10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended May 25, 2014, or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period for _________ to _________.

Commission file number: 0-27446

LANDEC CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	94-3025618
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification Number)

3603 Haven Avenue

Menlo Park, California 94025

(Address of principal executive offices)

Registrant's telephone number, including area code:

(650) 306-1650

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock	The NASDAQ Global Select Stock Market

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  ___  No    X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes  ___  No    X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   X    No ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes   X    No ___

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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. __

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer” and “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  ___                                                                     Accelerated Filer  X                         

Non Accelerated Filer  ___                                                                       Smaller Reporting Company  ___

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes  ___  No    X   

The aggregate market value of voting stock held by non-affiliates of the Registrant was approximately $294,141,000 as of November 24, 2013, the last business day of the registrant’s most recently completed second fiscal quarter, based upon the closing sales price on The NASDAQ Global Select Market reported for such date. Shares of Common Stock held by each officer and director and by each person who owns 10% or more of the outstanding Common Stock have been excluded from such calculation in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of July 18, 2014, there were 26,839,725 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement relating to its October 2014 Annual Meeting of Stockholders which statement will be filed not later than 120 days after the end of the fiscal year covered by this report, are incorporated by reference in Part III hereof.

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LANDEC CORPORATION

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

Item No.	Description	Page
Part I
1.	Business	4
1A.	Risk Factors	13
1B.	Unresolved Staff Comments	20
2.	Properties	21
3.	Legal Proceedings	21
4.	Mine Safety Disclosures	21
Part II
5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
6.	Selected Financial Data	22
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
7A.	Quantitative and Qualitative Disclosures about Market Risk	42
8.	Financial Statements and Supplementary Data	42
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	42
9A.	Controls and Procedures	42
9B.	Other Information	44
Part III
10.	Directors, Executive Officers and Corporate Governance	45
11.	Executive Compensation	45
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	45
13.	Certain Relationships and Related Transactions, and Director Independence	45
14.	Principal Accountant Fees and Services	45
Part IV
15.	Exhibits and Financial Statement Schedules	46

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PART I

Item 1.     Business

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Words such as “projected,” “expects,” “believes,” “intends,” “assumes” and similar expressions are used to identify forward-looking statements. These statements are made based upon current expectations and projections about our business and assumptions made by our management and are not guarantees of future performance, nor do we assume any obligation to update such forward-looking statements after the date this report is filed. Our actual results could differ materially from those projected in the forward-looking statements for many reasons, including the risk factors listed in Item 1A. “Risk Factors” and the factors discussed below.

Corporate Overview

Landec Corporation and its subsidiaries (“Landec” or the “Company”) design, develop, manufacture and market differentiated products in food and biomedical materials markets and license technology applications to partners. The Company is focused on health and wellness solutions and applications within the packaged food and biomaterial markets. In our Apio, Inc. (“Apio”) food business, we are committed to offering healthy, fresh produce products conveniently packaged to consumers. Apio also exports whole fruit and vegetables, predominantly to Asia through its subsidiary, Cal Ex Trading Company (“Cal-Ex”). In our Lifecore Biomedical, Inc. (“Lifecore”) biomedical materials business, we commercialize products that enable people to stay more active as they grow older.

Landec’s food and biomedical materials businesses utilize polymer chemistry technology, a key differentiating factor. Both core businesses focus on business-to-business selling such as selling directly to retail grocery store chains and club stores for Apio and directly to large ophthalmic suppliers for Lifecore. Both core businesses also benefit from the momentum that underlies consumer interest in healthy living - eating better and staying active.

Within our two core businesses, Landec has three operating segments – Food Products Technology, Food Export and HA-based Biomaterials, each of which is described below. Financial information concerning each of these segments for fiscal years 2014, 2013 and 2012 is summarized in Note 14 to the Consolidated Financial Statements.

Apio operates our Food Products Technology business, which combines our proprietary BreatheWay® food packaging technology with the capabilities of a large national food supplier and value-added produce processor which sells products under the Eat Smart® and GreenLine® brands. In Apio’s value-added operations, produce is processed by trimming, washing, mixing, and packaging in bags and trays that in most cases incorporate Landec’s BreatheWay membrane technology. The BreatheWay membrane increases shelf life and reduces shrink (waste) for retailers and helps ensure that consumers receive fresh produce by the time the product makes its way through the supply chain. Apio also licenses the BreatheWay technology to partners such as Chiquita Brands International, Inc. (“Chiquita”) for packaging and distribution of bananas and to Windset Holding 2010 Ltd., a Canadian corporation (“Windset”), for packaging of greenhouse grown cucumbers and peppers.

Apio also operates the Food Export business. The Food Export business purchases and sells whole fruit and vegetable products predominantly to Asian markets.

Lifecore operates our Biomaterials business and is principally involved in the manufacture of pharmaceutical-grade sodium hyaluronate (“HA”) products. Sodium hyaluronate is a naturally occurring polysaccharide that is widely distributed in the extracellular matrix in animals and humans. Based upon Lifecore’s expertise working with highly viscous HA, the Company also specializes in aseptic filling services, as a contract development and manufacturing organization (CDMO), for difficult to handle (viscous) medicines filled in finished dose syringes.

Landec was incorporated in California on October 31, 1986 and reincorporated as a Delaware corporation on November 6, 2008. Our common stock is listed on The NASDAQ Global Select Market under the symbol “LNDC”.

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Technology Overview

The Company has two proprietary polymer technology platforms: 1) Intelimer® materials which are the key technology behind our BreatheWay membrane technology, and 2) hyaluronan biopolymers. The Company’s materials are generally proprietary as a result of being patented or due to being specially formulated for specific customers to meet specific commercial applications and/or specific regulatory requirements. The Company’s polymer technologies, its customer relationships and trade names and its strong channels of distribution, are the foundation and key differentiating advantages on which Landec has built its business.

A) Intelimer Polymers

Intelimer polymers are crystalline, hydrophobic polymers that use a temperature switch to control and modulate properties such as viscosity, permeability and adhesion when varying the materials’ temperature above and below the temperature switch. The sharp temperature switch is adjustable at relatively low temperatures (0°C to 100°C) and the changes resulting from the temperature switch are relatively easy to maintain in industrial and commercial environments. For instance, Intelimer polymers can change within the range of one or two degrees Celsius from a non-adhesive state to a highly tacky, adhesive state; from an impermeable state to a highly permeable state; or from a solid state to a viscous liquid state.

Landec's proprietary polymer technology is based on the structure and phase behavior of Intelimer materials. The abrupt thermal transitions of specific Intelimer materials are achieved through the controlled use of hydrocarbon side chains that are attached to a polymer backbone. Below a pre-determined switch temperature, the polymer's side chains align through weak hydrophobic interactions resulting in a crystalline structure. When this side chain crystallizable polymer is heated to, or above, this switch temperature, these interactions are disrupted and the polymer is transformed into an amorphous, viscous state. Because this transformation involves a physical and not a chemical change, this process can be repeatedly reversible. Landec can set the polymer switch temperature anywhere between 0°C to 100°C by varying the average length of the side chains.

Landec's Intelimer materials are readily available and are generally synthesized from long side-chain acrylic monomers that are derived primarily from natural materials such as coconut and palm oils that are highly purified and designed to be manufactured economically through known synthetic processes. These acrylic-monomer raw materials are then polymerized by Landec leading to many different side-chain crystallizable polymers whose properties vary depending upon the initial materials and the synthetic process. Intelimer materials can be made into many different forms, including films, coatings, microcapsules and discrete forms. Intelimer polymers are the coatings on the substrate used to form our BreatheWay membranes.

BreatheWay Membrane Packaging 

Certain types of fresh-cut and whole produce can spoil or discolor rapidly when packaged in conventional packaging materials and, therefore, are limited in their ability to be distributed broadly to markets. The Company’s proprietary BreatheWay packaging technology utilizes Landec’s Intelimer polymer technology to naturally extend the shelf life and quality of fresh-cut and whole produce.

After harvesting, vegetables and fruit continue to respire, consuming oxygen and releasing carbon dioxide. Too much or too little oxygen can result in premature spoilage and decay. The respiration rate of produce varies for each fruit and vegetable. Conventional packaging films used today, such as polyethylene and polypropylene, can be made with modest permeability to oxygen and carbon dioxide, but often do not provide the optimal atmosphere for the packaged produce. To achieve optimal product performance, each fruit or vegetable requires its own unique package atmosphere conditions. The challenge facing the industry is to develop packaging that meets the highly variable needs that each product requires in order to achieve value-creating performance. The Company believes that its BreatheWay packaging technology possesses all of the critical functionalities required to serve this diverse market. In creating a product package, a BreatheWay membrane is applied over a small cutout section or an aperture of a flexible film bag or plastic tray. This highly permeable “window” acts as the mechanism to provide the majority of the gas transmission requirements for the entire package. These membranes are designed to provide three principal benefits:

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High Permeability. Landec's BreatheWay packaging technology is designed to permit transmission of oxygen and carbon dioxide at 300 to 1,000 times the rate of conventional packaging films. The Company thinks that these higher permeability levels will facilitate the packaging diversity required to market many types of fresh-cut and whole produce in many package sizes and configurations.

Ability to Adjust Oxygen and Carbon Dioxide Ratios. BreatheWay packaging can be tailored with carbon dioxide to oxygen transfer ratios ranging from 1.0 to 12.0 to selectively transmit oxygen and carbon dioxide at optimum rates to sustain the quality and shelf life of packaged produce. Other high permeability packaging materials, such as micro-perforated films cannot differentially control carbon dioxide permeability resulting in sub-optimal package atmosphere conditions for many produce products.

Temperature Responsiveness. Landec has developed breathable membranes that can be designed to increase or decrease permeability in response to environmental temperature changes. The Company has developed packaging that responds to higher oxygen requirements at elevated temperatures but is also reversible, and returns to its original state as temperatures decline. As the respiration rate of fresh produce also increases with temperature, the BreatheWay membrane’s temperature responsiveness allows packages to compensate for the change in produce respiration by automatically adjusting gas permeation rates. By doing so, detrimental package atmosphere conditions are avoided and improved quality is maintained through the distribution chain.

B) Sodium Hyaluronate (HA)

Sodium hyaluronate is a non-crystalline, hydrophilic polymer that exists naturally as part of the extracellular matrix in many tissues within the human body, most notably within the aqueous humor of the eye, synovial fluid, skin and umbilical cord. The viscoelastic properties and water solubility of HA make it ideal for medical applications where space maintenance, lubricity or tissue protection are critical. Because of its widespread presence in tissues, its critical role in normal physiology, and its high degree of biocompatibility, the Company believes that hyaluronan will continue to be used in existing applications and for an increasing variety of other medical applications.

Sodium hyaluronate can primarily be produced in two ways, either through bacterial fermentation or through extraction from rooster combs. Lifecore produces HA only from fermentation, using an extremely efficient microbial fermentation process and a highly effective purification operation.

Sodium hyaluronate was first demonstrated to have commercial medical utility as a viscoelastic solution in cataract surgery. In this application, it is used for maintaining the space in the anterior chamber and protecting corneal tissue during the removal and implantation of intraocular lenses. The first ophthalmic HA product, produced by extraction from rooster comb tissue, became commercially available in the United States in 1981. In 1985, Lifecore introduced the bacterial fermentation process to manufacture premium HA and received patent protection until 2002. HA-based products, produced either by rooster comb extraction or by fermentation processes such as Lifecore’s, have since gained widespread acceptance in ophthalmology and are currently used in the majority of cataract extraction procedures in the world. HA has also become a significant component in several products used in orthopedics. Lifecore’s HA is used as a viscous carrier for allogeneic freeze-dried demineralized bone used in spinal surgery, and as the active component of devices to treat the symptoms of osteoarthritis, and as a component to provide increased lubricity to medical devices. Lifecore’s HA has also been utilized in veterinary drug applications to treat traumatic arthritis.

Description of Business Segments

In this Description of Business Segments section, “Apio” and the “Food Products Technology business” will be used interchangeably; however, when describing Apio’s export business it will be referred to as the “Food Export business”.

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A) Food Products Technology Business

The Food Products Technology business had revenues of $361 million for the fiscal year ended May 25, 2014, $320 million for the fiscal year ended May 26, 2013 and $208 million for the fiscal year ended May 27, 2012.

Based in Guadalupe, California, Apio’s primary business is fresh-cut and whole value-added products typically packaged in our proprietary BreatheWay packaging. Apio’s fresh-cut value-added products business markets a variety of fresh-cut and whole vegetables to the top retail grocery chains, club stores and food service operators. During the fiscal year ended May 25, 2014, Apio shipped approximately twenty-nine million cartons of produce to its customers throughout North America, primarily in the United States.

Most vegetable products packaged in our BreatheWay packaging have 17 to 20 days of shelf life. In addition to packaging innovation, Landec’s Apio food business develops innovative blends and combinations of vegetables that are sold in flexible film bags or rigid trays. More recently, the Company has launched a family of salad kits that are comprised of “superfood” mixtures of vegetables with healthy toppings/dressings. The launch of the first of these products called Sweet Kale Salad has broken all of Apio’s records for speed of adoption with weekly sales of well over $1 million as of May 2014. Additionally, we have launched several other superfood salad kits including Ginger Bok Choy, Apple Fennel, Kale and Chard Stir Fry and Shanghai Stir Fry, as examples. The Company’s expertise includes accessing leading culinary experts and nutritionists nationally to help in the new product development process. We believe that our new products are “on trend” and strong market acceptance supports this belief. Recent statistics show that 39% of Americans are obese and 23% of Americans have diabetes. More and more consumers are beginning to make better food choices in their schools, homes and in restaurants and that is where our superfood products can fit into consumers daily healthy food choices.

In addition to proprietary packaging technology and a strong new product development pipeline, the Company has strong channels of distribution throughout North America with retail grocery store chains and club stores. Landec has one or more of its products in over 70% of all retail and club store sites in North America giving us a strong platform for introducing new products.

The Company sells its products under the nationally-known brands EatSmart® and GreenLine®. The Company also periodically licenses its BreatheWay packaging technology to partners such as Chiquita for packaging bananas and to Windset for packaging peppers and cucumbers that are grown hydroponically in greenhouses. The Company is engaged in the testing and development of other BreatheWay products. These packaging license relationships generate revenues either from product sales or royalties once commercialized.

Apio Business Model

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Landec is working with leaders in club stores, retail grocery chains and food service customers. The Company thinks it will have growth opportunities for the next several years through new customers and the introduction of innovative products in the United States, expansion of its existing customer relationships, and export and shipment of specialty packaged produce.

Landec manufactures its BreatheWay packaging through selected qualified contract manufacturers. In addition to using BreatheWay packaging for its value-added produce business, the Company markets and sells BreatheWay packaging directly to select partner food distributors.

There are five major distinguishing characteristics of Apio that provide competitive advantages in the Food Products Technology market:

Value-Added Supplier: Apio has structured its business as a marketer and seller of branded and private label fresh-cut and whole value-added produce. It is focused on selling products under its Eat Smart and GreenLine brands and private label brands for its fresh-cut and whole value-added products. As retail grocery chains, club stores and food service operators consolidate, Apio is well positioned as a single source of a broad range of products.

Reduced Farming Risks: Apio reduces its farming risk by not taking ownership of farmland, and instead, contracts with growers for produce and during certain times of the year, enters into joint ventures with growers for produce. The year-round sourcing of produce is a key component to the fresh-cut and whole value-added processing business.

Access to Customer Base: Apio has strategically invested in the rapidly growing fresh-cut and whole value-added business. Apio’s value-added processing plant in Guadalupe, CA, is automated with state-of-the-art vegetable processing equipment. Apio operates one large central processing facility in one of the lowest cost growing regions in California, the Santa Maria Valley, and for the majority of its non-green bean vegetable business, uses its packaging technology for nationwide delivery. With the acquisition of GreenLine, Apio now has three East Coast processing facilities and five East Coast distribution centers for nationwide delivery of green beans and recently Apio began processing non-green bean products in one of our East Coast processing facilities to meet the next-day delivery needs of customers.

Expanded Product Line Using Technology and Unique Blends: Apio, through the use of its BreatheWay packaging technology, is introducing new value-added products each year. These new product offerings range from various sizes of fresh-cut bagged products, to vegetable trays, to whole produce, to vegetable salads and to snack packs. During the last twelve months, Apio has introduced eleven new unique products.

Products Currently in Over 70% of U.S. Retail Grocery Stores: With the acquisition of GreenLine, Apio now has products in over 70% of all U.S. retail grocery stores. This gives Apio the opportunity to cross sell Eat Smart value-added products to GreenLine customers and GreenLine value-added products to Eat Smart customers.

Windset

On February 15, 2011, Apio entered into a share purchase agreement (the “Purchase Agreement”) with Windset. Pursuant to the Purchase Agreement, Apio purchased 150,000 senior preferred shares for $15 million and 201 common shares for $201 (the “Purchased Shares”). The Company’s common shares represent a 20.1% interest in Windset. The non-voting senior preferred shares yield a cash dividend of 7.5% annually. The dividend is payable within 90 days of each anniversary of the execution of the Purchase Agreement. The Purchase Agreement includes a put and call option, which can be exercised on the sixth anniversary of the Purchase Agreement whereby Apio can exercise the put to sell its Purchased Shares to Windset, or Windset can exercise the call to purchase the Purchased Shares from Apio, in either case, at a price equal to 20.1% of the appreciation in the fair market value of Windset from the date of the Company’s investment through the put/call date, plus the purchase price of the Purchased Shares. Under the terms of the arrangement with Windset, the Company is entitled to designate one of five members on the Board of Directors of Windset. On July 15, 2014, the Company purchased an additional 6.8% of Windset common stock and 8.5% of Windset’s outstanding junior preferred stock for an aggregate price of $11.0 million increasing its ownership to 26.9% of Windset’s common stock.

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The Company thinks that hydroponically grown produce using Windset’s know-how and growing practices will result in higher yields with competitive growing costs that will provide dependable year round supply to Windset’s customers. In addition, the produce grown in Windset’s greenhouses has a very high safety profile as no soil is used in the growing process. Windset owns and operates greenhouses in British Columbia, Canada and in Nevada and California. In addition to growing produce in their own greenhouses, Windset has numerous marketing arrangements with other greenhouse growers and utilizes buy/sell arrangements to meet fluctuation in demand from their customers.

B) Food Export Business

Food Export revenues consist of revenues generated from the purchase and sale of primarily whole commodity fruit and vegetable products to Asia through Apio’s export company, Cal-Ex. The Food Export business is a commission-based buy/sell business that realizes a gross margin in the 5-8% range.

The Food Export business had revenues of $70 million for the fiscal year ended May 25, 2014, $79 million for the fiscal year ended May 26, 2013 and $71 million for the fiscal year ended May 27, 2012.

Apio is strategically positioned with Cal-Ex to benefit from the growing population and wealth in Asia and other parts of the world over the next decade. Through Cal-Ex, Apio is currently one of the largest U.S. exporters of broccoli to Asia. Other large export items include apples, grapes, stonefruit and citrus.

C) HA-based Biomaterials

Our HA-based Biomaterials business operates through our Lifecore subsidiary. Lifecore had revenues of $46 million for the fiscal year ended May 25, 2014, $41 million for the fiscal year ended May 26, 2013 and $34 million for the fiscal year ended May 27, 2012.

Lifecore operates our medical materials business and is principally involved in the manufacture of pharmaceutical-grade sodium hyaluronate products in the form of injectable products for ophthalmologic and orthopedic applications. There is now a greater percentage of Americans age 65 and older than at any other time in U.S. history and currently over 40 million Americans are 65 years of age or older and this trend is going to accelerate dramatically over the upcoming years. As our population ages, eye surgeries such as cataract surgeries, are going to increase. Additionally, patients will seek joint therapy as cartilage and soft tissue deteriorates. HA injections are a primary course of treatment and Lifecore has built a leadership position in the markets it serves. It is estimated that there will be 22 million cataract surgeries in 2014 worldwide. Lifecore’s expertise includes its ability to ferment, separate, purify, and aseptically fill HA for injectable product use. In addition to ophthalmic and orthopedic uses, veterinary medicine is another application for Lifecore’s HA. Lifecore leverages its fermentation process to manufacture premium, pharmaceutical-grade HA and uses its aseptic filling capabilities to also deliver private-labeled HA finished products to its customers. Lifecore sells its products through partners in the U.S., Europe and South America. Lifecore has built its reputation as a premium supplier of HA.

Lifecore’s products are primarily sold to strategic marketing partners for use in three medical areas: (1) Ophthalmic, (2) Orthopedic and (3) Veterinary. In addition, Lifecore provides product development services to its partners for HA-based, as well as non-HA based, fermented products and aseptically formulated products. These services include activities such as tech transfer, material component changes, analytical method development, pilot studies, stability studies, process validation, and clinical production.

By leveraging its fermentation process and aseptic formulation and filling expertise, Lifecore has become a leader in the supply of HA-based products for multiple applications, and has taken advantage of non-HA device and drug opportunities by leveraging its expertise in manufacturing and aseptic syringe filling capabilities. Elements of Lifecore’s strategy include the following:

•     Establish strategic relationships with market leaders. Lifecore will continue to develop applications for products with partners who have strong marketing, sales and distribution capabilities to end-user markets. Through its strong reputation and history of providing pharmaceutical grade HA and products, Lifecore has been able to establish long-term relationships with the market leading ophthalmic surgical companies, and leverages those partnerships to attract new relationships in other medical markets.

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•     Expand medical applications for HA. Due to the growing knowledge of the unique characteristics of HA, and the role it plays in normal physiology, Lifecore continues to identify and pursue opportunities for the use of HA in other medical applications, such as wound care, aesthetic surgery, drug delivery, device coatings and through pharmaceutical sales to academic and corporate research customers. As part of this effort, Lifecore continues to explore applications for its Corgel® Biohydrogel technology licensed from the Cleveland Clinic Foundation. Further applications may involve expanding process development activity and/or additional licensing of technology.

•     Utilize manufacturing infrastructure to pursue contract aseptic filling and fermentation opportunities. Lifecore has made strategic capital investments in its contract manufacturing and development business focusing on extending its aseptic filling capacity and capabilities. It is investing in this segment to meet increasing partner demand and attract new contract filling opportunities. Lifecore is using its manufacturing capabilities to provide contract manufacturing and development services to its partners in the area of sterile pre-filled syringes and fermentation and purification requirements.

•     Maintain flexibility in product development and supply relationships. Lifecore’s vertically integrated development and manufacturing capabilities allow it to establish a variety of contractual relationships with global corporate partners. Lifecore’s role in these relationships extends from supplying HA raw materials to providing tech transfer and development services to manufacturing aseptically-packaged, finished sterile products and to assuming full supply chain responsibilities.

Trademarks/Trade names

Intelimer®, Landec®, Apio™, Eat Smart®, BreatheWay®, GreenLine®, Clearly Fresh™, Lifecore®, LUROCOAT^® and Ortholure™ are some of the trademarks or registered trademarks and trade names of the Company in the United States and other countries. This Annual Report on Form 10-K also refers to the trademarks of other companies.

Sales and Marketing

Apio is supported by dedicated sales and marketing resources. Apio has 36 sales and marketing employees, located in central California and throughout the U.S., supporting the Food Products Technology business and the Food Export business. During fiscal years 2014, 2013 and 2012, sales to the Company’s top five customers accounted for approximately 42%, 40% and 45%, respectively, of its revenues, with the top two customers, both from the Food Products Technology segment, Costco Wholesale Corporation which accounted for approximately 21%, 16%, and 17%, respectively, and Wal-mart, Inc. which accounted for approximately 11%, 13%, and 11%, respectively, of the Company’s revenues. A loss of either of these customers would have a material adverse effect on the Company’s business.

Lifecore sells products to partners under supply agreements and also through distribution agreements. Excluding research sales, Lifecore does not sell to end users and, therefore, does not have the traditional infrastructure of a dedicated sales force and marketing employees and its name recognition allows Lifecore to attract new customers and offer its services with a minimal marketing and sales infrastructure.

Seasonality

Apio’s sales are seasonal. The Food Products Technology business can be affected by seasonal weather factors, such as the high cost of sourcing product due to a shortage of essential value-added produce items, which have impacted quarterly results in the past. The Food Export business also typically recognizes a much higher percentage of its revenues and profit during the first half of Landec’s fiscal year compared to the second half. Lifecore’s business is not significantly affected by seasonality.

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Manufacturing and Processing

Food Products Technology Business

The manufacturing process for the Company's proprietary BreatheWay packaging products is comprised of polymer manufacturing, membrane manufacturing and label package conversion. A third party toll manufacturer currently makes virtually all of the polymers for the BreatheWay packaging system. Select outside contractors currently manufacture the breathable membranes, and Landec has transitioned virtually all of the label package conversion to Apio’s Guadalupe facility to meet the increasing product demand and to provide additional developmental capabilities.

Apio processes virtually all of its fresh-cut, value-added non-green bean products in its processing facility located in Guadalupe, California. Cooling of produce is done through third parties and Apio Cooling LP, a separate consolidated subsidiary in which Apio has a 60% ownership interest and is the general partner.

Apio processes its fresh-cut, value-added green bean products, acquired with the acquisition of GreenLine in April 2012, in four processing plants located in Guadalupe, California; Bowling Green, Ohio; Hanover, Pennsylvania; and Vero Beach, Florida.

Hyaluronan-based Biomaterials Business

The commercial production of HA by Lifecore requires fermentation, separation and purification capabilities. Products are supplied in a variety of bulk and single dose configurations.

Lifecore produces its HA through a bacterial fermentation process. Medical grade HA was initially commercially available only through an extraction process from rooster combs. Lifecore believes that the fermentation manufacturing approach is superior to rooster comb extraction because of greater efficiency and flexibility, a more favorable long-term regulatory environment, and better economies of scale in producing large commercial quantities. Today’s HA competitors are primarily utilizing a fermentation process.

Lifecore’s 114,000 square foot facility in Chaska, Minnesota is used primarily for the HA manufacturing process, formulation and aseptic syringe and bulk filling. The Company considers that the current inventory on-hand, together with its manufacturing capacity, will be sufficient to allow it to meet the needs of its current customers for the foreseeable future.

Lifecore provides versatility in the manufacturing of various types of finished products. It supplies several different forms of HA in a variety of molecular weight fractions as powders, solutions and gels, and in a variety of bulk and single-use finished packages. Lifecore continues to conduct development work designed to improve production efficiencies and expand its capabilities to achieve a wider range of HA product specifications in order to address the broadening opportunities for using HA in medical applications.

The FDA inspects the Company’s manufacturing systems periodically and requires compliance with the FDA’s Quality System Regulation (“QSR”). In addition, Lifecore’s customers conduct intensive quality audits of the facility and its operations.Lifecore also periodically contracts with independent regulatory consultants to conduct audits of its operations.  Similar to other manufacturers subject to regulatory and customer specific requirements, Lifecore’s facility was designed to meet applicable regulatory requirements and has been cleared for the manufacturing of both device and pharmaceutical products. The Company maintains a Quality System which complies with applicable standards and regulations: FDA Medical Device Quality System requirements (21 CFR 820); FDA Drug Good Manufacturing Practices (21 CFR 210-211); European Union Good Manufacturing Practices (EudraLex Volume 4); Medical Device Quality Management System (ISO 13485); European Medical Device Directive; Canadian Medical Device Regulations; International Guide for Active Pharmaceutical Ingredients (ICH Q7), and Australian Therapeutic Goods Regulations).  Compliance with these international standards of quality greatly assists in the marketing of Lifecore’s products globally.

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General

Several of the raw materials used in manufacturing certain of the Company’s products are currently purchased from a single source. Although to date the Company has not experienced difficulty acquiring materials for the manufacture of its products, no assurance can be given that interruptions in supplies will not occur in the future, that the Company will be able to obtain substitute vendors, or that the Company will be able to procure comparable materials at similar prices and terms within a reasonable time. Any such interruption of supply could have a material adverse effect on the Company’s ability to manufacture and distribute its products and, consequently, could materially and adversely affect the Company’s business, operating results and financial condition.

Research and Development

Landec is focusing its research and development resources on both existing and new product applications. Expenditures for research and development for the fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012 were $7.2 million, $9.3 million and $9.6 million, respectively. Research and development expenditures funded by corporate or governmental partners were zero during fiscal year 2014, $688,000 during fiscal year 2013 and zero in fiscal year 2012. The Company may seek funds for applied materials research programs from U.S. government agencies as well as from commercial entities. The Company anticipates that it will continue to incur significant research and development expenditures in order to maintain its competitive position with a continuing flow of innovative, high-quality products and services. As of May 25, 2014, Landec had 61 employees engaged in research and development with experience in polymer and analytical chemistry, product application, product formulation, and mechanical and chemical engineering.

Competition

The Company operates in highly competitive and rapidly evolving fields, and new developments are expected to continue at a rapid pace. Competition from large food processors, packaging companies, and medical and pharmaceutical companies is intense. Many of these competitors have substantially greater financial and technical resources and production and marketing capabilities than the Company, and many have substantially greater experience in conducting field trials, obtaining regulatory approvals and manufacturing and marketing commercial products. There can be no assurance that these competitors will not 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 the Company or that would render the Company's technology and products obsolete and non-competitive.

Patents and Proprietary Rights

The Company's success depends in large part on its ability to obtain patents, maintain trade secret protection and operate without infringing on the proprietary rights of third parties. The Company has had 43 U.S. patents issued of which 28 remain active as of May 25, 2014 with expiration dates ranging from 2014 to 2028. There can be no assurance that any of the pending patent applications will be approved, that the Company will develop additional proprietary products that are patentable, that any patents issued to the Company will provide the Company with competitive advantages or will not be challenged by any third parties or that the patents of others will not prevent the commercialization of products incorporating the Company's technology. Furthermore, there can be no assurance that others will not independently develop similar products, duplicate any of the Company's products or design around the Company's patents. Any of the foregoing results could have a material adverse effect on the Company's business, operating results and financial condition.

The commercial success of the Company will also depend, in part, on its ability to avoid infringing patents issued to others. If the Company were determined to be infringing any third party patent, the Company could be required to pay damages, alter its products or processes, obtain licenses or cease certain activities. In addition, if patents are issued to others which contain claims that compete or conflict with those of the Company and such competing or conflicting claims are ultimately determined to be valid, the Company may be required to pay damages, to obtain licenses to these patents, to develop or obtain alternative technology or to cease using such technology. If the Company is required to obtain any licenses, there can be no assurance that the Company will be able to do so on commercially favorable terms, if at all. The Company's failure to obtain a license to any technology that it may require to commercialize its products could have a material adverse impact on the Company's business, operating results and financial condition.

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Government Regulation 

Government regulation in the United States and other countries is a significant factor in the marketing of certain of the Company’s products and in the Company’s ongoing research and development activities. Some of the Company’s products are subject to extensive and rigorous regulation by the FDA, which regulates some of the products as medical devices and which, in some cases, requires Pre-Market Approval (“PMA”), and by foreign countries, which regulate some of the products as medical devices or drugs. Under the Federal Food, Drug, and Cosmetic Act (“FDC Act”), the FDA regulates the clinical testing, manufacturing, labeling, distribution, sale and promotion of medical devices in the United States.

Other regulatory requirements are placed on the manufacture, processing, packaging, labeling, distribution, recordkeeping and reporting of a medical device and on the quality control procedures, such as the FDA’s device QSR regulations. Manufacturing facilities are subject to periodic inspections by the FDA to assure compliance with device QSR requirements, along with pre-approval inspection (PAI) for PMA product introduction. Lifecore’s facility is subject to inspections as both a device and a drug manufacturing operation. For PMA devices, the Company that owns the product submission is required to submit an annual report and to obtain approval of a PMA supplement for modifications to the device or its labeling. Other applicable FDA requirements include the medical device reporting (“MDR”) regulation, which requires that the Company provide information to the FDA regarding deaths or serious injuries alleged to have been associated with the use of its devices, as well as product malfunctions that would likely cause or contribute to death or serious injury if the malfunction were to recur.

Employees

As of May 25, 2014, Landec had 531 full-time employees, of whom 432 were dedicated to research, development, manufacturing, quality control and regulatory affairs and 99 were dedicated to sales, marketing and administrative activities. Landec intends to recruit additional personnel in connection with the development, manufacturing and marketing of its products. None of Landec's employees is represented by a union, and Landec considers its relationship with its employees to be good.

Available Information

Landec’s website is http://www.landec.com. Landec makes available free of charge its annual, quarterly and current reports, and any amendments to those reports, as soon as reasonably practicable after electronically filing such reports with the SEC. Information contained on our website is not part of this Report.

Item 1A. Risk Factors

Landec desires to take advantage of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995 and of Section 21E and Rule 3b-6 under the Securities Exchange Act of 1934. Specifically, Landec wishes to alert readers that the following important factors could in the future affect, and in the past have affected, Landec’s actual results and could cause Landec’s results for future periods to differ materially from those expressed in any forward-looking statements made by or on behalf of Landec. Landec assumes no obligation to update such forward-looking statements.

Lapses in disclosure controls and procedures or internal control over financial reporting could materially and adversely affect the Company’s operations, profitability or reputation.

We are committed to maintaining high standards of internal control over financial reporting and disclosure controls and procedures. Nevertheless, lapses or deficiencies in disclosure controls and procedures or in our internal control over financial reporting may occur from time to time. On January 2, 2013, we reported that our audit committee reached a determination to restate our previously-filed interim financial statements for the quarter ended August 26, 2012 and that our previously-filed interim financial statements for the quarter ended August 26, 2012 should not be relied upon. We also reported management’s determination that a material weakness existed in our internal control over financial reporting at August 26, 2012. As a result of the material weakness, management also concluded that our disclosure controls and procedures were not effective at August 26, 2012.

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There can be no assurance that our disclosure controls and procedures will be effective in preventing a material weakness or significant deficiency in internal control over financial reporting from occurring in the future. Any such lapses or deficiencies may materially and adversely affect our business and results of operations or financial condition, restrict our ability to access the capital markets, require us to expend resources to correct the lapses or deficiencies, expose us to regulatory or legal proceedings, harm our reputation, or otherwise cause a decline in investor confidence.

Adverse Weather Conditions and Other Acts of God May Cause Substantial Decreases in Our Sales and/or Increases in Our Costs

Our Food Products Technology business is subject to weather conditions that affect commodity prices, crop quality and yields, and decisions by growers regarding crops to be planted. Crop diseases and severe conditions, particularly weather conditions such as unexpected or excessive rain or other precipitation, unseasonable temperature fluctuations, floods, droughts, frosts, windstorms, earthquakes and hurricanes, may adversely affect the supply of vegetables and fruits used in our business, which could reduce the sales volumes and/or increase the unit production costs. In fiscal year 2014, the Company’s operating income was negatively impacted by approximately $9.3 million in operational variances driven from produce quality and yield issues, higher labor costs and lower processing yields in the Food Products Technology business. Because a significant portion of the costs are fixed and contracted in advance of each operating year, volume declines reflecting production interruptions or other factors could result in increases in unit production costs which could result in substantial losses and weaken our financial condition.

The Global Economy is Experiencing Continued Volatility, Which May Have an Adverse Effect on Our Business

In recent years, the U.S. and international economy and financial markets experienced a significant slowdown and volatility due to uncertainties related to the availability of credit, energy prices, difficulties in the banking and financial services sectors, softness in the housing market, diminished market liquidity, geopolitical conflicts, falling consumer confidence and high unemployment rates. Ongoing volatility in the economy and financial markets could further lead to reduced demand for our products, which in turn, would reduce our revenues and adversely affect our business, financial condition and results of operations. In particular, volatility in the global markets have resulted in softer demand and more conservative purchasing decisions by customers, including a tendency toward lower-priced products, which could negatively impact our revenues, gross margins and results of operations. In addition to a reduction in sales, our profitability may decrease because we may not be able to reduce costs at the same rate as our sales decline. We cannot predict the ultimate severity or length of the current period of volatility, whether the recent signs of economic recovery will prove sustainable, or the timing or severity of future economic or industry downturns.

Given the current uncertain economic environment, our customers, suppliers and partners may have difficulties obtaining capital at adequate or historical levels to finance their ongoing business and operations, which could impair their ability to make timely payments to us. This may result in lower sales and/or inventory that may not be saleable or bad debt expense for Landec. In addition to the impact of the current market uncertainty on our customers, some of our vendors and growers may experience a reduction in their availability of funds and cash flows, which could negatively impact their business as well as ours. A further worsening of the economic environment or continued or increased volatility of the U.S. economy, including increased volatility in the credit markets, could adversely impact our customers’ and vendors’ ability or willingness to conduct business with us on the same terms or at the same levels as they have historically. Further, this economic volatility and uncertainty about future economic conditions makes it challenging for Landec to forecast its operating results, make business decisions, and identify the risks that may affect its business, sources and uses of cash, financial condition and results of operations.

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Our Future Operating Results Are Likely to Fluctuate Which May Cause Our Stock Price to Decline

In the past, our results of operations have fluctuated significantly from quarter to quarter and are expected to continue to fluctuate in the future. Apio can be affected by seasonal and weather factors which have impacted our financial results due to a shortage of essential value-added produce items. In fiscal year 2014, operational variances driven from produce quality and yield issues, higher labor costs and lower processing yields in the Food Products Technology business had an approximate $9.3 million negative impact on our operating income. Our earnings may also fluctuate based on our ability to collect accounts receivable from customers and notes receivable from growers and on price fluctuations in the fresh vegetable and fruit markets. Other factors that affect our operations include:

the seasonality and availability of our supplies,

our ability to process produce during critical harvest periods,

the timing and effects of ripening,

the degree of perishability,

the effectiveness of worldwide distribution systems,

total worldwide industry volumes,

the seasonality and timing of consumer demand,

foreign currency fluctuations, and

foreign importation restrictions and foreign political risks.

As a result of these and other factors, we expect to continue to experience fluctuations in quarterly operating results.

Uncertainty Relating To Integration Of New Business Acquisitions. 

The successful integration of new business acquisitions, including the GreenLine acquisition, may require substantial effort from the Company's management. The diversion of the attention of management and any difficulties encountered in the 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, and sales and marketing efforts. In addition, the process of combining organizations located in different regions of the United States 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 customer support 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.

We May Not Be Able to Achieve Acceptance of Our New Products in the Marketplace

Our success in generating significant sales of our products depends in part on our ability and our partners and licensees to achieve market acceptance of our new products and technology. The extent to which, and rate at which, we achieve market acceptance and penetration of our current and future products is a function of many variables including, but not limited to:

price,

safety,

efficacy,

reliability,

conversion costs,

regulatory approvals,

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marketing and sales efforts, and

general economic conditions affecting purchasing patterns.

We may not be able to develop and introduce new products and technologies in a timely manner or new products and technologies may not gain market acceptance. We or our partners/customers are in the early stage of product commercialization of certain Intelimer-based specialty packaging, HA-based products and other Intelimer polymer products. We expect that our future growth will depend in large part on our or our partners/customers ability to develop and market new products in our target markets and in new markets. In particular, we expect that our ability to compete effectively with existing food products companies will depend substantially on developing, commercializing, achieving market acceptance of and reducing the cost of producing our products. In addition, commercial applications of our temperature switch polymer technology are relatively new and evolving. Our failure to develop new products or the failure of our new products to achieve market acceptance would have a material adverse effect on our business, results of operations and financial condition.

We Face Strong Competition in the Marketplace

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 obsolete and non-competitive. We operate in highly competitive and rapidly evolving fields, and new developments are expected to continue at a rapid pace. Competition from large food products, industrial, medical and pharmaceutical companies is expected to be intense. In addition, the nature of our collaborative arrangements may result in our corporate partners and licensees becoming our competitors. Many of these competitors have substantially greater financial and technical resources and production and marketing capabilities than we do, and may have substantially greater experience in conducting clinical and field trials, obtaining regulatory approvals and manufacturing and marketing commercial products.

We Have a Concentration of Manufacturing for Apio and Lifecore and May Have to Depend on Third Parties to Manufacture Our Products

Any disruptions in our primary manufacturing operation at Apio’s facilities in Guadalupe, California or Bowling Green, Ohio or Lifecore’s facility in Chaska, Minnesota would reduce our ability to sell our products and would have a material adverse effect on our financial results. Additionally, we may need to consider seeking collaborative arrangements with other companies to manufacture our products. If we become dependent upon third parties for the manufacture of our products, our profit margins and our ability to develop and deliver those products on a timely basis may be adversely affected. Failures by third parties may impair our ability to deliver products on a timely basis and impair our competitive position. We may not be able to continue to successfully operate our manufacturing operations at acceptable costs, with acceptable yields, and retain adequately trained personnel.

Our Dependence on Single-Source Suppliers and Service Providers May Cause Disruption in Our Operations Should Any Supplier Fail to Deliver Materials

We may experience difficulty acquiring materials or services for the manufacture of our products or we may not be able to obtain substitute vendors. In addition, we may not be able to procure comparable materials at similar prices and terms within a reasonable time. Several services that are provided to Apio are obtained from a single provider. Several of the raw materials we use to manufacture our products are currently purchased from a single source, including some monomers used to synthesize Intelimer polymers, substrate materials for our breathable membrane products and 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.

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We May Be Unable to Adequately Protect Our Intellectual Property Rights

We may receive notices from third parties, including some of our competitors, claiming infringement by our products of their patent and other proprietary rights. Regardless of their merit, responding to any such claim could be time-consuming, result in costly litigation and require us to enter royalty and licensing agreements which may not be offered or available on terms acceptable to us. If a successful claim is made against us and we fail to develop or license a substitute technology, we could be required to alter our products or processes and our business, results of operations or financial position could be materially adversely affected. Our success depends in large part on our ability to obtain patents, maintain trade secret protection and operate without infringing on the proprietary rights of third parties. Any pending patent applications we file may not be approved and we may not be able to develop additional proprietary products that are patentable. Any patents issued to us may not provide us with competitive advantages or may be challenged by third parties. Patents held by others may prevent the commercialization of products incorporating our technology. Furthermore, others may independently develop similar products, duplicate our products or design around our patents.

Our Operations Are Subject to Regulations that Directly Impact Our Business

Our products and operations are subject to governmental regulation in the United States and foreign countries. The manufacture of our products is subject to periodic inspection by regulatory authorities. We may not be able to obtain necessary regulatory approvals on a timely basis or at all. Delays in receipt of or failure to receive approvals or loss of previously received approvals would have a material adverse effect on our business, financial condition and results of operations. Although we have no reason to believe that we will not be able to comply with all applicable regulations regarding the manufacture and sale of our products and polymer materials, regulations are always subject to change and depend heavily on administrative interpretations and the country in which the products are sold. Future changes in regulations or interpretations relating to matters such as safe working conditions, laboratory and manufacturing practices, environmental controls, and disposal of hazardous or potentially hazardous substances may adversely affect our business.

We are subject to FDA rules and regulations concerning the safety of the food products handled and sold by Apio, and the facilities in which they are packed and processed. Failure to comply with the applicable regulatory requirements can, among other things, result in:

fines, injunctions, civil penalties, and suspensions,

withdrawal of regulatory approvals,

product recalls and product seizures, including cessation of manufacturing and sales,

operating restrictions, and

criminal prosecution.

We may be required to incur significant costs to comply with the laws and regulations in the future which may have a material adverse effect on our business, operating results and financial condition.

Our food packaging products are subject to regulation under the Food, Drug and Cosmetic Act (the “FDC Act”). Under the FDC Act, any substance that when used as intended may reasonably be expected to become, directly or indirectly, a component or otherwise affect the characteristics of any food may be regulated as a food additive unless the substance is generally recognized as safe. Food packaging materials are generally not considered food additives by the FDA because these products are not expected to become components of food under their expected conditions of use. We consider our breathable membrane product to be a food packaging material not subject to regulation or approval by the FDA. We have not received any communication from the FDA concerning our breathable membrane product. If the FDA were to determine that our breathable membrane products are food additives, we may be required to submit a food additive petition for approval by the FDA. The food additive petition process is lengthy, expensive and uncertain. A determination by the FDA that a food additive petition is necessary would have a material adverse effect on our business, operating results and financial condition.

Our Food Products Technology business is subject to the Perishable Agricultural Commodities Act (“PACA”). PACA regulates fair trade standards in the fresh produce industry and governs all the products sold by Apio. Our failure to comply with the PACA requirements could among other things, result in civil penalties, suspension or revocation of a license to sell produce, and in the most egregious cases, criminal prosecution, which could have a material adverse effect on our business.

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Lifecore’s existing products and its products under development are considered to be medical devices and therefore, require clearance or approval by the FDA before commercial sales can be made in the United States. The products also require the approval of foreign government agencies before sales may be made in many other countries. The process of obtaining these clearances or approvals varies according to the nature and use of the product. It can involve lengthy and detailed safety, efficacy and clinical studies, as well as extensive site inspections and lengthy regulatory agency reviews. There can be no assurance that any of the Company’s clinical studies will show safety or effectiveness; that any of the Company’s products that require FDA clearance or appoval will obtain such clearance or approval on a timely basis, on terms acceptable to the Company for the purpose of actually marketing the products, or at all; or that following any such clearance or approval previously unknown problems will not result in restrictions on the marketing of the products or withdrawal of clearance or approval.

In addition, most of the existing products being sold by Lifecore and its customers are subject to continued regulation by the FDA, various state agencies and foreign regulatory agencies which regulate manufacturing, labeling and record keeping procedures for such products. Marketing clearances or approvals by these agencies can be withdrawn due to failure to comply with regulatory standards or the occurrence of unforeseen problems following initial clearance or approval. These agencies can also limit or prevent the manufacture or distribution of Lifecore’s products. A determination that Lifecore is in violation of such regulations could lead to the imposition of civil penalties, including fines, product recalls or product seizures, injunctions, and, in extreme cases, criminal sanctions.

Federal, state and local regulations impose various environmental controls on the use, storage, discharge or disposal of toxic, volatile or otherwise hazardous chemicals and gases used in some of the manufacturing processes. Our failure to control the use of, or to restrict adequately the discharge of, hazardous substances under present or future regulations could subject us to substantial liability or could cause our manufacturing operations to be suspended and changes in environmental regulations may impose the need for additional capital equipment or other requirements.

We Depend on Strategic Partners and Licenses for Future Development

Our strategy for development, clinical and field testing, manufacture, commercialization and marketing for some of our current and future products includes entering into various collaborations with corporate partners, licensees and others. We are dependent on our corporate partners to develop, test, manufacture and/or market some of our products. Although we believe that our partners in these collaborations have an economic motivation to succeed in performing their contractual responsibilities, the amount and timing of resources to be devoted to these activities are not within our control. Our partners may not perform their obligations as expected or we may not derive any additional revenue from the arrangements. Our partners may not pay any additional option or license fees to us or may not develop, market or pay any royalty fees related to products under such agreements. Moreover, some of the collaborative agreements provide that they may be terminated at the discretion of the corporate partner, and some of the collaborative agreements provide for termination under other circumstances. Our partners may pursue existing or alternative technologies in preference to our technology. Furthermore, we may not be able to negotiate additional collaborative arrangements in the future on acceptable terms, if at all, and our collaborative arrangements may not be successful.

Our International Sales May Expose Our Business to Additional Risks

For fiscal year 2014, approximately 29% of our total revenues were derived from product sales to international customers. A number of risks are inherent in international transactions. International sales and operations may be limited or disrupted by any of the following:

regulatory approval process,

government controls,

export license requirements,

political instability,

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price controls,

trade restrictions,

changes in tariffs, or

difficulties in staffing and managing international operations.

Foreign regulatory agencies have or may establish product standards different from those in the United States, and any inability to obtain foreign regulatory approvals on a timely basis could have a material adverse effect on our international business, and our financial condition and results of operations. While our foreign sales are currently priced in dollars, fluctuations in currency exchange rates may reduce the demand for our products by increasing the price of our products in the currency of the countries in which the products are sold. Regulatory, geopolitical and other factors may adversely impact our operations in the future or require us to modify our current business practices.

Cancellations or Delays of Orders by Our Customers May Adversely Affect Our Business

During fiscal year 2014, sales to our top five customers accounted for approximately 42% of our revenues, with our two largest customers from our Food Products Technology segment, Costco Wholesale Corporation and Wal-mart, Inc. accounting for approximately 21% and 11%, respectively, of our revenues. We expect that, for the foreseeable future, a limited number of customers may continue to account for a substantial portion of our revenues. We may experience changes in the composition of our customer base as we have experienced in the past. 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 could materially and adversely affect our business, operating results and financial condition. In addition, since some of the products processed by Apio and Lifecore are sole sourced to customers, our operating results could be adversely affected if one or more of our major customers were to develop other sources of supply. Our current customers may not continue to place orders, orders by existing customers may be canceled or may not continue at the levels of previous periods or we may not be able to obtain orders from new customers.

Our Sale of Some Products May Increase Our Exposure to Product Liability Claims

The testing, manufacturing, marketing, and sale of the products we develop involve an inherent risk of allegations of product liability. If any of our products were determined or alleged to be contaminated or defective or to have caused a harmful accident to an end-customer, we could incur substantial costs in responding to complaints or litigation regarding our products and our product brand image could be materially damaged. Such events may have a material adverse effect on our business, operating results and financial condition. 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 currently maintain product liability insurance. While we think the coverage and limits are consistent with industry standards, our coverage may not be adequate or 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 uninsured liabilities or in excess of insured liabilities could have a material adverse effect on our business, operating results and financial condition.

Our Stock Price May Fluctuate in Accordance with Market Conditions

The following events may cause the market price of our common stock to fluctuate significantly:

technological innovations applicable to our products,

our attainment of (or failure to attain) milestones in the commercialization of our technology,

our development of new products or the development of new products by our competitors,

new patents or changes in existing patents applicable to our products,

our acquisition of new businesses or the sale or disposal of a part of our businesses,

development of new collaborative arrangements by us, our competitors or other parties,

changes in government regulations applicable to our business,

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changes in investor perception of our business,

fluctuations in our operating results, and

changes in the general market conditions in our industry.

                These broad fluctuations may adversely affect the market price of our common stock.

We May Be Exposed to Employment Related Claims and Costs that Could Materially Adversely Affect Our Business

We have been subject in the past, and may be in the future, to claims by employees based on allegations of discrimination, negligence, harassment and inadvertent employment of undocumented workers or unlicensed personnel, and we may be subject to payment of workers' compensation claims and other similar claims. We could incur substantial costs and our management could spend a significant amount of time responding to such complaints or litigation regarding employee claims, which may have a material adverse effect on our business, operating results and financial condition.

We Are Dependent on Our Key Employees and if One or More of Them Were to Leave, We Could Experience Difficulties in Replacing Them and Our Operating Results Could Suffer

The success of our business depends to a significant extent on the continued service and performance of a relatively small number of key senior management, technical, sales, and marketing personnel. The loss of any of our key personnel for an extended period would likely harm our business. In addition, competition for senior level personnel with knowledge and experience in our different lines of business is intense. If any of our key personnel were to leave, we would need to devote substantial resources and management attention to replace 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.

We May Issue Preferred Stock with Preferential Rights that Could Affect Your Rights

The issuance of shares of preferred stock could have the effect of making it more difficult for a third party to acquire a majority of our outstanding stock, and the holders of such preferred stock could have voting, dividend, liquidation and other rights superior to those of holders of our Common Stock.

We Have Never Paid any Dividends on Our Common Stock

We have not paid any dividends on our Common Stock since inception and do not expect to in the foreseeable future. Any dividends may be subject to preferential dividends payable on any preferred stock we may issue.

Our Profitability Could Be Materially and Adversely Affected if it Is Determined that the Book Value of Goodwill is Higher than Fair Value

Our balance sheet includes an amount designated as “goodwill” that represents a portion of our assets and our stockholders’ equity. Goodwill arises when an acquirer pays more for a business than the fair value of the tangible and separately measurable intangible net assets. In accordance with accounting guidance, the amortization of goodwill has been replaced with an “impairment test” which requires that we compare the fair value of goodwill to its book value at least annually and more frequently if circumstances indicate a possible impairment. If we determine at any time in the future that the book value of goodwill is higher than fair value then the difference must be written-off, which could materially and adversely affect our reported profitability.

Item 1B. Unresolved Staff Comments

None.

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Item 2.     Properties

As of May 25, 2014, the Company owned or leased properties in Menlo Park and Arroyo Grande, Guadalupe California; Chaska, Minnesota; Bowling Green, Perrysburg and McClure, Ohio; Hanover, Pennsylvania; Vero Beach, Florida; Rock Hill, South Carolina and Rock Tavern, New York.

These properties are described below:

				Acres
Location	Business Segment	Ownership	Facilities	of Land	Lease Expiration
Menlo Park, CA	Corporate	Leased	14,600 square feet of office and laboratory space	—	12/31/16
Chaska, MN	HA-based Biomaterials	Owned	114,000 square feet of office, laboratory and manufacturing space	27.5	—
Guadalupe, CA	Food Products Technology	Owned	199,000 square feet of office space, manufacturing and cold storage	17.7	—
Bowling Green, OH	Food Products Technology	Owned	55,900 square feet of office space, manufacturing and cold storage	7.7	—
Hanover, PA	Food Products Technology	Owned	18,700 square feet of office space, manufacturing and cold storage	15.3	—
Vero Beach, FL	Food Products Technology	Leased	9,200 square feet of office space, manufacturing and cold storage	—	12/31/14
Rock Hill, SC	Food Products Technology	Owned	16,400 square feet of cold storage and office space	3.6	—
Rock Tavern, NY	Food Products Technology	Leased	7,700 square feet of cold storage and office space	—	8/23/23
McClure, OH	Food Products Technology	Leased	Farm land	185	12/31/14
Perrysburg, OH	Food Products Technology	Leased	9,000 square feet of office space	—	10/31/14
Guadalupe, CA	Food Products Technology	Leased	105,000 square feet of parking space	2.4	9/30/18
Guadalupe, CA	Food Products Technology	Leased	5,300 square feet of office space	—	5/31/17
Arroyo Grande, CA	Food Export	Leased	1,100 square feet of office space	—	Month-to- Month

The obligations of the Company under its credit agreement with BMO Harris Bank N.A. (“BMO Harris”) are secured by a lien on the Chaska, MN land and building. The obligations of the Company under its credit agreement with General Electric Capital Corporation (“General Electric”) are secured by a lien on all of the land and buildings of the Food Products Technology segment.

Item 3.     Legal Proceedings

 As of the date of this report, the Company is not a party to any legal proceedings.

Item 4.     Mine Safety Disclosures

Not applicable.

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PART II

Item 5.     Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The Common Stock is traded on The NASDAQ Global Select Market under the symbol “LNDC”. The following table sets forth for each period indicated the high and low sales prices for the Common Stock.

Fiscal Year Ended May 25, 2014		High		Low
	4th Quarter ending May 25, 2014	$	12.16	$	10.19
	3rd Quarter ending February 23, 2014	$	12.62	$	10.08
	2nd Quarter ending November 24, 2013	$	13.57	$	11.34
	1st Quarter ending August 25, 2013	$	15.82	$	13.21

Fiscal Year Ended May 26, 2013		High		Low
	4th Quarter ending May 26, 2013	$	14.66	$	10.48
	3rd Quarter ending February 24, 2013	$	12.87	$	9.15
	2nd Quarter ending November 25, 2012	$	12.20	$	8.86
	1st Quarter ending August 26, 2012	$	9.96	$	6.72

Holders

There were approximately 57 holders of record of 26,839,725 shares of outstanding Common Stock as of July 18, 2014. Since certain holders are listed under their brokerage firm’s names, the actual number of stockholders is higher.

Dividends

The Company has not paid any dividends on the Common Stock since its inception. The Company presently intends to retain all future earnings, if any, for its business and does not anticipate paying cash dividends on its Common Stock in the foreseeable future.

Issuer Purchases of Equity Securities

There were no shares repurchased by the Company during fiscal years 2014 or 2013. The Company may still repurchase up to $3.8 million of the Company’s Common Stock under the Company’s stock repurchase plan announced on July 14, 2010.

Item 6.     Selected Financial Data

The information set forth below is not necessarily indicative of the results of future operations and should be read in conjunction with the information contained in Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes to Consolidated Financial Statements contained in Item 8 of this report.

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	Year Ended May 25,  2014			Year  Ended  May 26, 2013			Year  Ended May 27, 2012			Year  Ended  May 29,  2011			Year  Ended  May 30, 2010
Statement of Income Data:
(in thousands)
Product sales		476,813			441,708			317,552			276,729			238,224
Cost of product sales		414,249			378,948			265,414			230,034			204,458
Gross profit		62,564			62,760			52,138			46,695			33,766
Operating costs and expenses:
Research and development		7,204			9,294			9,625			9,275			4,361
Selling, general and administrative		35,170			32,531			26,515			24,608			17,698
Other operating (income)/expenses		—			(3,933	)		1,421			4,780			3,725
Total operating costs and expenses		42,374			37,892			37,561			38,663			25,784
Operating profit		20,190			24,868			14,577			8,032			7,982
Dividend income		1,125			1,125			1,125			328			—
Interest income		260			179			180			430			834
Interest expense and other		(1,650	)		(2,008	)		(929	)		(820	)		(88	)
Other income		10,000			8,100			5,331			472			—
Net income before taxes		29,925			32,264			20,284			8,442			8,728
Income tax expense		(10,583	)		(9,452	)		(7,185	)		(4,181	)		(4,262	)
Consolidated net income		19,342			22,812			13,099			4,261			4,466
Non-controlling interest		(197	)		(225	)		(403	)		(341	)		(482	)
Net income applicable to common stockholders	$	19,145		$	22,587		$	12,696		$	3,920		$	3,984
Basic net income per share	$	0.72		$	0.87		$	0.49		$	0.15		$	0.15
Diluted net income per share	$	0.71		$	0.85		$	0.49		$	0.15		$	0.15
Shares used in per share computation:
Basic		26,628			25,830			25,849			26,397			26,382
Diluted		27,120			26,626			26,126			26,626			26,633

	May 25,  2014		May 26,  2013		May 27, 2012		May 29, 2011		May 30, 2010
Balance Sheet Data:
(in thousands)
Cash and cash equivalents	$	14,243	$	13,718	$	22,177	$	8,135	$	27,817
Total assets		313,623		290,942		277,692		206,312		200,197
Long-term debt		34,372		40,305		47,317		19,830		23,770
Retained earnings		71,554		52,409		29,822		17,126		13,206
Total stockholders’ equity	$	203,069	$	178,693	$	149,742	$	136,055	$	130,784

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Company’s Consolidated Financial Statements contained in Item 8 of this report. Except for the historical information contained herein, the matters discussed in this report are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include, without limitation, those mentioned in this report and, in particular, the factors described in Item 1A. "Risk Factors.” Landec undertakes no obligation to revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this report.

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Overview

Landec Corporation and its subsidiaries (“Landec” or the “Company”) design, develop, manufacture and sell differentiated products for food and biomaterials markets and license technology applications to partners. The Company has two proprietary polymer technology platforms: 1) Intelimer® polymers, and 2) hyaluronan (“HA”) biopolymers. The Company’s HA biopolymers are proprietary in that they are specially formulated for specific customers to meet strict regulatory requirements. The Company’s polymer technologies, along with its customer relationships and trade names, are the foundation, and a key differentiating advantage upon which Landec has built its business. The Company sells specialty packaged branded Eat Smart and GreenLine and private label fresh-cut vegetables and whole produce to retailers, club stores and foodservice operators, primarily in the United States, Canada and Asia through its Apio, Inc. (“Apio”) subsidiary and sells HA-based biomaterials through its Lifecore Biomedical, Inc. (“Lifecore”) subsidiary.

Landec has three core businesses – Food Products Technology, Food Export, and HA-based Biomaterials. The Food Products Technology segment combines the Company’s BreatheWay packaging technology with Apio’s branded Eat Smart and GreenLine and private label fresh-cut and whole produce business. The Food Export business is operated through Apio’s Cal-Ex export company which purchases and sells whole fruit and vegetable products to predominantly Asian markets. The HA-based Biomaterials business sells products utilizing HA in the ophthalmic, orthopedic and veterinary segments and also supplies HA to customers pursuing other medical applications, such as aesthetic surgery, medical device coatings, tissue engineering and pharmaceuticals. See "Business - Description of Core Business".

As of May 25, 2014, the Company’s retained earnings were $72 million. The Company may incur losses in the future. The amount of future net profits, if any, is uncertain and there can be no assurance that the Company will be able to sustain profitability in future years.

Critical Accounting Policies and Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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; sales returns and allowances; recognition and measurement of current and deferred income tax assets and liabilities; the assessment of recoverability of long-lived assets; the valuation of intangible assets and inventory; the valuation of investments; and the valuation and recognition of stock-based compensation.

These estimates involve the consideration of complex factors and require management to make judgments. The analysis of historical and future trends can require extended periods of time to resolve, and are subject to change from period to period. The actual results may differ from management’s estimates.

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The allowance for doubtful accounts is based on review of the overall condition of accounts receivable balances and review of significant past due accounts. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventories

Inventories are stated at the lower of cost or market. If the cost of the inventories exceeds their expected market value, provisions are recorded currently for the difference between the cost and the market value. These provisions are determined based on specific identification for unusable inventory and an additional reserve, based on historical losses, for inventory currently considered to be usable.

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Revenue Recognition

Revenue from product sales is recognized when there is persuasive evidence that an arrangement exists, title has transferred, the price is fixed and determinable, and collectability is reasonably assured. Allowances are established for estimated uncollectible amounts, product returns, and discounts based on specific identification and historical losses.

Apio’s Food Products Technology revenues generally consist of revenues generated from the sale of specialty packaged fresh-cut and whole value-added processed vegetable products that are generally washed and packaged in our proprietary packaging and sold under Apio’s Eat Smart and GreenLine brands and various private labels. Revenue is generally recognized upon shipment of these products to customers. The Company takes title to all produce it trades and/or packages, and therefore, records revenues and cost of sales at gross amounts in the Consolidated Statements of Comprehensive Income

In addition, Food Products Technology value-added revenues include the revenues generated from Apio Cooling, LP, a vegetable cooling operation in which Apio is the general partner with a 60% ownership position and from the sale of BreatheWay packaging to license partners. Revenue is recognized on the vegetable cooling operations as cooling and storage services are provided to our customers. Sales of BreatheWay packaging are recognized when shipped to our customers.

Apio’s Food Export revenues consist of revenues generated from the purchase and sale of primarily whole commodity fruit and vegetable products to Asia by Cal-Ex. As most Cal-Ex customers are in countries outside of the U.S., title transfers and revenue is generally recognized upon arrival of the shipment in the foreign port. Apio records revenue equal to the sale price to third parties because it takes title to the product while in transit.

Our HA-based Biomaterials business principally generates revenue through the sale of products containing HA. Lifecore primarily sells products to customers in three medical areas: (1) Ophthalmic, which represented approximately 60% of Lifecore’s revenues in fiscal year 2014, (2) Orthopedic, which represented approximately 20% of Lifecore’s revenues in fiscal year 2014 and (3) Veterinary/Other. The vast majority of revenues from our HA-based Biomaterials business are recognized upon shipment.

A small amount of revenues from our HA-based Biomaterials business is related to contract research and development (R&D) services and multi-element arrangement services with customers where we provide products and/or services in a bundled arrangement.

Contract revenue R&D is recorded as earned, based on the performance requirements of the contract. Non-refundable contract fees for which no further performance obligations exist, and there is no continuing involvement by the Company, are recognized on the earlier of when the payments are received or when collection is assured.

For sales arrangements that contain multiple elements, the Company splits the arrangement into separate units of accounting if the individually delivered elements have value to the customer on a standalone basis. The Company also evaluates whether multiple transactions with the same customer or related party should be considered part of a multiple element arrangement, whereby the Company assesses, among other factors, whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of each other. The Company then allocates revenue to each element based on a selling price hierarchy. The relative selling price for a deliverable is based on its vendor-specific objective evidence (VSOE), if available, third-party evidence (TPE), if VSOE is not available, or estimated selling price, if neither VSOE nor TPE is available. The Company then recognizes revenue on each deliverable in accordance with its policies for product and service revenue recognition. The Company is not typically able to determine VSOE or TPE, and therefore, uses estimated selling prices to allocate revenue between the elements of the arrangement.

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The Company limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services or future performance obligations or subject to customer-specific cancellation rights. The Company evaluates each deliverable in an arrangement to determine whether they represent separate units of accounting. A deliverable constitutes a separate unit of accounting when it has stand-alone value, and for an arrangement that includes a general right of return relative to the delivered products or services, delivery or performance of the undelivered product or service is considered probable and is substantially controlled by the Company. The Company considers a deliverable to have stand-alone value if the product or service is sold separately by the Company or another vendor or could be resold by the customer. Further, the revenue arrangements generally do not include a general right of return relative to the delivered products. Where the aforementioned criteria for a separate unit of accounting are not met, the deliverable is combined with the undelivered element(s) and treated as a single unit of accounting for the purposes of allocation of the arrangement consideration and revenue recognition. The Company allocates the total arrangement consideration to each separable element of an arrangement based upon the relative selling price of each element. Allocation of the consideration is determined at arrangement inception on the basis of each unit’s relative selling price. In instances where the Company has not established fair value for any undelivered element, revenue for all elements is deferred until delivery of the final element is completed and all recognition criteria are met.

Licensing revenue is recognized in accordance with prevailing accounting guidance. Initial license fees are deferred and amortized to revenue over the period of the agreement when a contract exists, the fee is fixed and determinable, and collectability is reasonably assured. Noncancellable, nonrefundable license fees are recognized over the period of the agreement, including those governing research and development activities and any related supply agreement entered into concurrently with the license when the risk associated with commercialization of a product is non-substantive at the outset of the arrangement.

From time to time, the Company offers customers sales incentives, which include volume rebates and discounts. These amounts are estimated on a quarterly basis and recorded as a reduction of revenue.

A summary of revenues by type of revenue arrangement as described above is as follows (in thousands):

	Year ended May 25, 2014		Year ended May 26, 2013
Recorded upon shipment	$	398,938	$	359,518
Recorded upon acceptance in foreign port		69,710		78,442
Revenue from license fees, R&D contracts and royalties/profit sharing		1,354		1,975
Revenue from multiple element arrangements		6,811		1,773
TOTAL	$	476,813	$	441,708

Goodwill and Other Intangibles

The Company’s intangible assets are comprised of customer relationships with an estimated useful life of twelve to thirteen years and trademarks/trade names and goodwill with indefinite lives (collectively, “intangible assets”), which the Company recognized in accordance with accounting guidance (i) upon the acquisition of GreenLine by Apio in April 2012, (ii) upon the acquisition of Lifecore in April 2010 and (iii) upon the acquisition of Apio in December 1999. Accounting guidance defines goodwill as “the excess of the cost of an acquired entity over the net of the estimated fair values of the assets acquired and the liabilities assumed at date of acquisition.” All intangible assets, including goodwill, associated with the acquisition of Lifecore was allocated to our HA-based Biomaterials reporting unit and the acquisitions of Apio and GreenLine were allocated to our Food Products Technology reporting unit pursuant to accounting guidance based upon the allocation of assets and liabilities acquired and consideration paid for each reporting unit. As of May 25, 2014, the HA-based Biomaterials reporting unit had $13.9 million of goodwill and the Food Products Technology reporting unit had $35.7 million of goodwill.

The Company tests its indefinite-lived intangible assets for impairment at least annually, in accordance with accounting guidance. For non-goodwill indefinite-lived assets, the Company performs a qualitative analysis in accordance with ASC 350-30-35. For goodwill, the Company performs a quantitative analysis in accordance with ASC 350-20-35.

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Application of the impairment tests for indefinite-lived intangible assets requires significant judgment by management, including identification of reporting units, assignment of assets and liabilities to reporting units, assignment of intangible assets to reporting units, and the determination of the fair value of each indefinite-lived intangible asset and reporting unit based upon projections of future net cash flows, discount rates and market multiples, which judgments and projections are inherently uncertain.

During the fiscal quarter ended February 23, 2014, the Company voluntarily changed the date of its annual goodwill and indefinite-lived intangible assets impairment testing from the last day of the fiscal month in July to the first day of the fiscal fourth quarter. This voluntary change is preferable under the circumstances as it provides the Company with additional time to complete its annual goodwill and indefinite-lived intangible asset impairment testing in advance of its year-end reporting and results in better alignment with the Company’s strategic planning and forecasting process. The voluntary change in accounting principle related to the annual testing date will not delay, accelerate, or avoid an impairment charge. This change is not applied retrospectively as it is impracticable to do so because retrospective application would require application of significant estimates and assumptions with the use of hindsight. Accordingly, the change will be applied prospectively.

The Company tested its indefinite-lived intangible assets for impairment as of February 24, 2014 and determined that no adjustments to the carrying values of these assets were necessary as of that date. On a quarterly basis, the Company considers the need to update its most recent annual tests for possible impairment of its indefinite-lived intangible assets, based on management’s assessment of changes in its business and other economic factors since the most recent annual evaluation. Such changes, if significant or material, could indicate a need to update the most recent annual tests for impairment of the indefinite-lived intangible assets during the current period. The results of these tests could lead to write-downs of the carrying values of these assets in the current period.

The Company uses the discounted cash flow (“DCF”) approach to develop an estimate of fair value for goodwill. The DCF approach recognizes that current value is premised on the expected receipt of future economic benefits. Indications of value are developed by discounting projected future net cash flows to their present value at a rate that reflects both the current return requirements of the market and the risks inherent in the specific investment. The market approach is not used to value the Company’s reporting units because insufficient market comparables exist to enable the Company to develop a reasonable fair value due to the unique nature of each of the Company’s reporting units.

The DCF associated with the annual goodwill impairment analysis for the Food Products Technology reporting unit is based on management’s five-year projection of revenues, gross profits and operating profits by fiscal year and assumes a 36% effective tax rate for each year. Management takes into account the historical trends of the Food Products Technology reporting unit and the industry categories in which it operates along with inflationary factors, current economic conditions, new product introductions, cost of sales, operating expenses, capital requirements and other relevant data when developing its projection. The estimated fair value of the Food Products Technology reporting unit as of February 24, 2014 was 136% of its book value at that date, therefore, no goodwill impairment was deemed to exist. For the test performed as of July 21, 2013, the projected cash flow from operations for determining the DCF for fiscal year 2014 was $10.1 million for the Food Products Technology reporting unit. The actual cash flow from operations for fiscal year 2014 was $10.5 million.

The DCF associated with the annual goodwill impairment analysis for the HA-based Biomaterials reporting unit is based on management’s five-year projections of revenues, gross profits and operating profits by fiscal year and assumes a 36% effective tax rate for each year. Management takes into account the historical trends of HA-based Biomaterials reporting unit and the industry categories in which it operates along with inflationary factors, current economic conditions, new product introductions, cost of sales, operating expenses, capital requirements and other relevant data when developing its projection. The estimated fair value of the HA-based Biomaterials reporting unit as of February 24, 2014 was 176% of its book value at that date, therefore, no goodwill impairment was deemed to exist. For the test performed as of July 21, 2013, the projected cash flow from operations for determining the DCF for fiscal year 2014 was $6.3 million for the HA-based Biomaterials reporting unit. The actual cash flow from operations for fiscal year 2014 was $10.2 million. The difference of $3.9 million is primarily due to timing of working capital changes and lower than planned intercompany charges for income taxes.

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Income Taxes

The Company accounts for income taxes in accordance with accounting guidance which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. The Company maintains valuation allowances when it is likely that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the Company’s income tax provision in the period of change. In determining whether a valuation allowance is warranted, the Company takes into account such factors as prior earnings history, expected future earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. At May 25, 2014, the Company had a valuation allowance of $881,000 against deferred tax assets.

In addition to valuation allowances, the Company establishes tax-contingency accruals for uncertain tax positions. The tax-contingency accruals are adjusted in light of changing facts and circumstances, such as the progress of tax audits, case law and emerging legislation. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. The Company’s effective tax rate includes the impact of tax-contingency accruals as considered appropriate by management.

A number of years may elapse before a particular matter, for which the Company has accrued, is audited and finally resolved. The number of years with open tax audits varies by jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes its tax-contingency accruals are adequate to address known tax contingencies. Favorable resolution of such matters could be recognized as a reduction to the Company’s effective tax rate in the year of resolution. Unfavorable settlement of any particular issue could increase the effective tax rate. Any resolution of a tax issue may require the use of cash in the year of resolution. The Company’s tax-contingency accruals are presented in the balance sheet within accrued liabilities.

Stock-Based Compensation

The Company’s stock-based awards include stock option grants and restricted stock unit awards (RSUs).

The estimated fair value for stock options, which determines the Company’s calculation of compensation expense, is based on the Black-Scholes pricing model. In addition, the accounting guidance requires the estimation of the expected forfeitures of stock-based awards at the time of grant. As a result, the Company uses historical data to estimate pre-vesting forfeitures and records stock-based compensation expense only for those awards that are expected to vest and revises those estimates in subsequent periods if the actual forfeitures differ from the prior estimates.

Fair Value Measurements

The Company uses fair value measurement accounting for financial assets and liabilities and for financial instruments and certain other items measured at fair value. The Company has elected the fair value option for its investment in a non-public company (see Note 4 to the Consolidated Financial Statements). The Company has not elected the fair value option for any of its other eligible financial assets or liabilities.

The accounting guidance established a three-tier hierarchy for fair value measurements, which prioritizes the inputs used in measuring fair value as follows:

Level 1 – observable inputs such as quoted prices for identical instruments in active markets.

Level 2 – inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data.

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Level 3 – unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions.

As of May 25, 2014, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis, including cash equivalents, marketable securities, interest rate swap and its minority interest investment in Windset.

The fair value of the Company’s marketable securities is determined based on observable inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Therefore, the Company has categorized its marketable securities as a Level 1 measurement.

The fair value of the Company’s interest rate swap is determined based on model inputs that can be observed in a liquid market, including yield curves, and is categorized as a Level 2 measurement.

The Company has elected the fair value option of accounting for its investment in Windset. The calculation of fair value utilizes significant unobservable inputs in the discounted cash flow models, including projected cash flows, growth rates and discount rates. As a result, the Company’s investment in Windset is considered to be a Level 3 measurement investment. The change in the fair market value of the Company’s investment in Windset for the fiscal years ended May 25, 2014 and May 26, 2013 was due to the Company’s 20.1% minority interest in the change in the fair market value of Windset during those periods. In determining the fair value of the investment in Windset, the Company utilizes the following significant unobservable inputs in the discounted cash flow models:

	At May 25, 2014					At May 26, 2013
Annual consolidated revenue growth rates			4%				3%	to	9%
Annual consolidated expense growth rates			4%				3%	to	8%
Consolidated income tax rates			15%					15%
Consolidated discount rates		16%	to	22	%		18%	to	28%

The revenue growth, expense growth and income tax rate assumptions, consider the Company's best estimate of the trends in those items over the discount period.   The discount rate assumption takes into account the risk-free rate of return, the market equity risk premium and the company’s specific risk premium and then applies an additional discount for lack of marketability of the underlying securities.    The discounted cash flow valuation model used by the Company has the following sensitivity to changes in inputs and assumptions (in thousands):

	Impact on value of Windset investment as of May 25, 2014
10% increase in revenue growth rates	$	3,200
10% increase in expense growth rates	$	(2,300	)
10% increase in income tax rates		—
10% increase in discount rates	$	(1,500	)

Imprecision in estimating unobservable market inputs can affect the amount of gain or loss recorded for a particular position. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

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The following table summarizes the fair value of the Company’s assets and liabilities that are measured at fair value on a recurring basis, as of May 25, 2014 and May 26, 2013 (in thousands):

	Fair Value at May 25, 2014						Fair Value at May 26, 2013
Assets:	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Marketable securities	$	-	$	-	$	-	$	1,545	$	-	$	-
Investment in private company		-		-		39,600		-		-		29,600
Total	$	-	$	-	$	39,600	$	1,545	$	-	$	29,600
Liabilities:
Interest rate swap		-		44		-		-		163		-
Total	$	-	$	44	$	-	$	-	$	163	$	-

Recent Accounting Pronouncements

Revenue Recognition

In May 2014, the FASB issued Accounting Standard Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The standard requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also includes a cohesive set of disclosure requirements intended to provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a company’s contracts with customers. ASU 2014-09 will be effective beginning the first quarter of the Company's fiscal year 2018 and early application is not permitted. The standard allows for either “full retrospective” adoption, meaning the standard is applied to all of the periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. Management is currently evaluating the effect ASU 2014-09 will have on the Company's Consolidated Financial Statements and disclosures.

Unrecognized Tax Benefits

In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, related to the presentation of unrecognized tax benefits. The update requires presentation of an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward in the statement of financial position. The guidance does not apply to the extent that a net operating loss carryforward or tax credit carryforward at the reporting date is not available under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. The guidance is effective for fiscal years (and interim periods within those years) beginning after December 15, 2013, with early adoption permitted. The Company early adopted this standard in the first fiscal quarter of fiscal year 2014 and such adoption did not have a significant impact on the Company's Consolidated Financial Statements or disclosures.

Results of Operations

Fiscal Year Ended May 25, 2014 Compared to Fiscal Year Ended May 26, 2013

Revenues (in thousands):

	Fiscal Year ended May 25, 2014		Fiscal Year ended May 26, 2013		Change
Food Products Technology	$	360,728	$	320,447		13	%
Food Export		69,827		78,568		(11%	)
Total Apio		430,555		399,015		8	%
HA-based Biomaterials		45,704		41,281		11	%
Corporate		554		1,412		(61%	)
Total Revenues	$	476,813	$	441,708		8	%

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Food Products Technology (Apio)

Apio’s Food Products Technology revenues consist of revenues generated from the sale of specialty packaged fresh-cut and whole value-added processed vegetable products that are washed and packaged in our proprietary packaging and sold under Apio’s Eat Smart and GreenLine brands and various private labels. In addition, value-added revenues include the revenues generated from Apio Cooling, LP, a vegetable cooling operation in which Apio is the general partner with a 60% ownership position, and from the sale of BreatheWay packaging to license partners.

The increase in Apio's Food Products Technology revenues for the fiscal year ended May 25, 2014 compared to the same period last year was primarily due to a 8% increase in unit volume sales resulting primarily from expanded product offerings and a 10% unit volume increase in the fresh-cut vegetable category, according to Nielsen, coupled with new product introductions which typically have a higher price per unit than historical offerings.

Food Export (Apio)

Apio’s Food Export revenues consist of revenues generated from the purchase and sale of primarily whole commodity fruit and vegetable products to Asia by Cal-Ex. Apio records revenue equal to the sale price to third parties because it takes title to the product while in transit.

The decrease in revenues in Apio’s Food Export business for the fiscal year ended May 25, 2014 compared to the same period last year was due to a 6% decrease in unit volume sales primarily as a result of new Indonesian import quotas on fruit coupled with a product mix change to lower priced export items compared to fiscal year 2013.

HA-based Biomaterials (Lifecore)

Lifecore principally generates revenue through the sale of products containing HA. Lifecore primarily sells products to customers in three medical areas: (1) Ophthalmic, which represented approximately 60% of Lifecore’s revenues in fiscal year 2014, (2) Orthopedic, which represented approximately 20% of Lifecore’s revenues in fiscal year 2014 and (3) Veterinary/Other.

The increase in Lifecore’s revenues for fiscal year 2014 compared to the same period last year was due to a 32% increase in revenues in Lifecore’s aseptic filling business from increased sales to existing customers partially offset by a 13% decrease in fermentation sales.

Corporate

Corporate revenues are generated from the licensing agreements with Air Products, Nitta and INCOTEC.

The decrease in Corporate revenues for fiscal year 2014 compared to the same period of last year was not significant.

Gross Profit (in thousands):

	Fiscal Year ended May 25, 2014		Fiscal Year ended May 26, 2013		Change
Food Products Technology	$	36,318	$	37,077		(2%	)
Food Export		5,340		5,274		1	%
Total Apio		41,658		42,351		(2%	)
HA-based Biomaterials		20,456		19,102		7	%
Corporate		450		1,307		(66%	)
Total Gross Profit	$	62,564	$	62,760		0	%

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General

There are numerous factors that can influence gross profit including product mix, customer mix, manufacturing costs, volume, sale discounts and charges for excess or obsolete inventory, to name a few. Many of these factors influence or are interrelated with other factors. The Company includes in cost of sales all of the costs related to the sale of products in accordance with U.S. generally accepted accounting principles. These costs include the following: raw materials (including produce, seeds, packaging, syringes and fermentation and purification supplies), direct labor, overhead (including indirect labor, depreciation, and facility related costs) and shipping and shipping-related costs. The following are the primary reasons for the changes in gross profit for the fiscal year ended May 25, 2014 compared to the same period last year as outlined in the table above.

Food Products Technology (Apio)

The decrease in gross profit for the Food Products Technology business for fiscal year 2014 compared to the same period last year was primarily due to much higher than expected operating costs including higher labor costs to meet higher than expected volumes and higher raw produce sourcing costs during primarily the first six months of fiscal year 2014 resulting from lower yields and poor quality due to a variety of factors, most importantly the heavy rains in the Midwest and along the East Coast and large temperatures swings in California throughout most of the year. The higher operating costs reduced Apio’s gross profit by approximately $9.3 million during fiscal year 2014 which was partially offset by the gross profit generated from the 13% increase in revenues.       

Food Export (Apio)

Apio’s Food Export business is a buy/sell business that typically realizes a gross margin in the 5-8% range.

The increase in gross profit for Apio’s Food Export business for fiscal year 2014 compared to the same period last year was primarily due to favorable product mix changes to higher margin products, primarily into Indonesia, which resulted in a higher gross margin percentage during fiscal year 2014 of 7.6% compared to a gross margin percentage of 6.7% during fiscal year 2013. The favorable product mix was offset by the decrease in gross profit resulting from an 11% decrease in revenues.

HA-based Biomaterials (Lifecore)

Lifecore operates in the medical devices industry and has historically realized an overall gross margin percentage of approximately 45-50%.

The increase in gross profit for fiscal year 2014 compared to the same period last year was due to an 11%, or $4.4 million increase in revenues resulting from the increased sales of both historical products and new products to existing customers. The increase in gross profit from higher revenues was partially offset by an unfavorable product mix change to higher sales of lower margin aseptically filled products from higher margin fermentation sales.

Corporate

The decrease in Corporate gross profit for fiscal year 2014 compared to the same period last year was not significant.

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Operating Expenses (in thousands):

	Fiscal Year ended May 25, 2014		Fiscal Year ended  May 26, 2013			Change
Research and Development:
Apio	$	1,105	$	1,088			2	%
Lifecore		4,739		4,930			(4	%)
Corporate		1,360		3,276			(58	%)
Total R&D	$	7,204	$	9,294			(22	%)
Selling, General and Administrative:
Apio	$	22,860	$	21,976			4	%
Lifecore		4,251		4,595			(7	%)
Corporate		8,059		5,960			35	%
Total S,G&A	$	35,170	$	32,531			8	%
Other operating expenses:
Apio	$	—	$	(3,933	)	N/M
Total Other Operating Expenses	$	—	$	(3,933	)	N/M

Research and Development

Landec’s research and development consisted primarily of product development and commercialization initiatives. Research and development efforts at Apio are focused on the Company’s proprietary BreatheWay membranes used for packaging produce, with a focus on extending the shelf-life of sensitive vegetables and fruit. In the Lifecore business, the research and development efforts are focused on new products and applications for HA-based biomaterials. For Corporate, the research and development efforts are focused on supporting the development and commercialization of new products and new technologies in our food and HA businesses along with developing uses for our proprietary Intelimer polymers outside of our food and HA businesses.

The decrease in research and development expenses for fiscal year 2014 compared to last year was primarily due to a decrease in Corporate R&D because of the Company transitioning away from R&D and licensing collaborations to maintain focus on R&D efforts at its core food and HA businesses.

Selling, General and Administrative (S,G&A)

Selling, general and administrative expenses consist primarily of sales and marketing expenses associated with Landec’s product sales and services, business development expenses and staff and administrative expenses.

The increase in S,G&A expenses for fiscal year 2014 compared to the same period last year was primarily due to an increase in accounting and tax fees, public company costs and board of director fees in fiscal year 2014.

Other Operating Expenses

Other operating expenses in fiscal year 2013 consisted of a $3.9 million reversal of the earn-out liability at Apio associated with the GreenLine acquisition.

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Non-operating income/(expense) (in thousands):

	Fiscal Year ended May 25, 2014			Fiscal Year ended May 26, 2013			Change
Dividend Income	$	1,125		$	1,125			—
Interest Income	$	260		$	179			45	%
Interest Expense	$	(1,650	)	$	(2,008	)		(18	%)
Other Income	$	10,000		$	8,100			23	%
Income Taxes	$	(10,583	)	$	(9,452	)		12	%
Non controlling Interest	$	(197	)	$	(225	)		(12	%)

Dividend Income

Dividend income is derived from the dividends accrued on our $15 million preferred stock investment in Windset which yields a cash dividend of 7.5% annually. There was no change in dividend income in fiscal year 2014 compared to fiscal year 2013.

Interest Income

The increase in interest income for the fiscal year 2014 compared to the same period last year was not significant.

Interest Expense

The decrease in interest expense during fiscal year 2014 compared to the same period last year was due to the Company paying down its debt by $9.9 million during fiscal year 2014.

Other Income

The increase in other income for fiscal year 2014 compared to the same period last year is primarily due to the change in the fair market value of our Windset investment being $1.9 million higher in fiscal year 2014 compared to the increase in fiscal year 2013.

Income Taxes

The increase in the income tax expense for fiscal year 2014 was due to an increase in the effective tax rate for fiscal year 2014 to 36% compared to 30% in fiscal year 2013. The effective tax rates for last year was lower than this year as a result of the $3.9 million earn out adjustment last year which was not subject to income tax. The increase in income taxes due to the increase in the effective tax rate was partially offset by a 7% decrease in net income before taxes compared to the same period last year.

Non controlling Interest

The non controlling interest consists of the limited partners’ equity interest in the net income of Apio Cooling, LP.

The decrease in non controlling interest for fiscal year 2014 compared to the same period last year was not significant.

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Fiscal Year Ended May 27, 2013 Compared to Fiscal Year Ended May 27, 2012

Revenues (in thousands):

	Fiscal Year ended May 26, 2013		Fiscal Year ended May 27, 2012		Change
Food Products Technology	$	320,447	$	207,582		54	%
Food Export		78,568		71,485		10	%
Total Apio		399,015		279,067		43	%
HA-based Biomaterials		41,281		34,283		20	%
Corporate		1,412		4,202		(66	%)
Total Revenues	$	441,708	$	317,552		39	%

Food Products Technology (Apio)

Apio’s Food Products Technology revenues consist of revenues generated from the sale of specialty packaged fresh-cut and whole value-added processed vegetable products that are washed and packaged in our proprietary packaging and sold under Apio’s Eat Smart and GreenLine brands and various private labels. In addition, value-added revenues include the revenues generated from Apio Cooling, LP, a vegetable cooling operation in which Apio is the general partner with a 60% ownership position and from the sale of BreatheWay packaging to license partners.

The increase in Apio's Food Products Technology revenues for the fiscal year ended May 26, 2013 compared to the same period last year was primarily due to the following factors: (1) a $27 million increase in non-green bean value-added sales due to a 15% increase in unit volume sales to existing non-green bean customers resulting primarily from expanded product offerings, gaining additional distribution locations and growth in the fresh-cut vegetable category, (2) an $86 million increase in revenues from GreenLine which was acquired on April 23, 2012 and (3) a larger percentage of Apio's non-green bean value-added sales volume being generated from sales to club stores rather than retail grocery chains. These increases in revenue were partially offset by product mix changes in retail grocery chains to lower priced products from higher priced products.

Food Export (Apio)

Apio’s Food Export revenues consist of revenues generated from the purchase and sale of primarily whole commodity fruit and vegetable products to Asia by Cal-Ex. Apio records revenue equal to the sale price to third parties because it takes title to the product while in transit.

The increase in revenues in Apio’s Food Export business for the fiscal year ended May 26, 2013 compared to the same period last year was primarily due to more favorable pricing for export products in fiscal year 2013 compared to fiscal year 2012 resulting in higher prices per unit sold.

HA-based Biomaterials (Lifecore)

Lifecore principally generates revenue through the sale of products containing HA. Lifecore primarily sells products to customers in three medical areas: (1) Ophthalmic, which represented approximately 65% of Lifecore’s revenues in fiscal year 2013, (2) Orthopedic, which represented approximately 20% of Lifecore’s revenues in fiscal year 2013 and (3) Veterinary/Other.

The increase in Lifecore’s revenues for fiscal year 2013 compared to the same period last year was due almost entirely to increased sales of existing aseptically filled products to existing customers and from new aseptically filled products recently approved by the FDA to existing customers in the Ophthalmic area.

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Corporate

Corporate revenues are generated from the licensing agreements with Air Products, Nitta and INCOTEC.

The decrease in Corporate revenues for fiscal year 2013 compared to the same period of last year was due to the termination of the Monsanto Agreement at the end of the second quarter of fiscal year 2012. The Company recognized $2.7 million in license fees from the Monsanto Agreement during fiscal year 2012. The Monsanto license fees were partially offset by research and development revenues from Nitta.

Gross Profit (in thousands):

	Fiscal Year ended May 26, 2013		Fiscal Year ended May 27, 2012		Change
Food Products Technology	$	37,077	$	25,237		47	%
Food Export		5,274		4,900		8	%
Total Apio		42,351		30,137		41	%
HA-based Biomaterials		19,102		17,994		6	%
Corporate		1,307		4,007		(67	%)
Total Gross Profit	$	62,760	$	52,138		20	%

General

There are numerous factors that can influence gross profit including product mix, customer mix, manufacturing costs, volume, sale discounts and charges for excess or obsolete inventory, to name a few. Many of these factors influence or are interrelated with other factors. The Company includes in cost of sales all of the costs related to the sale of products in accordance with U.S. generally accepted accounting principles. These costs include the following: raw materials (including produce, seeds, packaging, syringes and fermentation and purification supplies), direct labor, overhead (including indirect labor, depreciation, and facility related costs) and shipping and shipping-related costs. The following are the primary reasons for the changes in gross profit for the fiscal year ended May 26, 2013 compared to the same period last year as outlined in the table above.

Food Products Technology (Apio)

The increase in gross profit for the Food Products Technology business for the fiscal year 2013 compared to the same period last year was primarily due to (1) the 54% increase in revenues and (2) the addition of higher margin GreenLine products. These increases were partially offset by the negative impact of produce sourcing issues which primarily occurred during the second half of fiscal year 2013.

Food Export (Apio)

Apio’s Food Export business is a buy/sell business that typically realizes a gross margin in the 5-8% range.

The increase in gross profit for Apio’s Food Export business for fiscal year 2013 compared to the same period last year was primarily due to a 10% increase in revenues partially offset by higher procurement costs for certain export products.

HA-based Biomaterials (Lifecore)

Lifecore operates in the higher margin medical devices industry and has historically realized an overall gross margin of approximately 45-50%.

The increase in gross profit for fiscal year 2013 compared to the same period last year was due to an increase in revenues of $7.0 million resulting from the increased sales of both historical products and new products to existing customers which were partially offset by the revenue increase from aseptically filled products which have a lower gross margin than Lifecore’s other products.

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Corporate

The decrease in Corporate gross profit for fiscal year 2013 compared to the same period last year was due to the termination of the Monsanto Agreement at the end of the second quarter of fiscal year 2012. The Company recognized $2.7 million in license fees from the Monsanto Agreement during fiscal year 2012. The Monsanto license fees were partially offset by research and development revenues from Nitta.

Operating Expenses (in thousands):

	Fiscal Year ended May 26, 2013			Fiscal Year ended  May 27, 2012		Change
Research and Development:
Apio	$	1,088		$	1,106		(2	%)
Lifecore		4,930			4,671		6	%
Corporate		3,276			3,848		(15	%)
Total R&D	$	9,294		$	9,625		(3	%)
Selling, General and Administrative:
Apio	$	21,976		$	14,776		49	%
Lifecore		4,595			4,521		2	%
Corporate		5,960			7,218		(17	%)
Total S,G&A	$	32,531		$	26,515		23	%
Other operating expenses:
Apio	$	(3,933	)	$	871	N/M
Corporate		—			550	N/M
Total Other Operating Expenses	$	(3,933	)	$	1,421	N/M

Research and Development

Landec’s research and development consisted primarily of product development and commercialization initiatives. Research and development efforts at Apio are focused on the Company’s proprietary BreatheWay membranes used for packaging produce, with a focus on extending the shelf-life of sensitive vegetables and fruit. In the Lifecore business, the research and development efforts are focused on new products and applications for HA-based biomaterials. For Corporate, the research and development efforts are focused on supporting the development and commercialization of new products and new technologies in our food and HA businesses along with developing uses for our proprietary Intelimer polymers outside of our food and HA businesses.

The decrease in research and development expenses for fiscal year 2013 compared to the same period last year was primarily due to the decrease in research and development expenses incurred by Corporate during fiscal year 2012 at the Company’s former seed corn business which was sold in June 2012.

Selling, General and Administrative (S,G&A)

Selling, general and administrative expenses consist primarily of sales and marketing expenses associated with Landec’s product sales and services, business development expenses and staff and administrative expenses.

The increase in S,G&A expenses for fiscal year 2013 compared to the same period last year was primarily due to: (1) a $4.6 million increase in S,G&A expenses at Apio from GreenLine which was acquired on April 23, 2012 and (2) a $2.6 million increase in SG&A at Apio, excluding GreenLine, due to the amortization of the customer base intangible acquired in the acquisition of GreenLine and additional sales and marketing expenses associated with the increase in revenues. These increases were partially offset by a $1.3 million decrease in S,G&A at Corporate due primarily to no Corporate bonuses being earned in fiscal year 2013 compared to $1.0 million of Corporate bonuses earned in fiscal year 2012 and from S,G&A expenses at the Company’s former seed corn business in fiscal year 2012 which was sold in June 2012.

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Other Operating Expenses

Other operating expenses in fiscal year 2013 consisted of a $3.9 million reversal of the earn-out liability at Apio associated with the GreenLine acquisition. Other operating expenses in fiscal year 2012 consisted of expenses incurred as a result of the acquisition of GreenLine.

Non-operating income/(expense) (in thousands):

	Fiscal Year ended May 26, 2013			Fiscal Year ended May 27, 2012			Change
Dividend Income	$	1,125		$	1,125			—
Interest Income	$	179		$	180			(1	%)
Interest Expense	$	(2,008	)	$	(929	)		116	%
Other Income	$	8,100		$	5,331			52	%
Income Taxes	$	(9,452	)	$	(7,185	)		32	%
Non controlling Interest	$	(225	)	$	(403	)		(44	%)

Dividend Income

Dividend income is derived from the dividends accrued on our $15 million preferred stock investment in Windset which yields a cash dividend of 7.5% annually. There was no change in dividend income in fiscal year 2013 compared to fiscal year 2012.

Interest Income

The decrease in interest income for the fiscal year ended May 26, 2013 compared to the same period last year was primarily due to lower cash balances reflecting our use of cash to buyback shares of the Company’s common stock during fiscal year 2012 and to purchase GreenLine.

Interest Expense

The increase in interest expense during fiscal year 2013 compared to the same period last year was due to interest on the $32 million of debt incurred in the acquisition of GreenLine. This increase was partially offset by decreases in interest expense at Lifecore due to paying down its debt by $3.3 million during fiscal year 2013.

Other Income

The increase in other income for fiscal year 2013 compared to the same period last year is primarily due to the change in the fair market value of our Windset investment being $2.3 million higher in fiscal year 2013 compared to the change in fiscal year 2012.

Income Taxes

The increase in the income tax expense for fiscal year 2013 is due to a 59% increase in net income before taxes compared to the same period last year. The effective tax rate for fiscal year 2013 was 30% compared to 36% for the same period last year primarily because the $3.9 million reversal of the earn-out liability during fiscal year 2013 related to the GreenLine acquisition was not subject to income taxes and various to other tax deductions and credits in fiscal year 2013, such as the return of the R&D credit and the change in the Company’s state apportionment factors due to the addition of GreenLine, which resulted in a lower effective tax rate for fiscal year 2013.

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Non-controlling Interest

The non-controlling interest consists of the limited partners’ equity interest in the net income of Apio Cooling, LP.

The decrease in non-controlling interest for fiscal year 2013 compared to the same period last year was due to a decrease in Apio Cooling revenues.

Liquidity and Capital Resources

As of May 25, 2014, the Company had cash and cash equivalents of $14.2 million, a net increase of $525,000 from $13.7 million at May 26, 2013.

Cash Flow from Operating Activities 

Landec generated $21.0 million of cash from operating activities during fiscal year 2014 compared to generating $21.2 million from operating activities during fiscal year 2013.The primary sources of cash from operating activities during fiscal year 2014 were from (1) $19.3 million of net income, (2) $8.5 million of depreciation/amortization and stock-based compensation expenses and (3) a $5.6 million net increase in deferred tax liabilities. The primary uses of cash from operating activities were from the $10.0 million non-cash increase in the Company’s investment in Windset and a net increase of $2.7 million in working capital, excluding the portion of the increase in income taxes receivable which is attributable to the tax benefit from stock-based compensation.

The primary factors which increased working capital during fiscal year 2014 were a $8.0 million increase in receivables primarily due to May 2014 revenues for Apio and Lifecore being $5.3 million and $1.7 million higher, respectively, than Apio’s and Lifecore’s May 2013 revenues. These increases in working capital were partially offset by a $3.1 million increase in income taxes receivable due to overpayments and a $3.2 million increase in current liabilities resulting primarily from the timing of invoices at Apio.

Cash Flow from Investing Activities

Net cash used in investing activities for fiscal year 2014 was $13.3 million compared to $10.4 million for the same period last year. The primary uses of cash in investing activities during fiscal year 2014 were for the purchase of $14.9 million of equipment primarily to support the growth of the Apio value-added and Lifecore businesses.

Cash Flow from Financing Activities

Net cash used in financing activities for fiscal year 2014 was $7.2 million compared to $19.3 million for the same period last year. The net cash used in financing activities during fiscal year 2014 was primarily due to the $9.9 million of net payments on the Company’s lines of credit and long-term debt offset by $2.3 million received from proceeds from the sale of Common Stock. The primary use of cash from financing activities during fiscal year 2013 was from a $10 million earn out payment made related to the Lifecore acquisition, $9.7 million of which was recorded as a contingent liability at the time of the acquisition and was therefore classified as a financing activity.

Capital Expenditures

During the fiscal year ended May 25, 2014, Landec continued its expansion of Apio’s value-added processing facility and purchased vegetable processing equipment as well as made facility modifications and equipment purchases at Lifecore to support business growth. These expenditures represented the majority of the $14.9 million of capital expenditures during fiscal year 2014.

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Debt

On August 19, 2004, Lifecore issued variable rate industrial revenue bonds (“IRBs”).  These IRBs were assumed by Landec in the acquisition of Lifecore (see Note 9 to the Consolidated Financial Statements). The IRBs are collateralized by a bank letter of credit which is secured by a first mortgage on Lifecore’s facility in Chaska, Minnesota. In addition, Lifecore pays an annual remarketing fee equal to 0.125% and an annual letter of credit fee of 0.75%.

On April 23, 2012 in connection with the acquisition of GreenLine, Apio entered into three loan agreements with General Electric Capital Corporation and/or its affiliates (“GE Capital”), (collectively the “GE Debt Agreements”):

1)	A five-year, $25.0 million asset-based working capital revolving line of credit, with an interest rate of LIBOR plus 2%, with availability based on the combination of the eligible accounts receivable and inventory balances of Apio and its subsidiaries (availability was $19.8 million at May 25, 2014). Apio’s revolving line of credit has an unused fee of 0.375% per annum. At May 25, 2014 and May 26, 2013, Apio had zero and $4.0 million, respectively, outstanding under its revolving line of credit.
2)	A $12.7 million capital equipment loan which matures in seven years payable in monthly principal and interest payments of $175,356 with interest based on a fixed rate of 4.39% per annum.
3)	A $19.2 million real estate loan, $1.2 million of which was paid in April 2013, and the remainder maturing in ten years. The real estate loan has a fifteen year amortization period due in monthly principal and interest payments of $141,962 with interest based on a fixed rate of 4.02% per annum.   The principal balance remaining at the end of the ten year term is due in one lump sum on April 23, 2022.

Apio’s obligations under the GE Debt Agreements are secured by liens on all of the property of Apio and its subsidiaries. The GE Debt Agreements contain customary events of default under which obligations could be accelerated or increased. The GE Capital real estate and equipment loans are guaranteed by Landec, and Landec has pledged its equity interest in Apio as collateral under the line of credit agreement. The GE Debt Agreements contain customary covenants, such as limitations on the ability to (1) incur indebtedness or grant liens or negative pledges on Apio’s assets; (2) make loans or other investments; (3) pay dividends, sell stock or repurchase stock or other securities; (4) sell assets; (5) engage in mergers; (6) enter into sale and leaseback transactions; and (7) make changes in Apio’s corporate structure. In addition, Apio must maintain a minimum fixed charge coverage ratio of 1.10 to 1.0 if the availability under its line of credit falls below $7.5 million. Apio was in compliance with all financial covenants as of May 25, 2014 and May 26, 2013. Unamortized loan origination fees for the GE Debt Agreements were $964,000 and $1.2 million at May 25, 2014 and May 26, 2013, respectively, and are included in other assets in the Consolidated Balance Sheets.

On May 23, 2012, Lifecore entered into two financing agreements with BMO Harris Bank N.A. and/or its affiliates (“BMO Harris”), collectively (the “Lifecore Loan Agreements”):

(1) A Credit and Security Agreement (the “Credit Agreement”) which includes (a) a two-year, $10.0 million asset-based working capital revolving line of credit, with an interest rate of LIBOR plus 1.85%, with availability based on the combination of Lifecore’s eligible accounts receivable and inventory balances (availability was $7.9 million at May 25, 2014) and with no unused fee (as of May 25, 2014 and May 26, 2013, no amounts were outstanding under the line of credit) and (b) a $12.0 million term loan which matures in four years due in monthly payments of $250,000 with interest payable monthly based on a variable interest rate of LIBOR plus 2% (the “Term Loan”).

(2) A Reimbursement Agreement pursuant to which BMO Harris caused its affiliate Bank of Montreal to issue an irrevocable letter of credit in the amount of $3.5 million (the “Letter of Credit”) which is securing the IRBs described above.

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The obligations of Lifecore under the Lifecore Loan Agreements are secured by liens on all of the property of Lifecore. The Lifecore Loan Agreements contain customary covenants, such as limitations on the ability to (1) incur indebtedness or grant liens or negative pledges on Lifecore’s assets; (2) make loans or other investments; (3) pay dividends or repurchase stock or other securities; (4) sell assets; (5) engage in mergers; (6) enter into sale and leaseback transactions; (7) adopt certain benefit plans; and (8) make changes in Lifecore’s corporate structure. In addition, under the Credit Agreement, Lifecore must maintain (a) a minimum fixed charge coverage ratio of 1.10 to 1.0 and a minimum quick ratio of 1.25 to 1.00, both of which must be satisfied as of the end of each fiscal quarter commencing with the fiscal quarter ending August 26, 2012 and (b) a minimum tangible net worth of $29,000,000, measured as of May 28, 2013, and as of the end of each fiscal year thereafter. Unamortized loan origination fees for the Lifecore Loan Agreements were $98,000 and $149,000 at May 25, 2014 and May 26, 2013, respectively, and are included in other assets in the Consolidated Balance Sheets. Lifecore was in compliance with all financial covenants as of May 25, 2014 and May 26, 2013.

The market value of the Company’s debt approximates its recorded value as the interest rates on each debt instrument approximates current market rates.

The Term Loan was used to repay Lifecore’s former credit facility with Wells Fargo Bank, N.A. (“Wells Fargo”). The Letter of Credit (which replaces a letter of credit previously provided by Wells Fargo) provides liquidity and credit support for the IRBs.

In May 2010, the Company entered into a five-year interest rate swap agreement under the prior credit agreement with Wells Fargo, which expires on April 30, 2015. The interest rate swap was designated as a cash flow hedge of future interest payments of LIBOR and had a notional amount of $20 million. As a result of the interest rate swap transaction, the Company fixed for a five-year period the interest rate at 4.24% subject to market based interest rate risk on $20 million of borrowings under the credit agreement with Wells Fargo. The Company’s obligations under the interest rate swap transaction as to the scheduled payments were guaranteed and secured on the same basis as its obligations under the credit agreement with Wells Fargo at the time the agreement was consummated. Upon entering into the new Term Loan with BMO Harris, the Company used the proceeds from that loan to pay off the Wells Fargo credit facility. The swap with Wells Fargo was not terminated upon the extinguishment of the debt with Wells Fargo. As a result of extinguishing the debt with Wells Fargo as of May 23, 2012, the swap was no longer an effective hedge and therefore, the fair value of the swap at the time the debt was extinguished of $347,000 was reversed from other comprehensive income and recorded in other expense during fiscal year 2012. The fair value of the swap arrangement as of May 25, 2014 and May 26, 2013 was $44,000 and $163,000, respectively, and is included in other accrued liabilities in the accompanying Consolidated Balance Sheets.

Contractual Obligations

The Company’s material contractual obligations for the next five years and thereafter as of May 25, 2014, are as follows (in thousands):

	Due in Fiscal Year Ended May
Obligation	Total		2015		2016		2017		2018		2019		Thereafter
Income taxes	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Debt principal payments		34,372		6,055		6,181		3,318		3,456		3,599		11,763
Interest payments		5,198		1,146		958		795		663		525		1,111
Operating leases		11,038		2,916		2,720		2,225		1,375		929		873
Purchase commitments		5,046		5,046		—		—		—		—		—
Total	$	55,654	$	15,163	$	9,859	$	6,338	$	5,494	$	5,053	$	13,747

The income tax amounts above exclude liabilities associated with the accounting for uncertainty in income taxes as we are unable to reasonably estimate the ultimate amount or timing of settlement. See Note 11 in the Notes to Consolidated Financial Statements for further discussion.

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The interest payment amounts above include: (1) the 4.39% fixed interest rate payments on the GE Capital equipment loan, (2) the 4.02% fixed interest rate payments on the GE Capital real estate loan, (3) the estimated interest rate payment on the variable Term Loan with BMO Harris based on the four year historical average 30-day LIBOR plus 2% or 2.22% and (4) the estimated interest rate payment on the variable rate IRB based on the five year historical interest rate average for the Municipal Swap Index plus 20 basis points plus the letter of credit and remarketing fees of 0.875% resulting in a estimated rate of 1.25%.

Landec is not a party to any agreements with, or commitments to, any special purpose entities that would constitute material off-balance sheet financing other than the operating lease commitments.

Landec’s future capital requirements will depend on numerous factors, including the progress of its research and development programs; the continued development of marketing, sales and distribution capabilities; the ability of Landec to establish and maintain new collaborative and licensing arrangements; any decision to pursue additional acquisition opportunities; weather conditions that can affect the supply and price of produce, the timing and amount, if any, of payments received under licensing and research and development agreements; the costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights; the ability to comply with regulatory requirements; the emergence of competitive technology and market forces; the effectiveness of product commercialization activities and arrangements; and other factors. If Landec’s currently available funds, together with the internally generated cash flow from operations are not sufficient to satisfy its capital needs, Landec would be required to seek additional funding through other arrangements with collaborative partners, additional bank borrowings and public or private sales of its securities. There can be no assurance that additional funds, if required, will be available to Landec on favorable terms, if at all.

Landec believes that its cash from operations, along with existing cash, cash equivalents and marketable securities will be sufficient to finance its operational and capital requirements for at least the next twelve months.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

Not significant.     

Item 8.   Financial Statements and Supplementary Data

See Item 15 of Part IV of this report.

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of May 25, 2014 our management evaluated, with participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission, and are effective in providing reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

- 42 -

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of May 25, 2014. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (1992 Framework). Our management has concluded that, as of May 25, 2014, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Our independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on our internal control over financial reporting, which is included herein.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal controls over financial reporting during the fiscal year ended May 25, 2014 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

- 43 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Landec Corporation

We have audited Landec Corporation and subsidiaries’ internal control over financial reporting as of May 25, 2014, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 Framework) (the COSO criteria). Landec Corporation and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Landec Corporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of May 25, 2014, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Landec Corporation and subsidiaries as of May 25, 2014 and May 26, 2013, and the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended May 25, 2014 and our report dated August 1, 2014 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

San Francisco, California

August 1, 2014

Item 9B.   Other Information

None

- 44 -

PART III

Item 10. Directors, Executive Officers and Corporate Governance

This information required by this item will be contained in the Registrant’s definitive proxy statement which the Registrant will file with the Commission no later than September 22, 2014 (120 days after the Registrant’s fiscal year end covered by this Report) and is incorporated herein by reference.

Item 11. Executive Compensation

This information required by this item will be contained in the Registrant’s definitive proxy statement which the Registrant will file with the Commission no later than September 22, 2014 (120 days after the Registrant’s fiscal year end covered by this Report) and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

This information required by this item will be contained in the Registrant’s definitive proxy statement which the Registrant will file with the Commission no later than September 22, 2014 (120 days after the Registrant’s fiscal year end covered by this Report) and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions and Director Independence

This information required by this item will be contained in the Registrant’s definitive proxy statement which the Registrant will file with the Commission no later than September 22, 2014 (120 days after the Registrant’s fiscal year end covered by this Report) and is incorporated herein by reference.

Item 14.          Principal Accountant Fees and Services

This information required by this item will be contained in the Registrant’s definitive proxy statement which the Registrant will file with the Commission no later than September 22, 2014 (120 days after the Registrant’s fiscal year end covered by this Report) and is incorporated herein by reference.

- 45 -

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)      1.	Consolidated Financial Statements of Landec Corporation
		Page
	Report of Independent Registered Public Accounting Firm	47
	Consolidated Balance Sheets at May 25, 2014 and May 26, 2013	48
	Consolidated Statements of Comprehensive Income for the Years Ended May 25, 2014, May 26, 2013 and May 27, 2012	49
	Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended May 25, 2014, May 26, 2013 and May 27, 2012	50
	Consolidated Statements of Cash Flows for the Years Ended May 25, 2014, May 26, 2013 and May 27, 2012	51
	Notes to Consolidated Financial Statements	52
2.	All schedules provided for in the applicable accounting regulations of the Securities and Exchange Commission have been omitted since they pertain to items which do not appear in the financial statements of Landec Corporation and its subsidiaries or to items which are not significant or to items as to which the required disclosures have been made elsewhere in the financial statements and supplementary notes and such schedules.
3.	Index of Exhibits................................................................................................	81
	The exhibits listed in the accompanying Index of Exhibits are filed or incorporated by reference as part of this report.

- 46 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Landec Corporation

We have audited the accompanying consolidated balance sheets of Landec Corporation and subsidiaries as of May 25, 2014 and May 26, 2013, and the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended May 25, 2014. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Landec Corporation and subsidiaries at May 25, 2014 and May 26, 2013, and the consolidated results of their operations and their cash flows for each of the three years in the period ended May 25, 2014, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Landec Corporation’s internal control over financial reporting as of May 25, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 Framework) and our report dated August 1, 2014 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

San Francisco, California

August 1, 2014

- 47 -

 LANDEC CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

ASSETS	May 25, 2014		May 26, 2013
Current assets:
Cash and cash equivalents	$	14,243	$	13,718
Marketable securities		—		1,545
Accounts receivable, less allowance for doubtful accounts of $516 and $583 at May 25, 2014 and May 26, 2013, respectively		44,421		36,427
Accounts receivable, related party		304		316
Income taxes receivable		2,000		5,103
Inventories, net		24,735		24,113
Deferred taxes		2,056		1,582
Prepaid expenses and other current assets		3,170		2,856
Total current assets		90,929		85,660
Investment in non-public company, non-fair value		793		793
Investment in non-public company, fair value		39,600		29,600
Property and equipment, net		74,140		65,811
Goodwill, net		49,620		49,620
Trademarks/ trade names, net		48,428		48,428
Customer relationships, net		8,720		9,606
Other assets		1,393		1,424
Total Assets	$	313,623	$	290,942
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	31,981	$	32,031
Accounts payable, related party		134		225
Accrued compensation		4,096		4,984
Other accrued liabilities		4,871		2,332
Deferred revenue		1,254		1,248
Lines of credit		—		4,000
Current portion of long-term debt		6,055		5,933
Total current liabilities		48,391		50,753
Long-term debt		28,317		34,372
Deferred taxes		30,133		24,054
Other non-current liabilities		2,021		1,349
Total liabilities		108,862		110,528
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.001 par value; 50,000,000 shares authorized; 26,815,253 and 26,402,247 shares issued and outstanding at May 25, 2014 and May 26, 2013, respectively		27		26
Additional paid-in capital		131,488		126,258
Retained earnings		71,554		52,409
Total stockholders’ equity		203,069		178,693
Non-controlling interest		1,692		1,721
Total Equity		204,761		180,414
Total Liabilities and Stockholders’ Equity	$	313,623	$	290,942

See accompanying notes.

- 48 -

LANDEC CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share amounts)

	Year Ended May 25,			Year Ended May 26,			Year Ended May 27,
	2014			2013			2012
Product sales		476,813			441,708			317,552
Cost of product sales		414,249			378,948			265,414
Gross profit		62,564			62,760			52,138
Operating costs and expenses:
Research and development		7,204			9,294			9,625
Selling, general and administrative		35,170			32,531			26,515
Other operating expenses		—			(3,933	)		1,421
Total operating costs and expenses		42,374			37,892			37,561
Operating income		20,190			24,868			14,577
Dividend income		1,125			1,125			1,125
Interest income		260			179			180
Interest expense		(1,650	)		(2,008	)		(929	)
Other income		10,000			8,100			5,331
Net income before taxes		29,925			32,264			20,284
Income tax expense		(10,583	)		(9,452	)		(7,185	)
Consolidated net income		19,342			22,812			13,099
Non-controlling interest		(197	)		(225	)		(403	)
Net income and comprehensive income applicable to common stockholders	$	19,145		$	22,587		$	12,696
Basic net income per share	$	0.72		$	0.87		$	0.49
Diluted net income per share	$	0.71		$	0.85		$	0.49
Shares used in per share computation:
Basic		26,628			25,830			25,849
Diluted		27,120			26,626			26,126

See accompanying notes.

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LANDEC CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY

(in thousands, except share and per share amounts)

							Additional					Other			Total			Non-
	Common Stock						Paid-in			Retained		Comprehensive			Stockholders’			controlling
	Shares			Amount			Capital			Earnings		Loss			Equity			interest
Balance at May 29, 2011		26,405,799		$	27		$	119,169		$	17,126	$	(267	)	$	136,055		$	1,671
Issuance of common stock at $2.55 to $6.95 per share, net of taxes paid by Landec on behalf of employees		72,572			—			61			—		—			61			—
Issuance of common stock for vested restricted stock units		83,453			—			—			—		—			—			—
Common stock repurchased on the open market		(917,244	)		(1	)		(5,005	)		—		—			(5,006	)		—
Taxes paid by Company for stock swaps and RSUs		—			—			(260	)		—		—			(260	)		—
Stock-based compensation		—			—			1,872			—		—			1,872			—
Tax benefit from stock-based compensation expense		—			—			4,057			—		—			4,057			—
Non-controlling interest		—			—			—			—		—			—			403
Payments to non-controlling interest		—			—			—			—		—			—			(258	)
Net and comprehensive income		—			—			—			12,696		267			12,963			—
Balance at May 27, 2012		25,644,580			26			119,894			29,822		—			149,742			1,816
Issuance of common stock at $1.66 to $13.32 per share, net of taxes paid by Landec on behalf of employees		597,537			—			3,416			—		—			3,416			—
Issuance of common stock for vested restricted stock units		160,130			—			—			—		—			—			—
Taxes paid by Company for stock swaps and RSUs		—			—			(49	)		—		—			(49	)		—
Stock-based compensation		—			—			1,695			—		—			1,695			—
Tax benefit from stock-based compensation expense		—			—			1,302			—		—			1,302			—
Non-controlling interest		—			—			—			—		—			—			225
Payments to non-controlling interest		—			—			—			—		—			—			(320	)
Net and comprehensive income		—			—			—			22,587		—			22,587			—
Balance at May 26, 2013		26,402,247			26			126,258			52,409		—			178,693			1,721
Issuance of common stock at $5.63 to $13.32 per share, net of taxes paid by Landec on behalf of employees		372,852			1			2,297			—		—			2,298			—
Issuance of common stock for vested restricted stock units		40,154			—			—			—		—			—			—
Taxes paid by Company for stock swaps and RSUs		—			—			(345	)		—		—			(345	)		—
Stock-based compensation		—			—			1,356			—		—			1,356			—
Tax benefit from stock-based compensation expense		—			—			1,922			—		—			1,922			—
Non-controlling interest		—			—			—			—		—			—			197
Payments to non-controlling interest		—			—			—			—		—			—			(226	)
Net and comprehensive income		—			—			—			19,145		—			19,145			—
Balance at May 25, 2014		26,815,253		$	27		$	131,488		$	71,554	$	—		$	203,069		$	1,692

See accompanying notes

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LANDEC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Cash flows from operating activities:	Year Ended May 25, 2014			Year Ended May 26, 2013			Year Ended May 27, 2012
Consolidated net income	$	19,342		$	22,812		$	13,099
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,114			7,295			5,621
Stock-based compensation expense		1,356			1,695			1,872
Deferred taxes		5,605			6,511			3,283
Change in investment in non-public company , fair value		(10,000	)		( 8,100	)		(5,838	)
Tax benefit from stock based compensation		(1,922	)		(1,302	)		(4,057	)
Net loss on disposal of property and equipment		329			217			12
Earn out liability		—			(3,933	)		—
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable, net		(7,994	)		(4,121	)		(3,246	)
Accounts receivable, related party		12			(348	)		130
Income taxes receivable		5,025			(3,754	)		4,581
Inventories, net		(622	)		(2,102	)		(441	)
Issuance of notes and advances receivable		(4,763	)		(4,173	)		(3,699	)
Collection of notes and advances receivable		4,481			4,173			3,704
Prepaid expenses and other current assets		(32	)		(278	)		3,588
Accounts payable		(50	)		8,826			(544	)
Accounts payable, related party		(91	)		10			476
Accrued compensation		38			(798	)		2,701
Other accrued liabilities		3,211			(2,486	)		3,434
Deferred revenue		6			1,086			(2,495	)
Net cash provided by operating activities		21,045			21,230			22,181
Cash flows from investing activities:
Purchases of property and equipment		(14,886	)		(8,877	)		(5,371	)
Acquisition of GreenLine (Note 2)		—		ﮫ—				(66,826	)
Purchase of marketable securities		(1,417	)		(4,959	)		(30,723	)
Proceeds from maturities of marketable securities		2,962			3,414			31,104
Proceeds from sales of marketable securities		—			—			27,743
Net cash used in investing activities		(13,341	)		(10,422	)		(44,073	)
Cash flows from financing activities:
Repurchase of outstanding common stock		—			—			(5,006	)
Proceeds from sale of common stock		2,298			3,416			61
Taxes paid by Company for stock swaps and RSUs		(1,271	)		(49	)		(260	)
Tax benefit from stock-based compensation expense		1,922			1,302			4,057
Earn out payment from Lifecore acquisition		—			(9,650	)		—
Net change in other assets/liabilities		31			712			(1,813	)
Proceeds from long term debt		—			—			31,816
Proceeds from lines of credit		9,500			—			12,766
Payments on long term debt		(5,933	)		(7,012	)		(4,329	)
Payments on lines of credit		(13,500	)		(7,666	)		(1,100	)
Payments to non-controlling interest.		(226	)		(320	)		(258	)
Net cash (used in) provided by financing activities		(7,179	)		(19,267	)		35,934
Net increase (decrease) in cash and cash equivalents		525			(8,459	)		14,042
Cash and cash equivalents at beginning of year		13,718			22,177			8,135
Cash and cash equivalents at end of year	$	14,243		$	13,718		$	22,177
Supplemental disclosure of cash flows information:
Cash paid during the period for interest	$	1,504		$	1,728		$	952
Cash paid during the period for income taxes, net of refunds received	$	50		$	5,605		$	246

See accompanying notes.

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LANDEC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.            Organization, Basis of Presentation, and Summary of Significant Accounting Policies

Organization

Landec Corporation and its subsidiaries (“Landec” or the “Company”) design, develop, manufacture and sell differentiated products for food and biomaterials markets and license technology applications to partners. The Company has two proprietary polymer technology platforms: 1) Intelimer® polymers, and 2) hyaluronan (“HA”) biopolymers. The Company’s HA biopolymers are proprietary in that they are specially formulated for specific customers to meet strict regulatory requirements. The Company’s polymer technologies, along with its customer relationships and trade names, are the foundation, and a key differentiating advantage upon which Landec has built its business. The Company sells specialty packaged branded Eat Smart and GreenLine and private label fresh-cut vegetables and whole produce to retailers, club stores and foodservice operators, primarily in the United States, Canada and Asia through its Apio, Inc. (“Apio”) subsidiary and sells HA-based biomaterials through its Lifecore Biomedical, Inc. (“Lifecore”) subsidiary.

Basis of Presentation

Basis of Consolidation

The consolidated financial statements are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles and include the accounts of Landec Corporation and its subsidiaries, Apio and Lifecore. All material inter-company transactions and balances have been eliminated.

Arrangements that are not controlled through voting or similar rights are reviewed under the guidance for variable interest entities (“VIEs”). A company is required to consolidate the assets, liabilities and operations of a VIE if it is determined to be the primary beneficiary of the VIE.

An entity is a VIE and subject to consolidation, if by design: a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders or b) as a group the holders of the equity investment at risk lack any one of the following three characteristics: (i) the power, through voting rights or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity. The Company reviewed the consolidation guidance and concluded that the partnership interest and equity investment in non-public companies by the Company are not VIEs.

Reclassifications

Certain reclassifications have been made to prior year financial statements to conform to the current year presentation.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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; sales returns and allowances; recognition and measurement of current and deferred income tax assets and liabilities; the assessment of recoverability of long-lived assets; the valuation of intangible assets and inventory; the valuation of investments; and the valuation and recognition of stock-based compensation.

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1.            Organization, Basis of Presentation, and Summary of Significant Accounting Policies (continued)

These estimates involve the consideration of complex factors and require management to make judgments. The analysis of historical and future trends can require extended periods of time to resolve and are subject to change from period to period. The actual results may differ from management’s estimates.

Concentrations of Risk

Cash and cash equivalents, marketable securities, trade accounts receivable, grower advances and notes receivable are financial instruments that potentially subject the Company to concentrations of credit risk. Our Company policy limits, among other things, the amount of credit exposure to any one issuer and to any one type of investment, other than securities issued or guaranteed by the U.S. government. The Company routinely assesses the financial strength of customers and growers and, as a consequence, believes that trade receivables, grower advances and notes receivable credit risk exposure is limited. Credit losses for bad debt are provided for in the consolidated financial statements through a charge to operations. A valuation allowance is provided for known and anticipated credit losses. The recorded amounts for these financial instruments approximate their fair value.

Several of the raw materials we use to manufacture our products are currently purchased from a single source, including some monomers used to synthesize Intelimer polymers, substrate materials for our breathable membrane products and raw materials for our HA products.  

The operations of Windset, in which the Company holds a 20.1% minority investment, are predominantly located in British Columbia and Santa Maria, California. Routinely, the Company evaluates the financial strength and ability for Windset to continue as a going concern.

During the fiscal year ended May 25, 2014, sales to the Company’s top five customers accounted for approximately 42% of total revenue with the top two customers from the Food Products Technology segment, Costco Wholesale Corporation and Wal-mart, Inc. accounting for approximately 21% and 11%, respectively, of total revenues. In addition, approximately 29% of the Company’s total revenues were derived from product sales to international customers, none of which individually accounted for more than 5% of total revenues. As of May 25, 2014, the top two customers, Costco Wholesale Corporation and Wal-mart, Inc. represented approximately 16% and 12%, respectively, of total accounts receivable.

During the fiscal year ended May 26, 2013, sales to the Company’s top five customers accounted for approximately 40% of total revenue with the top two customers, Costco Wholesale Corporation and Wal-mart, Inc. from the Food Products Technology segment, accounting for approximately 16% and 13%, respectively, of total revenues. In addition, approximately 30% of the Company’s total revenues were derived from product sales to international customers, none of which individually accounted for more than 5% of total revenues. As of May 26, 2013, the top two customers, Costco Wholesale Corporation and Wal-mart, Inc. both represented approximately 15% of total accounts receivable.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets is measured by comparison of the carrying amount of the asset to the net undiscounted future cash flow expected to be generated from the asset. If the future undiscounted cash flows are not sufficient to recover the carrying value of the assets, the assets’ carrying value is adjusted to fair value. The Company regularly evaluates its long-lived assets for indicators of possible impairment.

Financial Instruments

The Company’s financial instruments are primarily composed of marketable securities, commercial-term trade payables, grower advances, notes receivable and debt instruments. For short-term instruments, the historical carrying amount approximates the fair value of the instrument. The fair value of long-term debt and lines of credit approximates their carrying value. Fair values for long-term financial instruments not readily marketable are estimated based upon discounted future cash flows at prevailing market interest rates. Based on these assumptions, management believes the fair market values of the Company’s financial instruments are not significantly different from their recorded amounts as of May 25, 2014 and May 26, 2013.

- 53 -

1.            Organization, Basis of Presentation, and Summary of Significant Accounting Policies (continued)

Accounts Receivable and Sales Returns and Allowance for Doubtful Accounts

The Company carries its accounts receivable at their face amounts less an allowance for estimated sales returns and doubtful accounts. Sales return allowances are estimated based on historical sales return amounts. Further, on a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts and estimated losses resulting from the inability of its customers to make required payments. The allowance for doubtful accounts is determined based on review of the overall condition of accounts receivable balances and review of significant past due accounts. The allowance for doubtful accounts is based on specific identification of past due amounts and for accounts over 90-days past due. The changes in the Company’s allowance for sales returns and doubtful accounts are summarized in the following table (in thousands).

	Balance at beginning of period		Additions from acquisitions and adjustments charged to revenue and expenses		Write offs, net of recoveries		Balance at end of period
Year ended May 27, 2012	$	342	$	248	$	(78)	$	512
Year ended May 26, 2013	$	512	$	109	$	(38)	$	583
Year ended May 25, 2014	$	583	$	143	$	(210)	$	516

Revenue Recognition

Revenue from product sales is recognized when there is persuasive evidence that an arrangement exists, title has transferred, the price is fixed and determinable, and collectability is reasonably assured. Allowances are established for estimated uncollectible amounts, product returns, and discounts based on specific identification and historical losses.

Apio’s Food Products Technology revenues generally consist of revenues generated from the sale of specialty packaged fresh-cut and whole value-added processed vegetable products that are generally washed and packaged in our proprietary packaging and sold under Apio’s Eat Smart and GreenLine brands and various private labels. Revenue is generally recognized upon shipment of these products to customers. The Company takes title to all produce it trades and/or packages, and therefore, records revenues and cost of sales at gross amounts in the Consolidated Statements of Comprehensive Income

In addition, Food Products Technology value-added revenues include the revenues generated from Apio Cooling, LP, a vegetable cooling operation in which Apio is the general partner with a 60% ownership position and from the sale of BreatheWay packaging to license partners. Revenue is recognized on the vegetable cooling operations as cooling and storage services are provided to our customers. Sales of BreatheWay packaging are recognized when shipped to our customers.

Apio’s Food Export revenues consist of revenues generated from the purchase and sale of primarily whole commodity fruit and vegetable products to Asia by Cal-Ex. As most Cal-Ex customers are in countries outside of the U.S., title transfers and revenue is generally recognized upon arrival of the shipment in the foreign port. Apio records revenue equal to the sale price to third parties because it takes title to the product while in transit.

Our HA-based Biomaterials business principally generates revenue through the sale of products containing HA. Lifecore primarily sells products to customers in three medical areas: (1) Ophthalmic, which represented approximately 60% of Lifecore’s revenues in fiscal year 2014, (2) Orthopedic, which represented approximately 20% of Lifecore’s revenues in fiscal year 2014 and (3) Veterinary/Other. The vast majority of revenues from our HA-based Biomaterials business are recognized upon shipment.

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1.            Organization, Basis of Presentation, and Summary of Significant Accounting Policies (continued)

A small amount of revenues from our HA-based Biomaterials business is related to contract research and development (R&D) services and multi-element arrangement services with customers where we provide products and/or services in a bundled arrangement.

Contract revenue R&D is recorded as earned, based on the performance requirements of the contract. Non-refundable contract fees for which no further performance obligations exist, and there is no continuing involvement by the Company, are recognized on the earlier of when the payments are received or when collection is assured.

For sales arrangements that contain multiple elements, the Company splits the arrangement into separate units of accounting if the individually delivered elements have value to the customer on a standalone basis. The Company also evaluates whether multiple transactions with the same customer or related party should be considered part of a multiple element arrangement, whereby the Company assesses, among other factors, whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of each other. The Company then allocates revenue to each element based on a selling price hierarchy. The relative selling price for a deliverable is based on its vendor-specific objective evidence (VSOE), if available, third-party evidence (TPE), if VSOE is not available, or estimated selling price, if neither VSOE nor TPE is available. The Company then recognizes revenue on each deliverable in accordance with its policies for product and service revenue recognition. The Company is not typically able to determine VSOE or TPE, and therefore, uses estimated selling prices to allocate revenue between the elements of the arrangement.

The Company limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services or future performance obligations or subject to customer-specific cancellation rights. The Company evaluates each deliverable in an arrangement to determine whether they represent separate units of accounting. A deliverable constitutes a separate unit of accounting when it has stand-alone value, and for an arrangement that includes a general right of return relative to the delivered products or services, delivery or performance of the undelivered product or service is considered probable and is substantially controlled by the Company. The Company considers a deliverable to have stand-alone value if the product or service is sold separately by the Company or another vendor or could be resold by the customer. Further, the revenue arrangements generally do not include a general right of return relative to the delivered products. Where the aforementioned criteria for a separate unit of accounting are not met, the deliverable is combined with the undelivered element(s) and treated as a single unit of accounting for the purposes of allocation of the arrangement consideration and revenue recognition. The Company allocates the total arrangement consideration to each separable element of an arrangement based upon the relative selling price of each element. Allocation of the consideration is determined at arrangement inception on the basis of each unit’s relative selling price. In instances where the Company has not established fair value for any undelivered element, revenue for all elements is deferred until delivery of the final element is completed and all recognition criteria are met.

Licensing revenue is recognized in accordance with prevailing accounting guidance. Initial license fees are deferred and amortized to revenue over the period of the agreement when a contract exists, the fee is fixed and determinable, and collectability is reasonably assured. Noncancellable, nonrefundable license fees are recognized over the period of the agreement, including those governing research and development activities and any related supply agreement entered into concurrently with the license when the risk associated with commercialization of a product is non-substantive at the outset of the arrangement.

From time to time, the Company offers customers sales incentives, which include volume rebates and discounts. These amounts are estimated on a quarterly basis and recorded as a reduction of revenue.

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1.            Organization, Basis of Presentation, and Summary of Significant Accounting Policies (continued)

A summary of revenues by type of revenue arrangement as described above is as follows (in thousands):

	Year ended May 25, 2014		Year ended May 26, 2013
Recorded upon shipment	$	398,938	$	359,518
Recorded upon acceptance in foreign port		69,710		78,442
Revenue from license fees, R&D contracts and royalties/profit sharing		1,354		1,975
Revenue from multiple element arrangements		6,811		1,773
Total	$	476,813	$	441,708

Shipping and Handling Costs

Amounts billed to third-party customers for shipping and handling are included as a component of revenues. Shipping and handling costs incurred are included as a component of cost of products sold and represent costs incurred to ship product from the sourcing locations to the end consumer markets.

Other Accounting Policies and Disclosures

Cash and Cash Equivalents

The Company records all highly liquid securities with three months or less from date of purchase to maturity as cash equivalents. Cash equivalents consist mainly of certificate of deposits (CDs), money market funds and U.S. Treasuries. The market value of cash equivalents approximates their historical cost given their short-term nature.

Marketable Securities

Short-term marketable securities consist of CDs that are FDIC insured and single A or better rated corporate and municipal bonds with original maturities of more than three months at the date of purchase regardless of the maturity date. The Company classifies all debt securities with readily determinable market values as “available for sale” as the Company views the funds within its portfolio as available for use in its current operations. The aggregate amount of CDs included in marketable securities as of May 25, 2014 and May 26, 2013 was zero and $701,000, respectively. The contractual maturities of the Company's marketable securities that are due in less than one year represent zero and $1.3 million of its marketable securities and those due in one to two years represent zero and $251,000 of the Company’s marketable securities as of May 25, 2014 and May 26, 2013, respectively. Investments in marketable securities are carried at fair market value with unrealized gains and losses reported as other income. The cost of debt securities is adjusted for amortization of premiums and discounts to maturity. This amortization is recorded to interest income. Realized gains and losses on the sale of available for sale securities are also recorded to interest income and were not significant for the fiscal years ended May 25, 2014 and May 26, 2013. During fiscal years 2014 and 2013, the Company did not sell any marketable securities. The cost of securities sold is based on the specific identification method.

Inventories

Inventories are stated at the lower of cost (using the first-in, first-out method) or market. As of May 25, 2014 and May 26, 2013 inventories consisted of (in thousands):

	May 25, 2014		May 26, 2013
Finished goods	$	11,111	$	11,297
Raw materials		10,376		9,290
Work in progress		3,248		3,526
Inventories, net	$	24,735	$	24,113

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1.            Organization, Basis of Presentation, and Summary of Significant Accounting Policies (continued)

If the cost of the inventories exceeds their net realizable value, provisions are recorded currently to reduce them to net realizable value. The Company also provides a provision for slow moving and obsolete inventories based on the estimate of demand for its products.

Advertising Expense

Advertising expenditures for the Company are expensed as incurred. Advertising expense for the Company for fiscal years 2014, 2013 and 2012 was $447,000, $445,000 and $406,000, respectively.

Notes and Advances Receivable

Apio issues notes and makes advances to produce growers for their crop and harvesting costs primarily for the purpose of sourcing crops for Apio's business.  Notes receivable and advances are generally recovered during the growing season (less than one year) using proceeds from the crops sold to Apio.  Notes are interest bearing obligations, evidenced by contracts and notes receivable.  These notes and advances receivable are secured by perfected liens on crops, have terms that range from three to nine months, and are reviewed at least quarterly for collectability.  A reserve is established for any note or advance deemed to not be fully collectible based upon an estimate of the crop value or the fair value of the security for the note or advance.  There were no notes or advances outstanding at May 25, 2014.

Related Party Transactions

The Company sold products to and earned license fees from Windset Holding 2010 Ltd., a Canadian corporation (“Windset”) during fiscal year 2014. The Company also provided cooling and distribution services to Beachside Produce LLC ("Beachside"), a commodity produce distributor, in which the Chairman of Apio had a farming and ownership interest, until May 26, 2013.   During fiscal years 2014, 2013 and 2012, the Company recognized related party revenues of $365,000, $2.5 million, and $3.8 million, respectively, which have been included in product sales in the accompanying Consolidated Statements of Comprehensive Income, from the sale of products and providing cooling services to these parties. As a result of Beachside no longer being a related party beginning in fiscal year 2014, the $2.1 million and $3.1 million of service revenue, related party for fiscal years 2013 and 2012, respectively, have been reclassified to product sales in the accompanying Consolidated Statements of Comprehensive Income. The related receivable balances of $304,000 and $316,000 from Windset are included in accounts receivable, related party in the accompanying Consolidated Balance Sheets as of May 25, 2014 and May 26, 2013, respectively.

Additionally, unrelated to the revenue transactions above, the Company purchases produce from Beachside and Windset for sale to third parties. During fiscal years 2014, 2013 and 2012, the Company recognized related party cost of product sales of $1.6 million, $6.7 million and $5.6 million, respectively, in the accompanying Consolidated Statements of Comprehensive Income, from the sale of products purchased from these parties. The related accounts payable of $134,000 and $225,000 from Windset are included in accounts payable, related party in the accompanying Consolidated Balance Sheets as of May 25, 2014 and May 26, 2013, respectively.

All related party transactions are monitored quarterly by the Company and approved by the Audit Committee of the Board of Directors.

Property and Equipment

Property and equipment are stated at cost. Expenditures for major improvements are capitalized while repairs and maintenance are charged to expense. Depreciation is expensed on a straight-line basis over the estimated useful lives of the respective assets, generally three to forty years for buildings and leasehold improvements and three to twenty years for furniture and fixtures, computers, capitalized software, capitalized leases, machinery, equipment and autos. Leasehold improvements are amortized on a straight-line basis over the lesser of the economic life of the improvement or the life of the lease.

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1.            Organization, Basis of Presentation, and Summary of Significant Accounting Policies (continued)

The Company capitalizes software development costs for internal use in accordance with accounting guidance. Capitalization of software development costs begins in the application development stage and ends when the asset is placed into service. The Company amortizes such costs using the straight-line basis over estimated useful lives of three to seven years. During fiscal year 2014, the Company capitalized $913,000 in software development costs. During fiscal years 2013 and 2012, the Company did not capitalize any software development costs.

Change in Depreciable Lives of Property and Equipment

In accordance with its policy, the Company reviews the estimated useful lives of its fixed assets on an ongoing basis. This review primarily indicated that the actual lives of certain buildings and machinery and equipment at its processing facilities were longer than the estimated useful lives used for depreciation purposes in the Company’s financial statements. As a result, effective November 25, 2013, the Company changed its estimates of the useful lives of its buildings and machinery and equipment to better reflect the estimated periods during which these assets will remain in service. The Company’s buildings that previously averaged 29 years were increased to an average of 35 years. The Company’s machinery and equipment that previously averaged 7 years were increased to an average of 11 years. The effect of this change in estimate for the six months ended May 25, 2014 was to decrease depreciation expense by $876,000, increase net income by $564,000, and increase basic and diluted earnings per share by $0.02.

Long-Lived Assets

The Company’s Long-Lived Assets consist of property, plant and equipment, and intangible assets. Intangible assets are comprised of customer relationships with an estimated useful life of twelve to thirteen years (the “finite-lived intangible assets”) and trademarks/trade names and goodwill with indefinite lives (collectively, “the indefinite-lived intangible assets”), which the Company recognized in accordance with accounting guidance (i) upon the acquisition of GreenLine Holding Company (“GreenLine”) by Apio in April 2012, (ii) upon the acquisition of Lifecore in April 2010 and (iii) upon the acquisition of Apio in December 1999. Accounting guidance defines goodwill as “the excess of the cost of an acquired entity over the net of the estimated fair values of the assets acquired and the liabilities assumed at date of acquisition.” All intangible assets, including goodwill, associated with the acquisition of Lifecore was allocated to the HA-based Biomaterials reporting unit and the acquisitions of Apio and GreenLine were allocated to the Food Products Technology reporting unit pursuant to accounting guidance based upon the allocation of assets and liabilities acquired and consideration paid for each reporting unit. As of May 25, 2014, the HA-based Biomaterials reporting unit had $13.9 million of goodwill and the Food Products Technology reporting unit had $35.7 million of goodwill.

Property, plant and equipment and finite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances occur that indicate that the carrying amount of an asset (or asset group) may not be recoverable. The Company’s impairment review requires significant management judgment including estimating the future success of product lines, future sales volumes, revenue and expense growth rates, alternative uses for the assets and estimated proceeds from the disposal of the assets. The Company conducts quarterly reviews of idle and underutilized equipment, and reviews business plans for possible impairment indicators. Impairment is indicated when the carrying amount of the asset (or asset group) exceeds its estimated future undiscounted cash flows and the impairment is viewed as other than temporary. When impairment is indicated, an impairment charge is recorded for the difference between the asset’s book value and its estimated fair value. Depending on the asset, estimated fair value may be determined either by use of a discounted cash flow model or by reference to estimated selling values of assets in similar condition. The use of different assumptions would increase or decrease the estimated fair value of assets and would increase or decrease any impairment measurement.

The Company tests its indefinite-lived intangible assets for impairment at least annually, in accordance with accounting guidance. For non-goodwill indefinite-lived intangible assets, the Company performs a qualitative analysis in accordance with ASC 350-30-35. For goodwill, the Company performs a quantitative analysis in accordance with ASC 350-20-35.

Application of the impairment tests for indefinite-lived intangible assets requires significant judgment by management, including identification of reporting units, assignment of assets and liabilities to reporting units, assignment of intangible assets to reporting units, and the determination of the fair value of each indefinite-lived intangible asset and reporting unit based upon projections of future net cash flows, discount rates and market multiples, which judgments and projections are inherently uncertain.

During the fiscal quarter ended February 23, 2014, the Company voluntarily changed the date of its annual goodwill and indefinite-lived intangible assets impairment testing from the last day of the fiscal month in July to the first day of the fiscal fourth quarter. This voluntary change is preferable under the circumstances as it provides the Company with additional time to complete its annual goodwill and indefinite-lived intangible asset impairment testing in advance of its year-end reporting and results in better alignment with the Company’s strategic planning and forecasting process. The voluntary change in accounting principle related to the annual testing date will not delay, accelerate, or avoid an impairment charge. This change is not applied retrospectively as it is impracticable to do so because retrospective application would require application of significant estimates and assumptions with the use of hindsight. Accordingly, the change will be applied prospectively.

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1.            Organization, Basis of Presentation, and Summary of Significant Accounting Policies (continued)

The Company tested its indefinite-lived intangible assets for impairment as of February 24, 2014 and determined that no adjustments to the carrying values of these assets were necessary as of that date. On a quarterly basis, the Company considers the need to update its most recent annual tests for possible impairment of its indefinite-lived intangible assets, based on management’s assessment of changes in its business and other economic factors since the most recent annual evaluation. Such changes, if significant or material, could indicate a need to update the most recent annual tests for impairment of the indefinite-lived intangible assets during the current period. The results of these tests could lead to write-downs of the carrying values of these assets in the current period.

The Company uses the discounted cash flow (“DCF”) approach to develop an estimate of fair value for goodwill. The DCF approach recognizes that current value is premised on the expected receipt of future economic benefits. Indications of value are developed by discounting projected future net cash flows to their present value at a rate that reflects both the current return requirements of the market and the risks inherent in the specific investment. The market approach is not used to value the Company’s reporting units because insufficient market comparables exist to enable the Company to develop a reasonable fair value due to the unique nature of each of the Company’s reporting units.

The DCF associated with the annual goodwill impairment analysis for the Food Products Technology reporting unit is based on management’s five-year projection of revenues, gross profits and operating profits by fiscal year and assumes a 36% effective tax rate for each year. Management takes into account the historical trends of the Food Products Technology reporting unit and the industry categories in which it operates along with inflationary factors, current economic conditions, new product introductions, cost of sales, operating expenses, capital requirements and other relevant data when developing its projection. The estimated fair value of the Food Products Technology reporting unit as of February 24, 2014 was 136% of its book value at that date, therefore, no goodwill impairment was deemed to exist. For the test performed as of July 21, 2013, the projected cash flow from operations for determining the DCF for fiscal year 2014 was $10.1 million for the Food Products Technology reporting unit. The actual cash flow from operations for fiscal year 2014 was $10.5 million.

The DCF associated with the annual goodwill impairment analysis for the HA-based Biomaterials reporting unit is based on management’s five-year projections of revenues, gross profits and operating profits by fiscal year and assumes a 36% effective tax rate for each year. Management takes into account the historical trends of HA-based Biomaterials reporting unit and the industry categories in which it operates along with inflationary factors, current economic conditions, new product introductions, cost of sales, operating expenses, capital requirements and other relevant data when developing its projection. The estimated fair value of the HA-based Biomaterials reporting unit as of February 24, 2014 was 176% of its book value at that date, therefore, no goodwill impairment was deemed to exist. For the test performed as of July 21, 2013, the projected cash flow from operations for determining the DCF for fiscal year 2014 was $6.3 million for the HA-based Biomaterials reporting unit. The actual cash flow from operations for fiscal year 2014 was $10.2 million. The difference of $3.9 million is primarily due to timing of working capital changes and lower than planned intercompany charges for income taxes.

Investment in Non-Public Company

The Company’s investment in Aesthetic Science is carried at cost and adjusted for impairment losses. Since there is no readily available market value information, the Company periodically reviews this investment to determine if an other than temporary decline in value has occurred based on the financial stability and viability of Aesthetic Science.

Aesthetic Science sold the rights to its Smartfil™ Injector System on July 16, 2010. As a result, Landec evaluated its cost method investment for impairment, utilizing a discounted cash flow analysis. Based on the terms of the agreement, the Company determined that its investment was other than temporarily impaired and therefore, recorded an impairment loss of $1.0 million in fiscal year 2010. The Company’s carrying value of its investment in Aesthetic Sciences, net of the impairment loss, is $793,000 at May 25, 2014 and May 26, 2013, and reported as an investment in non-public company, non-fair value, in the accompanying Consolidated Balance Sheets.

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1.            Organization, Basis of Presentation, and Summary of Significant Accounting Policies (continued)

On February 15, 2011, the Company made an investment in Windset which is reported as an investment in non-public company, fair value, in the accompanying Consolidated Balance Sheets as of May 25, 2014 and May 26, 2013. The Company has elected to account for its investment in Windset under the fair value option (see Note 4).

Partial Self-Insurance on Employee Health Plan

The Company provides health insurance benefits to eligible employees under a self-insured plan whereby the Company pays actual medical claims subject to certain stop loss limits. The Company records self-insurance liabilities based on actual claims filed and an estimate of those claims incurred but not reported. Any projection of losses concerning the Company's liability is subject to a high degree of variability. Among the causes of this variability are unpredictable external factors such as inflation rates, changes in severity, benefit level changes, medical costs, and claims settlement patterns. This self-insurance liability is included in accrued liabilities and represents management's best estimate of the amounts that have not been paid as of May 25, 2014. It is reasonably possible that the expense the Company ultimately incurs could differ and adjustments to future reserves may be necessary.

Deferred Revenue

Cash received in advance of services performed are recorded as deferred revenue. At May 25, 2014, $1.3 million was recognized as advances from customers. At May 26, 2013, $1.2 million was recognized as advances from customers.

Non-Controlling Interest

The Company reports all non-controlling interests as a separate component of stockholders’ equity. The non-controlling interest’s share of the income or loss of the consolidated subsidiary is reported as a separate line item in our Consolidated Statements of Comprehensive Income, following the consolidated net income caption.

In connection with the acquisition of Apio, Landec acquired Apio’s 60% general partner interest in Apio Cooling, a California limited partnership. Apio Cooling is included in the consolidated financial statements of Landec for all periods presented. The non-controlling interest balance of $1.7 million at both May 25, 2014 and May 26, 2013 is comprised of the non-controlling limited partners’ interest in Apio Cooling.

Income Taxes

The Company accounts for income taxes in accordance with accounting guidance which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. The Company maintains valuation allowances when it is likely that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the Company’s income tax provision in the period of change. In determining whether a valuation allowance is warranted, the Company takes into account such factors as prior earnings history, expected future earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. At May 25, 2014, the Company had an $881,000 valuation allowance against its deferred tax assets.

In addition to valuation allowances, the Company establishes accruals for uncertain tax positions. The tax-contingency accruals are adjusted in light of changing facts and circumstances, such as the progress of tax audits, case law and emerging legislation. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. The Company’s effective tax rate includes the impact of tax-contingency accruals as considered appropriate by management.

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1.            Organization, Basis of Presentation, and Summary of Significant Accounting Policies (continued)

A number of years may elapse before a particular matter, for which the Company has accrued, is audited and finally resolved. The number of years with open tax audits varies by jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes its tax-contingency accruals are adequate to address known tax contingencies. Favorable resolution of such matters could be recognized as a reduction to the Company’s effective tax rate in the year of resolution. Unfavorable settlement of any particular issue could increase the effective tax rate. Any resolution of a tax issue may require the use of cash in the year of resolution. The Company’s tax-contingency accruals are recorded in other accrued liabilities in the accompanying Consolidated Balance Sheets.

Per Share Information

Accounting guidance requires the presentation of basic and diluted earnings per share. Basic earnings per share excludes any dilutive effects of options, warrants and convertible securities and is computed using the weighted average number of common shares outstanding. Diluted earnings per share reflect the potential dilution as if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted common equivalent shares consist of stock options and restricted stock units, calculated using the treasury stock method.

The following table sets forth the computation of diluted net income per share (in thousands, except per share amounts):

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year  Ended  May 27, 2012
Numerator:
Net income applicable to Common Stockholders	$	19,145	$	22,587	$	12,696
Denominator:
Weighted average shares for basic net income per share		26,628		25,830		25,849
Effect of dilutive securities:
Stock options and restricted stock units		492		796		277
Weighted average shares for diluted net income per share		27,120		26,626		26,126
Diluted net income per share	$	0.71	$	0.85	$	0.49

Options to purchase 333,993, 88,022 and 1,855,167 shares of Common Stock at a weighted average exercise price of $14.15, $12.80 and $6.72 per share were outstanding during fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012, respectively, but were not included in the computation of diluted net income per share because the options’ exercise price were greater than the average market price of the Common Stock and, therefore, their inclusion would be antidilutive.

Cost of Sales

The Company includes in cost of sales all the costs related to the sale of products. These costs include the following: raw materials (including produce, seeds, packaging, syringes and fermentation and purification supplies), direct labor, overhead (including indirect labor, depreciation, and facility related costs) and shipping and shipping related costs.

Research and Development Expenses

Costs related to both research and development contracts and Company-funded research is included in research and development expenses. Research and development costs are primarily comprised of salaries and related benefits, supplies, travel expenses, consulting expenses and corporate allocations.

Accounting for Stock-Based Compensation

The Company records compensation expense for stock-based awards issued to employees and directors in exchange for services provided based on the estimated fair value of the awards on their grant dates and is recognized over the required service periods (generally the vesting period). For nonstatutory options, the cash flows resulting from the tax benefit due to tax deductions in excess of the compensation expense recognized for those options (excess tax benefit) are classified as financing activities within the statement of cash flows. The Company’s stock-based awards include stock option grants and restricted stock unit awards (“RSUs”).

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1.            Organization, Basis of Presentation, and Summary of Significant Accounting Policies (continued)

The following table summarizes the stock-based compensation for options and RSUs (in thousands):

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year Ended May 27, 2012
Options	$	558	$	788	$	1,046
RSUs		798		907		826
Total stock-based compensation expense	$	1,356	$	1,695	$	1,872

The following table summarizes the stock-based compensation by income statement line item (in thousands):

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year Ended May 27, 2012
Research and development	$	39	$	718	$	530
Sales, general and administrative		1,317		977		1,342
Total stock-based compensation expense	$	1,356	$	1,695	$	1,872

The estimated fair value for stock options, which determines the Company’s calculation of compensation expense, is based on the Black-Scholes option pricing model. RSUs are valued at the closing market price of the Company’s common stock on the date of grant. The Company uses the straight line single option method to calculate and recognize the fair value of stock-based compensation arrangements. In addition, the Company uses historical data to estimate pre-vesting forfeitures and records stock-based compensation expense only for those awards that are expected to vest and revises those estimates in subsequent periods if the actual forfeitures differ from the prior estimates.

The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected life of option awards, which have a significant impact on the fair value estimates. As of May 25, 2014, May 26, 2013 and May 27, 2012, the fair value of stock option grants was estimated using the following weighted average assumptions:

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year Ended May 27, 2012
Expected life (in years)		3.50		3.76		3.76
Risk-free interest rate		0.71%		0.48%		0.59%
Volatility		0.41		0.53		0.53
Dividend yield		0%		0%		0%

The weighted average estimated fair value of Landec employee stock options granted at grant date market prices during the fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012 was $4.41, $3.57 and $2.65 per share, respectively. No stock options were granted above or below grant date market prices during the fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012.

Fair Value Measurements

The Company uses fair value measurement accounting for financial assets and liabilities and for financial instruments and certain other items measured at fair value. The Company has elected the fair value option for its investment in a non-public company (see Note 4). The Company has not elected the fair value option for any of its other eligible financial assets or liabilities.

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1.             Organization, Basis of Presentation, and Summary of Significant Accounting Policies (continued)

The accounting guidance established a three-tier hierarchy for fair value measurements, which prioritizes the

inputs used in measuring fair value as follows:

Level 1 – observable inputs such as quoted prices for identical instruments in active markets.

Level 2 – inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data.

Level 3 – unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions.

As of May 25, 2014, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis, including cash equivalents, marketable securities, interest rate swap and its minority interest investment in Windset.

The fair value of the Company’s marketable securities is determined based on observable inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Therefore, the Company has categorized its marketable securities as a Level 1 measurement.

The fair value of the Company’s interest rate swap is determined based on model inputs that can be observed in a liquid market, including yield curves, and is categorized as a Level 2 measurement.

The Company has elected the fair value option of accounting for its investment in Windset. The calculation of fair value utilizes significant unobservable inputs in the discounted cash flow models, including projected cash flows, growth rates and discount rates. As a result, the Company’s investment in Windset is considered to be a Level 3 measurement investment. The change in the fair market value of the Company’s investment in Windset for the fiscal years ended May 25, 2014 and May 26, 2013 was due to the Company’s 20.1% minority interest in the change in the fair market value of Windset during those periods. In determining the fair value of the investment in Windset, the Company utilizes the following significant unobservable inputs in the discounted cash flow models:

	At May 25, 2014			At May 26, 2013
Annual consolidated revenue growth rates		4	%		3% to 9	%
Annual consolidated expense growth rates		4	%		3% to 8	%
Consolidated income tax rates		15	%		15	%
Consolidated discount rates		16% to 22	%		18% to 28	%

The revenue growth, expense growth and income tax rate assumptions, consider the Company's best estimate of the trends in those items over the discount period.   The discount rate assumption takes into account the risk-free rate of return, the market equity risk premium and the company’s specific risk premium and then applies an additional discount for lack of liquidity of the underlying securities.    The discounted cash flow valuation model used by the Company has the following sensitivity to changes in inputs and assumptions (in thousands):

	Impact on value of Windset investment as of May 25, 2014
10% increase in revenue growth rates	$	3,200
10% increase in expense growth rates	$	(2,300	)
10% increase in income tax rates		—
10% increase in discount rates	$	(1,500	)

Imprecision in estimating unobservable market inputs can affect the amount of gain or loss recorded for a particular position. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

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1.             Organization, Basis of Presentation, and Summary of Significant Accounting Policies (continued)

The following table summarizes the fair value of the Company’s assets and liabilities that are measured at fair value on a recurring basis, as of May 25, 2014 and May 26, 2013 (in thousands):

	Fair Value at May 25, 2014						Fair Value at May 26, 2013
Assets:	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Marketable securities	$	-	$	-	$	-	$	1,545	$	-	$	-
Investment in private company		-		-		39,600		-		-		29,600
Total	$	-	$	-	$	39,600	$	1,545	$	-	$	29,600
Liabilities:
Interest rate swap		-		44		-		-		163		-
Total	$	-	$	44	$	-	$	-	$	163	$	-

Recent Accounting Pronouncements

Revenue Recognition

In May 2014, the FASB issued Accounting Standard Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The standard requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also includes a cohesive set of disclosure requirements intended to provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a company’s contracts with customers. ASU 2014-09 will be effective beginning the first quarter of the Company's fiscal year 2018 and early application is not permitted. The standard allows for either “full retrospective” adoption, meaning the standard is applied to all of the periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. Management is currently evaluating the effect ASU 2014-09 will have on the Company's Consolidated Financial Statements and disclosures.

Unrecognized Tax Benefits

In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, related to the presentation of unrecognized tax benefits. The update requires presentation of an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward in the statement of financial position. The guidance does not apply to the extent that a net operating loss carryforward or tax credit carryforward at the reporting date is not available under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. The guidance is effective for fiscal years (and interim periods within those years) beginning after December 15, 2013, with early adoption permitted. The Company early adopted this standard in the first fiscal quarter of fiscal year 2014 and such adoption did not have a significant impact on the Company's Consolidated Financial Statements or disclosures.

2.             Acquisitions

GreenLine Holding Company

On April 23, 2012 (the “GreenLine Acquisition Date”), Apio acquired all of the outstanding equity of GreenLine under a Stock Purchase Agreement (the “GreenLine Purchase Agreement”) in order to expand its product offerings and enter into new markets such as foodservice. GreenLine, headquartered in Bowling Green, Ohio, was a privately-held company and is the leading processor and marketer of value-added, fresh-cut green beans in North America. GreenLine has four processing and distribution plants one each in Ohio, Pennsylvania, Florida and California and distribution centers in New York and South Carolina.

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2.             Acquisitions (continued)

Under the GreenLine Purchase Agreement, the aggregate consideration paid at closing consisted of $62.9 million in cash. In addition, the GreenLine Purchase Agreement included a potential earn out payment up to $7.0 million in the event that GreenLine achieved certain revenue targets during calendar year 2012. The earn out was comprised of $4.0 million for achieving a certain revenue target during calendar year 2012, and up to an additional $3.0 million for exceeding the revenue target by $3.0 million or more. In April 2012, the Company performed an analysis of projected revenues for GreenLine and concluded at that time that it was probable that GreenLine would meet, but not exceed, the initial revenue target and therefore, the Company recorded a $3.9 million liability as of May 27, 2012, representing the present value of the expected earn out payment. As a result of the severe drought in the Midwest during 2012, lower than expected results from new product launches and new planned business not being realized, during the second quarter of fiscal year 2013, the Company determined that GreenLine did not achieve the earn out revenue target. As a result, the Company reversed the $3.9 million liability recorded for the earn out and recorded a corresponding credit to other operating expenses in its Consolidated Statements of Comprehensive Income for fiscal year 2013.

The operating results of GreenLine are included in the Company’s financial statements beginning April 23, 2012, in the Food Products Technology operating segment. Included in the Company’s results for the fiscal year 2012 was $9.1 million of GreenLine’s net sales.

Intangible Assets

The Company identified two intangible assets in connection with the GreenLine acquisition: trade names and trademarks valued at $36.0 million, which are considered to be indefinite life assets and therefore, will not be amortized; and customer base valued at $7.5 million with a thirteen year useful life. The trade name/trademark intangible asset was valued using the relief from royalty valuation method and the customer relationship intangible asset was valued using the distributor method.

Goodwill 

The excess of the consideration transferred over the fair values assigned to the assets acquired and liabilities assumed was $13.2 million on the closing date, which represents the goodwill amount resulting from the acquisition which can be attributable to GreenLine’s long history, future prospects and the expected operating synergies from combining GreenLine with Apio’s fresh-cut, value-added vegetable business. None of the goodwill is expected to be deductible for income tax purposes. The Company will test goodwill for impairment on an annual basis or sooner, if indicators of impairment are present.

‘Acquisition-Related Transaction Costs

The Company recognized $1.4 million of acquisition-related expenses that were expensed in the year ended May 27, 2012 and are included in other operating expenses in the Consolidated Statements of Comprehensive Income for the year ended May 27, 2012. These expenses included investment banker fees, legal, accounting and tax service fees and appraisals fees.

3.             Sale of Landec Ag

On June 24, 2012, Landec entered into a stock purchase agreement and two licensing agreements (see Note 5) with INCOTEC^® Coating and Seed Technology Companies (“INCOTEC”), a leading provider of seed and coating technology products and services to the seed industry.

In the stock purchase agreement, Landec sold its equity interest in its seed subsidiary, Landec Ag LLC, to INCOTEC for $600,000, which resulted in a gain of $400,000. Under accounting guidance, because the stock purchase agreement was entered into at the same time the license agreements were consummated (a multiple element agreement), a portion of the gain, or $300,000, has been deferred and will be recognized as revenue monthly from the sale date over the seven year life of the Pollinator Plus® license agreement (see Note 5). The remaining $100,000 of the gain was recognized during the first quarter of fiscal year 2013.

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4.             Investments in non-public companies

In December 2005, Landec entered into a licensing agreement with Aesthetic Sciences for the exclusive rights to use Landec's Intelimer materials technology for the development of dermal fillers worldwide under the agreement. The Company received shares of preferred stock in exchange for the license with a valuation of $1.8 million. Aesthetic Sciences sold the rights to its Smartfil Injector System on July 16, 2010. Landec has evaluated its investment in Aesthetic Sciences for impairment, utilizing a discounted cash flow analysis under the terms of the purchase agreement. Based on the terms of the sale, the Company determined that its investment was other than temporarily impaired and therefore, recorded an impairment charge of $1.0 million in fiscal year 2010. The Company’s carrying value of its investment in Aesthetic Sciences is $793,000 as of May 25, 2014 and May 26, 2013. No additional impairment has been determined for the Company’s investment in Aesthetic Sciences.

On February 15, 2011, Apio entered into a share purchase agreement (the “Windset Purchase Agreement”) with Windset. Pursuant to the Windset Purchase Agreement, Apio purchased 150,000 senior preferred shares for $15 million and 201 common shares for $201 that were issued by Windset (the “Purchased Shares”). The Company’s common shares represent a 20.1% interest in Windset. The non-voting senior preferred shares yield a cash dividend of 7.5% annually. The dividend is payable within 90 days of each anniversary of the execution of the Windset Purchase Agreement, the first three dividend payments of $1.1 million were made in May of 2014, 2013 and 2012. The Windset Purchase Agreement includes a put and call option, which can be exercised on the sixth anniversary of the Windset Purchase Agreement whereby Apio can exercise the put to sell its Purchased Shares to Windset, or Windset can exercise the call to purchase the Purchased Shares from Apio, in either case, at a price equal to 20.1% of the appreciation in the fair market value of Windset from the date of the Company’s investment through the put and call date, plus the purchase price of the Purchased Shares. Under the terms of the arrangement with Windset, the Company is entitled to designate one of five members on the Board of Directors of Windset.

In accordance with accounting guidance, the investment in Windset does not qualify for equity method accounting as the investment does not meet the criteria of in-substance common stock due to returns through the annual dividend on the non-voting senior preferred shares that are not available to the common stock holders. As the put and call options require the Purchased Shares to be put or called in equal proportions, the Company has deemed that the investment, in substance, should be treated as a single security for purposes of accounting. The Company has adopted fair value option in the accounting for its investment in Windset effective on the acquisition date. The fair value of the Company’s investment in Windset utilizes significant unobservable inputs in the discounted cash flow models, including projected cash flows, growth rates and the discount rate, and is therefore considered a Level 3 for fair value measurement purposes (see Note 1). The Company believes that reporting its investment at fair value provides its investors with useful information on the performance of the Company’s investment and the anticipated appreciation in value as Windset expands its business.

The fair value of the Company’s investment in Windset was determined utilizing the Windset Purchase Agreement’s put/call calculation for value and a discounted cash flow model based on projections developed by Windset, and considers the put and call conversion options. These features impact the duration of the cash flows utilized to derive the estimated fair values of the investment. These two discounted cash flow models’ estimate for fair value, which generally approximate a similar result, is then weighted. Assumptions included in these discounted cash flow models will be evaluated quarterly based on Windset’s actual and projected operating results to determine the change in fair value.

During fiscal years 2014, 2013 and 2012, the Company recorded $1.1 million in dividend income and the Company recorded $10.0 million, $8.1 million and $5.8 million of income, respectively, which is included in other income in the Consolidated Statements of Comprehensive Income, from the increase in the fair market value of the Company’s investment in Windset.

The Company also entered into an exclusive license agreement with Windset, which was executed in June 2010, prior to contemplation of Apio’s investment in Windset (see Note 5).

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5.             License Agreements

Monsanto

On December 1, 2006, Landec entered into a five-year co-exclusive technology license and polymer supply agreement (“the Monsanto Agreement”) with Monsanto Company (“Monsanto”) for the use of Landec’s Intellicoat polymer seed coating technology. On December 1, 2011, Monsanto terminated the Monsanto Agreement and paid the Company a $4 million termination fee and all rights to the Intellicoat seed coating technology reverted to Landec. For fiscal year 2012, Landec recognized license revenues from the Monsanto Agreement of $2.7 million.

INCOTEC

In connection with the sale of Landec Ag to INCOTEC on June 24, 2012 (see Note 3), Landec entered into a seven-year exclusive technology license and polymer supply agreement with INCOTEC for the use of Landec’s Intellicoat^® polymer seed coating technology for male inbred corn which is sold under the Pollinator Plus label. This license does not include the use of Intellicoat for the controlled release of an active ingredient for agricultural applications which was retained by Landec. Landec will be the exclusive supplier of Pollinator Plus polymer to INCOTEC during the term of the license agreement and will receive a royalty equal to 20% of the revenues realized by INCOTEC from the sale of or sublicense of Pollinator Plus coatings during the first four years of the agreement and 10% for the last three years of the agreement.

On June 24, 2012, Landec also entered into a five-year exclusive technology license and polymer supply agreement with INCOTEC for the joint development of new polymer and unique coatings for use in seed treatment formulations. In this agreement, Landec will receive a value share which will be mutually agreed to by both parties prior to each application being developed.

Air Products

In March 2006, Landec entered into an exclusive license and research and development agreement with Air Products and Chemicals, Inc. (“Air Products”). In accordance with the agreement, Landec receives 40% of the direct profit generated from the sale of products by Air Products occurring after April 1, 2007, that incorporate Landec’s Intelimer materials.

Chiquita

The agreement with Chiquita has been renewed through December 2016 and requires Chiquita to pay annual gross profit minimums to Landec in order for Chiquita to maintain its exclusive license for bananas. Under the terms of the agreement, Chiquita must notify Landec before December 1^st of each year whether it is going to maintain its exclusive license for the following calendar year and thus agree to pay the minimums for that year. Landec was notified in November 2012 of Chiquita’s desire to not maintain its exclusive license. As a result, the agreement has reverted to a non-exclusive agreement in which Chiquita will pay the Company for membranes purchased and the Company is now entitled to sell its BreatheWay packaging technology for bananas to others.

                Windset

In June 2010, Apio entered into an exclusive license agreement with Windset to allow for the use of Landec’s proprietary breathable packaging to extend the shelf life of greenhouse grown cucumbers, peppers and tomatoes (“Exclusive Products”). In accordance with the agreement, Apio received and recorded a one-time upfront research and development fee of $100,000 and will receive license fees equal to 3% of net revenue of the Exclusive Products utilizing the proprietary breathable packaging technology, with or without the BreatheWay® trademark. The ongoing license fees are subject to annual minimums of $150,000 for each of the three types of exclusive product as each is added to the agreement. As of May 25, 2014, two products have been added to the agreement.

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5.             License Agreements (continued)

                 Nitta     

In July 2012, the Company entered into an agreement with Nitta Corporation (“Nitta”), a Japanese company, to develop additional uses of the Company’s adhesive polymer technology for electronics. During fiscal year 2013, the Company recognized $688,000 in research and development revenues from this agreement.

6.             Property and Equipment

Property and equipment consists of the following (in thousands):

	Years of Useful Life		May 25, 2014			May 26, 2013
Land and building		15-40	$	56,378		$	52,527
Leasehold improvements		3-20		1,079			1,029
Computer, capitalized software, machinery, equipment and auto		3-20		53,715			44,583
Furniture and fixtures		3-7		824			766
Construction in process				6,975			5,838
Gross property and equipment				118,971			104,743
Less accumulated depreciation and amortization				(44,831	)		(38,932	)
Net property and equipment			$	74,140		$	65,811

                Depreciation and amortization expense for property and equipment for the fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012 was $6.2 million, $6.3 million and $5.3 million, respectively. There were no equipment under capital leases at May 25, 2014 or May 26, 2013. Amortization related to capitalized software was $189,000, $160,000 and $136,000 for fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012, respectively. The unamortized computer software costs at May 25, 2014 and May 26, 2013 were $1.1 million and $343,000, respectively.

7.             Intangible Assets

Changes in the carrying amount of goodwill for the fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012 by reportable segment, are as follows (in thousands):

	Food Products Technology		Corporate		Hyaluronan- based Biomaterials		Total
Balance as of May 29, 2011		22,581		—		13,881		36,462
Goodwill acquired during the period		13,158		—		—		13,158
Balance as of May 27, 2012		35,739		—		13,881		49,620
Balance as of May 26, 2013	$	35,739	$	—	$	13,881	$	49,620
Balance as of May 25, 2014	$	35,739	$	—	$	13,881	$	49,620

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7.             Intangible Assets (continued)

Information regarding Landec’s other intangible assets is as follows (in thousands):

	Trademarks & Trade names		Customer Relationships			Total
Balance as of May 29, 2011		12,428		3,366			15,794
Acquired during the period		36,000		7,500			43,500
Amortization expense		—		(309	)		(309	)
Balance as of May 27, 2012		48,428		10,557			58,985
Amortization expense		—		(951	)		(951	)
Balance as of May 26, 2013	$	48,428	$	9,606		$	58,034
Amortization expense		—		(886	)		(886	)
Balance as of May 25, 2014	$	48,428	$	8,720		$	57,148

Accumulated amortization of Trademark and Trade names as of May 25, 2014 and May 26, 2013 was $872,000. Accumulated amortization of Customer Relationships as of May 25, 2014 and May 26, 2013 was $2.5 million and $1.6 million, respectively. Accumulated impairment losses as of May 25, 2014 and May 26, 2013 were $4.8 million. Lifecore’s Customer Relationships amount of $3.7 million is being amortized over 12 years and Apio’s customer relationships amount of $7.5 million is being amortized over 13 years. The amortization expense for the next five fiscal years is estimated to be $885,000 per year.

8.             Stockholders’ Equity

Holders of Common Stock are entitled to one vote per share.

Convertible Preferred Stock

The Company has authorized two million shares of preferred stock, and as of May 25, 2014 has no outstanding preferred stock.

Common Stock and Stock Option Plans

At May 25, 2014, the Company had 2.0 million common shares reserved for future issuance under Landec equity incentive plans.

On October 10, 2013, following stockholder approval at the Annual Meeting of Stockholders of the Company, the 2013 Stock Incentive Plan (the “Plan”) became effective and replaced the Company’s 2009 Stock Incentive Plan. Employees (including officers), consultants and directors of the Company and its subsidiaries and affiliates are eligible to participate in the Plan.

The Plan provides for the grant of stock options (both nonstatutory and incentive stock options), stock grants, stock units and stock appreciation rights. Awards under the Plan will be evidenced by an agreement with the Plan participants and 2.0 million shares of the Company’s Common Stock (“Shares”) were initially available for award under the Plan. Under the Plan, no recipient may receive awards during any fiscal year that exceeds the following amounts: (i) stock options covering in excess of 500,000 Shares; (ii) stock grants and stock units covering in excess of 250,000 Shares in the aggregate; or (iii) stock appreciation rights covering more than 500,000 Shares. In addition, awards to non-employee directors are discretionary. However, a non-employee director may not be granted awards in excess of 30,000 Shares in the aggregate during any fiscal year. The exercise price of the options is the fair market value of the Company’s Common Stock on the date the options are granted.

On October 15, 2009, following stockholder approval at the Annual Meeting of Stockholders of the Company, the 2009 Stock Incentive Plan (the “2009 Plan”) became effective and replaced the Company’s 2005 Stock Incentive Plan. Employees (including officers), consultants and directors of the Company and its subsidiaries and affiliates are eligible to participate in the 2009 Plan. The 2009 Plan provides for the grant of stock options (both nonstatutory and incentive stock options), stock grants, stock units and stock appreciation rights. Under the 2009 Plan, 1.9 million Shares were initially available for awards and as of May 25, 2014, 1.0 million options to purchase shares and restricted stock units (RSUs) were outstanding.

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8.             Stockholders’ Equity (continued)

On October 14, 2005, following stockholder approval at the Annual Meeting of Stockholders of the Company, the 2005 Stock Incentive Plan (“2005 Plan”) became effective. The 2005 Plan replaced the Company’s four then existing equity plans and no shares remain available for grant under those plans. Employees (including officers), consultants and directors of the Company and its subsidiaries and affiliates were eligible to participate in the 2005 Plan. The 2005 Plan provided for the grant of stock options (both nonstatutory and incentive stock options), stock grants, stock units and stock appreciation rights. Under the 2005 Plan, 861,038 Shares were initially available for awards, and as of May 25, 2014, 283,250 options to purchase shares were outstanding. The exercise price of the options was the fair market value of the Company’s Common Stock on the date the options were granted.

The 1995 Directors’ Stock Option Plan (the “Directors’ Plan”) provided that each person who became a non- employee director of the Company, who had not received a previous grant, be granted a nonstatutory stock option to purchase 20,000 shares of Common Stock on the date on which the optionee first became a non-employee director of the Company. Thereafter, on the date of each annual meeting of the stockholders each non-employee director was granted an additional option to purchase 10,000 shares of Common Stock if, on such date, he or she had served on the Company’s Board of Directors for at least six months prior to the date of such annual meeting. The exercise price of the options was the fair market value of the Company’s Common Stock on the date the options were granted. Options granted under this plan were exercisable and vested upon grant. No shares remain available for grant under the Directors’ Plan.

Activity under all Landec equity incentive plans is as follows:

Stock-Based Compensation Activity

				Restricted Stock Outstanding					Stock Options Outstanding
	RSUs and Options Available for Grant			Number of Restricted Shares			Weighted Average Grant Date Fair Value		Number of Stock Options			Weighted  Average Exercise Price
Balance at May 29, 2011		640,976			415,085		$	5.96		2,318,753		$	6.34
Granted		(191,333	)		47,833		$	6.67		143,500		$	6.67
Awarded/Exercised		—			(111,252	)	$	6.36		(371,727	)	$	5.40
Forfeited		—			(3,500	)	$	5.84		(5,657	)	$	5.76
Plan shares expired		—			—			—		(38,437	)	$	8.23
Balance at May 27, 2012		449,643			348,166		$	5.93		2,046,432		$	6.50
Granted		(26,666	)		6,666		$	9.01		20,000		$	9.01
Awarded/Exercised		—			(231,086	)	$	5.74		(671,563	)	$	6.30
Forfeited		—			(28,416	)	$	6.20		(44,977	)	$	6.34
Plan shares expired		—			—			—		(10,000	)	$	13.32
Balance at May 26, 2013		422,977			95,330		$	6.52		1,339,892		$	6.58
Additional shares reserved		2,000,000			—			—		—			—
Granted		(420,131	)		128,631		$	14.30		291,500		$	14.30
Awarded/Exercised		—			(62,499	)	$	6.18		(398,080	)	$	6.45
Forfeited		—			(12,162	)	$	8.86		(12,452	)	$	6.66
Plan shares expired		(2,846	)		—			—		(5,000	)	$	13.32
Balance at May 25, 2014		2,000,000			149,300		$	13.17		1,215,860		$	8.45

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8.             Stockholders’ Equity (continued)

Upon vesting of certain RSUs and the exercise of certain options during fiscal years 2014, 2013 and 2012, certain RSUs and exercised options were net share-settled to cover the required exercise price and withholding tax and the remaining amounts were converted into an equivalent number of shares of Common Stock. The Company withheld shares with value equivalent to the exercise price for options and the employees' minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld for fiscal years 2014, 2013 and 2012 were 47,573, 145,159 and 326,954 RSUs and options, respectively, which was based on the value of the option and/or RSUs on their exercise or vesting date as determined by the Company's closing stock price. Total payments for the employees' tax obligations to the taxing authorities during fiscal years 2014 and 2013 were approximately $1.3 million and $49,000, respectively. These net-share settlements had the effect of share repurchases by the Company as they reduced and retired the number of shares that would have otherwise have been issued as a result of the vesting and did not represent an expense to the Company.

The following table summarizes information concerning stock options outstanding and exercisable at May 25, 2014:

				Options Outstanding								Options Exercisable
Range of Exercise Prices				Number of Shares Outstanding		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Aggregate Intrinsic Value		Number of Shares Exercisable		Weighted Average Exercise Price		Aggregate Intrinsic Value
$	5.63	-	$5.63		287,219		3.01	$	5.63	$	1,832,457		287,219	$	5.63	$	1,832,457
$	5.65	-	$6.22		321,085		2.63	$	6.15	$	1,881,142		321,085	$	6.15	$	1,881,142
$	6.35	-	$7.50		230,056		2.63	$	6.76	$	1,207,945		214,612	$	6.77	$	1,125,386
$	8.19	-	$14.30		377,500		5.03	$	13.58	$	136,400		161,694	$	12.94	$	106,400
$	5.63	-	$14.30		1,215,860		3.46	$	8.45	$	5,057,944		984,610	$	7.25	$	4,945,385

At May 25, 2014 and May 26, 2013 options to purchase 984,610 and 1,262,934 shares of Landec’s Common Stock were vested, respectively and 231,250 and 76,958 were unvested, respectively. No options have been exercised prior to being vested. The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on the Company’s closing stock price of $12.01 on May 23, 2014, which would have been received by holders of stock options had all holders of stock options exercised their stock options that were in-the-money as of that date. The total number of in-the-money stock options exercisable as of May 25, 2014, was 852,916 shares. The aggregate intrinsic value of stock options exercised during the fiscal year 2014 was $2.3 million.

Option Awards

	Outstanding Options		Weighted Average Exercise Price		Weighted Average Remaining Contract Term (in years)		Aggregate Intrinsic Value
Vested		984,610	$	7.25		2.88	$	4,945,385
Expected to vest		226,625	$	13.56		5.93		110,308
Total		1,211,235	$	8.43		3.45	$	5,055,693

As of May 25, 2014, there was $2.0 million of total unrecognized compensation expense related to unvested equity compensation awards granted under the Company’s incentive stock plans. Total expense is expected to be recognized over the weighted-average period of 1.9 years for both stock options and restricted stock awards.

Stock Repurchase Plan

On July 14, 2010, the Board of Directors of the Company approved the establishment of a stock repurchase plan which allows for the repurchase of up to $10 million of the Company’s Common Stock. The Company may repurchase its common stock from time to time in open market purchases or in privately negotiated transactions. The timing and actual number of shares repurchased is at the discretion of management of the Company and will depend on a variety of factors, including stock price, corporate and regulatory requirements, market conditions, the relative attractiveness of other capital deployment opportunities and other corporate priorities. The stock repurchase program does not obligate Landec to acquire any amount of its common stock and the program may be modified, suspended or terminated at any time at the Company's discretion without prior notice. During fiscal years 2014 and 2013, the Company did not purchase any shares on the open market. During fiscal year 2012, the Company purchased on the open market 917,244 shares of its Common Stock for $5.0 million and retired those shares.

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9.             Debt

Long-term debt consists of the following (in thousands):

	May 25, 2014			May 26, 2013
Real estate loan agreement with General Electric Capital Corporation (“GE Capital”); due in monthly principal and interest payments of $133,060 through May 1, 2022 with interest based on a fixed rate of 4.02% per annum	$	16,137		$	17,065
Capital equipment loan with GE Capital; due in monthly principal and interest payments of $175,356 through May 1, 2019 with interest based on a fixed rate of 4.39% per annum		9,430			11,080
Term note with BMO Harris; due in monthly payments of $250,000 through May 23, 2016 with interest payable monthly at LIBOR plus 2% per annum		6,000			9,000
Industrial revenue bonds (“IRBs”) issued by Lifecore; due in annual payments through 2020 with interest at a variable rate set weekly by the bond remarketing agent (0.28% and 0.38% at May 25, 2014 and May 26, 2013, respectively)		2,805			3,160
Total		34,372			40,305
Less current portion		(6,055	)		(5,933	)
Long-term portion	$	28,317		$	34,372

The future minimum principal payments of the Company’s debt for each year presented are as follows (in thousands):

	GE RE Loan		GE Equipment		BMO Harris		IRB		Total
FY 2015		965		1,725		3,000		365		6,055
FY 2016		1,005		1,801		3,000		375		6,181
FY 2017		1,046		1,882		—		390		3,318
FY 2018		1,089		1,967		—		400		3,456
FY 2019		1,134		2,055		—		410		3,599
Thereafter		10,898		—		—		865		11,763
Total	$	16,137	$	9,430	$	6,000	$	2,805	$	34,372

In addition to entering into the GE Capital real estate and equipment loans mentioned above, on April 23, 2012 in connection with the acquisition of GreenLine, Apio also entered into a five-year, $25.0 million asset-based working capital revolving line of credit with GE Capital, with an interest rate of LIBOR plus 2%, with availability based on the combination of the eligible accounts receivable and eligible inventory (availability was $19.8 million at May 25, 2014). Apio’s revolving line of credit has an unused fee of 0.375% per annum. At May 25, 2014 and May 26, 2013, Apio had zero and $4.0 million, respectively, outstanding under its revolving line of credit.

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9. Debt (continued)

The GE real estate, equipment and line of credit agreements (collectively the “GE Debt Agreements”) are secured by liens on all of the property of Apio and its subsidiaries. The GE Debt Agreements contain customary events of default under which obligations could be accelerated or increased. The GE Capital real estate and equipment loans are guaranteed by Landec, and Landec has pledged its equity interest in Apio as collateral under the line of credit agreement. The GE Debt Agreements contain customary covenants, such as limitations on the ability to (1) incur indebtedness or grant liens or negative pledges on Apio’s assets; (2) make loans or other investments; (3) pay dividends, sell stock or repurchase stock or other securities; (4) sell assets; (5) engage in mergers; (6) enter into sale and leaseback transactions; and (7) make changes in Apio’s corporate structure. In addition, Apio must maintain a minimum fixed charge coverage ratio of 1.10 to 1.0 if the availability under its line of credit falls below $7.5 million. Apio was in compliance with all financial covenants as of May 25, 2014 and May 26, 2013. Unamortized loan origination fees for the GE Debt Agreements were $964,000 and $1.2 million at May 25, 2014 and May 26, 2013, respectively, and are included in other assets in the Consolidated Balance Sheets.

On May 23, 2012, Lifecore entered into two financing agreements with BMO Harris Bank N.A. and/or its affiliates (“BMO Harris”), collectively (the “Lifecore Loan Agreements”):

(1) A Credit and Security Agreement (the “Credit Agreement”) which includes (a) a two-year, $10.0 million asset-based working capital revolving line of credit, with an interest rate of LIBOR plus 1.85%, with availability based on the combination of Lifecore’s eligible accounts receivable and inventory balances (availability was $7.9 million at May 25, 2014) and with no unused fee (as of May 25, 2014 and May 26, 2013, no amounts were outstanding under the line of credit) and (b) a $12.0 million term loan which matures in four years due in monthly payments of $250,000 with interest payable monthly based on a variable interest rate of LIBOR plus 2% (the “Term Loan”).

(2) A Reimbursement Agreement pursuant to which BMO Harris caused its affiliate Bank of Montreal to issue an irrevocable letter of credit in the amount of $3.5 million (the “Letter of Credit”) which is securing the IRBs described above.

The obligations of Lifecore under the Lifecore Loan Agreements are secured by liens on all of the property of Lifecore. The Lifecore Loan Agreements contain customary covenants, such as limitations on the ability to (1) incur indebtedness or grant liens or negative pledges on Lifecore’s assets; (2) make loans or other investments; (3) pay dividends or repurchase stock or other securities; (4) sell assets; (5) engage in mergers; (6) enter into sale and leaseback transactions; (7) adopt certain benefit plans; and (8) make changes in Lifecore’s corporate structure. In addition, under the Credit Agreement, Lifecore must maintain (a) a minimum fixed charge coverage ratio of 1.10 to 1.0 and a minimum quick ratio of 1.25 to 1.00, both of which must be satisfied as of the end of each fiscal quarter commencing with the fiscal quarter ending August 26, 2012 and (b) a minimum tangible net worth of $29,000,000, measured as of May 28, 2013, and as of the end of each fiscal year thereafter. Lifecore was in compliance with all financial covenants as of May 25, 2014 and May 26, 2013. Unamortized loan origination fees for the Lifecore Loan Agreements were $98,000 and $149,000 at May 25, 2014 and May 26, 2013, respectively, and are included in other assets in the Consolidated Balance Sheets.

The market value of the Company’s debt approximates its recorded value as the interest rates on each debt instrument approximates current market rates.

The Term Loan was used to repay Lifecore’s former credit facility with Wells Fargo Bank, N.A. (“Wells Fargo”). The Letter of Credit (which replaces a letter of credit previously provided by Wells Fargo) provides liquidity and credit support for the IRBs.

On August 19, 2004, Lifecore issued variable rate industrial revenue bonds (“IRBs”).  These IRBs were assumed by Landec in the acquisition of Lifecore (see Note 2). The IRBs are collateralized by a bank letter of credit which is secured by a first mortgage on the Company’s facility in Chaska, Minnesota. In addition, the Company pays an annual remarketing fee equal to 0.125% and an annual letter of credit fee of 0.75%.The maturities on the IRBs are held in a sinking fund account, recorded in Other Current Assets in the accompanying Consolidated Balance Sheets, and are paid out each year on September 1st.

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10.           Derivative Financial Instruments

In May 2010, the Company entered into a five-year interest rate swap agreement under the credit agreement with Wells Fargo. The interest rate swap was designated as a cash flow hedge of future interest payments of LIBOR and had a notional amount of $20 million. As a result of the interest rate swap transaction, the Company fixed for a five-year period the interest rate at 4.24% subject to market based interest rate risk on $20 million of borrowings under the credit agreement with Wells Fargo. The Company’s obligations under the interest rate swap transaction as to the scheduled payments were guaranteed and secured on the same basis as its obligations under the credit agreement with Wells Fargo at the time the agreement was consummated. Upon entering into the new Term Loan with BMO Harris in May 2012, the Company used the proceeds from that loan to pay off the Wells Fargo credit facility. The swap with Wells Fargo was not terminated upon the extinguishment of the debt with Wells Fargo. As a result of extinguishing the debt with Wells Fargo as of May 23, 2012, the swap was no longer an effective hedge and therefore, the fair value of the swap at the time the debt was extinguished of $347,000 was reversed from other comprehensive income and recorded in other expense during fiscal year 2012. The fair value of the swap arrangement as of May 25, 2014 and May 26, 2013 was $44,000 and $163,000, respectively, and is included in other accrued liabilities in the accompanying Consolidated Balance Sheets.

11.           Income Taxes

The provision for income taxes consisted of the following (in thousands):

Current:	Year ended May 25, 2014		Year ended May 26, 2013			Year ended May 27, 2012
Federal	$	4,785	$	2,808		$	4,597
State		157		(18	)		(586	)
Foreign		56		56			56
Total		4,998		2,846			4,067
Deferred:
Federal		5,059		6,218			2,641
State		526		388			477
Total		5,585		6,606			3,118
Income tax expense	$	10,583	$	9,452		$	7,185

The actual provision for income taxes differs from the statutory U.S. federal income tax rate as follows (in thousands):

	Year Ended May 25, 2014			Year Ended May 26, 2013			Year Ended May 27, 2012
Provision at U.S. statutory rate (1)	$	10,405		$	11,214		$	6,958
State income taxes, net of federal benefit		711			731			451
Change in valuation allowance		99			370			1
Tax-exempt interest		—			—			(40	)
Tax credit carryforwards		(378	)		(801	)		(368	)
Transaction costs		—			—			322
Domestic manufacturing deduction		(406	)		(172	)		(208	)
Change in value of contingent consideration		—			(1,450	)		—
Other		152			(440	)		69
Total	$	10,583		$	9,452		$	7,185

(1) Statutory rate was 35% for fiscal years 2014, 2013 and 2012.

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11.           Income Taxes (continued)

The increase in income tax expense in fiscal year 2014 compared to fiscal year 2013 is primarily due to the benefit received in fiscal year 2013 related to the change in value of contingent consideration, the absence of which increased the effective tax tax rate from 30% in fiscal year 2013 to 36% in fiscal year 2014 partially offset by a 7% decrease in net income before taxes. The increase in the income tax expense in fiscal year 2013 compared to fiscal year 2012 is due to a 59% increase in net income before taxes partially offset by a decrease in the Company’s effective tax rate to 30% down from 36% in fiscal year 2012 related to a change in value of contingent consideration in fiscal year 2013

The effective tax rates for fiscal year 2014 differ from the statutory federal income tax rate of 35 percent as a result of several factors, including state taxes, non-deductible stock-based compensation expense, disqualified dispositions of incentive stock options, domestic manufacturing deduction, the benefit of federal and state research and development credits, and the change in valuation allowance. The effective tax rates for fiscal year 2013 differ from the statutory federal income tax rate of 35 percent as a result of several factors, including state taxes, change in value of contingent consideration, non-deductible stock-based compensation expense, disqualified dispositions of incentive stock options, domestic manufacturing deduction, the benefit of federal and state research and development credits, and the change in valuation allowance. The effective tax rates for fiscal year 2012 differ from the statutory federal income tax rate of 35 percent as a result of several factors, including state taxes, non-deductible stock-based compensation expense, tax exempt interest, domestic manufacturing deduction and the benefit of federal and state research and development credits, and accounting for transaction costs associated with the GreenLine acquisition in fiscal year 2012.

Significant components of deferred tax assets and liabilities consisted of the following (in thousands):

	May 25, 2014			May 26, 2013
Deferred tax assets:
Net operating loss carryforwards	$	3,630		$	3,853
Accruals and reserves		1,746			1,388
Stock-based compensation		723			621
Research and AMT credit carryforwards		495			486
Other		545			450
Gross deferred tax assets		7,139			6,798
Valuation allowance		(881	)		(783	)
Net deferred tax assets		6,258			6,015
Deferred tax liabilities:
Basis difference in investment in non-public company		(9,270	)		(5,505	)
Depreciation and amortization		(5,705	)		(5,822	)
Goodwill and other indefinite life intangibles		(19,360	)		(17,160	)
Deferred tax liabilities		(34,335	)		(28,487	)
Net deferred tax liabilities	$	(28,077	)	$	(22,472	)

As of May 25, 2014, the Company had federal, California, Indiana, and other state net operating loss carryforwards of approximately $8.3 million, $1.7 million, $6.7 million, and $14.7 million respectively. These losses expire in different periods through 2032, if not utilized. Such net operating losses consist of excess tax benefits from employee stock option exercises and have not been recorded in the Company’s deferred tax assets. The Company will record approximately $915,000 of the gross California net operating loss to additional paid in capital as and when such excess tax benefits are ultimately realized. The Company acquired additional net operating losses through the acquisition of GreenLine. Utilization of these acquired net operating losses in a specific year is limited due to the “change in ownership” provision of the Internal Revenue Code of 1986 and similar state provisions. The net operating losses presented above for federal and state purposes is net of any such limitation.

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11.           Income Taxes (continued)

The federal research and development credit has again expired and is currently unavailable for calendar 2014. As such, the Company is not benefiting any federal research credits for the last five months of the fiscal year ended May 25, 2014.

The Company has California research and development tax credits carryforwards of approximately $1.6 million. The research and development tax credit carryforwards have an unlimited carryforward period for California purposes. Certain tax credit carryovers are attributable to excess tax benefits from employee stock option exercises and have not been recorded in the Company’s deferred tax assets. The Company will record $1.1 million of the gross California research and development credit to additional paid in capital as and when such excess tax benefits are ultimately realized.

Valuation allowances are reviewed each period on a tax jurisdiction by jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets. Based on this analysis and considering all positive and negative evidence, the Company determined that a valuation allowance of $881,000 should be recorded as a result of uncertainty around the utilization of certain state net operating losses and a book impairment loss on the Company's investment in Aesthetic Sciences as it is more likely than not that a portion of the deferred tax asset will not be realized in the foreseeable future. The valuation allowance increased by $99,000 in fiscal year 2014 primarily due to uncertainty around the utilization of certain state net operating losses and credits.

The accounting for uncertainty in income taxes recognized in an enterprise’s financial statements prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and the derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure, and transition.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	As of
	May 25, 2014			May 26, 2013		May 27, 2012
Unrecognized tax benefits – beginning of the period	$	998		$	766	$	760
Gross increases – tax positions in prior period		7			103		1
Gross decreases – tax positions in prior period		(48	)		—		(1	)
Gross increases – current-period tax positions		78			129		246
Lapse of statute of limitations		—			—		(240	)
Unrecognized tax benefits – end of the period	$	1,035		$	998	$	766

As of May 25, 2014, the total amount of net unrecognized tax benefits was $1.0 million, of which, $817,000, if recognized, would affect the effective tax rate. As of May 26, 2013, the total amount of net unrecognized tax benefits was $1.0 million, of which, $807,000, if recognized, would affect the effective tax rate. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. The total amount of penalties and interest was not material as of May 25, 2014 and May 26, 2013. Additionally, the Company does not expect its unrecognized tax benefits to change materially within the next twelve months.

Due to tax attribute carryforwards, the Company is subject to examination for tax years 1997 forward for U.S. tax purposes. The Company is also subject to examination in various state jurisdictions for tax years 1998 forward, none of which were individually material.

12.           Commitments and Contingencies

Operating Leases

Landec leases facilities and equipment under operating lease agreements with various terms and conditions, which expire at various dates through fiscal year 2020. Certain of these leases have renewal options.

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12.           Commitments and Contingencies (continued)

The approximate future minimum lease payments under these operating leases, excluding land leases, at May 25, 2014 are as follows (in thousands):

	Amount
FY2015	$	2,916
FY2016		2,720
FY2017		2,225
FY2018		1,375
FY2019		929
Thereafter		873
Total	$	11,038

Rent expense for operating leases, including month to month arrangements was $4.4 million, $4.8 million and $1.5 million for the fiscal years 2014, 2013 and 2012, respectively.

Capital Leases

There was no equipment under capital lease agreements at May 25, 2014.

Employment Agreements

Landec has entered into employment agreements with certain key employees. These agreements provide for these employees to receive incentive bonuses based on the financial performance of certain divisions in addition to their annual base salaries. The accrued incentive bonuses amounted to $656,000 at May 25, 2014 and $548,000 at May 26, 2013.

Purchase Commitments

At May 25, 2014, the Company was committed to purchase $5.0 million of produce during fiscal year 2015 in accordance with contractual terms at market rates. Payments of $7.1 million were made in fiscal year 2014 under these arrangements.

Loss Contingencies

As of May 25, 2014, the Company is not a party to any legal proceedings.

13.          Employee Savings and Investment Plans

The Company sponsors a 401(k) plan which is available to substantially all of the Company’s employees. Landec’s Corporate Plan, which is available to all Landec employees (“Landec Plan”), allows participants to contribute from 1% to 50% of their salaries, up to the Internal Revenue Service (IRS) limitation into designated investment funds. The Company matches 67% on the first 6% contributed by an employee. Employee and Company contributions are fully vested at the time of the contributions. The Company retains the right, by action of the Board of Directors, to amend, modify, or terminate the plan. For fiscal years 2014, 2013 and 2012, the Company contributed $1.1 million, $939,000 and $789,000, respectively, to the Landec Plan.

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14.           Business Segment Reporting

The Company manages its business operations through three strategic business units. Based upon the information reported to the chief operating decision maker, who is the Chief Executive Officer, the Company has the following reportable segments: the Food Products Technology segment, the Food Export segment and the Hyaluronan-based Biomaterials segment.

The Food Products Technology segment markets and packs specialty packaged whole and fresh-cut fruit and vegetables, the majority of which incorporate the BreatheWay specialty packaging for the retail grocery, club store and food services industry. In addition, the Food Products Technology segment sells BreatheWay packaging to partners for non-vegetable products. The Food Export segment consists of revenues generated from the purchase and sale of primarily whole commodity fruit and vegetable products to Asia and domestically. The HA-based Biomaterials segment sells products utilizing hyaluronan, a naturally occurring polysaccharide that is widely distributed in the extracellular matrix of connective tissues in both animals and humans, for medical use primarily in the Ophthalmic, Orthopedic and Veterinary markets. Corporate licenses Landec’s patented Intellicoat seed coatings to the farming industry and licenses the Company’s Intelimer polymers for personal care products and other industrial products. The Corporate segment also includes general and administrative expenses, non-Food Products Technology and non HA-based Biomaterials interest income and income tax expenses. Beginning in fiscal year 2013, the Food Products Technology, the Food Export and the Hyaluronan-based Biomaterials segments include charges for corporate services and tax sharing allocated from the Corporate segment. All of the assets of the Company are located within the United States of America.

The Company’s international sales by geography are based on the billing address of the customer and were as follows (in millions):

	May 25, 2014		May 26, 2013		May 27, 2012
Canada	$	46.6	$	27.8	$	20.8
Taiwan	$	30.7	$	31.0	$	22.7
Belgium	$	13.1	$	16.6	$	15.6
Japan	$	9.9	$	10.6	$	11.1
Indonesia	$	9.6	$	21.0	$	23.0
China	$	8.2	$	5.0	$	4.3
All Other Countries	$	19.1	$	20.8	$	17.0

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14.          Business Segment Reporting (continued)

Operations by segment consisted of the following (in thousands): 

	Food Products				Hyaluronan- based
Fiscal Year Ended May 25, 2014	Technology		Food Export		Biomaterials		Corporate			TOTAL
Net sales	$	360,728	$	69,827	$	45,704	$	554		$	476,813
International sales	$	47,224	$	69,710	$	20,312	$	—		$	137,246
Gross profit	$	36,318	$	5,340	$	20,456	$	450		$	62,564
Net income (loss)	$	19,041	$	1,973	$	9,695	$	(11,564	)	$	19,145
Identifiable assets	$	196,257	$	25,391	$	85,858	$	6,117		$	313,623
Depreciation and amortization	$	4,751	$	6	$	2,221	$	136		$	7,114
Capital expenditures	$	10,950	$	—	$	3,877	$	59		$	14,886
Dividend income	$	1,125	$	—	$	—	$	—		$	1,125
Interest income	$	12	$	—	$	242	$	6		$	260
Interest expense	$	1,402	$	—	$	248	$	—		$	1,650
Income tax expense	$	33	$	3	$	17	$	10,530		$	10,583

Fiscal Year Ended May 26, 2013
Net sales	$	320,447	$	78,568	$	41,281	$	1,412		$	441,708
International sales	$	27,532	$	78,442	$	26,792	$	—		$	132,766
Gross profit	$	37,077	$	5,274	$	19,102	$	1,307		$	62,760
Net income (loss)	$	20,526	$	1,660	$	6,835	$	(6,434	)	$	22,587
Identifiable assets	$	180,104	$	21,737	$	80,940	$	8,161		$	290,942
Depreciation and amortization	$	4,761	$	4	$	2,379	$	151		$	7,295
Capital expenditures	$	5,598	$	—	$	3,190	$	89		$	8,877
Dividend income	$	1,125	$	—	$	—	$	—		$	1,125
Interest income	$	42	$	—	$	137	$	—		$	179
Interest expense	$	1,707	$	—	$	301	$	—		$	2,008
Income tax expense	$	3,399	$	339	$	1,400	$	4,314		$	9,452

Fiscal Year Ended May 27, 2012
Net sales	$	207,582	$	71,485	$	34,283	$	4,202		$	317,552
International sales	$	20,528	$	71,054	$	22,904	$	—		$	114,486
Gross profit	$	25,237	$	4,900	$	17,994	$	4,007		$	52,138
Net income (loss)	$	17,527	$	2,269	$	7,672	$	(14,772	)	$	12,696
Identifiable assets	$	169,541	$	18,425	$	81,927	$	7,799		$	277,692
Depreciation and amortization	$	3,191	$	7	$	2,242	$	181		$	5,621
Capital expenditures	$	2,498	$	—	$	2,798	$	75		$	5,371
Dividend income	$	1,125	$	—	$	—	$	—		$	1,125
Interest income	$	30	$	—	$	129	$	21		$	180
Interest expense	$	178	$	—	$	751	$	—		$	929
Income tax expense	$	—	$	—	$	—	$	7,185		$	7,185

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15.          Quarterly Consolidated Financial Information (unaudited)

The following is a summary of the unaudited quarterly results of operations for fiscal years 2014, 2013 and 2012 (in thousands, except for per share amounts):

FY 2014	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		FY 2014
Revenues	$	109,479	$	120,026	$	126,379	$	120,929	$	476,813
Gross profit	$	12,532	$	13,734	$	20,155	$	16,143	$	62,564
Net income	$	4,752	$	3,451	$	6,400	$	4,542	$	19,145
Net income per basic share	$	0.18	$	0.13	$	0.24	$	0.17	$	0.72
Net income per diluted share	$	0.18	$	0.13	$	0.24	$	0.17	$	0.71

FY 2013	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		FY 2013
Revenues	$	102,074	$	114,654	$	117,867	$	107,113	$	441,708
Gross profit	$	13,763	$	18,459	$	17,508	$	13,030	$	62,760
Net income	$	4,366	$	8,913	$	4,789	$	4,519	$	22,587
Net income per basic share	$	0.17	$	0.35	$	0.19	$	0.17	$	0.87
Net income per diluted share	$	0.17	$	0.34	$	0.18	$	0.17	$	0.85

FY 2012	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		FY 2012
Revenues	$	73,301	$	81,570	$	80,064	$	82,617	$	317,552
Gross profit	$	11,250	$	13,010	$	13,172	$	14,706	$	52,138
Net income (loss)	$	1,812	$	3,340	$	4,765	$	2,779	$	12,696
Net income (loss) per basic share	$	0.07	$	0.13	$	0.19	$	0.11	$	0.49
Net income (loss) per diluted share	$	0.07	$	0.13	$	0.18	$	0.11	$	0.49

16.          Subsequent Events

On July 15, 2014, Apio purchased from a shareholder of Windset an additional 68 shares of common stock and 15,857 shares of junior preferred stock of Windset for $11.0 million. After the purchase, Apio’s common stock ownership represents a 26.9% interest in Windset. The non-voting junior preferred stock does not yield a dividend unless declared by the Board of Directors of Windset. The newly purchased shares of common stock will be included in the put/call arrangement with Windset and will be adjusted to fair value on a quarterly basis along with the previously purchased common stock.

On July 17, 2014, Apio entered into the amendment with GE Capital, which amends the Credit Agreement dated April 23, 2012 among the parties. Under the amendment, the parties have agreed to increase the current revolving line of credit from $25 million to $40 million, reduce the interest rate from LIBOR plus 2.0% to LIBOR plus 1.75%, extend the term to July 17, 2019 and make certain other changes.

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(b)     Index of Exhibits.

Exhibit Number:	Exhibit Title
3.1	Certificate of Incorporation of Registrant, incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated November 7, 2008.
3.2	Amended and Restated Bylaws of Registrant, incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated October 18, 2011.
10.1	Form of Indemnification Agreement, incorporated herein by reference to Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 29, 2005.
10.2*	Form of Option Agreement for 1995 Directors’ Stock Option Plan, incorporated herein by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended October 31, 1996.
10.3	Industrial Real Estate Lease dated March 1, 1993 between the Registrant and Wayne R. Brown & Bibbits Brown, Trustees of the Wayne R. Brown & Bibbits Brown Living Trust dated December 30, 1987, incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1 (File No. 33-80723) declared effective on February 12, 1996.
10.4*	Form of Option Agreement for the 1996 Non-Executive Stock Option Plan, as amended, incorporated herein by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended October 31, 1996.
10.5*	1996 Amended and Restated Stock Option Plan, incorporated herein by reference to Exhibit 10.17 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2001.
10.6*	Form of Option Agreement for 1996 Amended and Restated Stock Option Plan, incorporated herein by reference to Exhibit 10.17 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 1997.
10.7*	New Executive Stock Option Plan, incorporated herein by reference to Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended October 29, 2000.
10.8*	1996 Non-Executive Stock Option Plan, as amended, incorporated herein by reference to Exhibit 10.35 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended October 28, 2001.
10.9	Supply Agreement between the Registrant and Apio Fresh LLC and the Growers listed therein, dated as of July 3, 2003, incorporated herein by reference to Exhibit 2.3 to the Registrant’s Current Report on Form 8-K dated July 3, 2003.
10.10*	1995 Directors’ Stock Option Plan, as amended, incorporated herein by reference to Exhibit 10.53 to the Registrant’s Annual Report on Form 10-Q for the fiscal quarter ended May 25, 2003.
10.11#	License and research and development agreement between the Registrant and Air Products and Chemicals, Inc. dated March 14, 2006, incorporated herein by reference to Exhibit 10.63 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 28, 2006.

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Exhibit Number:	Exhibit Title
10.12*	2005 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K dated October 14, 2005.
10.13*	Form of Stock Grant Agreement for 2005 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.2 to the Registrant's Current Report on Form 8-K dated October 14, 2005.
10.14*	Form of Notice of Stock Option Grant and Stock Option Agreement for 2005 Stock Incentive Plan, incorporated herein by reference to Exhibit 10.66 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 28, 2006.
10.15*	Form of Stock Unit Agreement for 2005 Stock Incentive Plan, incorporated herein by reference to Exhibit 10.67 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 28, 2006.
10.16*	Form of Stock Appreciation Right Agreement for 2005 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.5 to the Registrant's Current Report on Form 8-K dated October 14, 2005.
10.17	Agreement and Plan of Merger between Landec Corporation, a California corporation, and the Registrant, dated as of November 6, 2008, incorporated herein by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K dated November 7, 2008.
10.18*	2009 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K dated October 19, 2009.
10.19*	Form of Stock Grant Agreement for 2009 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.2 to the Registrant's Current Report on Form 8-K dated October 19, 2009.
10.20*	Form of Notice of Stock Option Grant and Stock Option Agreement for 2009 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.3 to the Registrant's Current Report on Form 8-K dated October 19, 2009.
10.21*	Form of Stock Unit Agreement for 2009 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.4 to the Registrant's Current Report on Form 8-K dated October 19, 2009.
10.22*	Form of Stock Appreciation Right Agreement for 2009 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.5 to the Registrant's Current Report on Form 8-K dated October 19, 2009.
10.23	Stock Purchase Agreement by and among the Registrant, Lifecore Biomedical, Inc., Lifecore Biomedical, LLC and Warburg Pincus Private Equity IX, L.P., dated April 30, 2010, incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated May 5, 2010.
10.24	Amended and Restated License, Supply and R&D Agreement dated November 27, 2009 by and among the Registrant, Landec Ag, LLC and Monsanto Company, incorporated by reference to Exhibit 10.25 to the Registrant’s Current Report on Form 8-K dated December 3, 2009.

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Exhibit Number:	Exhibit Title
10.25	Share Purchase Agreement, dated February 15, 2011, by and between Apio, Inc. and Windset Holdings 2010 Ltd., incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated February 18, 2011.
10.26	Stock Purchase Agreement by and among Apio, Inc., GreenLine Holding Company and 2003 Riverside Capital Appreciation Fund, L.P., dated April 23, 2012, incorporated herein by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K dated April 27, 2012.
10.27	Loan agreements by and between the Registrant, Apio, Inc. and General Electric Capital Corporation dated April 23, 2012, incorporated herein by reference to Exhibits 10.1 through 10.9 to the Registrant’s Current Report on Form 8-K dated May 27, 2012.
10.28	Credit Agreement and Reimbursement Agreement by and between Lifecore Biomedical, LLC and BMO Harris Bank N.A. dated May 23, 2012, incorporated herein by reference to Exhibits 10.1 and 10.2 to the Registrant’s Current Report on Form 8-K dated May 29, 2012.
10.29	Long-Term Incentive Plan, incorporated herein by reference to the Registrant’s Current Report on Form 8-K dated July 31, 2013.
10.30	Employment Agreement between the Registrant and Gregory S. Skinner effective as of January 1, 2013, incorporated herein by reference to Exhibit 10.37 to the Registrant’s Current Report on Form 8-K dated December 10, 2012.
10.31	Nonqualified Deferred Compensation Plan, incorporated herein by reference to the Registrant’s Current Report on Form 8-K dated July 31, 2013.
10.32	2013 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K dated October 11, 2013.
10.33	Form of Stock Grant Agreement for 2013 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.2 to the Registrant's Current Report on Form 8-K dated October 11, 2013.
10.34	Form of Notice of Stock Option Grant and Stock Option Agreement for 2013 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.3 to the Registrant's Current Report on Form 8-K dated October 11, 2013.
10.35	Form of Stock Unit Agreement for 2013 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.4 to the Registrant's Current Report on Form 8-K dated October 11, 2013.
10.36	Form of Stock Appreciation Right Agreement for 2013 Stock Incentive Plan, incorporated herein by reference to Exhibit 99.5 to the Registrant's Current Report on Form 8-K dated October 11, 2013.
10.37*	2015 Cash Bonus Plan, incorporated herein by reference to the Registrant’s Current Report on Form 8-K dated June 23, 2014.

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Exhibit Number:	Exhibit Title
10.38*	Employment Agreement between the Registrant and Gary T. Steele effective as of May 26, 2014, incorporated herein by reference to Exhibit 10.35 to the Registrant’s Current Report on Form 8-K dated June 23, 2014.
10.39	Stock Transfer Agreement dated July 15, 2014 among Apio, Inc., Newell Capital Corporation and Windset Holdings 2010 Ltd., incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated July 21, 2014.
10.40	Second Amendment to Credit Agreement dated July 17, 2014 among Apio, Inc., CalEx Trading Company, Greenline Logistics, Inc. and General Electric Capital Corporation, incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated July 21, 2014.
21.1	Subsidiaries of the Registrant at May 25, 2014	State of Incorporation
	Apio, Inc.	Delaware
	Lifecore Biomedical, Inc.	Delaware
23.1+	Consent of Independent Registered Public Accounting Firm
24.1+	Power of Attorney – See signature page
31.1+	CEO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2+	CFO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1+	CEO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.2+	CFO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002

101.INS**	XBRL Instance
101.SCH**	XBRL Taxonomy Extension Schema
101.CAL**	XBRL Taxonomy Extension Calculation
101.DEF**	XBRL Taxonomy Extension Definition
101.LAB**	XBRL Taxonomy Extension Labels
101.PRE**	XBRL Taxonomy Extension Presentation
*	Represents a management contract or compensatory plan or arrangement required to be filed as an exhibit to this report pursuant to Item 15(b) of Form 10-K.
**	Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
+	Filed herewith.
#	Confidential treatment requested as to certain portions. The term “confidential treatment” and the mark “*” as used throughout the indicated Exhibit means that material has been omitted.

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SIGNATURES

Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Menlo Park, State of California, on August 1, 2014.

	LANDEC CORPORATION
By:	/s/ Gregory S. Skinner
	Gregory S. Skinner
	Vice President of Finance and Administration
	and Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Gary T. Steele and Gregory S. Skinner, and each of them, as his attorney-in-fact, with full power of substitution, for him in any and all capacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorney to any and all amendments to said Report on Form 10-K.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/ Gary T. Steele
Gary T. Steele	President and Chief Executive Officer and Director (Principal Executive Officer)	August 1, 2014
/s/ Gregory S. Skinner
Gregory S. Skinner	Vice President of Finance and Administration and Chief Financial Officer (Principal Financial and Accounting Officer)	August 1, 2014
/s/ Nicholas Tompkins
Nicholas Tompkins	Chairman of the Board of Apio, Inc. and Director	August 1, 2014
/s/ Robert Tobin
Robert Tobin	Director	August 1, 2014
/s/ Albert D. Bolles, Ph.D
Albert D. Bolles, Ph.D	Director	August 1, 2014
/s/ Frederick Frank
Frederick Frank	Director	August 1, 2014
/s/ Stephen E. Halprin
Stephen E. Halprin	Director	August 1, 2014
/s/ Steven Goldby
Steven Goldby	Director	August 1, 2014
/s/ Richard Dean Hollis
Richard Dean Hollis	Director	August 1, 2014
/s/ Catherine A. Sohn
Catherine A. Sohn	Director	August 1, 2014
/s/ Tonia Pankopf
Tonia Pankopf	Director	August 1, 2014

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EXHIBIT INDEX

Exhibit Number	Exhibit Title
23.1	Consent of Independent Registered Public Accounting Firm
24.1	Power of Attorney. See signature page.
31.1	CEO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
31.2	CFO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
32.1	CEO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
32.2	CFO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

- 86 - 

EX-23

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 Nos. 333-109889, 333-89368, 333-62866, 333-06163, 333-29103, 333-80313, 333-52339, 333-129895, 333-163926 and 333-193213) pertaining to the Non-Plan Stock Option, New Executive Stock Option Plan, 1995 Employee Stock Purchase Plan, 1995 Directors' Stock Option Plan, 1996 Stock Option Plan, 1996 Non-Executive Stock Option Plan, 1988 Incentive Stock Option Plan, 2005 Stock Incentive Plan, 2009 Stock Incentive Plan and 2013 Stock Incentive Plan of our reports dated August 1, 2014, with respect to the consolidated financial statements of Landec Corporation and the effectiveness of internal control over financial reporting of Landec Corporation, included in this Annual Report (Form 10-K) for the year ended May 25, 2014.

/s/ ERNST & YOUNG LLP

San Francisco, California

August 1, 2014

EX-31

Exhibit 31.1

CERTIFICATIONS

I, Gary T. Steele, certify that:

1. I have reviewed this annual report on Form 10-K of Landec Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 1, 2014

/s/ Gary T. Steele
	Gary T. Steele
	President and Chief Executive Officer

EX-31

Exhibit 31.2

I, Gregory S. Skinner, certify that:

1. I have reviewed this annual report on Form 10-K of Landec Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 1, 2014

/s/ Gregory S. Skinner
	Gregory S. Skinner
	Vice President of Finance and Administration
	and Chief Financial Officer

EX-32

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Landec Corporation (the “Company”) on Form 10-K for the period ending May 25, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gary T. Steele, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

          (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: August 1, 2014

/s/ Gary T. Steele
	Gary T. Steele
	Chief Executive Officer and President
	(Principal Executive Officer)

* The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-K or as a separate disclosure document.

EX-32

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Landec Corporation (the “Company”) on Form 10-K for the period ending May 25, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory S. Skinner, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

          (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: August 1, 2014

/s/  Gregory S. Skinner
	Gregory S. Skinner
	Vice President and Chief Financial Officer
	(Principal Accounting Officer)

* The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-K or as a separate disclosure document.

XML

Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Stock-based Compensation Expense (USD $) In Thousands, unless otherwise specified	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 1,356	$ 1,695	$ 1,872
Research and Development Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	39	718	530
Sales, General and Administrative [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	1,317	977	1,342
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	558	788	1,046
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 798	$ 907	$ 826

XML

Note 8 - Stockholders' Equity (Details) - Stock-based Compensation Activity (USD $)	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012
Note 8 - Stockholders' Equity (Details) - Stock-based Compensation Activity [Line Items]
RSUs and options available for grant	422,977	449,643	640,976
Weighted average exercise price (in Dollars per share)	$ 12.80	$ 6.72
Additional shares reserved	2,000,000
RSUs and options, granted	(420,131)	(26,666)	(191,333)
RSUs and options, plan shares expired	(2,846)
RSUs and options available for grant	2,000,000	422,977	449,643
Weighted average exercise price (in Dollars per share)	$ 14.15	$ 12.80	$ 6.72
Restricted Stock [Member]
Note 8 - Stockholders' Equity (Details) - Stock-based Compensation Activity [Line Items]
Restricted shares outstanding	95,330	348,166	415,085
Weighted average grant date fair value (in Dollars per share)	$ 6.52	$ 5.93	$ 5.96
Restricted shares, granted	128,631	6,666	47,833
Weighted average grant date fair value, granted (in Dollars per share)	$ 14.30	$ 9.01	$ 6.67
Restricted shares, awarded/exercised	(62,499)	(231,086)	(111,252)
Weighted average grant date fair value, awarded/exercised (in Dollars per share)	$ 6.18	$ 5.74	$ 6.36
Restricted shares, forfeited	(12,162)	(28,416)	(3,500)
Weighted average grant date fair value, forfeited (in Dollars per share)	$ 8.86	$ 6.20	$ 5.84
Restricted shares outstanding	149,300	95,330	348,166
Weighted average grant date fair value (in Dollars per share)	$ 13.17	$ 6.52	$ 5.93
Employee Stock Option [Member]
Note 8 - Stockholders' Equity (Details) - Stock-based Compensation Activity [Line Items]
Stock options outstanding	1,339,892	2,046,432	2,318,753
Weighted average exercise price (in Dollars per share)	$ 6.58	$ 6.50	$ 6.34
Stock options, granted	291,500	20,000	143,500
Weighted average exercise price, granted (in Dollars per share)	$ 14.30	$ 9.01	$ 6.67
Stock options, awarded/exercised	(398,080)	(671,563)	(371,727)
Weighted average exercise price, awarded/exercised (in Dollars per share)	$ 6.45	$ 6.30	$ 5.40
Stock options, forfeited	(12,452)	(44,977)	(5,657)
Weighted average exercise price, forfeited (in Dollars per share)	$ 6.66	$ 6.34	$ 5.76
Stock options, plan shares expired	(5,000)	(10,000)	(38,437)
Weighted average exercise price, plan shares expired (in Dollars per share)	$ 13.32	$ 13.32	$ 8.23
Stock options outstanding	1,215,860	1,339,892	2,046,432
Weighted average exercise price (in Dollars per share)	$ 8.45	$ 6.58	$ 6.50

XML

Note 6 - Property and Equipment (Details) (USD $)	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012
Property, Plant and Equipment [Abstract]
Depreciation, Depletion and Amortization, Nonproduction	$ 6,200,000	$ 6,300,000	$ 5,300,000
Capital Leases, Balance Sheet, Assets by Major Class, Net	0	0
Capitalized Computer Software, Amortization	189,000	160,000	136,000
Capitalized Computer Software, Net	$ 1,100,000	$ 343,000

XML

Note 14 - Business Segment Reporting (Details)	12 Months Ended
	May 25, 2014
Segment Reporting [Abstract]
Number of Operating Segments	3

XML

Note 8 - Stockholders' Equity (Details) - Stock Options Outstanding and Exercisable (USD $) In Thousands, except Share data, unless otherwise specified				12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012	May 25, 2014 Range 1 [Member]	May 25, 2014 Range 2 [Member]	May 25, 2014 Range 3 [Member]	May 25, 2014 Range 4 [Member]	May 25, 2014 Range 5 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise price, lower limit				$ 5.63	$ 5.65	$ 6.35	$ 8.19	$ 5.63
Exercise price, upper limit				$ 5.63	$ 6.22	$ 7.50	$ 14.30	$ 14.30
Number of shares outstanding (in Shares)				287,219	321,085	230,056	377,500	1,215,860
Weighted average remaining contractual life				3 years 3 days	2 years 229 days	2 years 229 days	5 years 10 days	3 years 167 days
Weighted average exercise price, options oustanding	$ 14.15	$ 12.80	$ 6.72	$ 5.63	$ 6.15	$ 6.76	$ 13.58	$ 8.45
Aggregate intrinsic value, options oustanding (in Dollars)				$ 1,832,457	$ 1,881,142	$ 1,207,945	$ 136,400	$ 5,057,944
Number of shares exercisable (in Shares)				287,219	321,085	214,612	161,694	984,610
Weighted average exercise price, options exercisable				$ 5.63	$ 6.15	$ 6.77	$ 12.94	$ 7.25
Aggregate intrinsic value, options exercisable (in Dollars)				$ 1,832,457	$ 1,881,142	$ 1,125,386	$ 106,400	$ 4,945,385

XML

Note 4 - Investments in Non-public Companies (Details) (USD $)	12 Months Ended					0 Months Ended		0 Months Ended	1 Months Ended				0 Months Ended	1 Months Ended			12 Months Ended
	May 25, 2014	May 26, 2013	May 28, 2013	May 27, 2012	Feb. 15, 2011 Preferred Stock [Member] Windset [Member]	Feb. 15, 2011 Common Stock [Member] Apio, Inc [Member] Windset [Member]	Feb. 15, 2011 Common Stock [Member] Apio, Inc [Member] Windset [Member]	Feb. 15, 2011 Common Stock [Member] Windset [Member]	May 30, 2010 Aesthetic Sciences [Member]	May 25, 2014 Aesthetic Sciences [Member]	May 26, 2013 Aesthetic Sciences [Member]	Jul. 16, 2010 Aesthetic Sciences [Member]	Feb. 15, 2011 Windset [Member]	May 25, 2014 Windset [Member]	May 31, 2013 Windset [Member]	May 31, 2012 Windset [Member]	May 25, 2014 Windset [Member]	May 26, 2013 Windset [Member]	May 27, 2012 Windset [Member]	Feb. 15, 2011 Windset [Member]
Note 4 - Investments in Non-public Companies (Details) [Line Items]
Long-term Investments										$ 793,000	$ 793,000	$ 1,800,000
Other than Temporary Impairment Losses, Investments									1,000,000
Investment in Non-Public Company Shares (in Shares)					150,000		201
Payments to Acquire Investments						201		15,000,000
Investment Ownership Percentage																				20.10%
Preferred Stock, Dividend Rate, Percentage													7.50%
Dividends and Interest Paid														1,100,000	1,100,000	1,100,000
Investment Income, Dividend	1,125,000	1,125,000	1,125,000	1,125,000													1,100,000	1,100,000	1,100,000
Change in Market Value of Investment																	$ 10,000,000	$ 8,100,000	$ 5,800,000

XML

Note 15 - Quarterly Consolidated Financial Information (unaudited) (Tables)

12 Months Ended

May 25, 2014

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information [Table Text Block]

FY 2014	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		FY 2014
Revenues	$	109,479	$	120,026	$	126,379	$	120,929	$	476,813
Gross profit	$	12,532	$	13,734	$	20,155	$	16,143	$	62,564
Net income	$	4,752	$	3,451	$	6,400	$	4,542	$	19,145
Net income per basic share	$	0.18	$	0.13	$	0.24	$	0.17	$	0.72
Net income per diluted share	$	0.18	$	0.13	$	0.24	$	0.17	$	0.71

FY 2013	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		FY 2013
Revenues	$	102,074	$	114,654	$	117,867	$	107,113	$	441,708
Gross profit	$	13,763	$	18,459	$	17,508	$	13,030	$	62,760
Net income	$	4,366	$	8,913	$	4,789	$	4,519	$	22,587
Net income per basic share	$	0.17	$	0.35	$	0.19	$	0.17	$	0.87
Net income per diluted share	$	0.17	$	0.34	$	0.18	$	0.17	$	0.85

FY 2012	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		FY 2012
Revenues	$	73,301	$	81,570	$	80,064	$	82,617	$	317,552
Gross profit	$	11,250	$	13,010	$	13,172	$	14,706	$	52,138
Net income (loss)	$	1,812	$	3,340	$	4,765	$	2,779	$	12,696
Net income (loss) per basic share	$	0.07	$	0.13	$	0.19	$	0.11	$	0.49
Net income (loss) per diluted share	$	0.07	$	0.13	$	0.18	$	0.11	$	0.49

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Note 15 - Quarterly Consolidated Financial Information (unaudited) (Details) - Summary of Unaudited Quarterly Results of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended												12 Months Ended
	May 25, 2014	Feb. 23, 2014	Nov. 24, 2013	Aug. 25, 2013	May 26, 2013	Feb. 24, 2013	Nov. 25, 2012	Aug. 26, 2012	May 27, 2012	Feb. 26, 2012	Nov. 27, 2011	Aug. 28, 2011	May 25, 2014	May 26, 2013	May 27, 2012
Summary of Unaudited Quarterly Results of Operations [Abstract]
Revenues	$ 120,929	$ 126,379	$ 120,026	$ 109,479	$ 107,113	$ 117,867	$ 114,654	$ 102,074	$ 82,617	$ 80,064	$ 81,570	$ 73,301	$ 476,813	$ 441,708	$ 317,552
Gross profit	16,143	20,155	13,734	12,532	13,030	17,508	18,459	13,763	14,706	13,172	13,010	11,250	62,564	62,760	52,138
Net income	$ 4,542	$ 6,400	$ 3,451	$ 4,752	$ 4,519	$ 4,789	$ 8,913	$ 4,366	$ 2,779	$ 4,765	$ 3,340	$ 1,812	$ 19,145	$ 22,587	$ 12,696
Net income per basic share (in Dollars per share)	$ 0.17	$ 0.24	$ 0.13	$ 0.18	$ 0.17	$ 0.19	$ 0.35	$ 0.17	$ 0.11	$ 0.19	$ 0.13	$ 0.07	$ 0.72	$ 0.87	$ 0.49
Net income per diluted share (in Dollars per share)	$ 0.17	$ 0.24	$ 0.13	$ 0.18	$ 0.17	$ 0.18	$ 0.34	$ 0.17	$ 0.11	$ 0.18	$ 0.13	$ 0.07	$ 0.71	$ 0.85	$ 0.49

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Note 9 - Debt (Details) (USD $)							1 Months Ended				1 Months Ended			12 Months Ended		1 Months Ended		12 Months Ended		12 Months Ended
	May 25, 2014	May 28, 2013	May 26, 2013	May 23, 2012	May 25, 2014 GE Debt Agreements [Member]	May 26, 2013 GE Debt Agreements [Member]	May 23, 2012 Working Capital Line of Credit [Member] London Interbank Offered Rate (LIBOR) [Member]	May 23, 2012 Working Capital Line of Credit [Member]	May 25, 2014 Working Capital Line of Credit [Member]	May 26, 2013 Working Capital Line of Credit [Member]	May 23, 2012 Term Loan [Member] London Interbank Offered Rate (LIBOR) [Member]	May 23, 2012 Term Loan [Member]	May 25, 2014 Term Loan [Member]	May 25, 2014 Remarketing Fee [Member]	May 25, 2014 Annual Fees [Member]	Apr. 23, 2012 London Interbank Offered Rate (LIBOR) [Member] Apio, Inc [Member]	Apr. 23, 2012 Apio, Inc [Member]	May 25, 2014 Apio, Inc [Member]	May 26, 2013 Apio, Inc [Member]	May 25, 2014 Lifecore [Member]	May 26, 2013 Lifecore [Member]
Note 9 - Debt (Details) [Line Items]
Line of Credit Facility, Expiration Period								2 years									5 years
Line of Credit Facility, Maximum Borrowing Capacity								$ 10,000,000									$ 25,000,000
Debt Instrument, Basis Spread on Variable Rate							1.85%				2.00%					2.00%
Line of Credit Facility, Remaining Borrowing Capacity									7,900,000									19,800,000
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage																		0.375%
Long-term Line of Credit									0	0								0	4,000,000
Minimum Fixed Charge Coverage Ratio																		1.10		1.10
Minimum Fixed Charge Coverage Ratio Threshold																		7,500,000
Unamortized Loan Commitment and Origination Fees and Unamortized Discounts or Premiums					964,000	1,200,000														98,000	149,000
Number of Financing Agreements				2
Long-term Debt	34,372,000		40,305,000										12,000,000
Debt Instrument, Term												4 years
Debt Instrument, Periodic Payment, Principal												250,000
Letters of Credit Outstanding, Amount				3,500,000
Minimum Quick Ratio																				1.25
Minimum Tangible Net Worth		$ 29,000,000
Annual Re-Marketing Fee Percentage														0.125%
Annual Letter of Credit Fee Percentage															0.75%

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Note 14 - Business Segment Reporting (Details) - Sales by Geograhic Area (USD $) In Millions, unless otherwise specified	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012
CANADA
Note 14 - Business Segment Reporting (Details) - Sales by Geograhic Area [Line Items]
Segment sales	$ 46.6	$ 27.8	$ 20.8
TAIWAN, PROVINCE OF CHINA
Note 14 - Business Segment Reporting (Details) - Sales by Geograhic Area [Line Items]
Segment sales	30.7	31.0	22.7
BELGIUM
Note 14 - Business Segment Reporting (Details) - Sales by Geograhic Area [Line Items]
Segment sales	13.1	16.6	15.6
JAPAN
Note 14 - Business Segment Reporting (Details) - Sales by Geograhic Area [Line Items]
Segment sales	9.9	10.6	11.1
INDONESIA
Note 14 - Business Segment Reporting (Details) - Sales by Geograhic Area [Line Items]
Segment sales	9.6	21.0	23.0
CHINA
Note 14 - Business Segment Reporting (Details) - Sales by Geograhic Area [Line Items]
Segment sales	8.2	5.0	4.3
All Other Countries [Member]
Note 14 - Business Segment Reporting (Details) - Sales by Geograhic Area [Line Items]
Segment sales	$ 19.1	$ 20.8	$ 17.0

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Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Tables)

12 Months Ended

May 25, 2014

Accounting Policies [Abstract]

Allowance for Credit Losses on Financing Receivables [Table Text Block]

	Balance at beginning of period		Additions from acquisitions and adjustments charged to revenue and expenses		Write offs, net of recoveries		Balance at end of period
Year ended May 27, 2012	$	342	$	248	$	(78)	$	512
Year ended May 26, 2013	$	512	$	109	$	(38)	$	583
Year ended May 25, 2014	$	583	$	143	$	(210)	$	516

Revenue Recognition, Multiple-deliverable Arrangements [Table Text Block]

	Year ended May 25, 2014		Year ended May 26, 2013
Recorded upon shipment	$	398,938	$	359,518
Recorded upon acceptance in foreign port		69,710		78,442
Revenue from license fees, R&D contracts and royalties/profit sharing		1,354		1,975
Revenue from multiple element arrangements		6,811		1,773
Total	$	476,813	$	441,708

Schedule of Inventory, Current [Table Text Block]

	May 25, 2014		May 26, 2013
Finished goods	$	11,111	$	11,297
Raw materials		10,376		9,290
Work in progress		3,248		3,526
Inventories, net	$	24,735	$	24,113

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year  Ended  May 27, 2012
Numerator:
Net income applicable to Common Stockholders	$	19,145	$	22,587	$	12,696
Denominator:
Weighted average shares for basic net income per share		26,628		25,830		25,849
Effect of dilutive securities:
Stock options and restricted stock units		492		796		277
Weighted average shares for diluted net income per share		27,120		26,626		26,126
Diluted net income per share	$	0.71	$	0.85	$	0.49

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year Ended May 27, 2012
Options	$	558	$	788	$	1,046
RSUs		798		907		826
Total stock-based compensation expense	$	1,356	$	1,695	$	1,872

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year Ended May 27, 2012
Research and development	$	39	$	718	$	530
Sales, general and administrative		1,317		977		1,342
Total stock-based compensation expense	$	1,356	$	1,695	$	1,872

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year Ended May 27, 2012
Expected life (in years)		3.50		3.76		3.76
Risk-free interest rate		0.71%		0.48%		0.59%
Volatility		0.41		0.53		0.53
Dividend yield		0%		0%		0%

Schedule of Effect of Significant Unobservable Inputs for Investment [Table Text Block]

	At May 25, 2014			At May 26, 2013
Annual consolidated revenue growth rates		4	%		3% to 9	%
Annual consolidated expense growth rates		4	%		3% to 8	%
Consolidated income tax rates		15	%		15	%
Consolidated discount rates		16% to 22	%		18% to 28	%

Schedule of Sensitivity Analysis of Fair Value, Transferor's Interests in Transferred Financial Assets [Table Text Block]

	Impact on value of Windset investment as of May 25, 2014
10% increase in revenue growth rates	$	3,200
10% increase in expense growth rates	$	(2,300	)
10% increase in income tax rates		—
10% increase in discount rates	$	(1,500	)

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	Fair Value at May 25, 2014						Fair Value at May 26, 2013
Assets:	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Marketable securities	$	-	$	-	$	-	$	1,545	$	-	$	-
Investment in private company		-		-		39,600		-		-		29,600
Total	$	-	$	-	$	39,600	$	1,545	$	-	$	29,600
Liabilities:
Interest rate swap		-		44		-		-		163		-
Total	$	-	$	44	$	-	$	-	$	163	$	-

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Note 7 - Intangible Assets (Details) (USD $)					12 Months Ended
	May 25, 2014	May 26, 2013	May 25, 2014 Trademarks and Trade Names [Member]	May 26, 2013 Trademarks and Trade Names [Member]	May 25, 2014 Customer Relationships [Member] Lifecore [Member]	May 25, 2014 Customer Relationships [Member] Apio, Inc [Member]	May 25, 2014 Customer Relationships [Member]	May 26, 2013 Customer Relationships [Member]	May 25, 2014 Lifecore [Member]	May 25, 2014 Apio, Inc [Member]
Note 7 - Intangible Assets (Details) [Line Items]
Finite-Lived Intangible Assets, Accumulated Amortization			$ 872,000	$ 872,000			$ 2,500,000	$ 1,600,000
Goodwill, Impaired, Accumulated Impairment Loss	4,800,000	4,800,000
Finite-Lived Customer Relationships, Gross									3,700,000	7,500,000
Finite-Lived Intangible Asset, Useful Life					12 years	13 years
Finite-Lived Intangible Assets, Amortization Expense, Next Twelve Months	885,000
Finite-Lived Intangible Assets, Amortization Expense, Year Two	885,000
Finite-Lived Intangible Assets, Amortization Expense, Year Three	885,000
Finite-Lived Intangible Assets, Amortization Expense, Year Four	885,000
Finite-Lived Intangible Assets, Amortization Expense, Year Five	$ 885,000

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Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Sensitiviy to Changes in Inputs and Assumptions Used in Discounted Cash Flow Models (USD $) In Thousands, unless otherwise specified	May 25, 2014
Sensitiviy to Changes in Inputs and Assumptions Used in Discounted Cash Flow Models [Abstract]
10% increase in revenue growth rates	$ 3,200
10% increase in expense growth rates	(2,300)
10% increase in discount rates	$ (1,500)

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Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Components of Inventories (USD $) In Thousands, unless otherwise specified	May 25, 2014	May 26, 2013
Components of Inventories [Abstract]
Finished goods	$ 11,111	$ 11,297
Raw materials	10,376	9,290
Work in progress	3,248	3,526
Inventories, net	$ 24,735	$ 24,113

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Note 7 - Intangible Assets (Details) - Other Intangible Assets (USD $) In Thousands, unless otherwise specified	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012
Finite-Lived Intangible Assets [Line Items]
Balance	$ 58,034	$ 58,985	$ 15,794
Acquired during the period			43,500
Amortization expense	(886)	(951)	(309)
Balance	57,148	58,034	58,985
Trademarks and Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Balance			12,428
Acquired during the period			36,000
Balance	48,428	48,428	48,428
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Balance	9,606	10,557	3,366
Acquired during the period			7,500
Amortization expense	(886)	(951)	(309)
Balance	$ 8,720	$ 9,606	$ 10,557

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Note 12 - Commitments and Contingencies (Details) (USD $)	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012
Commitments and Contingencies Disclosure [Abstract]
Operating Leases, Rent Expense	$ 4,400,000	$ 4,800,000	$ 1,500,000
Accrued Bonuses	656,000	548,000
Purchase Commitment, Remaining Minimum Amount Committed	5,000,000
Payment on Purchase Commitments	$ 7,100,000

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Note 10 - Derivative Financial Instruments (Details) (USD $)	0 Months Ended	1 Months Ended
	May 23, 2012	May 30, 2010	May 25, 2014	May 26, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Derivative Asset, Notional Amount		$ 20,000,000
Interest Rate Swap Term		5 years
Derivative, Swaption Interest Rate		4.24%
Derivative, Notional Amount		20,000,000
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net	347,000
Derivative Liability, Fair Value, Gross Liability			$ 44,000	$ 163,000

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Note 5 - License Agreements (Details) (USD $)	0 Months Ended		1 Months Ended	0 Months Ended		12 Months Ended	0 Months Ended	1 Months Ended	12 Months Ended
	Jun. 24, 2012 First Four Years [Member] INCOTEC [Member]	Jun. 24, 2012 Last Three Years [Member] INCOTEC [Member]	Jun. 30, 2010 Apio, Inc [Member] Windset [Member]	Dec. 01, 2011 Monsanto [Member]	Dec. 01, 2006 Monsanto [Member]	May 27, 2012 Monsanto [Member]	Jun. 24, 2012 INCOTEC [Member]	Mar. 31, 2006 Air Products and Chemicals, Inc. [Member]	May 26, 2013 Nitta Corporation [Member]
Note 5 - License Agreements (Details) [Line Items]
License Agreement Term					5 years		7 years
Termination Fee				$ 4,000,000
Licenses Revenue						2,700,000
Royalty Percentage	20.00%	10.00%
License Agreement Profit Percentage								40.00%
Development Fee			100,000
Annual License Fee Percentage			3.00%
Annual Minimum License Fees			150,000
Research and Development Arrangement, Contract to Perform for Others, Compensation Earned									$ 688,000

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Note 2 - Acquisitions

12 Months Ended

May 25, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

2.             Acquisitions

GreenLine Holding Company

On April 23, 2012 (the “GreenLine Acquisition Date”), Apio acquired all of the outstanding equity of GreenLine under a Stock Purchase Agreement (the “GreenLine Purchase Agreement”) in order to expand its product offerings and enter into new markets such as foodservice. GreenLine, headquartered in Bowling Green, Ohio, was a privately-held company and is the leading processor and marketer of value-added, fresh-cut green beans in North America. GreenLine has four processing and distribution plants one each in Ohio, Pennsylvania, Florida and California and distribution centers in New York and South Carolina.

Under the GreenLine Purchase Agreement, the aggregate consideration paid at closing consisted of $62.9 million in cash. In addition, the GreenLine Purchase Agreement included a potential earn out payment up to $7.0 million in the event that GreenLine achieved certain revenue targets during calendar year 2012. The earn out was comprised of $4.0 million for achieving a certain revenue target during calendar year 2012, and up to an additional $3.0 million for exceeding the revenue target by $3.0 million or more. In April 2012, the Company performed an analysis of projected revenues for GreenLine and concluded at that time that it was probable that GreenLine would meet, but not exceed, the initial revenue target and therefore, the Company recorded a $3.9 million liability as of May 27, 2012, representing the present value of the expected earn out payment. As a result of the severe drought in the Midwest during 2012, lower than expected results from new product launches and new planned business not being realized, during the second quarter of fiscal year 2013, the Company determined that GreenLine did not achieve the earn out revenue target. As a result, the Company reversed the $3.9 million liability recorded for the earn out and recorded a corresponding credit to other operating expenses in its Consolidated Statements of Comprehensive Income for fiscal year 2013.

The operating results of GreenLine are included in the Company’s financial statements beginning April 23, 2012, in the Food Products Technology operating segment. Included in the Company’s results for the fiscal year 2012 was $9.1 million of GreenLine’s net sales.

Intangible Assets

The Company identified two intangible assets in connection with the GreenLine acquisition: trade names and trademarks valued at $36.0 million, which are considered to be indefinite life assets and therefore, will not be amortized; and customer base valued at $7.5 million with a thirteen year useful life. The trade name/trademark intangible asset was valued using the relief from royalty valuation method and the customer relationship intangible asset was valued using the distributor method.

Goodwill 

The excess of the consideration transferred over the fair values assigned to the assets acquired and liabilities assumed was $13.2 million on the closing date, which represents the goodwill amount resulting from the acquisition which can be attributable to GreenLine’s long history, future prospects and the expected operating synergies from combining GreenLine with Apio’s fresh-cut, value-added vegetable business. None of the goodwill is expected to be deductible for income tax purposes. The Company will test goodwill for impairment on an annual basis or sooner, if indicators of impairment are present.

‘Acquisition-Related Transaction Costs

The Company recognized $1.4 million of acquisition-related expenses that were expensed in the year ended May 27, 2012 and are included in other operating expenses in the Consolidated Statements of Comprehensive Income for the year ended May 27, 2012. These expenses included investment banker fees, legal, accounting and tax service fees and appraisals fees.

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Note 11 - Income Taxes (Details) (USD $)	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012	May 29, 2011
Note 11 - Income Taxes (Details) [Line Items]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	35.00%	35.00%	35.00%
Effective Income Tax Rate Reconciliation, Percent	36.00%	30.00%	36.00%
Decrease in Net Income Before Taxes	7.00%
Increase in Net Income Before Taxes		59.00%
Deferred Tax Assets, Valuation Allowance	$ 881,000	$ 783,000
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount	99,000
Unrecognized Tax Benefits	1,035,000	998,000	766,000	760,000
Unrecognized Tax Benefits that Would Impact Effective Tax Rate	817,000	807,000
Domestic Tax Authority [Member]
Note 11 - Income Taxes (Details) [Line Items]
Operating Loss Carryforwards	8,300,000
State and Local Jurisdiction [Member] | Research Tax Credit Carryforward [Member] | CALIFORNIA
Note 11 - Income Taxes (Details) [Line Items]
Deferred Tax Asset Recorded to Additional Paid In Capital	1,100,000
State and Local Jurisdiction [Member] | CALIFORNIA
Note 11 - Income Taxes (Details) [Line Items]
Operating Loss Carryforwards	1,700,000
Deferred Tax Asset Recorded to Additional Paid In Capital	915,000
Deferred Tax Assets, Tax Credit Carryforwards, Research	1,600,000
State and Local Jurisdiction [Member] | INDIANA
Note 11 - Income Taxes (Details) [Line Items]
Operating Loss Carryforwards	6,700,000
State and Local Jurisdiction [Member]
Note 11 - Income Taxes (Details) [Line Items]
Operating Loss Carryforwards	$ 14,700,000

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Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Fair Value of Assets and Liabilities Measure on Recurring Basis (USD $) In Thousands, unless otherwise specified	May 25, 2014	May 26, 2013
Fair Value, Inputs, Level 1 [Member]
Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Fair Value of Assets and Liabilities Measure on Recurring Basis [Line Items]
Marketable securities		$ 1,545
Total		1,545
Fair Value, Inputs, Level 2 [Member]
Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Fair Value of Assets and Liabilities Measure on Recurring Basis [Line Items]
Interest rate swap	44	163
Total	44	163
Fair Value, Inputs, Level 3 [Member]
Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Fair Value of Assets and Liabilities Measure on Recurring Basis [Line Items]
Investment in private company	39,600	29,600
Total	$ 39,600	$ 29,600

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Note 9 - Debt (Tables)

12 Months Ended

May 25, 2014

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments [Table Text Block]

	May 25, 2014			May 26, 2013
Real estate loan agreement with General Electric Capital Corporation (“GE Capital”); due in monthly principal and interest payments of $133,060 through May 1, 2022 with interest based on a fixed rate of 4.02% per annum	$	16,137		$	17,065
Capital equipment loan with GE Capital; due in monthly principal and interest payments of $175,356 through May 1, 2019 with interest based on a fixed rate of 4.39% per annum		9,430			11,080
Term note with BMO Harris; due in monthly payments of $250,000 through May 23, 2016 with interest payable monthly at LIBOR plus 2% per annum		6,000			9,000
Industrial revenue bonds (“IRBs”) issued by Lifecore; due in annual payments through 2020 with interest at a variable rate set weekly by the bond remarketing agent (0.28% and 0.38% at May 25, 2014 and May 26, 2013, respectively)		2,805			3,160
Total		34,372			40,305
Less current portion		(6,055	)		(5,933	)
Long-term portion	$	28,317		$	34,372

Schedule of Maturities of Long-term Debt [Table Text Block]

	GE RE Loan		GE Equipment		BMO Harris		IRB		Total
FY 2015		965		1,725		3,000		365		6,055
FY 2016		1,005		1,801		3,000		375		6,181
FY 2017		1,046		1,882		—		390		3,318
FY 2018		1,089		1,967		—		400		3,456
FY 2019		1,134		2,055		—		410		3,599
Thereafter		10,898		—		—		865		11,763
Total	$	16,137	$	9,430	$	6,000	$	2,805	$	34,372

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Note 8 - Stockholders' Equity (Tables)

12 Months Ended

May 25, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Activity [Table Text Block]

				Restricted Stock Outstanding					Stock Options Outstanding
	RSUs and Options Available for Grant			Number of Restricted Shares			Weighted Average Grant Date Fair Value		Number of Stock Options			Weighted  Average Exercise Price
Balance at May 29, 2011		640,976			415,085		$	5.96		2,318,753		$	6.34
Granted		(191,333	)		47,833		$	6.67		143,500		$	6.67
Awarded/Exercised		—			(111,252	)	$	6.36		(371,727	)	$	5.40
Forfeited		—			(3,500	)	$	5.84		(5,657	)	$	5.76
Plan shares expired		—			—			—		(38,437	)	$	8.23
Balance at May 27, 2012		449,643			348,166		$	5.93		2,046,432		$	6.50
Granted		(26,666	)		6,666		$	9.01		20,000		$	9.01
Awarded/Exercised		—			(231,086	)	$	5.74		(671,563	)	$	6.30
Forfeited		—			(28,416	)	$	6.20		(44,977	)	$	6.34
Plan shares expired		—			—			—		(10,000	)	$	13.32
Balance at May 26, 2013		422,977			95,330		$	6.52		1,339,892		$	6.58
Additional shares reserved		2,000,000			—			—		—			—
Granted		(420,131	)		128,631		$	14.30		291,500		$	14.30
Awarded/Exercised		—			(62,499	)	$	6.18		(398,080	)	$	6.45
Forfeited		—			(12,162	)	$	8.86		(12,452	)	$	6.66
Plan shares expired		(2,846	)		—			—		(5,000	)	$	13.32
Balance at May 25, 2014		2,000,000			149,300		$	13.17		1,215,860		$	8.45

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table Text Block]

				Options Outstanding								Options Exercisable
Range of Exercise Prices				Number of Shares Outstanding		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Aggregate Intrinsic Value		Number of Shares Exercisable		Weighted Average Exercise Price		Aggregate Intrinsic Value
$	5.63	-	$5.63		287,219		3.01	$	5.63	$	1,832,457		287,219	$	5.63	$	1,832,457
$	5.65	-	$6.22		321,085		2.63	$	6.15	$	1,881,142		321,085	$	6.15	$	1,881,142
$	6.35	-	$7.50		230,056		2.63	$	6.76	$	1,207,945		214,612	$	6.77	$	1,125,386
$	8.19	-	$14.30		377,500		5.03	$	13.58	$	136,400		161,694	$	12.94	$	106,400
$	5.63	-	$14.30		1,215,860		3.46	$	8.45	$	5,057,944		984,610	$	7.25	$	4,945,385

Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding [Table Text Block]

	Outstanding Options		Weighted Average Exercise Price		Weighted Average Remaining Contract Term (in years)		Aggregate Intrinsic Value
Vested		984,610	$	7.25		2.88	$	4,945,385
Expected to vest		226,625	$	13.56		5.93		110,308
Total		1,211,235	$	8.43		3.45	$	5,055,693

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Note 8 - Stockholders' Equity (Details) - Vested and Expected to Vest Option Awards (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	May 25, 2014	May 26, 2013
Vested and Expected to Vest Option Awards [Abstract]
Vested	984,610	1,262,934
Vested	$ 7.25
Vested	2 years 321 days
Vested	$ 4,945,385
Expected to vest	226,625
Expected to vest	$ 13.56
Expected to vest	5 years 339 days
Expected to vest	110,308
Total	1,211,235
Total	$ 8.43
Total	3 years 164 days
Total	$ 5,055,693

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Note 2 - Acquisitions (Details) (USD $)	12 Months Ended						1 Months Ended	0 Months Ended	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012	May 29, 2011	Apr. 23, 2012 Achieving Revenue Target [Member] GreenLine Holding Company [Member]	Apr. 23, 2012 Exceeding Revenue Target [Member] GreenLine Holding Company [Member]	Apr. 23, 2012 Revenue Target [Member] GreenLine Holding Company [Member]	Apr. 23, 2012 GreenLine Holding Company [Member]	May 26, 2013 GreenLine Holding Company [Member]	May 27, 2012 GreenLine Holding Company [Member]	Apr. 23, 2012 GreenLine Holding Company [Member]
Note 2 - Acquisitions (Details) [Line Items]
Number of Processing Plants								4
Payments to Acquire Businesses, Gross								$ 62,900,000
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High					4,000,000	3,000,000					7,000,000
Revenues							3,000,000
Business Combination, Contingent Consideration, Liability										3,900,000
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability		(3,933,000)	1,421,000						(3,900,000)
Revenue, Net	476,813,000	441,708,000	317,552,000							9,100,000
Indefinite-lived Intangible Assets Acquired								36,000,000
Finite-lived Intangible Assets Acquired			43,500,000					7,500,000
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life								13 years
Goodwill	49,620,000	49,620,000	49,620,000	36,462,000							13,200,000
Business Combination, Acquisition Related Costs										$ 1,400,000

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Note 11 - Income Taxes (Tables)

12 Months Ended

May 25, 2014

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

Current:	Year ended May 25, 2014		Year ended May 26, 2013			Year ended May 27, 2012
Federal	$	4,785	$	2,808		$	4,597
State		157		(18	)		(586	)
Foreign		56		56			56
Total		4,998		2,846			4,067
Deferred:
Federal		5,059		6,218			2,641
State		526		388			477
Total		5,585		6,606			3,118
Income tax expense	$	10,583	$	9,452		$	7,185

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Year Ended May 25, 2014			Year Ended May 26, 2013			Year Ended May 27, 2012
Provision at U.S. statutory rate (1)	$	10,405		$	11,214		$	6,958
State income taxes, net of federal benefit		711			731			451
Change in valuation allowance		99			370			1
Tax-exempt interest		—			—			(40	)
Tax credit carryforwards		(378	)		(801	)		(368	)
Transaction costs		—			—			322
Domestic manufacturing deduction		(406	)		(172	)		(208	)
Change in value of contingent consideration		—			(1,450	)		—
Other		152			(440	)		69
Total	$	10,583		$	9,452		$	7,185

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	May 25, 2014			May 26, 2013
Deferred tax assets:
Net operating loss carryforwards	$	3,630		$	3,853
Accruals and reserves		1,746			1,388
Stock-based compensation		723			621
Research and AMT credit carryforwards		495			486
Other		545			450
Gross deferred tax assets		7,139			6,798
Valuation allowance		(881	)		(783	)
Net deferred tax assets		6,258			6,015
Deferred tax liabilities:
Basis difference in investment in non-public company		(9,270	)		(5,505	)
Depreciation and amortization		(5,705	)		(5,822	)
Goodwill and other indefinite life intangibles		(19,360	)		(17,160	)
Deferred tax liabilities		(34,335	)		(28,487	)
Net deferred tax liabilities	$	(28,077	)	$	(22,472	)

Schedule of Unrecognized Tax Benefits Roll Forward [Table Text Block]

	As of
	May 25, 2014			May 26, 2013		May 27, 2012
Unrecognized tax benefits – beginning of the period	$	998		$	766	$	760
Gross increases – tax positions in prior period		7			103		1
Gross decreases – tax positions in prior period		(48	)		—		(1	)
Gross increases – current-period tax positions		78			129		246
Lapse of statute of limitations		—			—		(240	)
Unrecognized tax benefits – end of the period	$	1,035		$	998	$	766

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Note 12 - Commitments and Contingencies (Tables)

12 Months Ended

May 25, 2014

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

	Amount
FY2015	$	2,916
FY2016		2,720
FY2017		2,225
FY2018		1,375
FY2019		929
Thereafter		873
Total	$	11,038

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Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies

12 Months Ended

May 25, 2014

Accounting Policies [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

1.            Organization, Basis of Presentation, and Summary of Significant Accounting Policies

Organization

Landec Corporation and its subsidiaries (“Landec” or the “Company”) design, develop, manufacture and sell differentiated products for food and biomaterials markets and license technology applications to partners. The Company has two proprietary polymer technology platforms: 1) Intelimer® polymers, and 2) hyaluronan (“HA”) biopolymers. The Company’s HA biopolymers are proprietary in that they are specially formulated for specific customers to meet strict regulatory requirements. The Company’s polymer technologies, along with its customer relationships and trade names, are the foundation, and a key differentiating advantage upon which Landec has built its business. The Company sells specialty packaged branded Eat Smart and GreenLine and private label fresh-cut vegetables and whole produce to retailers, club stores and foodservice operators, primarily in the United States, Canada and Asia through its Apio, Inc. (“Apio”) subsidiary and sells HA-based biomaterials through its Lifecore Biomedical, Inc. (“Lifecore”) subsidiary.

Basis of Presentation

Basis of Consolidation

The consolidated financial statements are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles and include the accounts of Landec Corporation and its subsidiaries, Apio and Lifecore. All material inter-company transactions and balances have been eliminated.

Arrangements that are not controlled through voting or similar rights are reviewed under the guidance for variable interest entities (“VIEs”). A company is required to consolidate the assets, liabilities and operations of a VIE if it is determined to be the primary beneficiary of the VIE.

An entity is a VIE and subject to consolidation, if by design: a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders or b) as a group the holders of the equity investment at risk lack any one of the following three characteristics: (i) the power, through voting rights or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity. The Company reviewed the consolidation guidance and concluded that the partnership interest and equity investment in non-public companies by the Company are not VIEs.

Reclassifications

Certain reclassifications have been made to prior year financial statements to conform to the current year presentation.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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; sales returns and allowances; recognition and measurement of current and deferred income tax assets and liabilities; the assessment of recoverability of long-lived assets; the valuation of intangible assets and inventory; the valuation of investments; and the valuation and recognition of stock-based compensation.

These estimates involve the consideration of complex factors and require management to make judgments. The analysis of historical and future trends can require extended periods of time to resolve and are subject to change from period to period. The actual results may differ from management’s estimates.

Concentrations of Risk

Cash and cash equivalents, marketable securities, trade accounts receivable, grower advances and notes receivable are financial instruments that potentially subject the Company to concentrations of credit risk. Our Company policy limits, among other things, the amount of credit exposure to any one issuer and to any one type of investment, other than securities issued or guaranteed by the U.S. government. The Company routinely assesses the financial strength of customers and growers and, as a consequence, believes that trade receivables, grower advances and notes receivable credit risk exposure is limited. Credit losses for bad debt are provided for in the consolidated financial statements through a charge to operations. A valuation allowance is provided for known and anticipated credit losses. The recorded amounts for these financial instruments approximate their fair value.

Several of the raw materials we use to manufacture our products are currently purchased from a single source, including some monomers used to synthesize Intelimer polymers, substrate materials for our breathable membrane products and raw materials for our HA products.  

The operations of Windset, in which the Company holds a 20.1% minority investment, are predominantly located in British Columbia and Santa Maria, California. Routinely, the Company evaluates the financial strength and ability for Windset to continue as a going concern.

During the fiscal year ended May 25, 2014, sales to the Company’s top five customers accounted for approximately 42% of total revenue with the top two customers from the Food Products Technology segment, Costco Wholesale Corporation and Wal-mart, Inc. accounting for approximately 21% and 11%, respectively, of total revenues. In addition, approximately 29% of the Company’s total revenues were derived from product sales to international customers, none of which individually accounted for more than 5% of total revenues. As of May 25, 2014, the top two customers, Costco Wholesale Corporation and Wal-mart, Inc. represented approximately 16% and 12%, respectively, of total accounts receivable.

During the fiscal year ended May 26, 2013, sales to the Company’s top five customers accounted for approximately 40% of total revenue with the top two customers, Costco Wholesale Corporation and Wal-mart, Inc. from the Food Products Technology segment, accounting for approximately 16% and 13%, respectively, of total revenues. In addition, approximately 30% of the Company’s total revenues were derived from product sales to international customers, none of which individually accounted for more than 5% of total revenues. As of May 26, 2013, the top two customers, Costco Wholesale Corporation and Wal-mart, Inc. both represented approximately 15% of total accounts receivable.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets is measured by comparison of the carrying amount of the asset to the net undiscounted future cash flow expected to be generated from the asset. If the future undiscounted cash flows are not sufficient to recover the carrying value of the assets, the assets’ carrying value is adjusted to fair value. The Company regularly evaluates its long-lived assets for indicators of possible impairment.

Financial Instruments

The Company’s financial instruments are primarily composed of marketable securities, commercial-term trade payables, grower advances, notes receivable and debt instruments. For short-term instruments, the historical carrying amount approximates the fair value of the instrument. The fair value of long-term debt and lines of credit approximates their carrying value. Fair values for long-term financial instruments not readily marketable are estimated based upon discounted future cash flows at prevailing market interest rates. Based on these assumptions, management believes the fair market values of the Company’s financial instruments are not significantly different from their recorded amounts as of May 25, 2014 and May 26, 2013.

Accounts Receivable and Sales Returns and Allowance for Doubtful Accounts

The Company carries its accounts receivable at their face amounts less an allowance for estimated sales returns and doubtful accounts. Sales return allowances are estimated based on historical sales return amounts. Further, on a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts and estimated losses resulting from the inability of its customers to make required payments. The allowance for doubtful accounts is determined based on review of the overall condition of accounts receivable balances and review of significant past due accounts. The allowance for doubtful accounts is based on specific identification of past due amounts and for accounts over 90-days past due. The changes in the Company’s allowance for sales returns and doubtful accounts are summarized in the following table (in thousands).

	Balance at beginning of period		Additions from acquisitions and adjustments charged to revenue and expenses		Write offs, net of recoveries		Balance at end of period
Year ended May 27, 2012	$	342	$	248	$	(78)	$	512
Year ended May 26, 2013	$	512	$	109	$	(38)	$	583
Year ended May 25, 2014	$	583	$	143	$	(210)	$	516

Revenue Recognition

Revenue from product sales is recognized when there is persuasive evidence that an arrangement exists, title has transferred, the price is fixed and determinable, and collectability is reasonably assured. Allowances are established for estimated uncollectible amounts, product returns, and discounts based on specific identification and historical losses.

Apio’s Food Products Technology revenues generally consist of revenues generated from the sale of specialty packaged fresh-cut and whole value-added processed vegetable products that are generally washed and packaged in our proprietary packaging and sold under Apio’s Eat Smart and GreenLine brands and various private labels. Revenue is generally recognized upon shipment of these products to customers. The Company takes title to all produce it trades and/or packages, and therefore, records revenues and cost of sales at gross amounts in the Consolidated Statements of Comprehensive Income

In addition, Food Products Technology value-added revenues include the revenues generated from Apio Cooling, LP, a vegetable cooling operation in which Apio is the general partner with a 60% ownership position and from the sale of BreatheWay packaging to license partners. Revenue is recognized on the vegetable cooling operations as cooling and storage services are provided to our customers. Sales of BreatheWay packaging are recognized when shipped to our customers.

Apio’s Food Export revenues consist of revenues generated from the purchase and sale of primarily whole commodity fruit and vegetable products to Asia by Cal-Ex. As most Cal-Ex customers are in countries outside of the U.S., title transfers and revenue is generally recognized upon arrival of the shipment in the foreign port. Apio records revenue equal to the sale price to third parties because it takes title to the product while in transit.

Our HA-based Biomaterials business principally generates revenue through the sale of products containing HA. Lifecore primarily sells products to customers in three medical areas: (1) Ophthalmic, which represented approximately 60% of Lifecore’s revenues in fiscal year 2014, (2) Orthopedic, which represented approximately 20% of Lifecore’s revenues in fiscal year 2014 and (3) Veterinary/Other. The vast majority of revenues from our HA-based Biomaterials business are recognized upon shipment.

A small amount of revenues from our HA-based Biomaterials business is related to contract research and development (R&D) services and multi-element arrangement services with customers where we provide products and/or services in a bundled arrangement.

Contract revenue R&D is recorded as earned, based on the performance requirements of the contract. Non-refundable contract fees for which no further performance obligations exist, and there is no continuing involvement by the Company, are recognized on the earlier of when the payments are received or when collection is assured.

For sales arrangements that contain multiple elements, the Company splits the arrangement into separate units of accounting if the individually delivered elements have value to the customer on a standalone basis. The Company also evaluates whether multiple transactions with the same customer or related party should be considered part of a multiple element arrangement, whereby the Company assesses, among other factors, whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of each other. The Company then allocates revenue to each element based on a selling price hierarchy. The relative selling price for a deliverable is based on its vendor-specific objective evidence (VSOE), if available, third-party evidence (TPE), if VSOE is not available, or estimated selling price, if neither VSOE nor TPE is available. The Company then recognizes revenue on each deliverable in accordance with its policies for product and service revenue recognition. The Company is not typically able to determine VSOE or TPE, and therefore, uses estimated selling prices to allocate revenue between the elements of the arrangement.

The Company limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services or future performance obligations or subject to customer-specific cancellation rights. The Company evaluates each deliverable in an arrangement to determine whether they represent separate units of accounting. A deliverable constitutes a separate unit of accounting when it has stand-alone value, and for an arrangement that includes a general right of return relative to the delivered products or services, delivery or performance of the undelivered product or service is considered probable and is substantially controlled by the Company. The Company considers a deliverable to have stand-alone value if the product or service is sold separately by the Company or another vendor or could be resold by the customer. Further, the revenue arrangements generally do not include a general right of return relative to the delivered products. Where the aforementioned criteria for a separate unit of accounting are not met, the deliverable is combined with the undelivered element(s) and treated as a single unit of accounting for the purposes of allocation of the arrangement consideration and revenue recognition. The Company allocates the total arrangement consideration to each separable element of an arrangement based upon the relative selling price of each element. Allocation of the consideration is determined at arrangement inception on the basis of each unit’s relative selling price. In instances where the Company has not established fair value for any undelivered element, revenue for all elements is deferred until delivery of the final element is completed and all recognition criteria are met.

Licensing revenue is recognized in accordance with prevailing accounting guidance. Initial license fees are deferred and amortized to revenue over the period of the agreement when a contract exists, the fee is fixed and determinable, and collectability is reasonably assured. Noncancellable, nonrefundable license fees are recognized over the period of the agreement, including those governing research and development activities and any related supply agreement entered into concurrently with the license when the risk associated with commercialization of a product is non-substantive at the outset of the arrangement.

From time to time, the Company offers customers sales incentives, which include volume rebates and discounts. These amounts are estimated on a quarterly basis and recorded as a reduction of revenue.

A summary of revenues by type of revenue arrangement as described above is as follows (in thousands):

	Year ended May 25, 2014		Year ended May 26, 2013
Recorded upon shipment	$	398,938	$	359,518
Recorded upon acceptance in foreign port		69,710		78,442
Revenue from license fees, R&D contracts and royalties/profit sharing		1,354		1,975
Revenue from multiple element arrangements		6,811		1,773
Total	$	476,813	$	441,708

Shipping and Handling Costs

Amounts billed to third-party customers for shipping and handling are included as a component of revenues. Shipping and handling costs incurred are included as a component of cost of products sold and represent costs incurred to ship product from the sourcing locations to the end consumer markets.

Other Accounting Policies and Disclosures

Cash and Cash Equivalents

The Company records all highly liquid securities with three months or less from date of purchase to maturity as cash equivalents. Cash equivalents consist mainly of certificate of deposits (CDs), money market funds and U.S. Treasuries. The market value of cash equivalents approximates their historical cost given their short-term nature.

Marketable Securities

Short-term marketable securities consist of CDs that are FDIC insured and single A or better rated corporate and municipal bonds with original maturities of more than three months at the date of purchase regardless of the maturity date. The Company classifies all debt securities with readily determinable market values as “available for sale” as the Company views the funds within its portfolio as available for use in its current operations. The aggregate amount of CDs included in marketable securities as of May 25, 2014 and May 26, 2013 was zero and $701,000, respectively. The contractual maturities of the Company's marketable securities that are due in less than one year represent zero and $1.3 million of its marketable securities and those due in one to two years represent zero and $251,000 of the Company’s marketable securities as of May 25, 2014 and May 26, 2013, respectively. Investments in marketable securities are carried at fair market value with unrealized gains and losses reported as other income. The cost of debt securities is adjusted for amortization of premiums and discounts to maturity. This amortization is recorded to interest income. Realized gains and losses on the sale of available for sale securities are also recorded to interest income and were not significant for the fiscal years ended May 25, 2014 and May 26, 2013. During fiscal years 2014 and 2013, the Company did not sell any marketable securities. The cost of securities sold is based on the specific identification method.

Inventories

Inventories are stated at the lower of cost (using the first-in, first-out method) or market. As of May 25, 2014 and May 26, 2013 inventories consisted of (in thousands):

	May 25, 2014		May 26, 2013
Finished goods	$	11,111	$	11,297
Raw materials		10,376		9,290
Work in progress		3,248		3,526
Inventories, net	$	24,735	$	24,113

If the cost of the inventories exceeds their net realizable value, provisions are recorded currently to reduce them to net realizable value. The Company also provides a provision for slow moving and obsolete inventories based on the estimate of demand for its products.

Advertising Expense

Advertising expenditures for the Company are expensed as incurred. Advertising expense for the Company for fiscal years 2014, 2013 and 2012 was $447,000, $445,000 and $406,000, respectively.

Notes and Advances Receivable

Apio issues notes and makes advances to produce growers for their crop and harvesting costs primarily for the purpose of sourcing crops for Apio's business.  Notes receivable and advances are generally recovered during the growing season (less than one year) using proceeds from the crops sold to Apio.  Notes are interest bearing obligations, evidenced by contracts and notes receivable.  These notes and advances receivable are secured by perfected liens on crops, have terms that range from three to nine months, and are reviewed at least quarterly for collectability.  A reserve is established for any note or advance deemed to not be fully collectible based upon an estimate of the crop value or the fair value of the security for the note or advance.  There were no notes or advances outstanding at May 25, 2014.

Related Party Transactions

The Company sold products to and earned license fees from Windset Holding 2010 Ltd., a Canadian corporation (“Windset”) during fiscal year 2014. The Company also provided cooling and distribution services to Beachside Produce LLC ("Beachside"), a commodity produce distributor, in which the Chairman of Apio had a farming and ownership interest, until May 26, 2013.   During fiscal years 2014, 2013 and 2012, the Company recognized related party revenues of $365,000, $2.5 million, and $3.8 million, respectively, which have been included in product sales in the accompanying Consolidated Statements of Comprehensive Income, from the sale of products and providing cooling services to these parties. As a result of Beachside no longer being a related party beginning in fiscal year 2014, the $2.1 million and $3.1 million of service revenue, related party for fiscal years 2013 and 2012, respectively, have been reclassified to product sales in the accompanying Consolidated Statements of Comprehensive Income. The related receivable balances of $304,000 and $316,000 from Windset are included in accounts receivable, related party in the accompanying Consolidated Balance Sheets as of May 25, 2014 and May 26, 2013, respectively.

Additionally, unrelated to the revenue transactions above, the Company purchases produce from Beachside and Windset for sale to third parties. During fiscal years 2014, 2013 and 2012, the Company recognized related party cost of product sales of $1.6 million, $6.7 million and $5.6 million, respectively, in the accompanying Consolidated Statements of Comprehensive Income, from the sale of products purchased from these parties. The related accounts payable of $134,000 and $225,000 from Windset are included in accounts payable, related party in the accompanying Consolidated Balance Sheets as of May 25, 2014 and May 26, 2013, respectively.

All related party transactions are monitored quarterly by the Company and approved by the Audit Committee of the Board of Directors.

Property and Equipment

Property and equipment are stated at cost. Expenditures for major improvements are capitalized while repairs and maintenance are charged to expense. Depreciation is expensed on a straight-line basis over the estimated useful lives of the respective assets, generally three to forty years for buildings and leasehold improvements and three to twenty years for furniture and fixtures, computers, capitalized software, capitalized leases, machinery, equipment and autos. Leasehold improvements are amortized on a straight-line basis over the lesser of the economic life of the improvement or the life of the lease.

The Company capitalizes software development costs for internal use in accordance with accounting guidance. Capitalization of software development costs begins in the application development stage and ends when the asset is placed into service. The Company amortizes such costs using the straight-line basis over estimated useful lives of three to seven years. During fiscal year 2014, the Company capitalized $913,000 in software development costs. During fiscal years 2013 and 2012, the Company did not capitalize any software development costs.

Change in Depreciable Lives of Property and Equipment

In accordance with its policy, the Company reviews the estimated useful lives of its fixed assets on an ongoing basis. This review primarily indicated that the actual lives of certain buildings and machinery and equipment at its processing facilities were longer than the estimated useful lives used for depreciation purposes in the Company’s financial statements. As a result, effective November 25, 2013, the Company changed its estimates of the useful lives of its buildings and machinery and equipment to better reflect the estimated periods during which these assets will remain in service. The Company’s buildings that previously averaged 29 years were increased to an average of 35 years. The Company’s machinery and equipment that previously averaged 7 years were increased to an average of 11 years. The effect of this change in estimate for the six months ended May 25, 2014 was to decrease depreciation expense by $876,000, increase net income by $564,000, and increase basic and diluted earnings per share by $0.02.

Long-Lived Assets

The Company’s Long-Lived Assets consist of property, plant and equipment, and intangible assets. Intangible assets are comprised of customer relationships with an estimated useful life of twelve to thirteen years (the “finite-lived intangible assets”) and trademarks/trade names and goodwill with indefinite lives (collectively, “the indefinite-lived intangible assets”), which the Company recognized in accordance with accounting guidance (i) upon the acquisition of GreenLine Holding Company (“GreenLine”) by Apio in April 2012, (ii) upon the acquisition of Lifecore in April 2010 and (iii) upon the acquisition of Apio in December 1999. Accounting guidance defines goodwill as “the excess of the cost of an acquired entity over the net of the estimated fair values of the assets acquired and the liabilities assumed at date of acquisition.” All intangible assets, including goodwill, associated with the acquisition of Lifecore was allocated to the HA-based Biomaterials reporting unit and the acquisitions of Apio and GreenLine were allocated to the Food Products Technology reporting unit pursuant to accounting guidance based upon the allocation of assets and liabilities acquired and consideration paid for each reporting unit. As of May 25, 2014, the HA-based Biomaterials reporting unit had $13.9 million of goodwill and the Food Products Technology reporting unit had $35.7 million of goodwill.

Property, plant and equipment and finite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances occur that indicate that the carrying amount of an asset (or asset group) may not be recoverable. The Company’s impairment review requires significant management judgment including estimating the future success of product lines, future sales volumes, revenue and expense growth rates, alternative uses for the assets and estimated proceeds from the disposal of the assets. The Company conducts quarterly reviews of idle and underutilized equipment, and reviews business plans for possible impairment indicators. Impairment is indicated when the carrying amount of the asset (or asset group) exceeds its estimated future undiscounted cash flows and the impairment is viewed as other than temporary. When impairment is indicated, an impairment charge is recorded for the difference between the asset’s book value and its estimated fair value. Depending on the asset, estimated fair value may be determined either by use of a discounted cash flow model or by reference to estimated selling values of assets in similar condition. The use of different assumptions would increase or decrease the estimated fair value of assets and would increase or decrease any impairment measurement.

The Company tests its indefinite-lived intangible assets for impairment at least annually, in accordance with accounting guidance. For non-goodwill indefinite-lived intangible assets, the Company performs a qualitative analysis in accordance with ASC 350-30-35. For goodwill, the Company performs a quantitative analysis in accordance with ASC 350-20-35.

Application of the impairment tests for indefinite-lived intangible assets requires significant judgment by management, including identification of reporting units, assignment of assets and liabilities to reporting units, assignment of intangible assets to reporting units, and the determination of the fair value of each indefinite-lived intangible asset and reporting unit based upon projections of future net cash flows, discount rates and market multiples, which judgments and projections are inherently uncertain.

During the fiscal quarter ended February 23, 2014, the Company voluntarily changed the date of its annual goodwill and indefinite-lived intangible assets impairment testing from the last day of the fiscal month in July to the first day of the fiscal fourth quarter. This voluntary change is preferable under the circumstances as it provides the Company with additional time to complete its annual goodwill and indefinite-lived intangible asset impairment testing in advance of its year-end reporting and results in better alignment with the Company’s strategic planning and forecasting process. The voluntary change in accounting principle related to the annual testing date will not delay, accelerate, or avoid an impairment charge. This change is not applied retrospectively as it is impracticable to do so because retrospective application would require application of significant estimates and assumptions with the use of hindsight. Accordingly, the change will be applied prospectively.

The Company tested its indefinite-lived intangible assets for impairment as of February 24, 2014 and determined that no adjustments to the carrying values of these assets were necessary as of that date. On a quarterly basis, the Company considers the need to update its most recent annual tests for possible impairment of its indefinite-lived intangible assets, based on management’s assessment of changes in its business and other economic factors since the most recent annual evaluation. Such changes, if significant or material, could indicate a need to update the most recent annual tests for impairment of the indefinite-lived intangible assets during the current period. The results of these tests could lead to write-downs of the carrying values of these assets in the current period.

The Company uses the discounted cash flow (“DCF”) approach to develop an estimate of fair value for goodwill. The DCF approach recognizes that current value is premised on the expected receipt of future economic benefits. Indications of value are developed by discounting projected future net cash flows to their present value at a rate that reflects both the current return requirements of the market and the risks inherent in the specific investment. The market approach is not used to value the Company’s reporting units because insufficient market comparables exist to enable the Company to develop a reasonable fair value due to the unique nature of each of the Company’s reporting units.

The DCF associated with the annual goodwill impairment analysis for the Food Products Technology reporting unit is based on management’s five-year projection of revenues, gross profits and operating profits by fiscal year and assumes a 36% effective tax rate for each year. Management takes into account the historical trends of the Food Products Technology reporting unit and the industry categories in which it operates along with inflationary factors, current economic conditions, new product introductions, cost of sales, operating expenses, capital requirements and other relevant data when developing its projection. The estimated fair value of the Food Products Technology reporting unit as of February 24, 2014 was 136% of its book value at that date, therefore, no goodwill impairment was deemed to exist. For the test performed as of July 21, 2013, the projected cash flow from operations for determining the DCF for fiscal year 2014 was $10.1 million for the Food Products Technology reporting unit. The actual cash flow from operations for fiscal year 2014 was $10.5 million.

The DCF associated with the annual goodwill impairment analysis for the HA-based Biomaterials reporting unit is based on management’s five-year projections of revenues, gross profits and operating profits by fiscal year and assumes a 36% effective tax rate for each year. Management takes into account the historical trends of HA-based Biomaterials reporting unit and the industry categories in which it operates along with inflationary factors, current economic conditions, new product introductions, cost of sales, operating expenses, capital requirements and other relevant data when developing its projection. The estimated fair value of the HA-based Biomaterials reporting unit as of February 24, 2014 was 176% of its book value at that date, therefore, no goodwill impairment was deemed to exist. For the test performed as of July 21, 2013, the projected cash flow from operations for determining the DCF for fiscal year 2014 was $6.3 million for the HA-based Biomaterials reporting unit. The actual cash flow from operations for fiscal year 2014 was $10.2 million. The difference of $3.9 million is primarily due to timing of working capital changes and lower than planned intercompany charges for income taxes.

Investment in Non-Public Company

The Company’s investment in Aesthetic Science is carried at cost and adjusted for impairment losses. Since there is no readily available market value information, the Company periodically reviews this investment to determine if an other than temporary decline in value has occurred based on the financial stability and viability of Aesthetic Science.

Aesthetic Science sold the rights to its Smartfil™ Injector System on July 16, 2010. As a result, Landec evaluated its cost method investment for impairment, utilizing a discounted cash flow analysis. Based on the terms of the agreement, the Company determined that its investment was other than temporarily impaired and therefore, recorded an impairment loss of $1.0 million in fiscal year 2010. The Company’s carrying value of its investment in Aesthetic Sciences, net of the impairment loss, is $793,000 at May 25, 2014 and May 26, 2013, and reported as an investment in non-public company, non-fair value, in the accompanying Consolidated Balance Sheets.

On February 15, 2011, the Company made an investment in Windset which is reported as an investment in non-public company, fair value, in the accompanying Consolidated Balance Sheets as of May 25, 2014 and May 26, 2013. The Company has elected to account for its investment in Windset under the fair value option (see Note 4).

Partial Self-Insurance on Employee Health Plan

The Company provides health insurance benefits to eligible employees under a self-insured plan whereby the Company pays actual medical claims subject to certain stop loss limits. The Company records self-insurance liabilities based on actual claims filed and an estimate of those claims incurred but not reported. Any projection of losses concerning the Company's liability is subject to a high degree of variability. Among the causes of this variability are unpredictable external factors such as inflation rates, changes in severity, benefit level changes, medical costs, and claims settlement patterns. This self-insurance liability is included in accrued liabilities and represents management's best estimate of the amounts that have not been paid as of May 25, 2014. It is reasonably possible that the expense the Company ultimately incurs could differ and adjustments to future reserves may be necessary.

Deferred Revenue

Cash received in advance of services performed are recorded as deferred revenue. At May 25, 2014, $1.3 million was recognized as advances from customers. At May 26, 2013, $1.2 million was recognized as advances from customers.

Non-Controlling Interest

The Company reports all non-controlling interests as a separate component of stockholders’ equity. The non-controlling interest’s share of the income or loss of the consolidated subsidiary is reported as a separate line item in our Consolidated Statements of Comprehensive Income, following the consolidated net income caption.

In connection with the acquisition of Apio, Landec acquired Apio’s 60% general partner interest in Apio Cooling, a California limited partnership. Apio Cooling is included in the consolidated financial statements of Landec for all periods presented. The non-controlling interest balance of $1.7 million at both May 25, 2014 and May 26, 2013 is comprised of the non-controlling limited partners’ interest in Apio Cooling.

Income Taxes

The Company accounts for income taxes in accordance with accounting guidance which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. The Company maintains valuation allowances when it is likely that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the Company’s income tax provision in the period of change. In determining whether a valuation allowance is warranted, the Company takes into account such factors as prior earnings history, expected future earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. At May 25, 2014, the Company had an $881,000 valuation allowance against its deferred tax assets.

In addition to valuation allowances, the Company establishes accruals for uncertain tax positions. The tax-contingency accruals are adjusted in light of changing facts and circumstances, such as the progress of tax audits, case law and emerging legislation. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. The Company’s effective tax rate includes the impact of tax-contingency accruals as considered appropriate by management.

A number of years may elapse before a particular matter, for which the Company has accrued, is audited and finally resolved. The number of years with open tax audits varies by jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes its tax-contingency accruals are adequate to address known tax contingencies. Favorable resolution of such matters could be recognized as a reduction to the Company’s effective tax rate in the year of resolution. Unfavorable settlement of any particular issue could increase the effective tax rate. Any resolution of a tax issue may require the use of cash in the year of resolution. The Company’s tax-contingency accruals are recorded in other accrued liabilities in the accompanying Consolidated Balance Sheets.

Per Share Information

Accounting guidance requires the presentation of basic and diluted earnings per share. Basic earnings per share excludes any dilutive effects of options, warrants and convertible securities and is computed using the weighted average number of common shares outstanding. Diluted earnings per share reflect the potential dilution as if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted common equivalent shares consist of stock options and restricted stock units, calculated using the treasury stock method.

The following table sets forth the computation of diluted net income per share (in thousands, except per share amounts):

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year  Ended  May 27, 2012
Numerator:
Net income applicable to Common Stockholders	$	19,145	$	22,587	$	12,696
Denominator:
Weighted average shares for basic net income per share		26,628		25,830		25,849
Effect of dilutive securities:
Stock options and restricted stock units		492		796		277
Weighted average shares for diluted net income per share		27,120		26,626		26,126
Diluted net income per share	$	0.71	$	0.85	$	0.49

Options to purchase 333,993, 88,022 and 1,855,167 shares of Common Stock at a weighted average exercise price of $14.15, $12.80 and $6.72 per share were outstanding during fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012, respectively, but were not included in the computation of diluted net income per share because the options’ exercise price were greater than the average market price of the Common Stock and, therefore, their inclusion would be antidilutive.

Cost of Sales

The Company includes in cost of sales all the costs related to the sale of products. These costs include the following: raw materials (including produce, seeds, packaging, syringes and fermentation and purification supplies), direct labor, overhead (including indirect labor, depreciation, and facility related costs) and shipping and shipping related costs.

Research and Development Expenses

Costs related to both research and development contracts and Company-funded research is included in research and development expenses. Research and development costs are primarily comprised of salaries and related benefits, supplies, travel expenses, consulting expenses and corporate allocations.

Accounting for Stock-Based Compensation

The Company records compensation expense for stock-based awards issued to employees and directors in exchange for services provided based on the estimated fair value of the awards on their grant dates and is recognized over the required service periods (generally the vesting period). For nonstatutory options, the cash flows resulting from the tax benefit due to tax deductions in excess of the compensation expense recognized for those options (excess tax benefit) are classified as financing activities within the statement of cash flows. The Company’s stock-based awards include stock option grants and restricted stock unit awards (“RSUs”).

The following table summarizes the stock-based compensation for options and RSUs (in thousands):

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year Ended May 27, 2012
Options	$	558	$	788	$	1,046
RSUs		798		907		826
Total stock-based compensation expense	$	1,356	$	1,695	$	1,872

The following table summarizes the stock-based compensation by income statement line item (in thousands):

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year Ended May 27, 2012
Research and development	$	39	$	718	$	530
Sales, general and administrative		1,317		977		1,342
Total stock-based compensation expense	$	1,356	$	1,695	$	1,872

The estimated fair value for stock options, which determines the Company’s calculation of compensation expense, is based on the Black-Scholes option pricing model. RSUs are valued at the closing market price of the Company’s common stock on the date of grant. The Company uses the straight line single option method to calculate and recognize the fair value of stock-based compensation arrangements. In addition, the Company uses historical data to estimate pre-vesting forfeitures and records stock-based compensation expense only for those awards that are expected to vest and revises those estimates in subsequent periods if the actual forfeitures differ from the prior estimates.

The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected life of option awards, which have a significant impact on the fair value estimates. As of May 25, 2014, May 26, 2013 and May 27, 2012, the fair value of stock option grants was estimated using the following weighted average assumptions:

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year Ended May 27, 2012
Expected life (in years)		3.50		3.76		3.76
Risk-free interest rate		0.71%		0.48%		0.59%
Volatility		0.41		0.53		0.53
Dividend yield		0%		0%		0%

The weighted average estimated fair value of Landec employee stock options granted at grant date market prices during the fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012 was $4.41, $3.57 and $2.65 per share, respectively. No stock options were granted above or below grant date market prices during the fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012.

Fair Value Measurements

The Company uses fair value measurement accounting for financial assets and liabilities and for financial instruments and certain other items measured at fair value. The Company has elected the fair value option for its investment in a non-public company (see Note 4). The Company has not elected the fair value option for any of its other eligible financial assets or liabilities.

The accounting guidance established a three-tier hierarchy for fair value measurements, which prioritizes the

inputs used in measuring fair value as follows:

Level 1 – observable inputs such as quoted prices for identical instruments in active markets.

Level 2 – inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data.

Level 3 – unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions.

As of May 25, 2014, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis, including cash equivalents, marketable securities, interest rate swap and its minority interest investment in Windset.

The fair value of the Company’s marketable securities is determined based on observable inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Therefore, the Company has categorized its marketable securities as a Level 1 measurement.

The fair value of the Company’s interest rate swap is determined based on model inputs that can be observed in a liquid market, including yield curves, and is categorized as a Level 2 measurement.

The Company has elected the fair value option of accounting for its investment in Windset. The calculation of fair value utilizes significant unobservable inputs in the discounted cash flow models, including projected cash flows, growth rates and discount rates. As a result, the Company’s investment in Windset is considered to be a Level 3 measurement investment. The change in the fair market value of the Company’s investment in Windset for the fiscal years ended May 25, 2014 and May 26, 2013 was due to the Company’s 20.1% minority interest in the change in the fair market value of Windset during those periods. In determining the fair value of the investment in Windset, the Company utilizes the following significant unobservable inputs in the discounted cash flow models:

	At May 25, 2014			At May 26, 2013
Annual consolidated revenue growth rates		4	%		3% to 9	%
Annual consolidated expense growth rates		4	%		3% to 8	%
Consolidated income tax rates		15	%		15	%
Consolidated discount rates		16% to 22	%		18% to 28	%

The revenue growth, expense growth and income tax rate assumptions, consider the Company's best estimate of the trends in those items over the discount period.   The discount rate assumption takes into account the risk-free rate of return, the market equity risk premium and the company’s specific risk premium and then applies an additional discount for lack of liquidity of the underlying securities.    The discounted cash flow valuation model used by the Company has the following sensitivity to changes in inputs and assumptions (in thousands):

	Impact on value of Windset investment as of May 25, 2014
10% increase in revenue growth rates	$	3,200
10% increase in expense growth rates	$	(2,300	)
10% increase in income tax rates		—
10% increase in discount rates	$	(1,500	)

Imprecision in estimating unobservable market inputs can affect the amount of gain or loss recorded for a particular position. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The following table summarizes the fair value of the Company’s assets and liabilities that are measured at fair value on a recurring basis, as of May 25, 2014 and May 26, 2013 (in thousands):

	Fair Value at May 25, 2014						Fair Value at May 26, 2013
Assets:	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Marketable securities	$	-	$	-	$	-	$	1,545	$	-	$	-
Investment in private company		-		-		39,600		-		-		29,600
Total	$	-	$	-	$	39,600	$	1,545	$	-	$	29,600
Liabilities:
Interest rate swap		-		44		-		-		163		-
Total	$	-	$	44	$	-	$	-	$	163	$	-

Recent Accounting Pronouncements

Revenue Recognition

In May 2014, the FASB issued Accounting Standard Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The standard requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also includes a cohesive set of disclosure requirements intended to provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a company’s contracts with customers. ASU 2014-09 will be effective beginning the first quarter of the Company's fiscal year 2018 and early application is not permitted. The standard allows for either “full retrospective” adoption, meaning the standard is applied to all of the periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. Management is currently evaluating the effect ASU 2014-09 will have on the Company's Consolidated Financial Statements and disclosures.

Unrecognized Tax Benefits

In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, related to the presentation of unrecognized tax benefits. The update requires presentation of an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward in the statement of financial position. The guidance does not apply to the extent that a net operating loss carryforward or tax credit carryforward at the reporting date is not available under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. The guidance is effective for fiscal years (and interim periods within those years) beginning after December 15, 2013, with early adoption permitted. The Company early adopted this standard in the first fiscal quarter of fiscal year 2014 and such adoption did not have a significant impact on the Company's Consolidated Financial Statements or disclosures.

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Note 14 - Business Segment Reporting (Tables)

12 Months Ended

May 25, 2014

Segment Reporting [Abstract]

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

	May 25, 2014		May 26, 2013		May 27, 2012
Canada	$	46.6	$	27.8	$	20.8
Taiwan	$	30.7	$	31.0	$	22.7
Belgium	$	13.1	$	16.6	$	15.6
Japan	$	9.9	$	10.6	$	11.1
Indonesia	$	9.6	$	21.0	$	23.0
China	$	8.2	$	5.0	$	4.3
All Other Countries	$	19.1	$	20.8	$	17.0

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Food Products				Hyaluronan- based
Fiscal Year Ended May 25, 2014	Technology		Food Export		Biomaterials		Corporate			TOTAL
Net sales	$	360,728	$	69,827	$	45,704	$	554		$	476,813
International sales	$	47,224	$	69,710	$	20,312	$	—		$	137,246
Gross profit	$	36,318	$	5,340	$	20,456	$	450		$	62,564
Net income (loss)	$	19,041	$	1,973	$	9,695	$	(11,564	)	$	19,145
Identifiable assets	$	196,257	$	25,391	$	85,858	$	6,117		$	313,623
Depreciation and amortization	$	4,751	$	6	$	2,221	$	136		$	7,114
Capital expenditures	$	10,950	$	—	$	3,877	$	59		$	14,886
Dividend income	$	1,125	$	—	$	—	$	—		$	1,125
Interest income	$	12	$	—	$	242	$	6		$	260
Interest expense	$	1,402	$	—	$	248	$	—		$	1,650
Income tax expense	$	33	$	3	$	17	$	10,530		$	10,583

Fiscal Year Ended May 26, 2013
Net sales	$	320,447	$	78,568	$	41,281	$	1,412		$	441,708
International sales	$	27,532	$	78,442	$	26,792	$	—		$	132,766
Gross profit	$	37,077	$	5,274	$	19,102	$	1,307		$	62,760
Net income (loss)	$	20,526	$	1,660	$	6,835	$	(6,434	)	$	22,587
Identifiable assets	$	180,104	$	21,737	$	80,940	$	8,161		$	290,942
Depreciation and amortization	$	4,761	$	4	$	2,379	$	151		$	7,295
Capital expenditures	$	5,598	$	—	$	3,190	$	89		$	8,877
Dividend income	$	1,125	$	—	$	—	$	—		$	1,125
Interest income	$	42	$	—	$	137	$	—		$	179
Interest expense	$	1,707	$	—	$	301	$	—		$	2,008
Income tax expense	$	3,399	$	339	$	1,400	$	4,314		$	9,452

Fiscal Year Ended May 27, 2012
Net sales	$	207,582	$	71,485	$	34,283	$	4,202		$	317,552
International sales	$	20,528	$	71,054	$	22,904	$	—		$	114,486
Gross profit	$	25,237	$	4,900	$	17,994	$	4,007		$	52,138
Net income (loss)	$	17,527	$	2,269	$	7,672	$	(14,772	)	$	12,696
Identifiable assets	$	169,541	$	18,425	$	81,927	$	7,799		$	277,692
Depreciation and amortization	$	3,191	$	7	$	2,242	$	181		$	5,621
Capital expenditures	$	2,498	$	—	$	2,798	$	75		$	5,371
Dividend income	$	1,125	$	—	$	—	$	—		$	1,125
Interest income	$	30	$	—	$	129	$	21		$	180
Interest expense	$	178	$	—	$	751	$	—		$	929
Income tax expense	$	—	$	—	$	—	$	7,185		$	7,185

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Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Fair Value of Stock Option, Weighted Average Assumptions	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012
Fair Value of Stock Option, Weighted Average Assumptions [Abstract]
Expected life (in years)	3 years 6 months	3 years 277 days	3 years 277 days
Risk-free interest rate	0.71%	0.48%	0.59%
Volatility	0.41%	0.53%	0.53%
Dividend yield	0.00%	0.00%	0.00%

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Note 8 - Stockholders' Equity (Details) (USD $)	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012	May 23, 2014	May 29, 2011	Jul. 14, 2010
Note 8 - Stockholders' Equity (Details) [Line Items]
Common Stock, Voting Rights	one
Preferred Stock, Shares Authorized	2,000,000
Preferred Stock, Shares Outstanding	0
Common Stock, Capital Shares Reserved for Future Issuance	2,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	2,000,000	422,977	449,643		640,976
Shares Paid for Tax Withholding for Share Based Compensation	47,573	145,159	326,954
Payments Related to Tax Withholding for Share-based Compensation (in Dollars)	$ 1,271,000	$ 49,000	$ 260,000
Share-based Compensation Arrangement by Share-based Payment Award Options Vested Outstanding Number	984,610	1,262,934
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares	231,250	76,958
Share Price (in Dollars per share)				$ 12.01
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Number of Exercisable Options	852,916
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value (in Dollars)	2,300,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized (in Dollars)	2,000,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 328 days
Stock Repurchase Program, Authorized Amount (in Dollars)						10,000,000
Stock Repurchased and Retired During Period, Shares			917,244
Stock Repurchased and Retired During Period, Value (in Dollars)			$ 5,000,000
Director [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Share-based Goods and Nonemployee Services Transaction, Shares Approved for Issuance	30,000
Employee Stock Option [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	1,215,860	1,339,892	2,046,432		2,318,753
Employee Stock Option [Member] | Maximum [Member] | 2013 Stock Incentive Plan [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	500,000
Stock Grants and Stock Units [Member] | Maximum [Member] | 2013 Stock Incentive Plan [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	250,000
Stock Appreciation Rights (SARs) [Member] | Maximum [Member] | 2013 Stock Incentive Plan [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	500,000
Optionee First Becomes Non-Employee Director [Member] | 1995 Directors' Stock Option Plan [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Shares Purchasable with Nonstatutory Stock Option	20,000
Served on Board of Directors for at Least Six Months [Member] | 1995 Directors' Stock Option Plan [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Shares Purchasable with Nonstatutory Stock Option	10,000
2013 Stock Incentive Plan [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	2,000,000
2009 Stock Incentive Plan [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	1,900,000
Share-based Compensation Arrangement by Share-based Payment Award, Options and Non-Option Equity Instruments, Outstanding, Number	1,000,000
2005 Stock Incentive Plan [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	861,038
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	283,250

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Note 14 - Business Segment Reporting (Details) - Operations by Business Segment (USD $) In Thousands, unless otherwise specified	3 Months Ended												12 Months Ended
	May 25, 2014	Feb. 23, 2014	Nov. 24, 2013	Aug. 25, 2013	May 26, 2013	Feb. 24, 2013	Nov. 25, 2012	Aug. 26, 2012	May 27, 2012	Feb. 26, 2012	Nov. 27, 2011	Aug. 28, 2011	May 25, 2014	May 26, 2013	May 28, 2013	May 27, 2012
Segment Reporting Information [Line Items]
Net sales													$ 476,813	$ 441,708		$ 317,552
International sales													137,246	132,766		114,486
Gross profit	16,143	20,155	13,734	12,532	13,030	17,508	18,459	13,763	14,706	13,172	13,010	11,250	62,564	62,760		52,138
Net income (loss)													19,145	22,587		12,696
Identifiable assets	313,623				290,942				277,692				313,623	290,942		277,692
Depreciation and amortization													7,114	7,295	7,295	5,621
Capital expenditures													14,886	8,877	8,877	5,371
Dividend Income													1,125	1,125	1,125	1,125
Interest income													260	179	179	180
Interest expense													1,650	2,008	2,008	929
Income tax expense													10,583	9,452	9,452	7,185
Food Products Technology [Member]
Segment Reporting Information [Line Items]
Net sales													360,728	320,447		207,582
International sales													47,224	27,532		20,528
Gross profit													36,318	37,077		25,237
Net income (loss)													19,041	20,526		17,527
Identifiable assets	196,257				180,104				169,541				196,257	180,104		169,541
Depreciation and amortization													4,751		4,761	3,191
Capital expenditures													10,950		5,598	2,498
Dividend Income													1,125		1,125	1,125
Interest income													12		42	30
Interest expense													1,402		1,707	178
Income tax expense													33		3,399
Food Export [Member]
Segment Reporting Information [Line Items]
Net sales													69,827	78,568		71,485
International sales													69,710	78,442		71,054
Gross profit													5,340	5,274		4,900
Net income (loss)													1,973	1,660		2,269
Identifiable assets	25,391				21,737				18,425				25,391	21,737		18,425
Depreciation and amortization													6		4	7
Income tax expense													3		339
HA-based Biomaterials [Member]
Segment Reporting Information [Line Items]
Net sales													45,704	41,281		34,283
International sales													20,312	26,792		22,904
Gross profit													20,456	19,102		17,994
Net income (loss)													9,695	6,835		7,672
Identifiable assets	85,858				80,940				81,927				85,858	80,940		81,927
Depreciation and amortization													2,221		2,379	2,242
Capital expenditures													3,877		3,190	2,798
Interest income													242		137	129
Interest expense													248		301	751
Income tax expense													17		1,400
Corporate Segment [Member]
Segment Reporting Information [Line Items]
Net sales													554	1,412		4,202
Gross profit													450	1,307		4,007
Net income (loss)													(11,564)	(6,434)		(14,772)
Identifiable assets	6,117				8,161				7,799				6,117	8,161		7,799
Depreciation and amortization													136		151	181
Capital expenditures													59		89	75
Interest income													6			21
Income tax expense													$ 10,530		$ 4,314	$ 7,185

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Consolidated Balance Sheets (USD $)	May 25, 2014	May 26, 2013
Current assets:
Cash and cash equivalents	$ 14,243,000	$ 13,718,000
Marketable securities		1,545,000
Accounts receivable, less allowance for doubtful accounts of $516 and $583 at May 25, 2014 and May 26, 2013, respectively	44,421,000	36,427,000
Accounts receivable, related party	304,000	316,000
Income taxes receivable	2,000,000	5,103,000
Inventories, net	24,735,000	24,113,000
Deferred taxes	2,056,000	1,582,000
Prepaid expenses and other current assets	3,170,000	2,856,000
Total current assets	90,929,000	85,660,000
Investment in non-public company, non-fair value	793,000	793,000
Investment in non-public company, fair value	39,600,000	29,600,000
Property and equipment, net	74,140,000	65,811,000
Goodwill, net	49,620,000	49,620,000
Trademarks/ trade names, net	48,428,000	48,428,000
Customer relationships, net	8,720,000	9,606,000
Other assets	1,393,000	1,424,000
Total Assets	313,623,000	290,942,000
Current liabilities:
Accounts payable	31,981,000	32,031,000
Accounts payable, related party	134,000	225,000
Accrued compensation	4,096,000	4,984,000
Other accrued liabilities	4,871,000	2,332,000
Deferred revenue	1,254,000	1,248,000
Lines of credit		4,000,000
Current portion of long-term debt	6,055,000	5,933,000
Total current liabilities	48,391,000	50,753,000
Long-term debt	28,317,000	34,372,000
Deferred taxes	30,133,000	24,054,000
Other non-current liabilities	2,021,000	1,349,000
Total liabilities	108,862,000	110,528,000
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.001 par value; 50,000,000 shares authorized; 26,815,253 and 26,402,247 shares issued and outstanding at May 25, 2014 and May 26, 2013, respectively	27,000	26,000
Additional paid-in capital	131,488,000	126,258,000
Retained earnings	71,554,000	52,409,000
Total stockholders’ equity	203,069,000	178,693,000
Non-controlling interest	1,692,000	1,721,000
Total Equity	204,761,000	180,414,000
Total Liabilities and Stockholders’ Equity	$ 313,623,000	$ 290,942,000

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Note 3 - Sale of Landec Ag (Details) (USD $)	0 Months Ended	3 Months Ended
	Jun. 24, 2012	Aug. 25, 2013
Note 3 - Sale of Landec Ag (Details) [Line Items]
Number of Licensing Agreements	2
Landec Ag LLC [Member]
Note 3 - Sale of Landec Ag (Details) [Line Items]
Proceeds from Divestiture of Businesses, Net of Cash Divested	$ 600,000
Gain (Loss) on Disposition of Business	400,000
Disposal Group, Deferred Gain on Disposal	300,000
Amortization Period of Deferred Gain (Loss) on Divestiture of Investment	7 years
Disposal Group, Not Discontinued Operation, Gain (Loss) on Disposal		$ 100,000

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Consolidated Statements of Changes in Stockholders' Equity (Parentheticals) (Common Stock [Member], USD $)	May 25, 2014 Minimum [Member]	May 26, 2013 Minimum [Member]	May 27, 2012 Minimum [Member]	May 25, 2014 Maximum [Member]	May 26, 2013 Maximum [Member]	May 27, 2012 Maximum [Member]
Issuance of common stock	$ 5.63	$ 1.66	$ 2.55	$ 13.32	$ 13.32	$ 6.95

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Note 9 - Debt (Details) - Long-term Debt (Parentheticals) (USD $)	12 Months Ended
	May 25, 2014	May 26, 2013
Real Estate Loan [Member]
Debt Instrument [Line Items]
Monthly principal and interest payments (in Dollars)	$ 133,060,000	$ 133,060,000
Fixed interest rate	4.02%	4.02%
Capital Equipment Loan [Member]
Debt Instrument [Line Items]
Monthly principal and interest payments (in Dollars)	175,356,000	175,356,000
Fixed interest rate	4.39%	4.39%
Term Loan [Member]
Debt Instrument [Line Items]
Monthly payments (in Dollars)	$ 250,000,000	$ 250,000,000
Variable interest rate	2.00%	2.00%
Industrial Revenue Bonds [Member]
Debt Instrument [Line Items]
Variable interest rate	0.28%	0.38%

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Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Allowance for Sales Returns and Doubtful Accounts (USD $) In Thousands, unless otherwise specified	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012
Allowance for Sales Returns and Doubtful Accounts [Abstract]
Balance at beginning of period	$ 583	$ 512	$ 342
Additions from acquisitions and adjustments charged to revenue and expenses	143	109	248
Write offs, net of recoveries	(210)	(38)	(78)
Balance at end of period	$ 516	$ 583	$ 512

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Note 11 - Income Taxes (Details) - Deferred Tax Assets and Liabilities (USD $)	May 25, 2014	May 26, 2013
Deferred tax assets:
Net operating loss carryforwards	$ 3,630,000	$ 3,853,000
Accruals and reserves	1,746,000	1,388,000
Stock-based compensation	723,000	621,000
Research and AMT credit carryforwards	495,000	486,000
Other	545,000	450,000
Gross deferred tax assets	7,139,000	6,798,000
Valuation allowance	(881,000)	(783,000)
Net deferred tax assets	6,258,000	6,015,000
Deferred tax liabilities:
Basis difference in investment in non-public company	(9,270,000)	(5,505,000)
Depreciation and amortization	(5,705,000)	(5,822,000)
Goodwill and other indefinite life intangibles	(19,360,000)	(17,160,000)
Deferred tax liabilities	(34,335,000)	(28,487,000)
Net deferred tax liabilities	$ (28,077,000)	$ (22,472,000)

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Note 15 - Quarterly Consolidated Financial Information (unaudited)

12 Months Ended

May 25, 2014

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Information [Text Block]

15.          Quarterly Consolidated Financial Information (unaudited)

The following is a summary of the unaudited quarterly results of operations for fiscal years 2014, 2013 and 2012 (in thousands, except for per share amounts):

FY 2014	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		FY 2014
Revenues	$	109,479	$	120,026	$	126,379	$	120,929	$	476,813
Gross profit	$	12,532	$	13,734	$	20,155	$	16,143	$	62,564
Net income	$	4,752	$	3,451	$	6,400	$	4,542	$	19,145
Net income per basic share	$	0.18	$	0.13	$	0.24	$	0.17	$	0.72
Net income per diluted share	$	0.18	$	0.13	$	0.24	$	0.17	$	0.71

FY 2013	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		FY 2013
Revenues	$	102,074	$	114,654	$	117,867	$	107,113	$	441,708
Gross profit	$	13,763	$	18,459	$	17,508	$	13,030	$	62,760
Net income	$	4,366	$	8,913	$	4,789	$	4,519	$	22,587
Net income per basic share	$	0.17	$	0.35	$	0.19	$	0.17	$	0.87
Net income per diluted share	$	0.17	$	0.34	$	0.18	$	0.17	$	0.85

FY 2012	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		FY 2012
Revenues	$	73,301	$	81,570	$	80,064	$	82,617	$	317,552
Gross profit	$	11,250	$	13,010	$	13,172	$	14,706	$	52,138
Net income (loss)	$	1,812	$	3,340	$	4,765	$	2,779	$	12,696
Net income (loss) per basic share	$	0.07	$	0.13	$	0.19	$	0.11	$	0.49
Net income (loss) per diluted share	$	0.07	$	0.13	$	0.18	$	0.11	$	0.49

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Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Revenue Arrangements (USD $) In Thousands, unless otherwise specified	3 Months Ended												12 Months Ended
	May 25, 2014	Feb. 23, 2014	Nov. 24, 2013	Aug. 25, 2013	May 26, 2013	Feb. 24, 2013	Nov. 25, 2012	Aug. 26, 2012	May 27, 2012	Feb. 26, 2012	Nov. 27, 2011	Aug. 28, 2011	May 25, 2014	May 26, 2013	May 27, 2012
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
Revenue	$ 120,929	$ 126,379	$ 120,026	$ 109,479	$ 107,113	$ 117,867	$ 114,654	$ 102,074	$ 82,617	$ 80,064	$ 81,570	$ 73,301	$ 476,813	$ 441,708	$ 317,552
Revenue Recorded Upon Shipment [Member]
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
Revenue													398,938	359,518
Revenue Recorded Upon Acceptance in Foreign Port [Member]
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
Revenue													69,710	78,442
Revenue from License Fees, R&D Contracts and Royalties/Profit Sharing [Member]
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
Revenue													1,354	1,975
Revenue from Multiple Element Arrangements [Member]
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
Revenue													$ 6,811	$ 1,773

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Accounting Policies, by Policy (Policies)

12 Months Ended

May 25, 2014

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Basis of Consolidation

The consolidated financial statements are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles and include the accounts of Landec Corporation and its subsidiaries, Apio and Lifecore. All material inter-company transactions and balances have been eliminated.

Arrangements that are not controlled through voting or similar rights are reviewed under the guidance for variable interest entities (“VIEs”). A company is required to consolidate the assets, liabilities and operations of a VIE if it is determined to be the primary beneficiary of the VIE.

An entity is a VIE and subject to consolidation, if by design: a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders or b) as a group the holders of the equity investment at risk lack any one of the following three characteristics: (i) the power, through voting rights or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity. The Company reviewed the consolidation guidance and concluded that the partnership interest and equity investment in non-public companies by the Company are not VIEs.

Reclassification, Policy [Policy Text Block]

Reclassifications

Certain reclassifications have been made to prior year financial statements to conform to the current year presentation.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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; sales returns and allowances; recognition and measurement of current and deferred income tax assets and liabilities; the assessment of recoverability of long-lived assets; the valuation of intangible assets and inventory; the valuation of investments; and the valuation and recognition of stock-based compensation.

These estimates involve the consideration of complex factors and require management to make judgments. The analysis of historical and future trends can require extended periods of time to resolve and are subject to change from period to period. The actual results may differ from management’s estimates.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentrations of Risk

Cash and cash equivalents, marketable securities, trade accounts receivable, grower advances and notes receivable are financial instruments that potentially subject the Company to concentrations of credit risk. Our Company policy limits, among other things, the amount of credit exposure to any one issuer and to any one type of investment, other than securities issued or guaranteed by the U.S. government. The Company routinely assesses the financial strength of customers and growers and, as a consequence, believes that trade receivables, grower advances and notes receivable credit risk exposure is limited. Credit losses for bad debt are provided for in the consolidated financial statements through a charge to operations. A valuation allowance is provided for known and anticipated credit losses. The recorded amounts for these financial instruments approximate their fair value.

Several of the raw materials we use to manufacture our products are currently purchased from a single source, including some monomers used to synthesize Intelimer polymers, substrate materials for our breathable membrane products and raw materials for our HA products.  

The operations of Windset, in which the Company holds a 20.1% minority investment, are predominantly located in British Columbia and Santa Maria, California. Routinely, the Company evaluates the financial strength and ability for Windset to continue as a going concern.

During the fiscal year ended May 25, 2014, sales to the Company’s top five customers accounted for approximately 42% of total revenue with the top two customers from the Food Products Technology segment, Costco Wholesale Corporation and Wal-mart, Inc. accounting for approximately 21% and 11%, respectively, of total revenues. In addition, approximately 29% of the Company’s total revenues were derived from product sales to international customers, none of which individually accounted for more than 5% of total revenues. As of May 25, 2014, the top two customers, Costco Wholesale Corporation and Wal-mart, Inc. represented approximately 16% and 12%, respectively, of total accounts receivable.

During the fiscal year ended May 26, 2013, sales to the Company’s top five customers accounted for approximately 40% of total revenue with the top two customers, Costco Wholesale Corporation and Wal-mart, Inc. from the Food Products Technology segment, accounting for approximately 16% and 13%, respectively, of total revenues. In addition, approximately 30% of the Company’s total revenues were derived from product sales to international customers, none of which individually accounted for more than 5% of total revenues. As of May 26, 2013, the top two customers, Costco Wholesale Corporation and Wal-mart, Inc. both represented approximately 15% of total accounts receivable.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets is measured by comparison of the carrying amount of the asset to the net undiscounted future cash flow expected to be generated from the asset. If the future undiscounted cash flows are not sufficient to recover the carrying value of the assets, the assets’ carrying value is adjusted to fair value. The Company regularly evaluates its long-lived assets for indicators of possible impairment.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Financial Instruments

The Company’s financial instruments are primarily composed of marketable securities, commercial-term trade payables, grower advances, notes receivable and debt instruments. For short-term instruments, the historical carrying amount approximates the fair value of the instrument. The fair value of long-term debt and lines of credit approximates their carrying value. Fair values for long-term financial instruments not readily marketable are estimated based upon discounted future cash flows at prevailing market interest rates. Based on these assumptions, management believes the fair market values of the Company’s financial instruments are not significantly different from their recorded amounts as of May 25, 2014 and May 26, 2013.

Trade and Other Accounts Receivable, Policy [Policy Text Block]

Accounts Receivable and Sales Returns and Allowance for Doubtful Accounts

The Company carries its accounts receivable at their face amounts less an allowance for estimated sales returns and doubtful accounts. Sales return allowances are estimated based on historical sales return amounts. Further, on a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts and estimated losses resulting from the inability of its customers to make required payments. The allowance for doubtful accounts is determined based on review of the overall condition of accounts receivable balances and review of significant past due accounts. The allowance for doubtful accounts is based on specific identification of past due amounts and for accounts over 90-days past due. The changes in the Company’s allowance for sales returns and doubtful accounts are summarized in the following table (in thousands).

	Balance at beginning of period		Additions from acquisitions and adjustments charged to revenue and expenses		Write offs, net of recoveries		Balance at end of period
Year ended May 27, 2012	$	342	$	248	$	(78)	$	512
Year ended May 26, 2013	$	512	$	109	$	(38)	$	583
Year ended May 25, 2014	$	583	$	143	$	(210)	$	516

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

Revenue from product sales is recognized when there is persuasive evidence that an arrangement exists, title has transferred, the price is fixed and determinable, and collectability is reasonably assured. Allowances are established for estimated uncollectible amounts, product returns, and discounts based on specific identification and historical losses.

Apio’s Food Products Technology revenues generally consist of revenues generated from the sale of specialty packaged fresh-cut and whole value-added processed vegetable products that are generally washed and packaged in our proprietary packaging and sold under Apio’s Eat Smart and GreenLine brands and various private labels. Revenue is generally recognized upon shipment of these products to customers. The Company takes title to all produce it trades and/or packages, and therefore, records revenues and cost of sales at gross amounts in the Consolidated Statements of Comprehensive Income

In addition, Food Products Technology value-added revenues include the revenues generated from Apio Cooling, LP, a vegetable cooling operation in which Apio is the general partner with a 60% ownership position and from the sale of BreatheWay packaging to license partners. Revenue is recognized on the vegetable cooling operations as cooling and storage services are provided to our customers. Sales of BreatheWay packaging are recognized when shipped to our customers.

Apio’s Food Export revenues consist of revenues generated from the purchase and sale of primarily whole commodity fruit and vegetable products to Asia by Cal-Ex. As most Cal-Ex customers are in countries outside of the U.S., title transfers and revenue is generally recognized upon arrival of the shipment in the foreign port. Apio records revenue equal to the sale price to third parties because it takes title to the product while in transit.

Our HA-based Biomaterials business principally generates revenue through the sale of products containing HA. Lifecore primarily sells products to customers in three medical areas: (1) Ophthalmic, which represented approximately 60% of Lifecore’s revenues in fiscal year 2014, (2) Orthopedic, which represented approximately 20% of Lifecore’s revenues in fiscal year 2014 and (3) Veterinary/Other. The vast majority of revenues from our HA-based Biomaterials business are recognized upon shipment.

A small amount of revenues from our HA-based Biomaterials business is related to contract research and development (R&D) services and multi-element arrangement services with customers where we provide products and/or services in a bundled arrangement.

Contract revenue R&D is recorded as earned, based on the performance requirements of the contract. Non-refundable contract fees for which no further performance obligations exist, and there is no continuing involvement by the Company, are recognized on the earlier of when the payments are received or when collection is assured.

For sales arrangements that contain multiple elements, the Company splits the arrangement into separate units of accounting if the individually delivered elements have value to the customer on a standalone basis. The Company also evaluates whether multiple transactions with the same customer or related party should be considered part of a multiple element arrangement, whereby the Company assesses, among other factors, whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of each other. The Company then allocates revenue to each element based on a selling price hierarchy. The relative selling price for a deliverable is based on its vendor-specific objective evidence (VSOE), if available, third-party evidence (TPE), if VSOE is not available, or estimated selling price, if neither VSOE nor TPE is available. The Company then recognizes revenue on each deliverable in accordance with its policies for product and service revenue recognition. The Company is not typically able to determine VSOE or TPE, and therefore, uses estimated selling prices to allocate revenue between the elements of the arrangement.

The Company limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services or future performance obligations or subject to customer-specific cancellation rights. The Company evaluates each deliverable in an arrangement to determine whether they represent separate units of accounting. A deliverable constitutes a separate unit of accounting when it has stand-alone value, and for an arrangement that includes a general right of return relative to the delivered products or services, delivery or performance of the undelivered product or service is considered probable and is substantially controlled by the Company. The Company considers a deliverable to have stand-alone value if the product or service is sold separately by the Company or another vendor or could be resold by the customer. Further, the revenue arrangements generally do not include a general right of return relative to the delivered products. Where the aforementioned criteria for a separate unit of accounting are not met, the deliverable is combined with the undelivered element(s) and treated as a single unit of accounting for the purposes of allocation of the arrangement consideration and revenue recognition. The Company allocates the total arrangement consideration to each separable element of an arrangement based upon the relative selling price of each element. Allocation of the consideration is determined at arrangement inception on the basis of each unit’s relative selling price. In instances where the Company has not established fair value for any undelivered element, revenue for all elements is deferred until delivery of the final element is completed and all recognition criteria are met.

Licensing revenue is recognized in accordance with prevailing accounting guidance. Initial license fees are deferred and amortized to revenue over the period of the agreement when a contract exists, the fee is fixed and determinable, and collectability is reasonably assured. Noncancellable, nonrefundable license fees are recognized over the period of the agreement, including those governing research and development activities and any related supply agreement entered into concurrently with the license when the risk associated with commercialization of a product is non-substantive at the outset of the arrangement.

From time to time, the Company offers customers sales incentives, which include volume rebates and discounts. These amounts are estimated on a quarterly basis and recorded as a reduction of revenue.

A summary of revenues by type of revenue arrangement as described above is as follows (in thousands):

	Year ended May 25, 2014		Year ended May 26, 2013
Recorded upon shipment	$	398,938	$	359,518
Recorded upon acceptance in foreign port		69,710		78,442
Revenue from license fees, R&D contracts and royalties/profit sharing		1,354		1,975
Revenue from multiple element arrangements		6,811		1,773
Total	$	476,813	$	441,708

Shipping and Handling Cost, Policy [Policy Text Block]

Shipping and Handling Costs

Amounts billed to third-party customers for shipping and handling are included as a component of revenues. Shipping and handling costs incurred are included as a component of cost of products sold and represent costs incurred to ship product from the sourcing locations to the end consumer markets.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

The Company records all highly liquid securities with three months or less from date of purchase to maturity as cash equivalents. Cash equivalents consist mainly of certificate of deposits (CDs), money market funds and U.S. Treasuries. The market value of cash equivalents approximates their historical cost given their short-term nature.

Marketable Securities, Policy [Policy Text Block]

Marketable Securities

Short-term marketable securities consist of CDs that are FDIC insured and single A or better rated corporate and municipal bonds with original maturities of more than three months at the date of purchase regardless of the maturity date. The Company classifies all debt securities with readily determinable market values as “available for sale” as the Company views the funds within its portfolio as available for use in its current operations. The aggregate amount of CDs included in marketable securities as of May 25, 2014 and May 26, 2013 was zero and $701,000, respectively. The contractual maturities of the Company's marketable securities that are due in less than one year represent zero and $1.3 million of its marketable securities and those due in one to two years represent zero and $251,000 of the Company’s marketable securities as of May 25, 2014 and May 26, 2013, respectively. Investments in marketable securities are carried at fair market value with unrealized gains and losses reported as other income. The cost of debt securities is adjusted for amortization of premiums and discounts to maturity. This amortization is recorded to interest income. Realized gains and losses on the sale of available for sale securities are also recorded to interest income and were not significant for the fiscal years ended May 25, 2014 and May 26, 2013. During fiscal years 2014 and 2013, the Company did not sell any marketable securities. The cost of securities sold is based on the specific identification method.

Inventory, Policy [Policy Text Block]

Inventories

Inventories are stated at the lower of cost (using the first-in, first-out method) or market. As of May 25, 2014 and May 26, 2013 inventories consisted of (in thousands):

	May 25, 2014		May 26, 2013
Finished goods	$	11,111	$	11,297
Raw materials		10,376		9,290
Work in progress		3,248		3,526
Inventories, net	$	24,735	$	24,113

If the cost of the inventories exceeds their net realizable value, provisions are recorded currently to reduce them to net realizable value. The Company also provides a provision for slow moving and obsolete inventories based on the estimate of demand for its products.

Advertising Costs, Policy [Policy Text Block]

Advertising Expense

Advertising expenditures for the Company are expensed as incurred. Advertising expense for the Company for fiscal years 2014, 2013 and 2012 was $447,000, $445,000 and $406,000, respectively.

Receivables, Policy [Policy Text Block]

Notes and Advances Receivable

Apio issues notes and makes advances to produce growers for their crop and harvesting costs primarily for the purpose of sourcing crops for Apio's business.  Notes receivable and advances are generally recovered during the growing season (less than one year) using proceeds from the crops sold to Apio.  Notes are interest bearing obligations, evidenced by contracts and notes receivable.  These notes and advances receivable are secured by perfected liens on crops, have terms that range from three to nine months, and are reviewed at least quarterly for collectability.  A reserve is established for any note or advance deemed to not be fully collectible based upon an estimate of the crop value or the fair value of the security for the note or advance.  There were no notes or advances outstanding at May 25, 2014.

Related Party Transactions [Policy Text Block]

Related Party Transactions

The Company sold products to and earned license fees from Windset Holding 2010 Ltd., a Canadian corporation (“Windset”) during fiscal year 2014. The Company also provided cooling and distribution services to Beachside Produce LLC ("Beachside"), a commodity produce distributor, in which the Chairman of Apio had a farming and ownership interest, until May 26, 2013.   During fiscal years 2014, 2013 and 2012, the Company recognized related party revenues of $365,000, $2.5 million, and $3.8 million, respectively, which have been included in product sales in the accompanying Consolidated Statements of Comprehensive Income, from the sale of products and providing cooling services to these parties. As a result of Beachside no longer being a related party beginning in fiscal year 2014, the $2.1 million and $3.1 million of service revenue, related party for fiscal years 2013 and 2012, respectively, have been reclassified to product sales in the accompanying Consolidated Statements of Comprehensive Income. The related receivable balances of $304,000 and $316,000 from Windset are included in accounts receivable, related party in the accompanying Consolidated Balance Sheets as of May 25, 2014 and May 26, 2013, respectively.

Additionally, unrelated to the revenue transactions above, the Company purchases produce from Beachside and Windset for sale to third parties. During fiscal years 2014, 2013 and 2012, the Company recognized related party cost of product sales of $1.6 million, $6.7 million and $5.6 million, respectively, in the accompanying Consolidated Statements of Comprehensive Income, from the sale of products purchased from these parties. The related accounts payable of $134,000 and $225,000 from Windset are included in accounts payable, related party in the accompanying Consolidated Balance Sheets as of May 25, 2014 and May 26, 2013, respectively.

All related party transactions are monitored quarterly by the Company and approved by the Audit Committee of the Board of Directors.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment are stated at cost. Expenditures for major improvements are capitalized while repairs and maintenance are charged to expense. Depreciation is expensed on a straight-line basis over the estimated useful lives of the respective assets, generally three to forty years for buildings and leasehold improvements and three to twenty years for furniture and fixtures, computers, capitalized software, capitalized leases, machinery, equipment and autos. Leasehold improvements are amortized on a straight-line basis over the lesser of the economic life of the improvement or the life of the lease.

The Company capitalizes software development costs for internal use in accordance with accounting guidance. Capitalization of software development costs begins in the application development stage and ends when the asset is placed into service. The Company amortizes such costs using the straight-line basis over estimated useful lives of three to seven years. During fiscal year 2014, the Company capitalized $913,000 in software development costs. During fiscal years 2013 and 2012, the Company did not capitalize any software development costs.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Long-Lived Assets

The Company’s Long-Lived Assets consist of property, plant and equipment, and intangible assets. Intangible assets are comprised of customer relationships with an estimated useful life of twelve to thirteen years (the “finite-lived intangible assets”) and trademarks/trade names and goodwill with indefinite lives (collectively, “the indefinite-lived intangible assets”), which the Company recognized in accordance with accounting guidance (i) upon the acquisition of GreenLine Holding Company (“GreenLine”) by Apio in April 2012, (ii) upon the acquisition of Lifecore in April 2010 and (iii) upon the acquisition of Apio in December 1999. Accounting guidance defines goodwill as “the excess of the cost of an acquired entity over the net of the estimated fair values of the assets acquired and the liabilities assumed at date of acquisition.” All intangible assets, including goodwill, associated with the acquisition of Lifecore was allocated to the HA-based Biomaterials reporting unit and the acquisitions of Apio and GreenLine were allocated to the Food Products Technology reporting unit pursuant to accounting guidance based upon the allocation of assets and liabilities acquired and consideration paid for each reporting unit. As of May 25, 2014, the HA-based Biomaterials reporting unit had $13.9 million of goodwill and the Food Products Technology reporting unit had $35.7 million of goodwill.

Property, plant and equipment and finite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances occur that indicate that the carrying amount of an asset (or asset group) may not be recoverable. The Company’s impairment review requires significant management judgment including estimating the future success of product lines, future sales volumes, revenue and expense growth rates, alternative uses for the assets and estimated proceeds from the disposal of the assets. The Company conducts quarterly reviews of idle and underutilized equipment, and reviews business plans for possible impairment indicators. Impairment is indicated when the carrying amount of the asset (or asset group) exceeds its estimated future undiscounted cash flows and the impairment is viewed as other than temporary. When impairment is indicated, an impairment charge is recorded for the difference between the asset’s book value and its estimated fair value. Depending on the asset, estimated fair value may be determined either by use of a discounted cash flow model or by reference to estimated selling values of assets in similar condition. The use of different assumptions would increase or decrease the estimated fair value of assets and would increase or decrease any impairment measurement.

The Company tests its indefinite-lived intangible assets for impairment at least annually, in accordance with accounting guidance. For non-goodwill indefinite-lived intangible assets, the Company performs a qualitative analysis in accordance with ASC 350-30-35. For goodwill, the Company performs a quantitative analysis in accordance with ASC 350-20-35.

Application of the impairment tests for indefinite-lived intangible assets requires significant judgment by management, including identification of reporting units, assignment of assets and liabilities to reporting units, assignment of intangible assets to reporting units, and the determination of the fair value of each indefinite-lived intangible asset and reporting unit based upon projections of future net cash flows, discount rates and market multiples, which judgments and projections are inherently uncertain.

During the fiscal quarter ended February 23, 2014, the Company voluntarily changed the date of its annual goodwill and indefinite-lived intangible assets impairment testing from the last day of the fiscal month in July to the first day of the fiscal fourth quarter. This voluntary change is preferable under the circumstances as it provides the Company with additional time to complete its annual goodwill and indefinite-lived intangible asset impairment testing in advance of its year-end reporting and results in better alignment with the Company’s strategic planning and forecasting process. The voluntary change in accounting principle related to the annual testing date will not delay, accelerate, or avoid an impairment charge. This change is not applied retrospectively as it is impracticable to do so because retrospective application would require application of significant estimates and assumptions with the use of hindsight. Accordingly, the change will be applied prospectively.

The Company tested its indefinite-lived intangible assets for impairment as of February 24, 2014 and determined that no adjustments to the carrying values of these assets were necessary as of that date. On a quarterly basis, the Company considers the need to update its most recent annual tests for possible impairment of its indefinite-lived intangible assets, based on management’s assessment of changes in its business and other economic factors since the most recent annual evaluation. Such changes, if significant or material, could indicate a need to update the most recent annual tests for impairment of the indefinite-lived intangible assets during the current period. The results of these tests could lead to write-downs of the carrying values of these assets in the current period.

The Company uses the discounted cash flow (“DCF”) approach to develop an estimate of fair value for goodwill. The DCF approach recognizes that current value is premised on the expected receipt of future economic benefits. Indications of value are developed by discounting projected future net cash flows to their present value at a rate that reflects both the current return requirements of the market and the risks inherent in the specific investment. The market approach is not used to value the Company’s reporting units because insufficient market comparables exist to enable the Company to develop a reasonable fair value due to the unique nature of each of the Company’s reporting units.

The DCF associated with the annual goodwill impairment analysis for the Food Products Technology reporting unit is based on management’s five-year projection of revenues, gross profits and operating profits by fiscal year and assumes a 36% effective tax rate for each year. Management takes into account the historical trends of the Food Products Technology reporting unit and the industry categories in which it operates along with inflationary factors, current economic conditions, new product introductions, cost of sales, operating expenses, capital requirements and other relevant data when developing its projection. The estimated fair value of the Food Products Technology reporting unit as of February 24, 2014 was 136% of its book value at that date, therefore, no goodwill impairment was deemed to exist. For the test performed as of July 21, 2013, the projected cash flow from operations for determining the DCF for fiscal year 2014 was $10.1 million for the Food Products Technology reporting unit. The actual cash flow from operations for fiscal year 2014 was $10.5 million.

The DCF associated with the annual goodwill impairment analysis for the HA-based Biomaterials reporting unit is based on management’s five-year projections of revenues, gross profits and operating profits by fiscal year and assumes a 36% effective tax rate for each year. Management takes into account the historical trends of HA-based Biomaterials reporting unit and the industry categories in which it operates along with inflationary factors, current economic conditions, new product introductions, cost of sales, operating expenses, capital requirements and other relevant data when developing its projection. The estimated fair value of the HA-based Biomaterials reporting unit as of February 24, 2014 was 176% of its book value at that date, therefore, no goodwill impairment was deemed to exist. For the test performed as of July 21, 2013, the projected cash flow from operations for determining the DCF for fiscal year 2014 was $6.3 million for the HA-based Biomaterials reporting unit. The actual cash flow from operations for fiscal year 2014 was $10.2 million. The difference of $3.9 million is primarily due to timing of working capital changes and lower than planned intercompany charges for income taxes.

Investment In Non-Public Companies [Policy Text Block]

Investment in Non-Public Company

The Company’s investment in Aesthetic Science is carried at cost and adjusted for impairment losses. Since there is no readily available market value information, the Company periodically reviews this investment to determine if an other than temporary decline in value has occurred based on the financial stability and viability of Aesthetic Science.

Aesthetic Science sold the rights to its Smartfil™ Injector System on July 16, 2010. As a result, Landec evaluated its cost method investment for impairment, utilizing a discounted cash flow analysis. Based on the terms of the agreement, the Company determined that its investment was other than temporarily impaired and therefore, recorded an impairment loss of $1.0 million in fiscal year 2010. The Company’s carrying value of its investment in Aesthetic Sciences, net of the impairment loss, is $793,000 at May 25, 2014 and May 26, 2013, and reported as an investment in non-public company, non-fair value, in the accompanying Consolidated Balance Sheets.

On February 15, 2011, the Company made an investment in Windset which is reported as an investment in non-public company, fair value, in the accompanying Consolidated Balance Sheets as of May 25, 2014 and May 26, 2013. The Company has elected to account for its investment in Windset under the fair value option (see Note 4).

Self Insurance Reserve [Policy Text Block]

Partial Self-Insurance on Employee Health Plan

The Company provides health insurance benefits to eligible employees under a self-insured plan whereby the Company pays actual medical claims subject to certain stop loss limits. The Company records self-insurance liabilities based on actual claims filed and an estimate of those claims incurred but not reported. Any projection of losses concerning the Company's liability is subject to a high degree of variability. Among the causes of this variability are unpredictable external factors such as inflation rates, changes in severity, benefit level changes, medical costs, and claims settlement patterns. This self-insurance liability is included in accrued liabilities and represents management's best estimate of the amounts that have not been paid as of May 25, 2014. It is reasonably possible that the expense the Company ultimately incurs could differ and adjustments to future reserves may be necessary.

Revenue Recognition, Deferred Revenue [Policy Text Block]

Deferred Revenue

Cash received in advance of services performed are recorded as deferred revenue. At May 25, 2014, $1.3 million was recognized as advances from customers. At May 26, 2013, $1.2 million was recognized as advances from customers.

Non-controlling Interest [Policy Text Block]

Non-Controlling Interest

The Company reports all non-controlling interests as a separate component of stockholders’ equity. The non-controlling interest’s share of the income or loss of the consolidated subsidiary is reported as a separate line item in our Consolidated Statements of Comprehensive Income, following the consolidated net income caption.

In connection with the acquisition of Apio, Landec acquired Apio’s 60% general partner interest in Apio Cooling, a California limited partnership. Apio Cooling is included in the consolidated financial statements of Landec for all periods presented. The non-controlling interest balance of $1.7 million at both May 25, 2014 and May 26, 2013 is comprised of the non-controlling limited partners’ interest in Apio Cooling.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company accounts for income taxes in accordance with accounting guidance which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. The Company maintains valuation allowances when it is likely that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the Company’s income tax provision in the period of change. In determining whether a valuation allowance is warranted, the Company takes into account such factors as prior earnings history, expected future earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. At May 25, 2014, the Company had an $881,000 valuation allowance against its deferred tax assets.

In addition to valuation allowances, the Company establishes accruals for uncertain tax positions. The tax-contingency accruals are adjusted in light of changing facts and circumstances, such as the progress of tax audits, case law and emerging legislation. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. The Company’s effective tax rate includes the impact of tax-contingency accruals as considered appropriate by management.

A number of years may elapse before a particular matter, for which the Company has accrued, is audited and finally resolved. The number of years with open tax audits varies by jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes its tax-contingency accruals are adequate to address known tax contingencies. Favorable resolution of such matters could be recognized as a reduction to the Company’s effective tax rate in the year of resolution. Unfavorable settlement of any particular issue could increase the effective tax rate. Any resolution of a tax issue may require the use of cash in the year of resolution. The Company’s tax-contingency accruals are recorded in other accrued liabilities in the accompanying Consolidated Balance Sheets.

Earnings Per Share, Policy [Policy Text Block]

Per Share Information

Accounting guidance requires the presentation of basic and diluted earnings per share. Basic earnings per share excludes any dilutive effects of options, warrants and convertible securities and is computed using the weighted average number of common shares outstanding. Diluted earnings per share reflect the potential dilution as if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted common equivalent shares consist of stock options and restricted stock units, calculated using the treasury stock method.

The following table sets forth the computation of diluted net income per share (in thousands, except per share amounts):

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year  Ended  May 27, 2012
Numerator:
Net income applicable to Common Stockholders	$	19,145	$	22,587	$	12,696
Denominator:
Weighted average shares for basic net income per share		26,628		25,830		25,849
Effect of dilutive securities:
Stock options and restricted stock units		492		796		277
Weighted average shares for diluted net income per share		27,120		26,626		26,126
Diluted net income per share	$	0.71	$	0.85	$	0.49

Options to purchase 333,993, 88,022 and 1,855,167 shares of Common Stock at a weighted average exercise price of $14.15, $12.80 and $6.72 per share were outstanding during fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012, respectively, but were not included in the computation of diluted net income per share because the options’ exercise price were greater than the average market price of the Common Stock and, therefore, their inclusion would be antidilutive.

Cost of Sales, Policy [Policy Text Block]

Cost of Sales

The Company includes in cost of sales all the costs related to the sale of products. These costs include the following: raw materials (including produce, seeds, packaging, syringes and fermentation and purification supplies), direct labor, overhead (including indirect labor, depreciation, and facility related costs) and shipping and shipping related costs.

Research and Development Expense, Policy [Policy Text Block]

Research and Development Expenses

Costs related to both research and development contracts and Company-funded research is included in research and development expenses. Research and development costs are primarily comprised of salaries and related benefits, supplies, travel expenses, consulting expenses and corporate allocations.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Accounting for Stock-Based Compensation

The Company records compensation expense for stock-based awards issued to employees and directors in exchange for services provided based on the estimated fair value of the awards on their grant dates and is recognized over the required service periods (generally the vesting period). For nonstatutory options, the cash flows resulting from the tax benefit due to tax deductions in excess of the compensation expense recognized for those options (excess tax benefit) are classified as financing activities within the statement of cash flows. The Company’s stock-based awards include stock option grants and restricted stock unit awards (“RSUs”).

The following table summarizes the stock-based compensation for options and RSUs (in thousands):

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year Ended May 27, 2012
Options	$	558	$	788	$	1,046
RSUs		798		907		826
Total stock-based compensation expense	$	1,356	$	1,695	$	1,872

The following table summarizes the stock-based compensation by income statement line item (in thousands):

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year Ended May 27, 2012
Research and development	$	39	$	718	$	530
Sales, general and administrative		1,317		977		1,342
Total stock-based compensation expense	$	1,356	$	1,695	$	1,872

The estimated fair value for stock options, which determines the Company’s calculation of compensation expense, is based on the Black-Scholes option pricing model. RSUs are valued at the closing market price of the Company’s common stock on the date of grant. The Company uses the straight line single option method to calculate and recognize the fair value of stock-based compensation arrangements. In addition, the Company uses historical data to estimate pre-vesting forfeitures and records stock-based compensation expense only for those awards that are expected to vest and revises those estimates in subsequent periods if the actual forfeitures differ from the prior estimates.

The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected life of option awards, which have a significant impact on the fair value estimates. As of May 25, 2014, May 26, 2013 and May 27, 2012, the fair value of stock option grants was estimated using the following weighted average assumptions:

	Fiscal Year Ended May 25, 2014		Fiscal Year Ended May 26, 2013		Fiscal Year Ended May 27, 2012
Expected life (in years)		3.50		3.76		3.76
Risk-free interest rate		0.71%		0.48%		0.59%
Volatility		0.41		0.53		0.53
Dividend yield		0%		0%		0%

The weighted average estimated fair value of Landec employee stock options granted at grant date market prices during the fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012 was $4.41, $3.57 and $2.65 per share, respectively. No stock options were granted above or below grant date market prices during the fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements

The Company uses fair value measurement accounting for financial assets and liabilities and for financial instruments and certain other items measured at fair value. The Company has elected the fair value option for its investment in a non-public company (see Note 4). The Company has not elected the fair value option for any of its other eligible financial assets or liabilities.

The accounting guidance established a three-tier hierarchy for fair value measurements, which prioritizes the

inputs used in measuring fair value as follows:

Level 1 – observable inputs such as quoted prices for identical instruments in active markets.

Level 2 – inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data.

Level 3 – unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions.

As of May 25, 2014, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis, including cash equivalents, marketable securities, interest rate swap and its minority interest investment in Windset.

The fair value of the Company’s marketable securities is determined based on observable inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Therefore, the Company has categorized its marketable securities as a Level 1 measurement.

The fair value of the Company’s interest rate swap is determined based on model inputs that can be observed in a liquid market, including yield curves, and is categorized as a Level 2 measurement.

The Company has elected the fair value option of accounting for its investment in Windset. The calculation of fair value utilizes significant unobservable inputs in the discounted cash flow models, including projected cash flows, growth rates and discount rates. As a result, the Company’s investment in Windset is considered to be a Level 3 measurement investment. The change in the fair market value of the Company’s investment in Windset for the fiscal years ended May 25, 2014 and May 26, 2013 was due to the Company’s 20.1% minority interest in the change in the fair market value of Windset during those periods. In determining the fair value of the investment in Windset, the Company utilizes the following significant unobservable inputs in the discounted cash flow models:

	At May 25, 2014			At May 26, 2013
Annual consolidated revenue growth rates		4	%		3% to 9	%
Annual consolidated expense growth rates		4	%		3% to 8	%
Consolidated income tax rates		15	%		15	%
Consolidated discount rates		16% to 22	%		18% to 28	%

The revenue growth, expense growth and income tax rate assumptions, consider the Company's best estimate of the trends in those items over the discount period.   The discount rate assumption takes into account the risk-free rate of return, the market equity risk premium and the company’s specific risk premium and then applies an additional discount for lack of liquidity of the underlying securities.    The discounted cash flow valuation model used by the Company has the following sensitivity to changes in inputs and assumptions (in thousands):

	Impact on value of Windset investment as of May 25, 2014
10% increase in revenue growth rates	$	3,200
10% increase in expense growth rates	$	(2,300	)
10% increase in income tax rates		—
10% increase in discount rates	$	(1,500	)

Imprecision in estimating unobservable market inputs can affect the amount of gain or loss recorded for a particular position. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The following table summarizes the fair value of the Company’s assets and liabilities that are measured at fair value on a recurring basis, as of May 25, 2014 and May 26, 2013 (in thousands):

	Fair Value at May 25, 2014						Fair Value at May 26, 2013
Assets:	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Marketable securities	$	-	$	-	$	-	$	1,545	$	-	$	-
Investment in private company		-		-		39,600		-		-		29,600
Total	$	-	$	-	$	39,600	$	1,545	$	-	$	29,600
Liabilities:
Interest rate swap		-		44		-		-		163		-
Total	$	-	$	44	$	-	$	-	$	163	$	-

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

Revenue Recognition

In May 2014, the FASB issued Accounting Standard Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The standard requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also includes a cohesive set of disclosure requirements intended to provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a company’s contracts with customers. ASU 2014-09 will be effective beginning the first quarter of the Company's fiscal year 2018 and early application is not permitted. The standard allows for either “full retrospective” adoption, meaning the standard is applied to all of the periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. Management is currently evaluating the effect ASU 2014-09 will have on the Company's Consolidated Financial Statements and disclosures.

Unrecognized Tax Benefits

In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, related to the presentation of unrecognized tax benefits. The update requires presentation of an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward in the statement of financial position. The guidance does not apply to the extent that a net operating loss carryforward or tax credit carryforward at the reporting date is not available under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. The guidance is effective for fiscal years (and interim periods within those years) beginning after December 15, 2013, with early adoption permitted. The Company early adopted this standard in the first fiscal quarter of fiscal year 2014 and such adoption did not have a significant impact on the Company's Consolidated Financial Statements or disclosures.

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Note 12 - Commitments and Contingencies (Details) - Future Minimum Lease Payments Under Operating Leases, Excluding Land Leases (USD $) In Thousands, unless otherwise specified	May 25, 2014
Future Minimum Lease Payments Under Operating Leases, Excluding Land Leases [Abstract]
FY2015	$ 2,916
FY2016	2,720
FY2017	2,225
FY2018	1,375
FY2019	929
Thereafter	873
Total	$ 11,038

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Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012
Consolidated net income	$ 19,342,000	$ 22,812,000	$ 13,099,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,114,000	7,295,000	5,621,000
Stock-based compensation expense	1,356,000	1,695,000	1,872,000
Deferred taxes	5,605,000	6,511,000	3,283,000
Change in investment in non-public company , fair value	(10,000,000)	(8,100,000)	(5,838,000)
Tax benefit from stock based compensation	(1,922,000)	(1,302,000)	(4,057,000)
Net loss on disposal of property and equipment	329,000	217,000	12,000
Earn out liability		(3,933,000)	1,421,000
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable, net	(7,994,000)	(4,121,000)	(3,246,000)
Accounts receivable, related party	12,000	(348,000)	130,000
Income taxes receivable	5,025,000	(3,754,000)	4,581,000
Inventories, net	(622,000)	(2,102,000)	(441,000)
Issuance of notes and advances receivable	(4,763,000)	(4,173,000)	(3,699,000)
Collection of notes and advances receivable	4,481,000	4,173,000	3,704,000
Prepaid expenses and other current assets	(32,000)	(278,000)	3,588,000
Accounts payable	(50,000)	8,826,000	(544,000)
Accounts payable, related party	(91,000)	10,000	476,000
Accrued compensation	38,000	(798,000)	2,701,000
Other accrued liabilities	3,211,000	(2,486,000)	3,434,000
Deferred revenue	6,000	1,086,000	(2,495,000)
Net cash provided by operating activities	21,045,000	21,230,000	22,181,000
Cash flows from investing activities:
Purchases of property and equipment	(14,886,000)	(8,877,000)	(5,371,000)
Acquisition of GreenLine (Note 2)			(66,826,000)
Purchase of marketable securities	(1,417,000)	(4,959,000)	(30,723,000)
Proceeds from maturities of marketable securities	0	0
Proceeds from sales of marketable securities	0	0
Net cash used in investing activities	(13,341,000)	(10,422,000)	(44,073,000)
Cash flows from financing activities:
Repurchase of outstanding common stock			(5,006,000)
Proceeds from sale of common stock	2,298,000	3,416,000	61,000
Taxes paid by Company for stock swaps and RSUs	(1,271,000)	(49,000)	(260,000)
Tax benefit from stock-based compensation expense	1,922,000	1,302,000	4,057,000
Earn out payment from Lifecore acquisition		(9,650,000)
Net change in other assets/liabilities	31,000	712,000	(1,813,000)
Proceeds from long term debt			31,816,000
Proceeds from lines of credit	9,500,000		12,766,000
Payments on long term debt	(5,933,000)	(7,012,000)	(4,329,000)
Payments on lines of credit	(13,500,000)	(7,666,000)	(1,100,000)
Payments to non-controlling interest.	(226,000)	(320,000)	(258,000)
Net cash (used in) provided by financing activities	(7,179,000)	(19,267,000)	35,934,000
Net increase (decrease) in cash and cash equivalents	525,000	(8,459,000)	14,042,000
Cash and cash equivalents at beginning of year	13,718,000	22,177,000	8,135,000
Cash and cash equivalents at end of year	14,243,000	13,718,000	22,177,000
Supplemental disclosure of cash flows information:
Cash paid during the period for interest	1,504,000	1,728,000	952,000
Cash paid during the period for income taxes, net of refunds received	50,000	5,605,000	246,000
Marketable Maturities [Member]
Cash flows from investing activities:
Proceeds from maturities of marketable securities	2,962,000	3,414,000	31,104,000
Proceeds from sales of marketable securities	2,962,000	3,414,000	31,104,000
Marketable Sales [Member]
Cash flows from investing activities:
Proceeds from maturities of marketable securities			27,743,000
Proceeds from sales of marketable securities			27,743,000
Earnout [Member]
Adjustments to reconcile net income to net cash provided by operating activities:
Earn out liability		$ (3,933,000)

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Consolidated Balance Sheets (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	May 25, 2014	May 26, 2013
Allowance for doubtful accounts (in Dollars)	$ 516	$ 583
Common stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	26,815,253	26,402,247
Common stock, shares outstanding	26,815,253	26,402,247

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Note 10 - Derivative Financial Instruments

12 Months Ended

May 25, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

10.           Derivative Financial Instruments

In May 2010, the Company entered into a five-year interest rate swap agreement under the credit agreement with Wells Fargo. The interest rate swap was designated as a cash flow hedge of future interest payments of LIBOR and had a notional amount of $20 million. As a result of the interest rate swap transaction, the Company fixed for a five-year period the interest rate at 4.24% subject to market based interest rate risk on $20 million of borrowings under the credit agreement with Wells Fargo. The Company’s obligations under the interest rate swap transaction as to the scheduled payments were guaranteed and secured on the same basis as its obligations under the credit agreement with Wells Fargo at the time the agreement was consummated. Upon entering into the new Term Loan with BMO Harris in May 2012, the Company used the proceeds from that loan to pay off the Wells Fargo credit facility. The swap with Wells Fargo was not terminated upon the extinguishment of the debt with Wells Fargo. As a result of extinguishing the debt with Wells Fargo as of May 23, 2012, the swap was no longer an effective hedge and therefore, the fair value of the swap at the time the debt was extinguished of $347,000 was reversed from other comprehensive income and recorded in other expense during fiscal year 2012. The fair value of the swap arrangement as of May 25, 2014 and May 26, 2013 was $44,000 and $163,000, respectively, and is included in other accrued liabilities in the accompanying Consolidated Balance Sheets.

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Document And Entity Information (USD $)	12 Months Ended
	May 25, 2014	Jul. 18, 2014	Nov. 24, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	LANDEC CORP \CA\
Document Type	10-K
Current Fiscal Year End Date	--05-25
Entity Common Stock, Shares Outstanding		26,839,725
Entity Public Float			$ 294,141,000
Amendment Flag	false
Entity Central Index Key	0001005286
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	May 25, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	FY

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Note 11 - Income Taxes

12 Months Ended

May 25, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

11.           Income Taxes

The provision for income taxes consisted of the following (in thousands):

Current:	Year ended May 25, 2014		Year ended May 26, 2013			Year ended May 27, 2012
Federal	$	4,785	$	2,808		$	4,597
State		157		(18	)		(586	)
Foreign		56		56			56
Total		4,998		2,846			4,067
Deferred:
Federal		5,059		6,218			2,641
State		526		388			477
Total		5,585		6,606			3,118
Income tax expense	$	10,583	$	9,452		$	7,185

The actual provision for income taxes differs from the statutory U.S. federal income tax rate as follows (in thousands):

	Year Ended May 25, 2014			Year Ended May 26, 2013			Year Ended May 27, 2012
Provision at U.S. statutory rate (1)	$	10,405		$	11,214		$	6,958
State income taxes, net of federal benefit		711			731			451
Change in valuation allowance		99			370			1
Tax-exempt interest		—			—			(40	)
Tax credit carryforwards		(378	)		(801	)		(368	)
Transaction costs		—			—			322
Domestic manufacturing deduction		(406	)		(172	)		(208	)
Change in value of contingent consideration		—			(1,450	)		—
Other		152			(440	)		69
Total	$	10,583		$	9,452		$	7,185

(1) Statutory rate was 35% for fiscal years 2014, 2013 and 2012.

The increase in income tax expense in fiscal year 2014 compared to fiscal year 2013 is primarily due to the benefit received in fiscal year 2013 related to the change in value of contingent consideration, the absence of which increased the effective tax tax rate from 30% in fiscal year 2013 to 36% in fiscal year 2014 partially offset by a 7% decrease in net income before taxes. The increase in the income tax expense in fiscal year 2013 compared to fiscal year 2012 is due to a 59% increase in net income before taxes partially offset by a decrease in the Company’s effective tax rate to 30% down from 36% in fiscal year 2012 related to a change in value of contingent consideration in fiscal year 2013

The effective tax rates for fiscal year 2014 differ from the statutory federal income tax rate of 35 percent as a result of several factors, including state taxes, non-deductible stock-based compensation expense, disqualified dispositions of incentive stock options, domestic manufacturing deduction, the benefit of federal and state research and development credits, and the change in valuation allowance. The effective tax rates for fiscal year 2013 differ from the statutory federal income tax rate of 35 percent as a result of several factors, including state taxes, change in value of contingent consideration, non-deductible stock-based compensation expense, disqualified dispositions of incentive stock options, domestic manufacturing deduction, the benefit of federal and state research and development credits, and the change in valuation allowance. The effective tax rates for fiscal year 2012 differ from the statutory federal income tax rate of 35 percent as a result of several factors, including state taxes, non-deductible stock-based compensation expense, tax exempt interest, domestic manufacturing deduction and the benefit of federal and state research and development credits, and accounting for transaction costs associated with the GreenLine acquisition in fiscal year 2012.

Significant components of deferred tax assets and liabilities consisted of the following (in thousands):

	May 25, 2014			May 26, 2013
Deferred tax assets:
Net operating loss carryforwards	$	3,630		$	3,853
Accruals and reserves		1,746			1,388
Stock-based compensation		723			621
Research and AMT credit carryforwards		495			486
Other		545			450
Gross deferred tax assets		7,139			6,798
Valuation allowance		(881	)		(783	)
Net deferred tax assets		6,258			6,015
Deferred tax liabilities:
Basis difference in investment in non-public company		(9,270	)		(5,505	)
Depreciation and amortization		(5,705	)		(5,822	)
Goodwill and other indefinite life intangibles		(19,360	)		(17,160	)
Deferred tax liabilities		(34,335	)		(28,487	)
Net deferred tax liabilities	$	(28,077	)	$	(22,472	)

As of May 25, 2014, the Company had federal, California, Indiana, and other state net operating loss carryforwards of approximately $8.3 million, $1.7 million, $6.7 million, and $14.7 million respectively. These losses expire in different periods through 2032, if not utilized. Such net operating losses consist of excess tax benefits from employee stock option exercises and have not been recorded in the Company’s deferred tax assets. The Company will record approximately $915,000 of the gross California net operating loss to additional paid in capital as and when such excess tax benefits are ultimately realized. The Company acquired additional net operating losses through the acquisition of GreenLine. Utilization of these acquired net operating losses in a specific year is limited due to the “change in ownership” provision of the Internal Revenue Code of 1986 and similar state provisions. The net operating losses presented above for federal and state purposes is net of any such limitation.

The federal research and development credit has again expired and is currently unavailable for calendar 2014. As such, the Company is not benefiting any federal research credits for the last five months of the fiscal year ended May 25, 2014.

The Company has California research and development tax credits carryforwards of approximately $1.6 million. The research and development tax credit carryforwards have an unlimited carryforward period for California purposes. Certain tax credit carryovers are attributable to excess tax benefits from employee stock option exercises and have not been recorded in the Company’s deferred tax assets. The Company will record $1.1 million of the gross California research and development credit to additional paid in capital as and when such excess tax benefits are ultimately realized.

Valuation allowances are reviewed each period on a tax jurisdiction by jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets. Based on this analysis and considering all positive and negative evidence, the Company determined that a valuation allowance of $881,000 should be recorded as a result of uncertainty around the utilization of certain state net operating losses and a book impairment loss on the Company's investment in Aesthetic Sciences as it is more likely than not that a portion of the deferred tax asset will not be realized in the foreseeable future. The valuation allowance increased by $99,000 in fiscal year 2014 primarily due to uncertainty around the utilization of certain state net operating losses and credits.

The accounting for uncertainty in income taxes recognized in an enterprise’s financial statements prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and the derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure, and transition.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	As of
	May 25, 2014			May 26, 2013		May 27, 2012
Unrecognized tax benefits – beginning of the period	$	998		$	766	$	760
Gross increases – tax positions in prior period		7			103		1
Gross decreases – tax positions in prior period		(48	)		—		(1	)
Gross increases – current-period tax positions		78			129		246
Lapse of statute of limitations		—			—		(240	)
Unrecognized tax benefits – end of the period	$	1,035		$	998	$	766

As of May 25, 2014, the total amount of net unrecognized tax benefits was $1.0 million, of which, $817,000, if recognized, would affect the effective tax rate. As of May 26, 2013, the total amount of net unrecognized tax benefits was $1.0 million, of which, $807,000, if recognized, would affect the effective tax rate. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. The total amount of penalties and interest was not material as of May 25, 2014 and May 26, 2013. Additionally, the Company does not expect its unrecognized tax benefits to change materially within the next twelve months.

Due to tax attribute carryforwards, the Company is subject to examination for tax years 1997 forward for U.S. tax purposes. The Company is also subject to examination in various state jurisdictions for tax years 1998 forward, none of which were individually material.

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012
Product sales	$ 476,813	$ 441,708	$ 317,552
Cost of product sales	414,249	378,948	265,414
Gross profit	62,564	62,760	52,138
Operating costs and expenses:
Research and development	7,204	9,294	9,625
Selling, general and administrative	35,170	32,531	26,515
Other operating expenses		(3,933)	1,421
Total operating costs and expenses	42,374	37,892	37,561
Operating income	20,190	24,868	14,577
Dividend income	1,125	1,125	1,125
Interest income	260	179	180
Interest expense	(1,650)	(2,008)	(929)
Other income	10,000	8,100	5,331
Net income before taxes	29,925	32,264	20,284
Income tax expense	(10,583)	(9,452)	(7,185)
Consolidated net income	19,342	22,812	13,099
Non-controlling interest	(197)	(225)	(403)
Net income and comprehensive income applicable to common stockholders	$ 19,145	$ 22,587	$ 12,696
Basic net income per share (in Dollars per share)	$ 0.72	$ 0.87	$ 0.49
Diluted net income per share (in Dollars per share)	$ 0.71	$ 0.85	$ 0.49
Shares used in per share computation:
Basic (in Shares)	26,628	25,830	25,849
Diluted (in Shares)	27,120	26,626	26,126

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Note 5 - License Agreements

12 Months Ended

May 25, 2014

License Agreements [Abstract]

License Agreements [Text Block]

5.             License Agreements

Monsanto

On December 1, 2006, Landec entered into a five-year co-exclusive technology license and polymer supply agreement (“the Monsanto Agreement”) with Monsanto Company (“Monsanto”) for the use of Landec’s Intellicoat polymer seed coating technology. On December 1, 2011, Monsanto terminated the Monsanto Agreement and paid the Company a $4 million termination fee and all rights to the Intellicoat seed coating technology reverted to Landec. For fiscal year 2012, Landec recognized license revenues from the Monsanto Agreement of $2.7 million.

INCOTEC

In connection with the sale of Landec Ag to INCOTEC on June 24, 2012 (see Note 3), Landec entered into a seven-year exclusive technology license and polymer supply agreement with INCOTEC for the use of Landec’s Intellicoat^® polymer seed coating technology for male inbred corn which is sold under the Pollinator Plus label. This license does not include the use of Intellicoat for the controlled release of an active ingredient for agricultural applications which was retained by Landec. Landec will be the exclusive supplier of Pollinator Plus polymer to INCOTEC during the term of the license agreement and will receive a royalty equal to 20% of the revenues realized by INCOTEC from the sale of or sublicense of Pollinator Plus coatings during the first four years of the agreement and 10% for the last three years of the agreement.

On June 24, 2012, Landec also entered into a five-year exclusive technology license and polymer supply agreement with INCOTEC for the joint development of new polymer and unique coatings for use in seed treatment formulations. In this agreement, Landec will receive a value share which will be mutually agreed to by both parties prior to each application being developed.

Air Products

In March 2006, Landec entered into an exclusive license and research and development agreement with Air Products and Chemicals, Inc. (“Air Products”). In accordance with the agreement, Landec receives 40% of the direct profit generated from the sale of products by Air Products occurring after April 1, 2007, that incorporate Landec’s Intelimer materials.

Chiquita

The agreement with Chiquita has been renewed through December 2016 and requires Chiquita to pay annual gross profit minimums to Landec in order for Chiquita to maintain its exclusive license for bananas. Under the terms of the agreement, Chiquita must notify Landec before December 1^st of each year whether it is going to maintain its exclusive license for the following calendar year and thus agree to pay the minimums for that year. Landec was notified in November 2012 of Chiquita’s desire to not maintain its exclusive license. As a result, the agreement has reverted to a non-exclusive agreement in which Chiquita will pay the Company for membranes purchased and the Company is now entitled to sell its BreatheWay packaging technology for bananas to others.

                Windset

In June 2010, Apio entered into an exclusive license agreement with Windset to allow for the use of Landec’s proprietary breathable packaging to extend the shelf life of greenhouse grown cucumbers, peppers and tomatoes (“Exclusive Products”). In accordance with the agreement, Apio received and recorded a one-time upfront research and development fee of $100,000 and will receive license fees equal to 3% of net revenue of the Exclusive Products utilizing the proprietary breathable packaging technology, with or without the BreatheWay® trademark. The ongoing license fees are subject to annual minimums of $150,000 for each of the three types of exclusive product as each is added to the agreement. As of May 25, 2014, two products have been added to the agreement.

                 Nitta     

In July 2012, the Company entered into an agreement with Nitta Corporation (“Nitta”), a Japanese company, to develop additional uses of the Company’s adhesive polymer technology for electronics. During fiscal year 2013, the Company recognized $688,000 in research and development revenues from this agreement.

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Note 4 - Investments in Non-public Companies

12 Months Ended

May 25, 2014

Investment Holdings [Abstract]

Investment Holdings [Text Block]

4.             Investments in non-public companies

In December 2005, Landec entered into a licensing agreement with Aesthetic Sciences for the exclusive rights to use Landec's Intelimer materials technology for the development of dermal fillers worldwide under the agreement. The Company received shares of preferred stock in exchange for the license with a valuation of $1.8 million. Aesthetic Sciences sold the rights to its Smartfil Injector System on July 16, 2010. Landec has evaluated its investment in Aesthetic Sciences for impairment, utilizing a discounted cash flow analysis under the terms of the purchase agreement. Based on the terms of the sale, the Company determined that its investment was other than temporarily impaired and therefore, recorded an impairment charge of $1.0 million in fiscal year 2010. The Company’s carrying value of its investment in Aesthetic Sciences is $793,000 as of May 25, 2014 and May 26, 2013. No additional impairment has been determined for the Company’s investment in Aesthetic Sciences.

On February 15, 2011, Apio entered into a share purchase agreement (the “Windset Purchase Agreement”) with Windset. Pursuant to the Windset Purchase Agreement, Apio purchased 150,000 senior preferred shares for $15 million and 201 common shares for $201 that were issued by Windset (the “Purchased Shares”). The Company’s common shares represent a 20.1% interest in Windset. The non-voting senior preferred shares yield a cash dividend of 7.5% annually. The dividend is payable within 90 days of each anniversary of the execution of the Windset Purchase Agreement, the first three dividend payments of $1.1 million were made in May of 2014, 2013 and 2012. The Windset Purchase Agreement includes a put and call option, which can be exercised on the sixth anniversary of the Windset Purchase Agreement whereby Apio can exercise the put to sell its Purchased Shares to Windset, or Windset can exercise the call to purchase the Purchased Shares from Apio, in either case, at a price equal to 20.1% of the appreciation in the fair market value of Windset from the date of the Company’s investment through the put and call date, plus the purchase price of the Purchased Shares. Under the terms of the arrangement with Windset, the Company is entitled to designate one of five members on the Board of Directors of Windset.

In accordance with accounting guidance, the investment in Windset does not qualify for equity method accounting as the investment does not meet the criteria of in-substance common stock due to returns through the annual dividend on the non-voting senior preferred shares that are not available to the common stock holders. As the put and call options require the Purchased Shares to be put or called in equal proportions, the Company has deemed that the investment, in substance, should be treated as a single security for purposes of accounting. The Company has adopted fair value option in the accounting for its investment in Windset effective on the acquisition date. The fair value of the Company’s investment in Windset utilizes significant unobservable inputs in the discounted cash flow models, including projected cash flows, growth rates and the discount rate, and is therefore considered a Level 3 for fair value measurement purposes (see Note 1). The Company believes that reporting its investment at fair value provides its investors with useful information on the performance of the Company’s investment and the anticipated appreciation in value as Windset expands its business.

The fair value of the Company’s investment in Windset was determined utilizing the Windset Purchase Agreement’s put/call calculation for value and a discounted cash flow model based on projections developed by Windset, and considers the put and call conversion options. These features impact the duration of the cash flows utilized to derive the estimated fair values of the investment. These two discounted cash flow models’ estimate for fair value, which generally approximate a similar result, is then weighted. Assumptions included in these discounted cash flow models will be evaluated quarterly based on Windset’s actual and projected operating results to determine the change in fair value.

During fiscal years 2014, 2013 and 2012, the Company recorded $1.1 million in dividend income and the Company recorded $10.0 million, $8.1 million and $5.8 million of income, respectively, which is included in other income in the Consolidated Statements of Comprehensive Income, from the increase in the fair market value of the Company’s investment in Windset.

The Company also entered into an exclusive license agreement with Windset, which was executed in June 2010, prior to contemplation of Apio’s investment in Windset (see Note 5).

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Note 16 - Subsequent Events

12 Months Ended

May 25, 2014

Subsequent Events [Abstract]

Subsequent Events [Text Block]

16.          Subsequent Events

On July 15, 2014, Apio purchased from a shareholder of Windset an additional 68 shares of common stock and 15,857 shares of junior preferred stock of Windset for $11.0 million. After the purchase, Apio’s common stock ownership represents a 26.9% interest in Windset. The non-voting junior preferred stock does not yield a dividend unless declared by the Board of Directors of Windset. The newly purchased shares of common stock will be included in the put/call arrangement with Windset and will be adjusted to fair value on a quarterly basis along with the previously purchased common stock.

On July 17, 2014, Apio entered into the amendment with GE Capital, which amends the Credit Agreement dated April 23, 2012 among the parties. Under the amendment, the parties have agreed to increase the current revolving line of credit from $25 million to $40 million, reduce the interest rate from LIBOR plus 2.0% to LIBOR plus 1.75%, extend the term to July 17, 2019 and make certain other changes.

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Note 12 - Commitments and Contingencies

12 Months Ended

May 25, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

12.           Commitments and Contingencies

Operating Leases

Landec leases facilities and equipment under operating lease agreements with various terms and conditions, which expire at various dates through fiscal year 2020. Certain of these leases have renewal options.

The approximate future minimum lease payments under these operating leases, excluding land leases, at May 25, 2014 are as follows (in thousands):

	Amount
FY2015	$	2,916
FY2016		2,720
FY2017		2,225
FY2018		1,375
FY2019		929
Thereafter		873
Total	$	11,038

Rent expense for operating leases, including month to month arrangements was $4.4 million, $4.8 million and $1.5 million for the fiscal years 2014, 2013 and 2012, respectively.

Capital Leases

There was no equipment under capital lease agreements at May 25, 2014.

Employment Agreements

Landec has entered into employment agreements with certain key employees. These agreements provide for these employees to receive incentive bonuses based on the financial performance of certain divisions in addition to their annual base salaries. The accrued incentive bonuses amounted to $656,000 at May 25, 2014 and $548,000 at May 26, 2013.

Purchase Commitments

At May 25, 2014, the Company was committed to purchase $5.0 million of produce during fiscal year 2015 in accordance with contractual terms at market rates. Payments of $7.1 million were made in fiscal year 2014 under these arrangements.

Loss Contingencies

As of May 25, 2014, the Company is not a party to any legal proceedings.

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Note 8 - Stockholders' Equity

12 Months Ended

May 25, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

8.             Stockholders’ Equity

Holders of Common Stock are entitled to one vote per share.

Convertible Preferred Stock

The Company has authorized two million shares of preferred stock, and as of May 25, 2014 has no outstanding preferred stock.

Common Stock and Stock Option Plans

At May 25, 2014, the Company had 2.0 million common shares reserved for future issuance under Landec equity incentive plans.

On October 10, 2013, following stockholder approval at the Annual Meeting of Stockholders of the Company, the 2013 Stock Incentive Plan (the “Plan”) became effective and replaced the Company’s 2009 Stock Incentive Plan. Employees (including officers), consultants and directors of the Company and its subsidiaries and affiliates are eligible to participate in the Plan.

The Plan provides for the grant of stock options (both nonstatutory and incentive stock options), stock grants, stock units and stock appreciation rights. Awards under the Plan will be evidenced by an agreement with the Plan participants and 2.0 million shares of the Company’s Common Stock (“Shares”) were initially available for award under the Plan. Under the Plan, no recipient may receive awards during any fiscal year that exceeds the following amounts: (i) stock options covering in excess of 500,000 Shares; (ii) stock grants and stock units covering in excess of 250,000 Shares in the aggregate; or (iii) stock appreciation rights covering more than 500,000 Shares. In addition, awards to non-employee directors are discretionary. However, a non-employee director may not be granted awards in excess of 30,000 Shares in the aggregate during any fiscal year. The exercise price of the options is the fair market value of the Company’s Common Stock on the date the options are granted.

On October 15, 2009, following stockholder approval at the Annual Meeting of Stockholders of the Company, the 2009 Stock Incentive Plan (the “2009 Plan”) became effective and replaced the Company’s 2005 Stock Incentive Plan. Employees (including officers), consultants and directors of the Company and its subsidiaries and affiliates are eligible to participate in the 2009 Plan. The 2009 Plan provides for the grant of stock options (both nonstatutory and incentive stock options), stock grants, stock units and stock appreciation rights. Under the 2009 Plan, 1.9 million Shares were initially available for awards and as of May 25, 2014, 1.0 million options to purchase shares and restricted stock units (RSUs) were outstanding.

On October 14, 2005, following stockholder approval at the Annual Meeting of Stockholders of the Company, the 2005 Stock Incentive Plan (“2005 Plan”) became effective. The 2005 Plan replaced the Company’s four then existing equity plans and no shares remain available for grant under those plans. Employees (including officers), consultants and directors of the Company and its subsidiaries and affiliates were eligible to participate in the 2005 Plan. The 2005 Plan provided for the grant of stock options (both nonstatutory and incentive stock options), stock grants, stock units and stock appreciation rights. Under the 2005 Plan, 861,038 Shares were initially available for awards, and as of May 25, 2014, 283,250 options to purchase shares were outstanding. The exercise price of the options was the fair market value of the Company’s Common Stock on the date the options were granted.

The 1995 Directors’ Stock Option Plan (the “Directors’ Plan”) provided that each person who became a non- employee director of the Company, who had not received a previous grant, be granted a nonstatutory stock option to purchase 20,000 shares of Common Stock on the date on which the optionee first became a non-employee director of the Company. Thereafter, on the date of each annual meeting of the stockholders each non-employee director was granted an additional option to purchase 10,000 shares of Common Stock if, on such date, he or she had served on the Company’s Board of Directors for at least six months prior to the date of such annual meeting. The exercise price of the options was the fair market value of the Company’s Common Stock on the date the options were granted. Options granted under this plan were exercisable and vested upon grant. No shares remain available for grant under the Directors’ Plan.

Activity under all Landec equity incentive plans is as follows:

Stock-Based Compensation Activity

				Restricted Stock Outstanding					Stock Options Outstanding
	RSUs and Options Available for Grant			Number of Restricted Shares			Weighted Average Grant Date Fair Value		Number of Stock Options			Weighted  Average Exercise Price
Balance at May 29, 2011		640,976			415,085		$	5.96		2,318,753		$	6.34
Granted		(191,333	)		47,833		$	6.67		143,500		$	6.67
Awarded/Exercised		—			(111,252	)	$	6.36		(371,727	)	$	5.40
Forfeited		—			(3,500	)	$	5.84		(5,657	)	$	5.76
Plan shares expired		—			—			—		(38,437	)	$	8.23
Balance at May 27, 2012		449,643			348,166		$	5.93		2,046,432		$	6.50
Granted		(26,666	)		6,666		$	9.01		20,000		$	9.01
Awarded/Exercised		—			(231,086	)	$	5.74		(671,563	)	$	6.30
Forfeited		—			(28,416	)	$	6.20		(44,977	)	$	6.34
Plan shares expired		—			—			—		(10,000	)	$	13.32
Balance at May 26, 2013		422,977			95,330		$	6.52		1,339,892		$	6.58
Additional shares reserved		2,000,000			—			—		—			—
Granted		(420,131	)		128,631		$	14.30		291,500		$	14.30
Awarded/Exercised		—			(62,499	)	$	6.18		(398,080	)	$	6.45
Forfeited		—			(12,162	)	$	8.86		(12,452	)	$	6.66
Plan shares expired		(2,846	)		—			—		(5,000	)	$	13.32
Balance at May 25, 2014		2,000,000			149,300		$	13.17		1,215,860		$	8.45

Upon vesting of certain RSUs and the exercise of certain options during fiscal years 2014, 2013 and 2012, certain RSUs and exercised options were net share-settled to cover the required exercise price and withholding tax and the remaining amounts were converted into an equivalent number of shares of Common Stock. The Company withheld shares with value equivalent to the exercise price for options and the employees' minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld for fiscal years 2014, 2013 and 2012 were 47,573, 145,159 and 326,954 RSUs and options, respectively, which was based on the value of the option and/or RSUs on their exercise or vesting date as determined by the Company's closing stock price. Total payments for the employees' tax obligations to the taxing authorities during fiscal years 2014 and 2013 were approximately $1.3 million and $49,000, respectively. These net-share settlements had the effect of share repurchases by the Company as they reduced and retired the number of shares that would have otherwise have been issued as a result of the vesting and did not represent an expense to the Company.

The following table summarizes information concerning stock options outstanding and exercisable at May 25, 2014:

				Options Outstanding								Options Exercisable
Range of Exercise Prices				Number of Shares Outstanding		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Aggregate Intrinsic Value		Number of Shares Exercisable		Weighted Average Exercise Price		Aggregate Intrinsic Value
$	5.63	-	$5.63		287,219		3.01	$	5.63	$	1,832,457		287,219	$	5.63	$	1,832,457
$	5.65	-	$6.22		321,085		2.63	$	6.15	$	1,881,142		321,085	$	6.15	$	1,881,142
$	6.35	-	$7.50		230,056		2.63	$	6.76	$	1,207,945		214,612	$	6.77	$	1,125,386
$	8.19	-	$14.30		377,500		5.03	$	13.58	$	136,400		161,694	$	12.94	$	106,400
$	5.63	-	$14.30		1,215,860		3.46	$	8.45	$	5,057,944		984,610	$	7.25	$	4,945,385

At May 25, 2014 and May 26, 2013 options to purchase 984,610 and 1,262,934 shares of Landec’s Common Stock were vested, respectively and 231,250 and 76,958 were unvested, respectively. No options have been exercised prior to being vested. The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on the Company’s closing stock price of $12.01 on May 23, 2014, which would have been received by holders of stock options had all holders of stock options exercised their stock options that were in-the-money as of that date. The total number of in-the-money stock options exercisable as of May 25, 2014, was 852,916 shares. The aggregate intrinsic value of stock options exercised during the fiscal year 2014 was $2.3 million.

Option Awards

	Outstanding Options		Weighted Average Exercise Price		Weighted Average Remaining Contract Term (in years)		Aggregate Intrinsic Value
Vested		984,610	$	7.25		2.88	$	4,945,385
Expected to vest		226,625	$	13.56		5.93		110,308
Total		1,211,235	$	8.43		3.45	$	5,055,693

As of May 25, 2014, there was $2.0 million of total unrecognized compensation expense related to unvested equity compensation awards granted under the Company’s incentive stock plans. Total expense is expected to be recognized over the weighted-average period of 1.9 years for both stock options and restricted stock awards.

Stock Repurchase Plan

On July 14, 2010, the Board of Directors of the Company approved the establishment of a stock repurchase plan which allows for the repurchase of up to $10 million of the Company’s Common Stock. The Company may repurchase its common stock from time to time in open market purchases or in privately negotiated transactions. The timing and actual number of shares repurchased is at the discretion of management of the Company and will depend on a variety of factors, including stock price, corporate and regulatory requirements, market conditions, the relative attractiveness of other capital deployment opportunities and other corporate priorities. The stock repurchase program does not obligate Landec to acquire any amount of its common stock and the program may be modified, suspended or terminated at any time at the Company's discretion without prior notice. During fiscal years 2014 and 2013, the Company did not purchase any shares on the open market. During fiscal year 2012, the Company purchased on the open market 917,244 shares of its Common Stock for $5.0 million and retired those shares.

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Note 9 - Debt (Details) - Future Minimum Principal Payments of Debt (USD $) In Thousands, unless otherwise specified	May 25, 2014	May 26, 2013
Note 9 - Debt (Details) - Future Minimum Principal Payments of Debt [Line Items]
FY 2015	$ 6,055
FY 2016	6,181
FY 2017	3,318
FY 2018	3,456
FY 2019	3,599
Thereafter	11,763
Total	34,372	40,305
Real Estate Loan [Member]
Note 9 - Debt (Details) - Future Minimum Principal Payments of Debt [Line Items]
FY 2015	965
FY 2016	1,005
FY 2017	1,046
FY 2018	1,089
FY 2019	1,134
Thereafter	10,898
Total	16,137	17,065
Capital Equipment Loan [Member]
Note 9 - Debt (Details) - Future Minimum Principal Payments of Debt [Line Items]
FY 2015	1,725
FY 2016	1,801
FY 2017	1,882
FY 2018	1,967
FY 2019	2,055
Total	9,430	11,080
Term Loan [Member]
Note 9 - Debt (Details) - Future Minimum Principal Payments of Debt [Line Items]
FY 2015	3,000
FY 2016	3,000
Total	6,000	9,000
Industrial Revenue Bonds [Member]
Note 9 - Debt (Details) - Future Minimum Principal Payments of Debt [Line Items]
FY 2015	365
FY 2016	375
FY 2017	390
FY 2018	400
FY 2019	410
Thereafter	865
Total	$ 2,805	$ 3,160

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Note 6 - Property and Equipment

12 Months Ended

May 25, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

6.             Property and Equipment

Property and equipment consists of the following (in thousands):

	Years of Useful Life		May 25, 2014			May 26, 2013
Land and building		15-40	$	56,378		$	52,527
Leasehold improvements		3-20		1,079			1,029
Computer, capitalized software, machinery, equipment and auto		3-20		53,715			44,583
Furniture and fixtures		3-7		824			766
Construction in process				6,975			5,838
Gross property and equipment				118,971			104,743
Less accumulated depreciation and amortization				(44,831	)		(38,932	)
Net property and equipment			$	74,140		$	65,811

                Depreciation and amortization expense for property and equipment for the fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012 was $6.2 million, $6.3 million and $5.3 million, respectively. There were no equipment under capital leases at May 25, 2014 or May 26, 2013. Amortization related to capitalized software was $189,000, $160,000 and $136,000 for fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012, respectively. The unamortized computer software costs at May 25, 2014 and May 26, 2013 were $1.1 million and $343,000, respectively.

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Note 7 - Intangible Assets

12 Months Ended

May 25, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

7.             Intangible Assets

Changes in the carrying amount of goodwill for the fiscal years ended May 25, 2014, May 26, 2013 and May 27, 2012 by reportable segment, are as follows (in thousands):

	Food Products Technology		Corporate		Hyaluronan- based Biomaterials		Total
Balance as of May 29, 2011		22,581		—		13,881		36,462
Goodwill acquired during the period		13,158		—		—		13,158
Balance as of May 27, 2012		35,739		—		13,881		49,620
Balance as of May 26, 2013	$	35,739	$	—	$	13,881	$	49,620
Balance as of May 25, 2014	$	35,739	$	—	$	13,881	$	49,620

Information regarding Landec’s other intangible assets is as follows (in thousands):

	Trademarks & Trade names		Customer Relationships			Total
Balance as of May 29, 2011		12,428		3,366			15,794
Acquired during the period		36,000		7,500			43,500
Amortization expense		—		(309	)		(309	)
Balance as of May 27, 2012		48,428		10,557			58,985
Amortization expense		—		(951	)		(951	)
Balance as of May 26, 2013	$	48,428	$	9,606		$	58,034
Amortization expense		—		(886	)		(886	)
Balance as of May 25, 2014	$	48,428	$	8,720		$	57,148

Accumulated amortization of Trademark and Trade names as of May 25, 2014 and May 26, 2013 was $872,000. Accumulated amortization of Customer Relationships as of May 25, 2014 and May 26, 2013 was $2.5 million and $1.6 million, respectively. Accumulated impairment losses as of May 25, 2014 and May 26, 2013 were $4.8 million. Lifecore’s Customer Relationships amount of $3.7 million is being amortized over 12 years and Apio’s customer relationships amount of $7.5 million is being amortized over 13 years. The amortization expense for the next five fiscal years is estimated to be $885,000 per year.

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Note 9 - Debt

12 Months Ended

May 25, 2014

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

9.             Debt

Long-term debt consists of the following (in thousands):

	May 25, 2014			May 26, 2013
Real estate loan agreement with General Electric Capital Corporation (“GE Capital”); due in monthly principal and interest payments of $133,060 through May 1, 2022 with interest based on a fixed rate of 4.02% per annum	$	16,137		$	17,065
Capital equipment loan with GE Capital; due in monthly principal and interest payments of $175,356 through May 1, 2019 with interest based on a fixed rate of 4.39% per annum		9,430			11,080
Term note with BMO Harris; due in monthly payments of $250,000 through May 23, 2016 with interest payable monthly at LIBOR plus 2% per annum		6,000			9,000
Industrial revenue bonds (“IRBs”) issued by Lifecore; due in annual payments through 2020 with interest at a variable rate set weekly by the bond remarketing agent (0.28% and 0.38% at May 25, 2014 and May 26, 2013, respectively)		2,805			3,160
Total		34,372			40,305
Less current portion		(6,055	)		(5,933	)
Long-term portion	$	28,317		$	34,372

The future minimum principal payments of the Company’s debt for each year presented are as follows (in thousands):

	GE RE Loan		GE Equipment		BMO Harris		IRB		Total
FY 2015		965		1,725		3,000		365		6,055
FY 2016		1,005		1,801		3,000		375		6,181
FY 2017		1,046		1,882		—		390		3,318
FY 2018		1,089		1,967		—		400		3,456
FY 2019		1,134		2,055		—		410		3,599
Thereafter		10,898		—		—		865		11,763
Total	$	16,137	$	9,430	$	6,000	$	2,805	$	34,372

In addition to entering into the GE Capital real estate and equipment loans mentioned above, on April 23, 2012 in connection with the acquisition of GreenLine, Apio also entered into a five-year, $25.0 million asset-based working capital revolving line of credit with GE Capital, with an interest rate of LIBOR plus 2%, with availability based on the combination of the eligible accounts receivable and eligible inventory (availability was $19.8 million at May 25, 2014). Apio’s revolving line of credit has an unused fee of 0.375% per annum. At May 25, 2014 and May 26, 2013, Apio had zero and $4.0 million, respectively, outstanding under its revolving line of credit.

The GE real estate, equipment and line of credit agreements (collectively the “GE Debt Agreements”) are secured by liens on all of the property of Apio and its subsidiaries. The GE Debt Agreements contain customary events of default under which obligations could be accelerated or increased. The GE Capital real estate and equipment loans are guaranteed by Landec, and Landec has pledged its equity interest in Apio as collateral under the line of credit agreement. The GE Debt Agreements contain customary covenants, such as limitations on the ability to (1) incur indebtedness or grant liens or negative pledges on Apio’s assets; (2) make loans or other investments; (3) pay dividends, sell stock or repurchase stock or other securities; (4) sell assets; (5) engage in mergers; (6) enter into sale and leaseback transactions; and (7) make changes in Apio’s corporate structure. In addition, Apio must maintain a minimum fixed charge coverage ratio of 1.10 to 1.0 if the availability under its line of credit falls below $7.5 million. Apio was in compliance with all financial covenants as of May 25, 2014 and May 26, 2013. Unamortized loan origination fees for the GE Debt Agreements were $964,000 and $1.2 million at May 25, 2014 and May 26, 2013, respectively, and are included in other assets in the Consolidated Balance Sheets.

On May 23, 2012, Lifecore entered into two financing agreements with BMO Harris Bank N.A. and/or its affiliates (“BMO Harris”), collectively (the “Lifecore Loan Agreements”):

(1) A Credit and Security Agreement (the “Credit Agreement”) which includes (a) a two-year, $10.0 million asset-based working capital revolving line of credit, with an interest rate of LIBOR plus 1.85%, with availability based on the combination of Lifecore’s eligible accounts receivable and inventory balances (availability was $7.9 million at May 25, 2014) and with no unused fee (as of May 25, 2014 and May 26, 2013, no amounts were outstanding under the line of credit) and (b) a $12.0 million term loan which matures in four years due in monthly payments of $250,000 with interest payable monthly based on a variable interest rate of LIBOR plus 2% (the “Term Loan”).

(2) A Reimbursement Agreement pursuant to which BMO Harris caused its affiliate Bank of Montreal to issue an irrevocable letter of credit in the amount of $3.5 million (the “Letter of Credit”) which is securing the IRBs described above.

The obligations of Lifecore under the Lifecore Loan Agreements are secured by liens on all of the property of Lifecore. The Lifecore Loan Agreements contain customary covenants, such as limitations on the ability to (1) incur indebtedness or grant liens or negative pledges on Lifecore’s assets; (2) make loans or other investments; (3) pay dividends or repurchase stock or other securities; (4) sell assets; (5) engage in mergers; (6) enter into sale and leaseback transactions; (7) adopt certain benefit plans; and (8) make changes in Lifecore’s corporate structure. In addition, under the Credit Agreement, Lifecore must maintain (a) a minimum fixed charge coverage ratio of 1.10 to 1.0 and a minimum quick ratio of 1.25 to 1.00, both of which must be satisfied as of the end of each fiscal quarter commencing with the fiscal quarter ending August 26, 2012 and (b) a minimum tangible net worth of $29,000,000, measured as of May 28, 2013, and as of the end of each fiscal year thereafter. Lifecore was in compliance with all financial covenants as of May 25, 2014 and May 26, 2013. Unamortized loan origination fees for the Lifecore Loan Agreements were $98,000 and $149,000 at May 25, 2014 and May 26, 2013, respectively, and are included in other assets in the Consolidated Balance Sheets.

The market value of the Company’s debt approximates its recorded value as the interest rates on each debt instrument approximates current market rates.

The Term Loan was used to repay Lifecore’s former credit facility with Wells Fargo Bank, N.A. (“Wells Fargo”). The Letter of Credit (which replaces a letter of credit previously provided by Wells Fargo) provides liquidity and credit support for the IRBs.

On August 19, 2004, Lifecore issued variable rate industrial revenue bonds (“IRBs”).  These IRBs were assumed by Landec in the acquisition of Lifecore (see Note 2). The IRBs are collateralized by a bank letter of credit which is secured by a first mortgage on the Company’s facility in Chaska, Minnesota. In addition, the Company pays an annual remarketing fee equal to 0.125% and an annual letter of credit fee of 0.75%. The maturities on the IRBs are held in a sinking fund account, recorded in Other Current Assets in the accompanying Consolidated Balance Sheets, and are paid out each year on September 1st.

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Note 11 - Income Taxes (Details) - Income Tax Rate Reconcilliation (USD $) In Thousands, unless otherwise specified	12 Months Ended
	May 25, 2014		May 26, 2013		May 28, 2013	May 27, 2012
Income Tax Rate Reconcilliation [Abstract]
Provision at U.S. statutory rate (1)	$ 10,405	[1]	$ 11,214	[1]		$ 6,958	[1]
State income taxes, net of federal benefit	711		731			451
Change in valuation allowance	99		370			1
Tax-exempt interest						(40)
Tax credit carryforwards	(378)		(801)			(368)
Transaction costs						322
Domestic manufacturing deduction	(406)		(172)			(208)
Change in value of contingent consideration			(1,450)
Other	152		(440)			69
Total	$ 10,583		$ 9,452		$ 9,452	$ 7,185

[1] Statutory rate was 35% for fiscal years 2014, 2013 and 2012.

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Note 11 - Income Taxes (Details) - Unrecognized Tax Benefits (USD $) In Thousands, unless otherwise specified	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012
Unrecognized Tax Benefits [Abstract]
Unrecognized tax benefits – beginning of the period	$ 998	$ 766	$ 760
Gross increases – tax positions in prior period	7	103	1
Gross decreases – tax positions in prior period	(48)		(1)
Gross increases – current-period tax positions	78	129	246
Lapse of statute of limitations			(240)
Unrecognized tax benefits – end of the period	$ 1,035	$ 998	$ 766

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Note 11 - Income Taxes (Details) - Provision for Income Taxes (USD $) In Thousands, unless otherwise specified	12 Months Ended
	May 25, 2014	May 26, 2013	May 28, 2013	May 27, 2012
Provision for Income Taxes [Abstract]
Federal	$ 4,785	$ 2,808		$ 4,597
State	157	(18)		(586)
Foreign	56	56		56
Total	4,998	2,846		4,067
Deferred:
Federal	5,059	6,218		2,641
State	526	388		477
Total	5,605	6,511		3,283
Income tax expense	$ 10,583	$ 9,452	$ 9,452	$ 7,185

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Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) (USD $)	12 Months Ended					12 Months Ended			6 Months Ended	9 Months Ended	12 Months Ended						6 Months Ended		9 Months Ended	12 Months Ended		6 Months Ended	12 Months Ended				12 Months Ended						12 Months Ended												6 Months Ended	12 Months Ended			12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012	May 30, 2010	May 29, 2011	May 25, 2014 Beachside Produce LLC [Member]	May 26, 2013 Beachside Produce LLC [Member]	May 27, 2012 Beachside Produce LLC [Member]	May 25, 2014 Building [Member]	Nov. 24, 2013 Building [Member]	May 25, 2014 Building [Member] Minimum [Member]	May 25, 2014 Building [Member] Maximum [Member]	May 25, 2014 Leasehold Improvements [Member] Minimum [Member]	May 25, 2014 Leasehold Improvements [Member] Maximum [Member]	May 25, 2014 Software Development [Member] Minimum [Member]	May 25, 2014 Software Development [Member] Maximum [Member]	May 25, 2014 Machinery and Equipment [Member] Depreciable Assets [Member] (Deprecated 2014-01-31)	May 25, 2014 Machinery and Equipment [Member]	Nov. 24, 2013 Machinery and Equipment [Member]	May 25, 2014 Ophthalmic [Member] HA-based Biomaterials [Member] Sales Revenue, Goods, Net [Member] Product Concentration Risk [Member]	May 25, 2014 Orthopedic [Member] HA-based Biomaterials [Member] Sales Revenue, Goods, Net [Member] Product Concentration Risk [Member]	Nov. 24, 2013 HA-based Biomaterials [Member]	May 25, 2014 HA-based Biomaterials [Member]	May 26, 2013 HA-based Biomaterials [Member]	May 27, 2012 HA-based Biomaterials [Member]	May 29, 2011 HA-based Biomaterials [Member]	May 25, 2014 Food Products Technology [Member]	May 26, 2013 Food Products Technology [Member]	May 27, 2012 Food Products Technology [Member]	May 29, 2011 Food Products Technology [Member]	May 25, 2014 Short Term [Member]	May 26, 2013 Short Term [Member]	May 25, 2014 Customer Relationships [Member] Minimum [Member]	May 25, 2014 Customer Relationships [Member] Maximum [Member]	May 25, 2014 Costco Wholesale Corporation [Member] Sales Revenue, Goods, Net [Member] Customer Concentration Risk [Member]	May 26, 2013 Costco Wholesale Corporation [Member] Sales Revenue, Goods, Net [Member] Customer Concentration Risk [Member]	May 25, 2014 Costco Wholesale Corporation [Member] Accounts Receivable [Member] Customer Concentration Risk [Member]	May 26, 2013 Costco Wholesale Corporation [Member] Accounts Receivable [Member] Customer Concentration Risk [Member]	May 25, 2014 Wal-mart, Inc. [Member] Sales Revenue, Goods, Net [Member] Customer Concentration Risk [Member]	May 26, 2013 Wal-mart, Inc. [Member] Sales Revenue, Goods, Net [Member] Customer Concentration Risk [Member]	May 25, 2014 Wal-mart, Inc. [Member] Accounts Receivable [Member] Customer Concentration Risk [Member]	May 26, 2013 Wal-mart, Inc. [Member] Accounts Receivable [Member] Customer Concentration Risk [Member]	May 25, 2014 International Customers [Member] Sales Revenue, Goods, Net [Member] Geographic Concentration Risk [Member]	May 26, 2013 International Customers [Member] Sales Revenue, Goods, Net [Member] Geographic Concentration Risk [Member]	May 25, 2014 Depreciable Assets [Member] (Deprecated 2014-01-31)	May 25, 2014 Sales Revenue, Goods, Net [Member] Customer Concentration Risk [Member]	May 26, 2013 Sales Revenue, Goods, Net [Member] Customer Concentration Risk [Member]	May 25, 2014 Apio Cooling, LP [Member] Apio, Inc [Member]	May 25, 2014 Fiscal 2013 [Member]	May 25, 2014 Fiscal 2012 [Member]	May 25, 2014 Minimum [Member]	May 25, 2014 Maximum [Member]
Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) [Line Items]
Number of Proprietary Platforms	2
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	20.10%
Concentration Risk, Percentage																				60.00%	20.00%														21.00%	16.00%	16.00%	15.00%	11.00%	13.00%	12.00%	15.00%	29.00%	30.00%		42.00%	40.00%
Investment Ownership Percentage																																																60.00%
Number of Product Segments																							3
Certificates of Deposit, at Carrying Value	$ 0	$ 701,000
Marketable Securities Contractual Maturity																																																			1 year	2 years
Marketable Securities	0	251,000																													0	1,300,000
Proceeds from Sale and Maturity of Marketable Securities	0	0
Advertising Expense		445,000	406,000																																																	447,000
Revenue from Related Parties						365,000	2,500,000	3,800,000
Prior Period Reclassification Adjustment																																																	2,100,000	3,100,000
Accounts Receivable, Related Parties	304,000	316,000
Related Party Costs	1,600,000	6,700,000	5,600,000
Accounts Payable, Related Parties	134,000	225,000
Property, Plant and Equipment, Useful Life									35 years	29 years	3 years	40 years	3 years	20 years	3 years	7 years		11 years	7 years
Capitalized Computer Software, Additions	913,000	0	0
New Accounting Pronouncement or Change in Accounting Principle Effect of Change on Depreciation Expense																																													876,000
New Accounting Pronouncement or Change in Accounting Principle, Effect of Change on Net Income																	564,000
New Accounting Pronouncement or Change in Accounting Principle, Effect of Change on Basic Earnings Per Share (in Dollars per share)																	$ 0.02
Finite-Lived Intangible Asset, Useful Life																																	12 years	13 years
Goodwill	49,620,000	49,620,000	49,620,000		36,462,000																		13,881,000	13,881,000	13,881,000	13,881,000	35,739,000	35,739,000	35,739,000	22,581,000
Fair Value Assumptions, Expected Term																							5 years				5 years
Effective Income Tax Rate Reconciliation, Percent	36.00%	30.00%	36.00%																				36.00%				36.00%
Percentage of Estimated Fair Value Exceeds Net Book Value																							176.00%				136.00%
Projected Cash Flow																							6,300,000				10,100,000
Cash, Period Increase (Decrease)																							10,200,000				10,500,000
Difference Between Projected Cash Flow and Actual Cash Flow																						3,900,000
Cost-method Investments, Realized Losses				1,000,000
Cost Method Investments	793,000	793,000
Deferred Revenue	1,300,000	1,200,000
Stockholders' Equity Attributable to Noncontrolling Interest	1,692,000	1,721,000
Deferred Tax Assets, Valuation Allowance	$ 881,000	$ 783,000
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares)	333,993	88,022	1,855,167
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price (in Dollars per share)	$ 14.15	$ 12.80	$ 6.72
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in Dollars per share)	$ 4.41	$ 3.57	$ 2.65

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Note 7 - Intangible Assets (Details) - Goodwill (USD $) In Thousands, unless otherwise specified	12 Months Ended			12 Months Ended
	May 27, 2012	May 25, 2014	May 26, 2013	May 27, 2012 Food Products Technology [Member]	May 25, 2014 Food Products Technology [Member]	May 26, 2013 Food Products Technology [Member]	May 25, 2014 HA-based Biomaterials [Member]	May 26, 2013 HA-based Biomaterials [Member]	May 27, 2012 HA-based Biomaterials [Member]	May 29, 2011 HA-based Biomaterials [Member]
Goodwill [Line Items]
Balance	$ 36,462	$ 49,620	$ 49,620	$ 22,581	$ 35,739	$ 35,739	$ 13,881	$ 13,881	$ 13,881	$ 13,881
Goodwill acquired during the period	13,158			13,158
Balance	$ 49,620	$ 49,620	$ 49,620	$ 35,739	$ 35,739	$ 35,739	$ 13,881	$ 13,881	$ 13,881	$ 13,881

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Note 14 - Business Segment Reporting

12 Months Ended

May 25, 2014

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

14.           Business Segment Reporting

The Company manages its business operations through three strategic business units. Based upon the information reported to the chief operating decision maker, who is the Chief Executive Officer, the Company has the following reportable segments: the Food Products Technology segment, the Food Export segment and the Hyaluronan-based Biomaterials segment.

The Food Products Technology segment markets and packs specialty packaged whole and fresh-cut fruit and vegetables, the majority of which incorporate the BreatheWay specialty packaging for the retail grocery, club store and food services industry. In addition, the Food Products Technology segment sells BreatheWay packaging to partners for non-vegetable products. The Food Export segment consists of revenues generated from the purchase and sale of primarily whole commodity fruit and vegetable products to Asia and domestically. The HA-based Biomaterials segment sells products utilizing hyaluronan, a naturally occurring polysaccharide that is widely distributed in the extracellular matrix of connective tissues in both animals and humans, for medical use primarily in the Ophthalmic, Orthopedic and Veterinary markets. Corporate licenses Landec’s patented Intellicoat seed coatings to the farming industry and licenses the Company’s Intelimer polymers for personal care products and other industrial products. The Corporate segment also includes general and administrative expenses, non-Food Products Technology and non HA-based Biomaterials interest income and income tax expenses. Beginning in fiscal year 2013, the Food Products Technology, the Food Export and the Hyaluronan-based Biomaterials segments include charges for corporate services and tax sharing allocated from the Corporate segment. All of the assets of the Company are located within the United States of America.

The Company’s international sales by geography are based on the billing address of the customer and were as follows (in millions):

	May 25, 2014		May 26, 2013		May 27, 2012
Canada	$	46.6	$	27.8	$	20.8
Taiwan	$	30.7	$	31.0	$	22.7
Belgium	$	13.1	$	16.6	$	15.6
Japan	$	9.9	$	10.6	$	11.1
Indonesia	$	9.6	$	21.0	$	23.0
China	$	8.2	$	5.0	$	4.3
All Other Countries	$	19.1	$	20.8	$	17.0

Operations by segment consisted of the following (in thousands): 

	Food Products				Hyaluronan- based
Fiscal Year Ended May 25, 2014	Technology		Food Export		Biomaterials		Corporate			TOTAL
Net sales	$	360,728	$	69,827	$	45,704	$	554		$	476,813
International sales	$	47,224	$	69,710	$	20,312	$	—		$	137,246
Gross profit	$	36,318	$	5,340	$	20,456	$	450		$	62,564
Net income (loss)	$	19,041	$	1,973	$	9,695	$	(11,564	)	$	19,145
Identifiable assets	$	196,257	$	25,391	$	85,858	$	6,117		$	313,623
Depreciation and amortization	$	4,751	$	6	$	2,221	$	136		$	7,114
Capital expenditures	$	10,950	$	—	$	3,877	$	59		$	14,886
Dividend income	$	1,125	$	—	$	—	$	—		$	1,125
Interest income	$	12	$	—	$	242	$	6		$	260
Interest expense	$	1,402	$	—	$	248	$	—		$	1,650
Income tax expense	$	33	$	3	$	17	$	10,530		$	10,583

Fiscal Year Ended May 26, 2013
Net sales	$	320,447	$	78,568	$	41,281	$	1,412		$	441,708
International sales	$	27,532	$	78,442	$	26,792	$	—		$	132,766
Gross profit	$	37,077	$	5,274	$	19,102	$	1,307		$	62,760
Net income (loss)	$	20,526	$	1,660	$	6,835	$	(6,434	)	$	22,587
Identifiable assets	$	180,104	$	21,737	$	80,940	$	8,161		$	290,942
Depreciation and amortization	$	4,761	$	4	$	2,379	$	151		$	7,295
Capital expenditures	$	5,598	$	—	$	3,190	$	89		$	8,877
Dividend income	$	1,125	$	—	$	—	$	—		$	1,125
Interest income	$	42	$	—	$	137	$	—		$	179
Interest expense	$	1,707	$	—	$	301	$	—		$	2,008
Income tax expense	$	3,399	$	339	$	1,400	$	4,314		$	9,452

Fiscal Year Ended May 27, 2012
Net sales	$	207,582	$	71,485	$	34,283	$	4,202		$	317,552
International sales	$	20,528	$	71,054	$	22,904	$	—		$	114,486
Gross profit	$	25,237	$	4,900	$	17,994	$	4,007		$	52,138
Net income (loss)	$	17,527	$	2,269	$	7,672	$	(14,772	)	$	12,696
Identifiable assets	$	169,541	$	18,425	$	81,927	$	7,799		$	277,692
Depreciation and amortization	$	3,191	$	7	$	2,242	$	181		$	5,621
Capital expenditures	$	2,498	$	—	$	2,798	$	75		$	5,371
Dividend income	$	1,125	$	—	$	—	$	—		$	1,125
Interest income	$	30	$	—	$	129	$	21		$	180
Interest expense	$	178	$	—	$	751	$	—		$	929
Income tax expense	$	—	$	—	$	—	$	7,185		$	7,185

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Note 6 - Property and Equipment (Tables)

12 Months Ended

May 25, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

	Years of Useful Life		May 25, 2014			May 26, 2013
Land and building		15-40	$	56,378		$	52,527
Leasehold improvements		3-20		1,079			1,029
Computer, capitalized software, machinery, equipment and auto		3-20		53,715			44,583
Furniture and fixtures		3-7		824			766
Construction in process				6,975			5,838
Gross property and equipment				118,971			104,743
Less accumulated depreciation and amortization				(44,831	)		(38,932	)
Net property and equipment			$	74,140		$	65,811

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Note 6 - Property and Equipment (Details) - Components of Property and Equipment (USD $) In Thousands, unless otherwise specified					12 Months Ended				12 Months Ended				12 Months Ended				12 Months Ended
	May 25, 2014	May 26, 2013	May 25, 2014 Land and Building [Member]	May 26, 2013 Land and Building [Member]	May 25, 2014 Land and Building [Member] Minimum [Member]	May 25, 2014 Land and Building [Member] Maximum [Member]	May 25, 2014 Leasehold Improvements [Member]	May 26, 2013 Leasehold Improvements [Member]	May 25, 2014 Leasehold Improvements [Member] Minimum [Member]	May 25, 2014 Leasehold Improvements [Member] Maximum [Member]	May 25, 2014 Computer, Capitalized Software, Machinery, Equipment and Auto [Member]	May 26, 2013 Computer, Capitalized Software, Machinery, Equipment and Auto [Member]	May 25, 2014 Computer, Capitalized Software, Machinery, Equipment and Auto [Member] Minimum [Member]	May 25, 2014 Computer, Capitalized Software, Machinery, Equipment and Auto [Member] Maximum [Member]	May 25, 2014 Furniture and Fixtures [Member]	May 26, 2013 Furniture and Fixtures [Member]	May 25, 2014 Furniture and Fixtures [Member] Minimum [Member]	May 25, 2014 Furniture and Fixtures [Member] Maximum [Member]	May 25, 2014 Construction in Progress [Member]	May 26, 2013 Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Years of useful life					15 years	40 years			3 years	20 years			3 years	20 years			3 years	7 years
Gross property and equipment	$ 118,971	$ 104,743	$ 56,378	$ 52,527			$ 1,079	$ 1,029			$ 53,715	$ 44,583			$ 824	$ 766			$ 6,975	$ 5,838
Less accumulated depreciation and amortization	(44,831)	(38,932)
Net property and equipment	$ 74,140	$ 65,811

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Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Significant Unobservable Inputs Used in Discounted Cash Flow Models	12 Months Ended
	May 25, 2014	May 26, 2013
Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Significant Unobservable Inputs Used in Discounted Cash Flow Models [Line Items]
Annual consolidated revenue growth rates	4.00%
Annual consolidated expense growth rates	4.00%
Consolidated income tax rates	15.00%	15.00%
Minimum [Member]
Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Significant Unobservable Inputs Used in Discounted Cash Flow Models [Line Items]
Annual consolidated revenue growth rates		3.00%
Annual consolidated expense growth rates		3.00%
Consolidated discount rates	16.00%	18.00%
Maximum [Member]
Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Significant Unobservable Inputs Used in Discounted Cash Flow Models [Line Items]
Annual consolidated revenue growth rates		9.00%
Annual consolidated expense growth rates		8.00%
Consolidated discount rates	22.00%	28.00%

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Consolidated Statements of Changes in Stockholders' Equity (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012
Balance	$ 204,761	$ 180,414
Common Stock [Member]
Balance	26	26	27
Balance (in Shares)	26,402,247	25,644,580	26,405,799
Issuance of common stock, net of taxes paid by Landec on behalf of employees	1
Issuance of common stock, net of taxes paid by Landec on behalf of employees (in Shares)	372,852	597,537	72,572
Issuance of common stock for vested restricted stock units (in Shares)	40,154	160,130	83,453
Common stock repurchased on the open market			(1)
Common stock repurchased on the open market (in Shares)			(917,244)
Balance	27	26	26
Balance (in Shares)	26,815,253	26,402,247	25,644,580
Additional Paid-in Capital [Member]
Balance	126,258	119,894	119,169
Issuance of common stock, net of taxes paid by Landec on behalf of employees	2,297	3,416	61
Common stock repurchased on the open market			(5,005)
Taxes paid by Company for stock swaps and RSUs	(345)	(49)	(260)
Stock-based compensation	1,356	1,695	1,872
Tax benefit from stock-based compensation expense	1,922	1,302	4,057
Balance	131,488	126,258	119,894
Retained Earnings [Member]
Balance	52,409	29,822	17,126
Net and comprehensive income	19,145	22,587	12,696
Balance	71,554	52,409	29,822
Accumulated Other Comprehensive Income (Loss) [Member]
Balance			(267)
Net and comprehensive income			267
Parent [Member]
Balance	178,693	149,742	136,055
Issuance of common stock, net of taxes paid by Landec on behalf of employees	2,298	3,416	61
Common stock repurchased on the open market			(5,006)
Taxes paid by Company for stock swaps and RSUs	(345)	(49)	(260)
Stock-based compensation	1,356	1,695	1,872
Tax benefit from stock-based compensation expense	1,922	1,302	4,057
Net and comprehensive income	19,145	22,587	12,963
Balance	203,069	178,693	149,742
Noncontrolling Interest [Member]
Balance	1,721	1,816	1,671
Non-controlling interest	197	225	403
Payments to non-controlling interest	(226)	(320)	(258)
Balance	$ 1,692	$ 1,721	$ 1,816

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Note 3 - Sale of Landec Ag

12 Months Ended

May 25, 2014

Disclosure Text Block Supplement [Abstract]

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

3.             Sale of Landec Ag

On June 24, 2012, Landec entered into a stock purchase agreement and two licensing agreements (see Note 5) with INCOTEC^® Coating and Seed Technology Companies (“INCOTEC”), a leading provider of seed and coating technology products and services to the seed industry.

In the stock purchase agreement, Landec sold its equity interest in its seed subsidiary, Landec Ag LLC, to INCOTEC for $600,000, which resulted in a gain of $400,000. Under accounting guidance, because the stock purchase agreement was entered into at the same time the license agreements were consummated (a multiple element agreement), a portion of the gain, or $300,000, has been deferred and will be recognized as revenue monthly from the sale date over the seven year life of the Pollinator Plus® license agreement (see Note 5). The remaining $100,000 of the gain was recognized during the first quarter of fiscal year 2013.

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Note 9 - Debt (Details) - Long-term Debt (USD $) In Thousands, unless otherwise specified	May 25, 2014	May 26, 2013
Debt Instrument [Line Items]
Debt balance	$ 34,372	$ 40,305
Less current portion	(6,055)	(5,933)
Long-term portion	28,317	34,372
Real Estate Loan [Member]
Debt Instrument [Line Items]
Debt balance	16,137	17,065
Capital Equipment Loan [Member]
Debt Instrument [Line Items]
Debt balance	9,430	11,080
Term Loan [Member]
Debt Instrument [Line Items]
Debt balance	6,000	9,000
Industrial Revenue Bonds [Member]
Debt Instrument [Line Items]
Debt balance	$ 2,805	$ 3,160

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Note 13 - Employee Savings and Investment Plans (Details) (USD $)	12 Months Ended
	May 25, 2014	May 26, 2013	May 27, 2012
Note 13 - Employee Savings and Investment Plans (Details) [Line Items]
Defined Contribution Plan Percent of Employee Contributions Matched by Employer	67.00%
Defined Contribution Plan, Employer Discretionary Contribution Amount (in Dollars)	$ 1,100,000	$ 939,000	$ 789,000
Maximum Contribution for Employer Match [Member]
Note 13 - Employee Savings and Investment Plans (Details) [Line Items]
Defined Contribution Plans Employee Contributions Eligible for Employer Match	6.00%
Minimum [Member]
Note 13 - Employee Savings and Investment Plans (Details) [Line Items]
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent	1.00%
Maximum [Member]
Note 13 - Employee Savings and Investment Plans (Details) [Line Items]
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent	50.00%

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Note 7 - Intangible Assets (Tables)

12 Months Ended

May 25, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill [Table Text Block]

	Food Products Technology		Corporate		Hyaluronan- based Biomaterials		Total
Balance as of May 29, 2011		22,581		—		13,881		36,462
Goodwill acquired during the period		13,158		—		—		13,158
Balance as of May 27, 2012		35,739		—		13,881		49,620
Balance as of May 26, 2013	$	35,739	$	—	$	13,881	$	49,620
Balance as of May 25, 2014	$	35,739	$	—	$	13,881	$	49,620

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	Trademarks & Trade names		Customer Relationships			Total
Balance as of May 29, 2011		12,428		3,366			15,794
Acquired during the period		36,000		7,500			43,500
Amortization expense		—		(309	)		(309	)
Balance as of May 27, 2012		48,428		10,557			58,985
Amortization expense		—		(951	)		(951	)
Balance as of May 26, 2013	$	48,428	$	9,606		$	58,034
Amortization expense		—		(886	)		(886	)
Balance as of May 25, 2014	$	48,428	$	8,720		$	57,148

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Note 16 - Subsequent Events (Details) (USD $)		0 Months Ended		0 Months Ended			0 Months Ended				0 Months Ended		1 Months Ended
	Jul. 15, 2014 Common Stock [Member] Subsequent Event [Member] Apio, Inc [Member] Windset [Member]	Feb. 15, 2011 Common Stock [Member] Apio, Inc [Member] Windset [Member]	Feb. 15, 2011 Common Stock [Member] Apio, Inc [Member] Windset [Member]	Feb. 15, 2011 Common Stock [Member] Windset [Member]	Jul. 15, 2014 Preferred Stock [Member] Subsequent Event [Member] Apio, Inc [Member] Windset [Member]	Feb. 15, 2011 Preferred Stock [Member] Windset [Member]	Jul. 17, 2014 Subsequent Event [Member] Capital Equipment Loan [Member] London Interbank Offered Rate (LIBOR) [Member] Apio, Inc [Member]	Jul. 16, 2014 Subsequent Event [Member] Capital Equipment Loan [Member] London Interbank Offered Rate (LIBOR) [Member] Apio, Inc [Member]	Jul. 17, 2014 Subsequent Event [Member] Capital Equipment Loan [Member] Apio, Inc [Member]	Jul. 16, 2014 Subsequent Event [Member] Capital Equipment Loan [Member] Apio, Inc [Member]	Jul. 15, 2014 Subsequent Event [Member] Apio, Inc [Member] Windset [Member]	Jul. 15, 2014 Subsequent Event [Member] Apio, Inc [Member] Windset [Member]	Apr. 23, 2012 London Interbank Offered Rate (LIBOR) [Member] Apio, Inc [Member]	Apr. 23, 2012 Apio, Inc [Member]	Feb. 15, 2011 Windset [Member]
Note 16 - Subsequent Events (Details) [Line Items]
Investment in Non-Public Company Shares	68		201		15,857	150,000
Payments to Acquire Investments		$ 201		$ 15,000,000							$ 11,000,000
Investment Ownership Percentage												26.90%			20.10%
Line of Credit Facility, Maximum Borrowing Capacity									$ 40,000,000	$ 25,000,000				$ 25,000,000
Debt Instrument, Basis Spread on Variable Rate							1.75%	2.00%					2.00%

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Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - Diluted Net Income Per Share (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended												12 Months Ended
	May 25, 2014	Feb. 23, 2014	Nov. 24, 2013	Aug. 25, 2013	May 26, 2013	Feb. 24, 2013	Nov. 25, 2012	Aug. 26, 2012	May 27, 2012	Feb. 26, 2012	Nov. 27, 2011	Aug. 28, 2011	May 25, 2014	May 26, 2013	May 27, 2012
Diluted Net Income Per Share [Abstract]
Net income applicable to Common Stockholders (in Dollars)													$ 19,145	$ 22,587	$ 12,696
Denominator:
Weighted average shares for basic net income per share													26,628	25,830	25,849
Stock options and restricted stock units													492	796	277
Weighted average shares for diluted net income per share													27,120	26,626	26,126
Diluted net income per share (in Dollars per share)	$ 0.17	$ 0.24	$ 0.13	$ 0.18	$ 0.17	$ 0.18	$ 0.34	$ 0.17	$ 0.11	$ 0.18	$ 0.13	$ 0.07	$ 0.71	$ 0.85	$ 0.49

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Note 13 - Employee Savings and Investment Plans

12 Months Ended

May 25, 2014

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

13.          Employee Savings and Investment Plans

The Company sponsors a 401(k) plan which is available to substantially all of the Company’s employees. Landec’s Corporate Plan, which is available to all Landec employees (“Landec Plan”), allows participants to contribute from 1% to 50% of their salaries, up to the Internal Revenue Service (IRS) limitation into designated investment funds. The Company matches 67% on the first 6% contributed by an employee. Employee and Company contributions are fully vested at the time of the contributions. The Company retains the right, by action of the Board of Directors, to amend, modify, or terminate the plan. For fiscal years 2014, 2013 and 2012, the Company contributed $1.1 million, $939,000 and $789,000, respectively, to the Landec Plan.