, labor intensive, and involve substantial expenditures. The new ERP is critical to our ability to gather important information, obtain and deliver products, send invoices, fulfill contractual obligations, maintain books and records, provide accurate, timely and reliable reports on our financial and operating results, and otherwise operate our business. ERP implementations also require transformation of internal processes. Any such implementation involves risks, including loss of information and potential disruption in operations. The implementation and maintenance of the new ERP system may be subject to delays and cost overruns. Any disruptions, delays or deficiencies in the implementation of the new ERP system could affect our ability to process orders, ship products, send invoices, fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results, including reports required by the SEC such as the evaluation of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, and otherwise operate our business. Additionally, if we do not implement the new ERP as planned, the effectiveness of our internal control over financial reporting could be adversely affected.

Ability to Sell

Total Risks: 6/30 (20%)Above Sector Average

Competition1 | 3.3%

Competition - Risk 1

We are subject to increasing competition in the marketplace.

We operate in a market that is highly competitive. Our competition in the contract manufacturing market includes full-service contract manufacturers and large pharmaceutical companies offering third-party manufacturing services. We also may compete with the internal operations of pharmaceutical companies that choose to perform the services that we offer internally or that choose to produce products internally. We also compete with other manufacturers of HA, which either produce HA as a raw material for others or as a component in their own products or both. The demand for our development and manufacturing services may change over time in ways that we do not anticipate due to changes in industry or regulatory standards, customer needs, the introduction by competitors of alternative offerings and technologies, or other reasons. Competitors may succeed in developing alternative technologies and products that are more effective, easier to use or less expensive than those which have been or are being developed by us or that would render our technology and products or services obsolete and non-competitive. New developments are expected to continue at a rapid pace and additional competition may emerge, particularly in lower-cost geographies. Many of these competitors have substantially greater financial and technical resources and development, production and manufacturing capabilities than we do, and may have substantially greater experience in conducting critical services that our customers require or may require in the future. Competition may result in price reductions, lower gross profit margins, increased discounts to customers, loss of market share and customer opportunities, which could require increased spending by us relating to our operations and capabilities, technical personnel, quality assurance, and sales and marketing.

Demand2 | 6.7%

Demand - Risk 1

Added

Our success as a stand-alone CDMO will be subject to customer demand based on factors beyond our control.

The amount that our customers spend on the development and manufacture of their products or product candidates, particularly the amount our customers choose to spend on outsourcing these services to us, substantially impacts our revenue and profitability. Our success as a stand-alone fully integrated CDMO will require strong customer demand for our services and capabilities. In particular, we expect that our ability to meet our future growth objectives will depend in large part on our existing and potential customers' demand for and ability to market to consumers various HA-based products and non-HA products that we are able to manufacture for them. In September 2024, we substantially expanded our production capacity and capabilities through the installation of a new fully-automated, high-speed and multi-purpose 5-head aseptic isolator-filler. If we are not able to fill this additional capacity through existing or new customer demand, our margins could be adversely affected. The amount that our customers or potential customers are willing or able to spend on our development and manufacturing services may vary greatly depending on factors beyond our control, including broad factors, such as industry or general economic and financial market conditions, or on more customer-specific factors, such as the success of development programs or the size and resources of the customer. Our smaller customers or potential customers with early-stage programs may have limitations on willingness to spend or access to capital, especially during times of economic uncertainty, and so may not be able to engage or pay for our services or otherwise be required to delay or cancel our services. Regardless of size, our customers or potential customers determine the amounts that they will spend on our services based upon, among other things, the success of clinical studies, market acceptance of their products, available resources, internal capabilities and their need to develop new products. The extent to which, and rate at which, our customers achieve market acceptance of their products, including consumer preferences and trends, and penetration of their current and new products, is a function of many variables including, but not limited to price, safety, efficacy, reliability, conversion costs, regulatory approvals, intellectual property rights, competition, marketing and sales efforts, and general economic conditions affecting purchasing patterns. In particular, our ability to maintain and grow our business is highly reliant on and subject to the success of our customers in obtaining regulatory approvals and commercial success of these products in the marketplace. Our development customers may experience a delay in, or a failure to receive, regulatory approval of their products or fail to maintain regulatory approval of their products, and we therefore are not able to manufacture these products. In addition, if we are not able to, or a customer perceives a risk that we will not be able to, maintain the regulatory approvals for our facilities, our customers may choose to seek an alternative supplier of our services. Furthermore, increasing consolidation in the pharmaceutical industry may impact customer demand for our services, especially if our customers choose to develop or acquire integrated manufacturing operations, or otherwise reduce spending on our services.

Demand - Risk 2

Changed

A significant portion of our revenue has been concentrated on a few large customers, including Alcon, one of our primary lenders, and terminations of agreements or cancellations or delays of orders by these customers may adversely affect our business.

During the fiscal year ended May 25, 2025, the Company had sales concentrations of 10% or greater from three customers, including Alcon, which is also one of our primary lenders. Alcon and the other customers accounted for 44%, 18% and 10%, respectively, of our revenue during the fiscal year ended May 25, 2025. We expect that, for the foreseeable future, a limited number of customers may continue to account for a substantial portion of our revenues as we work to expand and diversify our customers and revenue sources. The reduction, delay or cancellation of orders from one or more major customers for any reason or the loss of one or more of our major customers, whether through termination of existing agreements in accordance with their terms, competition, consolidation, development of other sources of supply, or otherwise, could materially and adversely affect our revenue. For some of our products and services, our major customers do not have minimum purchase obligations. Our major customers may not continue to place orders, orders by existing major customers may be canceled or may not continue at the levels of previous periods, or we may not be able to obtain orders for additional products or services.

Sales & Marketing3 | 10.0%

Sales & Marketing - Risk 1

Changed

Our profitability is dependent upon our ability to obtain appropriate pricing for our products and to control our cost structure or to pass along costs to our customers.

Our profitability and success depends on our ability to obtain appropriate pricing for our products and services. In many cases, our contractual arrangements with customers establish pricing terms and mechanics for price increases that will govern the relationship for long periods of time (including, in certain cases, up to several years), and therefore well in advance of our delivery of the products and services. Accordingly, our profitability is heavily reliant on accurately predicting our costs, which is dependent upon assumptions and estimates that may not ultimately be correct, and our ability to pass along cost increases to our customers. In addition, to the extent these pricing arrangements limit our inability to pass along cost increases, we may experience unanticipated increases in our cost structure, including with respect to raw material and labor costs, facility and equipment costs, unanticipated inefficiencies, product loss, or shipping and storage costs. Competition in our industry can also put downward pressure on pricing, which, in turn, can decrease our margins and increase the pressure placed on our ability to accurately predict or pass along our costs. Our attempts to offset increased costs through pricing actions for our products and services or to pass along such increased costs to our customers may not be sufficient or successful, particularly in light of the limitations created by our existing arrangements and competitive pressures. In addition, our efforts to constrain the cost of our operations may not be effective, or may be inadequate to offset pricing pressures or any unanticipated increases in costs. If we are unable to obtain adequate pricing for our products and services and/or to pass along cost increases, our profitability, results of operations and financial position could be materially adversely affected.

Sales & Marketing - Risk 2

Changed

Our CDMO services are highly complex, and our failure to provide quality and timely services to our CDMO customers could adversely impact our business.

The CDMO services we offer can be highly complex, due in part to strict regulatory requirements and the inherent complexity of the services provided. Timely operations within our facilities could be impacted by a variety of unforeseen matters, including equipment malfunction, contamination, failure of our employees to follow our required standard instructions, protocols and operating procedures, problems with raw materials and environmental factors. Such issues could affect production of a single manufacturing run or entire manufacturing campaigns, requiring the destruction of products, or could halt manufacturing operations altogether. In addition, any failure to meet required quality standards may result in our failure to deliver products timely to our customers which, in turn, could damage our reputation for quality and service. Any such incident could, among other things, lead to increased costs, lost revenue, reimbursement to customers for lost product, damage to and possibly termination of customer relationships, time and expense spent investigating and remediating the cause and, depending on the cause, similar losses with respect to other manufacturing runs. In addition, such issues could subject us to litigation, the cost of which could be significant.

Sales & Marketing - Risk 3

Added

If we are unable to retain existing customers, attract new customers and sell additional products and services to our existing and new customers, our revenue growth and profitability will be adversely affected.

During fiscal year 2025, Lifecore continued to execute on its previously announced strategic initiatives in an effort to support higher performance as a CDMO and bring stability to the Company. Key measures taken include the appointment of key leaders, the completion of a private placement of our Common Stock, a nearly three-year term extension of our Revolving Credit Facility, the sale of excess capital equipment and regaining compliance with our continuing SEC reporting obligations and continued listing standards of Nasdaq. However, our historical financial results have been, and our future financial results may be, subject to fluctuations. Our ability to make payments on our debt, fund our other liquidity needs, and make planned capital expenditures will depend on our ability to generate cash in the future. Our ability to generate cash is reliant on our ability to maintain existing and enter into new customer arrangements. If we are unable to retain existing customers, attract new customers and sell additional products and services to our existing and new customers, our revenue growth, profitability and cash generation will be adversely affected. If we are unable to continue to demonstrate that we have stabilized the business, including that we are able to fund liquidity needs and execute on our strategic objectives, we may cause concern to our current or potential customers, which may result in the loss of both existing and potential business opportunities and make it more difficult to attract and retain customers. Additionally, if we are not able to retain our personnel, particularly our executive and technical personnel, we may risk the loss of the relationships and expertise that are important to attracting, retaining and growing customer relationships.

Legal & Regulatory

Total Risks: 3/30 (10%)Above Sector Average

Regulation2 | 6.7%

Regulation - Risk 1

Added

Our customers' failure to receive or maintain regulatory approval for product candidates or products could negatively impact our revenue and profitability.

Lifecore's existing products and the products that Lifecore is developing for its customers are considered to be medical devices, drug products, or combination products, and therefore require clearance or approval by the FDA before commercial sales can be made in the United States. These products also require the approval of foreign government agencies before sales may be made in many other countries. The process for our customer to obtain these clearances or approvals varies according to the nature and use of the product. As a result, our business depends upon FDA or other regulatory approval of the products we manufacture for customers. If our customers experience a delay in, or failure to receive, approval for any of the products that we manufacture, our revenue and profitability could be adversely affected. After approval by the FDA or other regulatory agencies, these products are generally subject to continued regulation by the FDA, various state agencies and foreign regulatory agencies, including regulation of the design, nonclinical and clinical research studies, manufacturing, labeling, distribution, post-marketing product modifications, advertising, promotion, import, export, adverse event and other reporting, and record-keeping procedures for such products. If our customers fail to maintain regulatory approval of products that we manufacture for them, lose the ability to market the products we manufacture for them, or if the regulatory agencies otherwise limit or prevent the manufacture or distribution of Lifecore's products or change the manufacturing requirements relating to such products, our revenue and profitability could be adversely affected.

Regulation - Risk 2

Changed

Our business is highly regulated and our operations are subject to laws, regulations and standards that directly impact our business.

Our business is highly regulated. We are required to maintain compliance with cGMP and applicable product tracking and tracing requirements, and our manufacturing facilities are subject to inspections by the FDA and other global regulators and customers to confirm such compliance. We produce multiple products and so we face increased risks associated with cGMP compliance. In March 2025, the FDA completed a general drug product good manufacturing practices inspection of Lifecore. While it closed its inspection in May 2025 without further required action, future inspections by the FDA, other regulators or customers may result in observations not acceptable by them. Our inability to demonstrate ongoing cGMP compliance could require us to engage in lengthy and expensive remediation efforts, withdraw or recall products and/or interrupt our supply of any products or provision of services. Delays or other issues that arise in the development, manufacture, fill/finish, packaging, or storage of any drug product as a result of a failure of our facilities to pass any regulatory agency inspection or maintain cGMP compliance could significantly impair our relationships with our customers, which would substantially harm our business, prospects, operating results and financial condition. Any ongoing or additional findings of non-compliance could also increase our costs and cause us to lose revenue from products or services, which could be seriously detrimental to our business, prospects, operating results and financial condition. In addition, if we, or a regulatory authority, discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with a facility where the product is manufactured, a regulatory authority may impose restrictions relative to that product or the manufacturing facility, including requiring recall or withdrawal of the product from the market, suspension of manufacturing, or other FDA action or other action by the equivalent regulatory authorities in other countries. Furthermore, compliance with other foreign, federal, state, and local laws, regulations and standards applicable to our business is costly and time-consuming, and we may be required to incur significant compliance costs and capital expenditures in the future.

Litigation & Legal Liabilities1 | 3.3%

Litigation & Legal Liabilities - Risk 1

Changed

The outcome of existing and future litigation and regulatory proceedings and the related fees, costs and penalties could have a material adverse effect on our business.

As previously disclosed, we were delinquent in filing certain of our past periodic reports with the SEC, and we have restated previously issued financial statements for several periods, which have subjected us to, and may in the future, subject us to further, governmental or regulatory investigations or stockholder litigation. For example, on February 16, 2024, the Chicago Regional Office of the SEC issued a subpoena to the Company seeking documents and information concerning the restatements. Also, on July 29, 2024, shareholder David Carew filed a putative class action complaint on behalf of our stockholders in the United States District Court of Minnesota alleging that statements made to our shareholders between October 7, 2020 and March 19, 2024 regarding our financial results, internal controls, remediation efforts, periodic reporting, and financial prospects were false and misleading in violation of Section 10(b) of the Exchange Act. In addition, in December 2024, 22NW, LP ("22NW"), filed a complaint in the Commercial Division of the Supreme Court of the State of New York, New York County alleging, among other things, material misrepresentations by us in connection with its acquisition of economic interests in the Company, including its investment in the Redeemable Convertible Preferred Stock. Both the Carew securities class action complaint and the 22NW complaint seek compensatory damages, court costs, and attorneys' fees, among other remedies. We have incurred, and may be required in future to incur further, significant legal fees and other expenses related to the SEC investigation and these lawsuits. In addition, any adverse determination in any of these matters could expose us to significant liabilities. See "Note 9 – Commitments and Contingencies" to our consolidated financial statements contained in this Annual Report on Form 10-K for additional information regarding the SEC investigation and these lawsuits. In addition, from time to time, we may be subject to claims or lawsuits during the ordinary course of business regarding, but not limited to, employment matters, safety standards, product liability, security of customer and employee personal information, contractual matters, and compliance with laws. Litigation to defend ourselves against claims by third parties or enforcement actions by regulators, or to enforce any rights that we may have against third parties, has been and may continue to be necessary, which has resulted and in the future could result in substantial costs, penalties, limitations on our business and diversion of our resources, causing a material adverse effect on our business, financial condition, results of operations or cash flows.

Production

Total Risks: 3/30 (10%)Above Sector Average

Manufacturing1 | 3.3%

Manufacturing - Risk 1

Added

Loss or compromise of our HA bacterial cell bank assets could materially impact our business operations, product quality and competitive position.

We produce HA using microbial fermentation and purification processes, the starting point of which is reliant on our HA bacterial cell bank assets. While we maintain redundant storage backups of these assets, including one maintained at a third party site, any failure, including due to natural disasters, equipment failures, network failures or cyberattacks, that causes a material interruption or discontinuance in our storage of the assets could result in stored assets being damaged and unable to be utilized. As living organisms, bacterial strains are inherently sensitive to environmental conditions, and so improper handling and variations in temperature, pH, nutrient composition, or other process parameters can lead to contamination, mutation, or loss of desired bacterial traits or performance, quality deviations and production inefficiencies. In addition, the expertise required to manage and maintain our cell bank assets is highly specialized and departures of key personnel or inadequate knowledge transfer may result in procedural errors, loss of proprietary know-how, or diminished operational continuity. We have implemented robust controls, including SOPs and multiple physical storage sites to mitigate these risks, but any failure in our HA bacterial cell bank management could materially and adversely affect our HA manufacturing operations, regulatory standing, reputation and competitive advantage.

Employment / Personnel1 | 3.3%

Employment / Personnel - Risk 1

We are dependent on our key employees and if one or more of them were to leave, we could experience difficulties in replacing them or effectively transitioning their replacements and our operating results could suffer.

We made key executive officer appointments, including a new CEO in May 2024 and a new CFO in September 2024, as well as other senior leadership appointments thereafter. The success of our business depends to a significant extent on the continued service and performance of this senior leadership team, as well as our ability to attract and retain qualified scientific, technical, sales and marketing personnel. These employees may voluntarily terminate their employment with us at any time. The loss of any of our key personnel for an extended period may cause hardship for our business. In addition, competition for senior level personnel with knowledge and experience in our business is intense. If any of our key personnel were to leave, we would need to devote substantial resources and management attention to replacing them. As a result, management attention may be diverted from managing our business, and we may need to pay higher compensation to replace these employees.

Supply Chain1 | 3.3%

Supply Chain - Risk 1

Our dependence on single-source suppliers and service providers may cause disruption in our operations should any supplier fail to deliver materials.

Several of the raw materials we use to manufacture our products are currently purchased from a single source, including raw materials for our HA products. Any interruption of our relationship with single-source suppliers or service providers could delay product shipments and materially harm our business. We may experience difficulty acquiring materials or services for the manufacture of our products or we may not be able to obtain substitute vendors on a timely basis or at all. In addition, we may not be able to procure comparable materials at similar prices and terms within a reasonable time, if at all, all of which could materially harm our business.

Macro & Political

Total Risks: 2/30 (7%)Above Sector Average

Natural and Human Disruptions1 | 3.3%

Natural and Human Disruptions - Risk 1

Added

We have a concentration of facilities and unforeseen events could materially disrupt our ability to provide services and manufacture products for our customers.

We have three facilities that are all located within two miles of one another in Chaska, Minnesota that use specialized manufacturing equipment to operate our business. Any prolonged disruptions in our primary manufacturing operations due to unforeseen events, including power outages or natural disasters, in or around this area would reduce our ability to provide our CDMO services and conduct our manufacturing operations given that we would not be able to shift manufacturing capabilities to alternative locations. Accordingly, such events would have a material adverse effect on our business, results of operations and financial condition.

Capital Markets1 | 3.3%

Capital Markets - Risk 1

Changes to U.S. trade policy, tariff and import/export regulations may have a material adverse effect on our business.

Changes in U.S. or international social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories or countries where we currently sell our products or conduct our business, as well as any negative sentiment toward the U.S. as a result of such changes, could have a material adverse impact on our business, financial condition, and results of operations. For example, the U.S. has recently imposed significant tariffs on imports from other countries, which have prompted retaliatory measures from several countries, which may further escalate, and impact our cost of doing business. It is not yet clear whether or when tariffs may be imposed on pharmaceutical imports, but the imposition of adopted, new or proposed tariffs, or trade restrictions or sourcing requirements could result in increased costs for raw materials, components or finished goods, disruptions to our supply chain, change in manufacturing locations, manufacturing delays and/or adverse impacts to clinical trials. These cost increases, disruptions, delays and adverse impacts may reduce our revenues and margins, require us to raise prices, or make our products less competitive in the marketplace. In addition, we may be restricted in our ability to adapt to these impacts and challenges due to, among other things, the terms of our existing arrangements. If we are unable to mitigate these risks through supply chain adjustments, pricing strategies, cost containment or pass-through, or other measures, our financial performance and growth prospects could be negatively affected. The impact of any adopted, new or proposed tariffs, trade restrictions or sourcing requirements on our business is subject to a number of factors that we cannot predict, including, but not limited to, the scope, nature, amount, effective date and duration of any such measures. Furthermore, the general uncertainty relating to such measures have the potential to adversely impact the U.S. economy or certain sectors thereof, our industry and the global demand for our products, and as a result, could have a material adverse effect on our business, financial condition and results of operations.

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?

Risk factors are any situations or occurrences that could make investing in a company risky.

The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.

They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.

It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.

How do companies disclose their risk factors?

Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.

Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.

Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.

According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.

How can I use TipRanks risk factors in my stock research?

Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.

You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.

Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.

A simplified analysis of risk factors is unique to TipRanks.

What are all the risk factor categories?

TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.

1. Financial & Corporate

Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.

2. Legal & Regulatory

Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
Regulation – risks related to compliance, GDPR, and new legislation.
Environmental / Social – risks related to environmental regulation and to data privacy.
Taxation & Government Incentives – risks related to taxation and changes in government incentives.

3. Production

Costs – risks related to costs of production including commodity prices, future contracts, inventory.
Supply Chain – risks related to the company’s suppliers.
Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.

4. Technology & Innovation

Innovation / R&D – risks related to innovation and new product development.
Technology – risks related to the company’s reliance on technology.
Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.

5. Ability to Sell

Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
Competition – risks related to the company’s competition including substitutes.
Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
Brand & Reputation – risks related to the company’s brand and reputation.

6. Macro & Political

Economy & Political Environment – risks related to changes in economic and political conditions.
Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
International Operations – risks related to the global nature of the company.
Capital Markets – risks related to exchange rates and trade, cryptocurrency.