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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2007
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For
the transition period from  to
  Lifecore Biomedical, Inc.
  Minnesota
    
    41-0948334(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer Identification No.)3515 Lyman Boulevard 
Chaska, Minnesota
    
    55318(Address of principal executive 
offices)
    
    (Zip Code)
   (Former name, former address and former fiscal year,
  þ o
  o þ o
  o þ




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
 FORM 10-Q
 TABLE OF CONTENTS
 PagePart I. Financial InformationItem 1. Financial Statements  UnauditedCondensed Consolidated Balance Sheets at
September 30, 2007 and June 30, 2007
    
    
    2Condensed Consolidated Statements of Operations for Three Months
Ended September 30, 2007 and 2006
    
    
    3Condensed Consolidated Statements of Cash Flows for
Three Months Ended September 30, 2007 and 2006
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5-10Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    11-15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    16Item 4. Controls and Procedures
    
    
    16Part II. Other InformationItem 1. Legal Proceedings
    
    
    17-18Item 1A. Risk Factors
    
    
    18Item 6. Exhibits
    
    
    19Signatures
    
    
    20Exhibit Index
    
    
    21302 Certification of Chief Executive Officer302 Certification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer
  1




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
 
 PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
  September 30,
    
    
    June 30,2007
    
    
    2007ASSETSCurrent AssetsCash and cash equivalents
    
    $
    39,554,000
    
    
    $
    39,105,000Accounts receivable, less allowances
    
    
    16,185,000
    
    
    
    15,555,000Inventories
    
    
    13,151,000
    
    
    
    12,145,000Deferred income taxes, net
    
    
    3,035,000
    
    
    
    3,684,000Prepaid expenses
    
    
    1,468,000
    
    
    
    1,448,000Total current assets
    
    
    73,393,000
    
    
    
    71,937,000Property, plant and equipmentLand, building and equipment
    
    
    51,748,000
    
    
    
    51,382,000Less accumulated depreciation
    
    
    (28,863,000
    )
    
    
    (28,277,000
    )22,885,000
    
    
    
    23,105,000Other AssetsIntangibles, net
    
    
    5,420,000
    
    
    
    5,454,000Inventories
    
    
    1,376,000
    
    
    
    1,491,000Other
    
    
    308,000
    
    
    
    284,0007,104,000
    
    
    
    7,229,000$
    103,382,000
    
    
    $
    102,271,000LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesCurrent maturities of long-term obligations
    
    $
    303,000
    
    
    $
    303,000Accounts payable
    
    
    3,389,000
    
    
    
    3,354,000Accrued compensation
    
    
    1,579,000
    
    
    
    1,769,000Accrued expenses
    
    
    1,551,000
    
    
    
    1,897,000Total current liabilities
    
    
    6,822,000
    
    
    
    7,323,000Long-term obligations
    
    
    4,424,000
    
    
    
    4,496,000Long-term tax reserve
    
    
    584,000
    
    
    
    Long-term deferred income taxes, net
    
    
    982,000
    
    
    
    982,000Shareholders equity
    
    
    90,570,000
    
    
    
    89,470,000$
    103,382,000
    
    
    $
    102,271,000
  2




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  Three months ended September 30,2007
    
    
    2006Net sales
    
    $
    15,683,000
    
    
    $
    15,010,000Cost of goods sold
    
    
    5,982,000
    
    
    
    5,572,000Gross profit
    
    
    9,701,000
    
    
    
    9,438,000Operating expensesResearch and development
    
    
    1,240,000
    
    
    
    1,096,000Marketing and sales
    
    
    4,828,000
    
    
    
    4,912,000General and administrative
    
    
    2,076,000
    
    
    
    1,924,0008,144,000
    
    
    
    7,932,000Operating income
    
    
    1,557,000
    
    
    
    1,506,000Other income (expense)Interest income
    
    
    496,000
    
    
    
    331,000Interest expense
    
    
    (68,000
    )
    
    
    (64,000
    )Currency transaction gains
    
    
    54,000
    
    
    
    73,000Other
    
    
    31,000
    
    
    
    6,000513,000
    
    
    
    346,000Income before income tax expense
    
    
    2,070,000
    
    
    
    1,852,000Income tax expense
    
    
    807,000
    
    
    
    713,000Net income
    
    $
    1,263,000
    
    
    $
    1,139,000Net income per shareBasic
    
    $
    0.09
    
    
    $
    0.09Diluted
    
    $
    0.09
    
    
    $
    0.08Weighted average shares outstandingBasic
    
    
    13,472,018
    
    
    
    13,223,448Diluted
    
    
    13,798,491
    
    
    
    13,672,260
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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Three months ended September 30,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    1,263,000
    
    
    $
    1,139,000Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    623,000
    
    
    
    535,000Allowance for doubtful accounts
    
    
    13,000
    
    
    
    48,000Deferred income taxes
    
    
    649,000
    
    
    
    565,000Stock-based compensation
    
    
    202,000
    
    
    
    385,000Accumulated currency translation adjustment
    
    
    13,000
    
    
    
    70,000Changes in operating assets and liabilities:Accounts receivable
    
    
    (511,000
    )
    
    
    451,000Inventories
    
    
    (803,000
    )
    
    
    (604,000
    )Prepaid expenses
    
    
    (4,000
    )
    
    
    (70,000
    )Accounts payable
    
    
    (29,000
    )
    
    
    (377,000
    )Accrued liabilities
    
    
    (556,000
    )
    
    
    (511,000
    )Net cash provided by operating activities
    
    
    860,000
    
    
    
    1,631,000Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (366,000
    )
    
    
    (292,000
    )Change in other assets
    
    
    (18,000
    )
    
    
    8,000Net cash used in investing activities
    
    
    (384,000
    )
    
    
    (284,000
    )Cash flows from financing activities:Payments on long-term obligations
    
    
    (72,000
    )
    
    
    (70,000
    )Proceeds from stock options exercised
    
    
    45,000
    
    
    
    195,000Net cash provided by (used in) financing activities
    
    
    (27,000
    )
    
    
    125,000Net increase in cash and cash equivalents
    
    
    449,000
    
    
    
    1,472,000Cash and cash equivalents at beginning of period
    
    
    39,105,000
    
    
    
    26,638,000Cash and cash equivalents at end of period
    
    $
    39,554,000
    
    
    $
    28,110,000Supplemental disclosure of cash flow information:Cash paid during the period for:Interest
    
    $
    68,000
    
    
    $
    64,000Taxes
    
    
    188,000
    
    
    
    141,000
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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
 
 NOTES TO CONDENSED
CONSOLIDATED STATEMENTS - UNAUDITED
         September 30,
    
    
    June 30,2007
    
    
    2007Raw Materials
    
    $
    5,165,000
    
    
    $
    4,609,000Work-in-process
    
    
    879,000
    
    
    
    361,000Finished goods-current
    
    
    7,107,000
    
    
    
    7,175,00013,151,000
    
    
    
    12,145,000Finished goods-long term
    
    
    1,376,000
    
    
    
    1,491,000$
    14,527,000
    
    
    $
    13,636,000
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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)
       September 30,
    
    
    June 30,
    
    
    Useful2007
    
    
    2007
    
    
    LivesGoodwill
    
    $
    4,783,000
    
    
    $
    4,783,000
    
    
    IndefinitePatents and license fees
    
    
    756,000
    
    
    
    756,000
    
    
    15-18 yearsDistribution
rights and licenses
    
    
    350,000
    
    
    
    350,000
    
    
    8 yearsCustomer list
    
    
    80,000
    
    
    
    80,000
    
    
    5 yearsAccumulated amortization
    
    
    (549,000
    )
    
    
    (515,000
    )$
    5,420,000
    
    
    $
    5,454,000
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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)
    Three months ended September 30,2007
    
    
    2006Cost of goods sold
    
    $
    16,000
    
    
    $
    17,000Research and development
    
    
    24,000
    
    
    
    65,000Marketing and sales
    
    
    53,000
    
    
    
    118,000General and administrative
    
    
    106,000
    
    
    
    113,000Total stock-based compensation expense
    
    $
    199,000
    
    
    $
    313,000
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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)
        Three months ended September 30,2007
    
    
    2006Net salesHyaluronan products
    
    $
    4,849,000
    
    
    $
    4,779,000Dental products
    
    
    10,834,000
    
    
    
    10,231,000$
    15,683,000
    
    
    $
    15,010,000Operating incomeHyaluronan products
    
    $
    943,000
    
    
    $
    996,000Dental products
    
    
    614,000
    
    
    
    510,000$
    1,557,000
    
    
    $
    1,506,000
 8




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)
          9




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)
       10




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Critical Accounting Policies
   Overview
       11




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 Results of Operations
  Hyaluronan
    
    
    DentalDivision
    
    
    Division
    
    
    Consolidated2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    4,849,000
    
    
    $
    4,779,000
    
    
    $
    10,834,000
    
    
    $
    10,231,000
    
    
    $
    15,683,000
    
    
    $
    15,010,000Cost of goods sold
    
    
    2,084,000
    
    
    
    2,122,000
    
    
    
    3,898,000
    
    
    
    3,450,000
    
    
    
    5,982,000
    
    
    
    5,572,000Gross profit
    
    
    2,765,000
    
    
    
    2,657,000
    
    
    
    6,936,000
    
    
    
    6,781,000
    
    
    
    9,701,000
    
    
    
    9,438,000Operating expensesResearch and
development
    
    
    888,000
    
    
    
    716,000
    
    
    
    352,000
    
    
    
    380,000
    
    
    
    1,240,000
    
    
    
    1,096,000Marketing and sales
    
    
    118,000
    
    
    
    196,000
    
    
    
    4,710,000
    
    
    
    4,716,000
    
    
    
    4,828,000
    
    
    
    4,912,000General and
administrative
    
    
    816,000
    
    
    
    749,000
    
    
    
    1,260,000
    
    
    
    1,175,000
    
    
    
    2,076,000
    
    
    
    1,924,0001,822,000
    
    
    
    1,661,000
    
    
    
    6,322,000
    
    
    
    6,271,000
    
    
    
    8,144,000
    
    
    
    7,932,000Operating income
    
    $
    943,000
    
    
    $
    996,000
    
    
    $
    614,000
    
    
    $
    510,000
    
    
    $
    1,557,000
    
    
    $
    1,506,000
 Net Sales
  TM
 Gross profit
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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 Research and development
 Marketing and sales
 General and administrative
 Other income (expense)
 Provision for income taxes.
 Liquidity and Capital Resources
  Cash Provided by Operating Activities.
  Cash Used in Investing Activities
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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 Cash Provided by (Used in) Financing Activities.
     Seasonality
  14




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 Cautionary Statement
  15




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES
     16




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
 
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
       17




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART II  OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS (continued)
  
 ITEM 1A. RISK FACTORS
  The Company may be subject to product liability claims and other legal proceedings which could have
a material adverse effect on the Companys business, financial condition and results of operations.
    18




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART II  OTHER INFORMATION
 
 ITEM 6. EXHIBITS
 3.1
    
    Amended and Restated Articles of Incorporation, as adopted on January 18, 2006
(incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed
on January 24, 2006)3.2
    
    Amended Bylaws, as adopted on April 19, 2007 (incorporated by reference to Exhibit 10.1
to the Companys Current Report on Form 8-K filed on April 25, 2007)4.1
    
    Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to 1987 S-2
Registration Statement [File No. 33-12970])31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification of the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification of the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
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SIGNATURES
  LIFECORE BIOMEDICAL, INC.By:Dated:  November 9, 2007

    /s/ Dennis J. AllinghamDennis J. Allingham
President, Chief Executive Officer, Secretary and Director

(duly authorized officer)Dated:  November 9, 2007
    /s/ David M. NoelDavid M. NoelVice President of Finance and Chief Financial Officer
(principal financial and accounting officer) 20




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Exhibit Index
 3.1
    
    Amended and Restated Articles of Incorporation, as adopted on January 18, 2006
(incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed
on January 24, 2006)3.2
    
    Amended Bylaws, as adopted on April 19, 2007 (incorporated by reference to Exhibit 10.1
to the Companys Current Report on Form 8-K filed on April 25, 2007)4.1
    
    Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to 1987 S-2
Registration Statement [File No. 33-12970])31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification of the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification of the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 21