##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



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Form 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 31, 2002

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from  to

Commission File Number O-4136

Lifecore Biomedical, Inc.

|                                |  |                                  
|------------------------------- |  | ---------------------------------
|Minnesota                       |  | 41-0948334                       
|                                |  |                                  
|(State or other jurisdiction of |  | (IRS Employer Identification No.)
|incorporation or organization)  |  |                                  
|                                |  |                                  
|3515 Lyman Boulevard            |  |                                  
|Chaska, Minnesota               |  | 55318                            
|                                |  |                                  
|(Address of principal executive |  | (Zip Code)                       
|offices)                        |  |                                  

Registrants telephone number, including area code: 952-368-4300

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 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 o

The number of shares outstanding of the registrants Common Stock, $.01 par value, as of January 28, 2003 was
12,884,417 shares.

1



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TABLE OF CONTENTS



|                                                   |                                                                                               |                                                                                                                  |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|Form 10-Q                                         
|Part I. Financial Information                     
|                                                   | Item 1. Financial Statements                                                                 
|                                                   |                                                                                               | Condensed Consolidated Balance Sheets at December 31, 2002 and June 30, 2002                                    
|                                                   |                                                                                               | Condensed Consolidated Statements of Operations for Three Months and Six Months Ended December 31, 2002 and 2001
|                                                   |                                                                                               | Condensed Consolidated Statements of Cash Flows for Six Months Ended December 31, 2002 and 2001                 
|                                                   |                                                                                               | Notes to Condensed Consolidated Financial Statements                                                            
|                                                   | Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
|                                                   | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                                   | Item 4. Controls and Procedures                                                              
|Part II  Other Information                       
|                                                   | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                   | Item 6. Exhibits and Reports on Form 8-K                                                     
|                                                   |                                                                                               | a. Exhibits and Exhibit Index                                                                                   
|                                                   |                                                                                               | b. Reports on Form 8-K                                                                                          
|Signatures                                        
|Certifications                                    
|EX-10.1 Revolving Credit and Security Agreement   
|EX-99.1 Certification Pursuant to 18 USC Sec. 1350
|EX-99.2 Certification Pursuant to 18 USC Sec. 1350



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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES

FORM 10-Q
INDEX

|                              |                                                                                               |                                                                                                                  |       |       |      | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | ----- | ----- | ---- | 
|                              |                                                                                               |                                                                                                                  |       | Page  |     
|Part I. Financial Information |                                                                                               |                                                                                                                  |       |      
|                             
|                              | Item 1. Financial Statements                                                                  |                                                                                                                  |       |       |     
|                             
|                              |                                                                                               | Condensed Consolidated Balance Sheets at
December 31, 2002 and June 30, 2002                                     |       |       | 3    | 
|                             
|                              |                                                                                               | Condensed Consolidated Statements of Operations for Three
Months and Six Months Ended December 31, 2002 and 2001 |       |       | 4    | 
|                             
|                              |                                                                                               | Condensed Consolidated Statements of Cash Flows for
Six Months Ended December 31, 2002 and 2001                  |       |       | 5    | 
|                             
|                              |                                                                                               | Notes to Condensed Consolidated Financial Statements                                                             |       |       | 6-10 | 
|                             
|                              | Item 2. Managements Discussion and Analysis of Results of
Operations and Financial Condition |                                                                                                                  |       | 11-15 |     
|                             
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                                  |       | 16    |     
|                             
|                              | Item 4. Controls and Procedures                                                               |                                                                                                                  |       | 16    |     
|                             
|Part II. Other Information    |                                                                                               |                                                                                                                  |       |      
|                             
|                              | Item 4.
Submission of Matters to a Vote of Security Holders                                   |                                                                                                                  |       | 17    |     
|                             
|                              | Item 6.
Exhibits and Reports on Form 8-K                                                      |                                                                                                                  | 17    |      
|                              |                                                                                               | a. Exhibit Index                                                                                                 |       | 17    |     
|                              |                                                                                               | b. Reports on Form 8-K                                                                                           |       |       | 17   | 
|                             
|Signatures                    |                                                                                               |                                                                                                                  | 18    |      
|                             
|Certifications                |                                                                                               |                                                                                                                  | 19-20 |      

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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

|                                     |                                             |                           |            |              |            |   |            |             |            | 
|------------------------------------ | ------------------------------------------- | ------------------------- | ---------- | ------------ | ---------- | - | ---------- | ----------- | ---------- | 
|                                     |                                             |                           |            | December 31, |            |   | June 30,   |            
|ASSETS                               |                                             | 2002                      |            |              | 2002       |  
|                                     |                                             |                           |            |              |            |  
|Current Assets                       |                                             |                           |            |              |            |   |            |            
|                                     | Cash and cash equivalents                   |                           | $          | 912,000      |            |   | $          | 2,528,000   |           
|                                     | Accounts receivable, less allowances        |                           |            | 8,032,000    |            |   |            | 7,882,000   |           
|                                     | Inventories                                 |                           |            | 13,098,000   |            |   |            | 11,810,000  |           
|                                     | Prepaid expenses                            |                           |            | 914,000      |            |   |            | 997,000     |           
|                                     |                                             |                           |            |              |            |  
|                                     |                                             | Total current assets      |            |              | 22,956,000 |   |            |             | 23,217,000 | 
|Property, plant and equipment        |                                             |                           |            |              |            |   |            |            
|                                     | Land, building and equipment                |                           |            | 44,370,000   |            |   |            | 43,988,000  |           
|                                     | Less accumulated depreciation               |                           |            | (18,515,000  | )          |   |            | (17,194,000 | )         
|                                     |                                             |                           |            |              |            |  
|                                     |                                             |                           | 25,855,000 |              |            |   | 26,794,000 |            
|Other Assets                         |                                             |                           |            |              |            |   |            |            
|                                     | Intangibles                                 |                           |            | 4,726,000    |            |   |            | 4,850,000   |           
|                                     | Security deposits                           |                           |            | 856,000      |            |   |            | 845,000     |           
|                                     | Inventories                                 |                           |            | 2,873,000    |            |   |            | 3,316,000   |           
|                                     | Other                                       |                           |            | 960,000      |            |   |            | 1,074,000   |           
|                                     |                                             |                           |            |              |            |  
|                                     |                                             |                           | 9,415,000  |              |            |   | 10,085,000 |            
|                                     |                                             |                           |            |              |            |  
|                                     |                                             | $                         | 58,226,000 |              |            | $ | 60,096,000 |            
|                                     |                                             |                           |            |              |            |  
|LIABILITIES AND SHAREHOLDERS EQUITY |                                             |                           |            |              |            |   |            |            
|Current Liabilities                  |                                             |                           |            |              |            |   |            |            
|                                     | Current maturities of long-term obligations |                           | $          | 139,000      |            |   | $          | 139,000     |           
|                                     | Line of Credit                              |                           |            | 550,000      |            |   |            |            |           
|                                     | Accounts payable                            |                           |            | 1,837,000    |            |   |            | 3,500,000   |           
|                                     | Accrued compensation                        |                           |            | 1,013,000    |            |   |            | 1,053,000   |           
|                                     | Accrued expenses                            |                           |            | 708,000      |            |   |            | 742,000     |           
|                                     |                                             |                           |            |              |            |  
|                                     |                                             | Total current liabilities |            |              | 4,247,000  |   |            |             | 5,434,000  | 
|Long-term obligations                |                                             |                           | 6,058,000  |              |            |   | 6,114,000  |            
|Shareholders equity                 |                                             |                           | 47,921,000 |              |            |   | 48,548,000 |            
|                                     |                                             |                           |            |              |            |  
|                                     |                                             | $                         | 58,226,000 |              |            | $ | 60,096,000 |            
|                                     |                                             |                           |            |              |            |  

See accompanying notes to condensed consolidated financial statements.

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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (continued)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

|                                    |  |                            |            |                                 |            |   |                               |   |            |      |            |   |            |   |            |   |            |  
|----------------------------------- |  | -------------------------- | ---------- | ------------------------------- | ---------- | - | ----------------------------- | - | ---------- | ---- | ---------- | - | ---------- | - | ---------- | - | ---------- | -
|                                    |  |                            |            | Three months ended December 31, |            |   | Six months ended December 31, |  
|                                    |  |                            |            |                                 |            |   |                               |  
|                                    |  |                            |            | 2002                            |            |   | 2001                          |   |            | 2002 |            |   | 2001       |  
|                                    |  |                            |            |                                 |            |   |                               |   |            |      |            |   |            |  
|Net sales                           |  | $                          | 10,262,000 |                                 |            | $ | 8,584,000                     |   |            | $    | 19,234,000 |   |            | $ | 16,818,000 |  
|Cost of goods sold                  |  |                            | 4,165,000  |                                 |            |   | 5,323,000                     |   |            |      | 9,074,000  |   |            |   | 10,258,000 |  
|                                    |  |                            |            |                                 |            |   |                               |   |            |      |            |  
|Gross profit                        |  |                            | 6,097,000  |                                 |            |   | 3,261,000                     |   |            |      | 10,160,000 |   |            |   | 6,560,000  |  
|                                   
|Operating expenses                  |  |                            |            |                                 |            |   |                               |   |            |      |            |   |            |   |            |  
|                                    |  | Research and development   |            |                                 | 1,011,000  |   |                               |   | 1,127,000  |      |            |   | 1,968,000  |   |            |   | 2,763,000  |  
|                                    |  | Marketing and sales        |            |                                 | 3,057,000  |   |                               |   | 2,691,000  |      |            |   | 5,905,000  |   |            |   | 5,135,000  |  
|                                    |  | General and administrative |            |                                 | 1,545,000  |   |                               |   | 1,303,000  |      |            |   | 2,704,000  |   |            |   | 2,349,000  |  
|                                    |  |                            |            |                                 |            |   |                               |   |            |      |            |  
|                                    |  |                            | 5,613,000  |                                 |            |   | 5,121,000                     |   |            |      | 10,577,000 |   |            |   | 10,247,000 |  
|                                    |  |                            |            |                                 |            |   |                               |   |            |      |            |  
|Operating income (loss)             |  |                            | 484,000    |                                 |            |   | (1,860,000                    | ) |            |      | (417,000   | ) |            |   | (3,687,000 | )
|                                   
|Other income (expense)              |  |                            |            |                                 |            |   |                               |   |            |      |            |   |            |   |            |  
|                                    |  | Interest income            |            |                                 | 6,000      |   |                               |   | 10,000     |      |            |   | 35,000     |   |            |   | 78,000     |  
|                                    |  | Interest expense           |            |                                 | (262,000   | ) |                               |   | (223,000   | )    |            |   | (428,000   | ) |            |   | (393,000   | )
|                                    |  | Other                      |            |                                 | 84,000     |   |                               |   | (7,000     | )    |            |   | 76,000     |   |            |   | (10,000    | )
|                                    |  |                            |            |                                 |            |   |                               |   |            |      |            |  
|                                    |  |                            | (172,000   | )                               |            |   | (220,000                      | ) |            |      | (317,000   | ) |            |   | (325,000   | )
|                                    |  |                            |            |                                 |            |   |                               |   |            |      |            |  
|Net income (loss)                   |  | $                          | 312,000    |                                 |            | $ | (2,080,000                    | ) |            | $    | (734,000   | ) |            | $ | (4,012,000 | )
|                                    |  |                            |            |                                 |            |   |                               |   |            |      |            |  
|Net income (loss) per share         |  |                            |            |                                 |            |   |                               |   |            |      |            |   |            |   |            |  
|                                    |  | Basic                      |            | $                               | 0.02       |   |                               | $ | (0.16      | )    |            | $ | (0.06      | ) |            | $ | (0.31      | )
|                                    |  |                            |            |                                 |            |   |                               |   |            |      |            |  
|                                    |  | Diluted                    |            | $                               | 0.02       |   |                               | $ | (0.16      | )    |            | $ | (0.06      | ) |            | $ | (0.31      | )
|                                    |  |                            |            |                                 |            |   |                               |   |            |      |            |  
|Weighted average shares outstanding |  |                            |            |                                 |            |   |                               |   |            |      |            |   |            |   |            |  
|                                    |  | Basic                      |            |                                 | 12,882,313 |   |                               |   | 12,785,099 |      |            |   | 12,878,471 |   |            |   | 12,766,358 |  
|                                    |  |                            |            |                                 |            |   |                               |   |            |      |            |  
|                                    |  | Diluted                    |            |                                 | 12,949,904 |   |                               |   | 12,785,099 |      |            |   | 12,878,471 |   |            |   | 12,766,358 |  
|                                    |  |                            |            |                                 |            |   |                               |   |            |      |            |  

See accompanying notes to condensed consolidated financial statements.

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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (continued)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

|                                                                            |                                             |          |                     |           |                               |            |            |           |         |           |  
|--------------------------------------------------------------------------- | ------------------------------------------- | -------- | ------------------- | --------- | ----------------------------- | ---------- | ---------- | --------- | ------- | --------- | -
|                                                                            |                                             |          |                     |           | Six months ended December 31, |           
|                                                                            |                                             |          |                     |           |                               |           
|                                                                            |                                             |          |                     |           | 2002                          |            |            | 2001      |        
|                                                                            |                                             |          |                     |           |                               |            |            |           |        
|Cash flows from operating activities:                                       |                                             |          |                     |           |                               |            |            |          
|Net loss                                                                    |                                             | $        | (734,000            | )         |                               | $          | (4,012,000 | )        
|Adjustments to reconcile net loss to net cash used in
operating activities: |                                             |          |                     |           |                               |            |            |          
|                                                                            | Depreciation and amortization               |          |                     | 1,490,000 |                               |            |            | 1,505,000 |        
|                                                                            | Allowance for doubtful accounts             |          |                     | 40,000    |                               |            |            | 128,000   |        
|                                                                            | Changes in operating assets and liabilities |          |                     |           |                               |            |            |           |        
|                                                                            |                                             |          | Accounts receivable |           |                               | (191,000   | )          |           |         | 223,000   |  
|                                                                            |                                             |          | Inventories         |           |                               | (844,000   | )          |           |         | 1,310,000 |  
|                                                                            |                                             |          | Prepaid expenses    |           |                               | 83,000     |            |           |         | (191,000  | )
|                                                                            |                                             |          | Accounts payable    |           |                               | (1,663,000 | )          |           |         | (422,000  | )
|                                                                            |                                             |          | Accrued liabilities |           |                               | (73,000    | )          |           |         | 403,000   |  
|                                                                            |                                             |          |                     |           |                               |           
|Net
cash used in operating activities                                       |                                             |          | (1,892,000          | )         |                               |            | (1,056,000 | )        
|                                                                           
|Cash flows from investing activities:                                       |                                             |          |                     |           |                               |            |            |          
|                                                                            | Purchases of property, plant and equipment  |          |                     | (382,000  | )                             |            |            | (346,000  | )      
|                                                                            | Purchases of intangibles                    |          |                     | (40,000   | )                             |            |            | (60,000   | )      
|                                                                            | Increase in security deposits               |          |                     | (11,000   | )                             |            |            |          |        
|                                                                            | Decrease (increase) in other assets         |          |                     | 108,000   |                               |            |            | (152,000  | )      
|                                                                            |                                             |          |                     |           |                               |           
|Net cash used in investing activities                                       |                                             |          | (325,000            | )         |                               |            | (558,000   | )        
|                                                                           
|Cash flows from financing activities:                                       |                                             |          |                     |           |                               |            |            |          
|                                                                            | Advance on line of credit                   |          |                     | 550,000   |                               |            |            |          |        
|                                                                            | Payments on long-term obligations           |          |                     | (56,000   | )                             |            |            | (65,000   | )      
|                                                                            | Proceeds from stock issuance                |          |                     | 107,000   |                               |            |            | 264,000   |        
|                                                                            |                                             |          |                     |           |                               |           
|Net cash provided by financing activities                                   |                                             |          | 601,000             |           |                               |            | 199,000    |          
|                                                                            |                                             |          |                     |           |                               |           
|Net decrease in cash and cash equivalents                                   |                                             |          | (1,616,000          | )         |                               |            | (1,415,000 | )        
|Cash and cash equivalents at beginning of period                            |                                             |          | 2,528,000           |           |                               |            | 2,310,000  |          
|                                                                            |                                             |          |                     |           |                               |           
|Cash and cash equivalents at end of period                                  |                                             | $        | 912,000             |           |                               | $          | 895,000    |          
|                                                                            |                                             |          |                     |           |                               |           
|Supplemental disclosure of cash flow information:                           |                                             |          |                     |           |                               |            |            |          
|                                                                            | Cash paid during the period for:            |          |                     |           |                               |            |            |           |        
|                                                                            |                                             | Interest |                     | $         | 381,000                       |            |            | $         | 336,000 |          

See accompanying notes to condensed consolidated financial statements.

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

December 31, 2002

NOTE A  FINANCIAL INFORMATION

Lifecore Biomedical, Inc. (the Company) develops, manufactures and markets biomaterials and medical devices for
use in various surgical markets through two divisions, the Hyaluronan Division and the Oral Restorative Division.
The Companys manufacturing facility is located in Chaska, Minnesota. The Hyaluronan Division conducts its
business through OEM and contract manufacturing alliances in the
gynecologic, ophthalmic, orthopedic and veterinary surgery fields. The Oral Restorative Division conducts its business through direct sales
and marketing in the United States, Germany, Italy and Sweden and through 22 distributors in 35 foreign
countries.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with
Regulation S-X pursuant to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of America have been condensed or omitted pursuant
to such rules and regulations, although management believes that the disclosures are adequate to make the
information presented not misleading.

In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly the financial position as of
December 31, 2002, and the results of operations for the three and six month periods ended December 31, 2002 and
2001 and cash flows for the six month periods ended December 31, 2002 and 2001. The results of operations for
the six months ended December 31, 2002 are not necessarily indicative of the results for the full year or of the
results for any future periods. The unaudited condensed consolidated balance sheet as of June 30, 2002 has been
derived from audited financial statements as of that date.

In preparation of the Companys consolidated financial statements, management is required to make estimates and
assumptions that affect reported amounts of assets and liabilities and related revenues and expenses during the
reporting periods. Actual results could differ from the estimates used by management.

NOTE B  INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) or market. Inventories not expected to
be consumed within one year are classified as a long-term asset. Finished good inventories include hyaluronan,
packaged aseptic, and oral restorative products. Inventories consist of the following:

|                 |  |              |            |  |          |   |            | 
|---------------- |  | ------------ | ---------- |  | -------- | - | ---------- | 
|                 |  | December 31, |            |  | June 30, |  
|                 |  | 2002         |            |  | 2002     |  
|                 |  |              |            |  |          |  
|                 |  | (Unaudited)  |           
|Raw materials    |  | $            | 3,162,000  |  |          | $ | 2,902,000  | 
|Work in progress |  |              | 391,000    |  |          |   | 272,000    | 
|Finished goods   |  |              | 12,418,000 |  |          |   | 11,952,000 | 
|                 |  |              |            |  |          |  
|                 |  | $            | 15,971,000 |  |          | $ | 15,126,000 | 
|                 |  |              |            |  |          |  

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

December 31, 2002

NOTE C  INTANGIBLE ASSETS

Effective July 1, 2001, the Company adopted Financial Accounting Standards Board (FASB) Statement of Financial
Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets. Under the provisions of SFAS No. 142
the Company ceased amortization of goodwill and technology and regulatory rights effective July 1, 2001, while
the customer list continues to be amortized on the straight-line method over 5 years. On an ongoing basis the
Company reviews the valuation of intangibles to determine possible impairment by comparing the carrying value to
projected undiscounted future cash flows of the related assets. As a result, there was no impairment recorded
for the three month period ended December 31, 2002 and a $40,000 impairment was recorded for the six month period
ended December 31, 2002.

|                                        |  |   |            |   |  |              |            |   |          |   |           | 
|--------------------------------------- |  | - | ---------- | - |  | ------------ | ---------- | - | -------- | - | --------- | 
|Intangibles consisted of the following: |  |   |            |   | 
|                                        |  |   |            |   |  |              |           
|                                        |  |   |            |   |  |              |            |   |          |   |           | 
|                                        |  |   |            |   |  | December 31, |            |   | June 30, |  
|                                        |  |   |            |   |  | 2002         |            |   | 2002     |  
|                                        |  |   |            |   |  |              |            |   |          |  
|Goodwill                                |  | $ | 8,245,000  |   |  | $            | 8,245,000  |  
|Customer list                           |  |   | 725,000    |   |  |              | 725,000    |  
|Patents                                 |  |   | 387,000    |   |  |              | 387,000    |  
|Accumulated amortization                |  |   | (4,631,000 | ) |  |              | (4,507,000 | )
|                                        |  |   |            |   |  |              |            |   |          |  
|                                        |  |   |            |   |  | $            | 4,726,000  |   |          | $ | 4,850,000 | 
|                                        |  |   |            |   |  |              |            |   |          |  

NOTE D  AGREEMENTS

Lifecore and ETHICON have entered into a Conveyance, License, Development and Supply Agreement (the ETHICON
Agreement) whereby ETHICON transferred to Lifecore its ownership in certain technology related to research and
development previously conducted on the Companys sodium hyaluronan material. The technology transferred to
Lifecore includes written technical documents related to ETHICONs research and development of a product to
inhibit the formation of postsurgical adhesions. These documents include product specifications, methods and
techniques, technology, know-how and certain patents. Lifecore assumed responsibility for continuing the
anti-adhesion development project including conducting a human
gynecology clinical trial on GYNECARE INTERGEL Adhesion Prevention
Solution (INTERGEL Solution), a
second-generation hyaluronan-based product. Lifecore has granted ETHICON exclusive worldwide marketing rights
through 2008 to the products developed by Lifecore within defined fields of use.

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

December 31, 2002

NOTE E  LINE OF CREDIT

The Company has established a new $5,000,000 credit facility with a bank as set forth in Exhibit 10.1 The
agreement has a maturity date of December 31, 2005. This agreement replaces a credit facility with a different
bank which expired on December 31, 2002. Both agreements allow for advances against eligible accounts receivable
and inventories, subject to a borrowing base certificate. Interest is accrued at the prime rate at December 31,
2002, which was 4.75% and at the prime rate plus 1%, or 5.75%, under the previous agreement. A balance of
$550,000 was outstanding under the line of credit at December 31, 2002 and there was no balance outstanding at
June 30, 2002. The terms of the new agreement require the Company to comply with various financial covenants
including minimum tangible net worth, liabilities to tangible net worth ratio and profitability. At December 31,
2002 and June 30, 2002, the Company was in compliance with all covenants.

NOTE F  NET LOSS PER SHARE

The Companys basic net income (loss) per share amounts have been computed by dividing net income (loss) by the
weighted average number of outstanding common shares. The Companys diluted net income (loss) per share is
computed by dividing net income (loss) by the weighted average number of outstanding common shares and common
share equivalents relating to stock options, when dilutive. For the three months ended December 31, 2002 the
Company reported net income and as a result, 67,591 common share equivalents were included in the computation of
diluted net income per share. For the three months ended December 31, 2001 and six months ended December 31,
2002 and 2001 the Company reported a net loss and as such, no common share equivalents were included in the
computation of diluted net loss per share. However, if the Company would have reported net income in the three
months ended December 31, 2001 and the six months ended December 31, 2002 and 2001, 470,893, 93,956, and 247,742
common share equivalents, respectfully, would have been included in the computation of diluted net income per
share.

Options to purchase 2,499,970 and 1,949,418 shares of common stock with a weighted average exercise price of
$12.71 and $14.11 for the three-month and six-month periods ended December 31, 2002 and options to purchase
901,700 and 613,450 shares of common stock with a weighted average exercise price of $14.28 and $16.21 for the
three-month and six-month periods ended December 31, 2001, respectively, were outstanding but were not included
in the calculation of diluted net loss per share because the options exercise prices were greater than the
average market price of the Companys common stock during those periods. Although these options were
antidilutive for the periods presented, they may be dilutive in future period calculations.

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 (cont.)

December 31, 2002

NOTE G  SEGMENT INFORMATION

The Company operates two business segments. The Hyaluronan Division develops, manufactures, and markets products
containing hyaluronan. The Oral Restorative Division develops, manufactures and/or markets various oral
restorative products to the area of implant dentistry. Currently, products containing hyaluronan are sold
primarily to customers pursuant to ongoing supply agreements. The Companys Oral Restorative Division markets
products directly to clinicians and dental laboratories in the United States, Germany, Italy and Sweden and
primarily through distributorship arrangements in other foreign locations. The operations of the Companys
subsidiaries, Lifecore Biomedical GmbH, Lifecore Biomedical SpA, and Lifecore Biomedical AB have not been
material to the consolidated financial statements.

Segment assets and the basis of segmentation are consistent with that reported at June 30, 2002. Segment
information for sales and income (loss) from operations are as follows:

|                              |                           |   |                                 |           |   |                               |            |            |      |   |            |            |   |   |            |            |  
|----------------------------- | ------------------------- | - | ------------------------------- | --------- | - | ----------------------------- | ---------- | ---------- | ---- | - | ---------- | ---------- | - | - | ---------- | ---------- | -
|                              |                           |   | Three months ended December 31, |           |   | Six months ended December 31, |           
|                              |                           |   |                                 |           |   |                               |           
|                              |                           |   | 2002                            |           |   | 2001                          |            |            | 2002 |   |            | 2001       |  
|                              |                           |   |                                 |           |   |                               |            |            |      |   |            |            |  
|Net sales                     |                           |   |                                 |           |   |                               |            |            |      |   |            |            |   |   |            |           
|                              | Hyaluronan products       |   | $                               | 3,411,000 |   |                               | $          | 2,525,000  |      |   | $          | 7,109,000  |   |   | $          | 5,553,000  |  
|                              | Oral restorative products |   |                                 | 6,851,000 |   |                               |            | 6,059,000  |      |   |            | 12,125,000 |   |   |            | 11,265,000 |  
|                              |                           |   |                                 |           |   |                               |            |            |      |   |            |           
|                              |                           | $ | 10,262,000                      |           |   | $                             | 8,584,000  |            |      | $ | 19,234,000 |            |   | $ | 16,818,000 |           
|                              |                           |   |                                 |           |   |                               |            |            |      |   |            |           
|Income (loss) from operations |                           |   |                                 |           |   |                               |            |            |      |   |            |            |   |   |            |           
|                              | Hyaluronan products       |   | $                               | 572,000   |   |                               | $          | (1,768,000 | )    |   | $          | 137,000    |   |   | $          | (3,332,000 | )
|                              | Oral restorative products |   |                                 | (88,000   | ) |                               |            | (92,000    | )    |   |            | (554,000   | ) |   |            | (355,000   | )
|                              |                           |   |                                 |           |   |                               |            |            |      |   |            |           
|                              |                           | $ | 484,000                         |           |   | $                             | (1,860,000 | )          |      | $ | (417,000   | )          |   | $ | (3,687,000 | )         
|                              |                           |   |                                 |           |   |                               |            |            |      |   |            |           

NOTE H  NEW ACCOUNTING PRONOUNCEMENTS

In June 2002, FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which
addresses accounting and processing for costs associated with exit or disposal activities. SFAS No. 146 requires
the recognition of a liability for a cost associated with an exit or disposal activity when the liability is
incurred versus the date the Company commits to an exit plan. In addition, SFAS No. 146 states the liability
should be initially measured at fair value. The requirements of SFAS No. 146 are effective for exit or disposal
activities that are initiated after December 31, 2002. This pronouncement is not expected to have a material
impact on our consolidated financial position or results of operation.

In December 2002, FASB issued SFAS No. 148, Accounting for Stock-Based Compensation    Transition and
Disclosure. SFAS No. 148 amends the disclosure and certain transition provisions of SFAS No. 123, Accounting
for Stock-Based Compensation. Its disclosure provisions, which apply to all entities with employee stock-based
compensation, are effective for fiscal years ending after December 15, 2002. New interim period disclosures are
required in financial statements for interim periods beginning after December 15, 2002. Other than the
additional disclosure requirements, this pronouncement is not expected to have a material impact on our
consolidated financial position or results of operation.

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 (cont.)

December 31, 2002

NOTE H  NEW ACCOUNTING PRONOUNCEMENTS (CONT.)

In November 2002, FASB issued FASB Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 addresses the
disclosure requirements of a guarantor in its interim and annual financial statements about its obligations under
certain guarantees that it has issued. FIN 45 also requires a guarantor to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure
requirements of FIN 45 are effective for the Company for its quarter ended December 31, 2002. The liability
recognition requirements will be applicable prospectively to all guarantees issued or modified after December 31,
2002. Other than the additional disclosure requirements, this pronouncement is not expected to have a material
impact on our consolidated financial position or results of operation.

In January 2003, FASB issued FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities.
FIN 46 is an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, and
addresses consolidation by business enterprises of variable interest entities. FIN 46 applies immediately to
variable interest entities created or obtained after January 31, 2003 and it applies in the first fiscal year or
interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a
variable interest that it acquired before February 1, 2003. This pronouncement is not expected to have a
material impact on our consolidated financial position or results of operation.

10



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##### Table of Contents






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

Critical Accounting Policies:

The discussion and analysis of our financial condition and results of operations are based upon our consolidated
financial statements, which have been prepared in accordance with accounting principles generally accepted in the
United States of America (US GAAP). The preparation of these financial statements requires management to make
estimates and assumptions in certain circumstances that affect the reported amount of assets and liabilities,
revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial
statements. Management bases its estimates and judgments on historical experience, observance of trends in the
industry, information provided by customers and other outside sources and on various other factors that are
believed to be reasonable under the circumstances. Actual results may differ from these estimates under
different assumptions or conditions.

Revenue Recognition:

The Companys revenues are recognized when products are shipped to or otherwise accepted by unaffiliated
customers. The Securities and Exchange Commissions Staff Accounting Bulletin (SAB) No. 101, Revenue
Recognition provides guidance on the application of US GAAP to selected revenue recognition issues. The Company
has concluded that its revenue recognition policy is appropriate and in accordance with US GAAP and SAB No. 101.

Allowance for Uncollectible Accounts Receivable:

Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. The
Company extends credit to customers in the normal course of business, but generally does not require collateral
or any other security to support amounts due. Management performs on-going credit evaluations of its customers
and bases the estimated allowance on these evaluations.

Inventories:

Inventories are stated at the lower of cost (first-in, first-out method) or market and have been reduced by an
allowance for obsolete, excess or unmarketable inventory. The estimated allowance is based on managements review
of inventories on-hand compared to estimated future usage and sales.

Goodwill, Intangible and Other Long-Lived Assets:

Intangible and certain other long-lived assets with a definite life are amortized over their useful lives. Useful
lives are based on managements estimates of the period that the assets will generate revenue.

In July 2001, the Financial Accounting Standards Board issued SFAS 142 which deals with, among other things,
amortization of goodwill. The Company adopted this new standard effective July 1, 2001 and ceased amortization of
goodwill at that date and reviews goodwill for impairment on a regular basis, at least annually.

Management has reviewed goodwill and other intangibles for impairment and has concluded that such assets are
appropriately valued at the financial statement dates.

Recently Issued Accounting Pronouncements:

The notes to the consolidated financial statements included in this Form 10-Q include a discussion regarding
recently issued accounting pronouncements. The effects on the Companys financial statements from these
pronouncements are not expected to be material.

11



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##### Table of Contents



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

Results of Operations

Three Months Ended December 31, 2002 Compared to Three Months Ended December 31, 2001:

|                        |                            |   |            |         |  |                  |            |         |              |   |           |           |  |   |           |           |  |      |            |           |  |   |            |           | 
|----------------------- | -------------------------- | - | ---------- | ------- |  | ---------------- | ---------- | ------- | ------------ | - | --------- | --------- |  | - | --------- | --------- |  | ---- | ---------- | --------- |  | - | ---------- | --------- | 
|                        |                            |   | Hyaluronan |         |  | Oral Restorative |            |         |              |   |           |           | 
|                        |                            |   | Division   |         |  | Division         |            |         | Consolidated |  
|                        |                            |   |            |         |  |                  |            |         |              |  
|                        |                            |   | 2002       |         |  | 2001             |            |         | 2002         |   |           | 2001      |  |   | 2002      |           |  | 2001 |           
|                        |                            |   |            |         |  |                  |            |         |              |   |           |           |  |   |           |           |  |      |           
|Net sales               |                            | $ | 3,411,000  |         |  | $                | 2,525,000  |         |              | $ | 6,851,000 |           |  | $ | 6,059,000 |           |  | $    | 10,262,000 |           |  | $ | 8,584,000  |          
|Cost of goods sold      |                            |   | 1,289,000  |         |  |                  | 2,926,000  |         |              |   | 2,876,000 |           |  |   | 2,397,000 |           |  |      | 4,165,000  |           |  |   | 5,323,000  |          
|                        |                            |   |            |         |  |                  |            |         |              |   |           |           |  |   |           |           |  |     
|Gross profit (loss)     |                            |   | 2,122,000  |         |  |                  | (401,000   | )       |              |   | 3,975,000 |           |  |   | 3,662,000 |           |  |      | 6,097,000  |           |  |   | 3,261,000  |          
|                       
|Operating expenses      |                            |   |            |         |  |                  |            |         |              |   |           |           |  |   |           |           |  |      |            |           |  |   |            |          
|                        | Research and development   |   |            | 794,000 |  |                  |            | 884,000 |              |   |           | 217,000   |  |   |           | 243,000   |  |      |            | 1,011,000 |  |   |            | 1,127,000 | 
|                        | Marketing and sales        |   |            | 179,000 |  |                  |            | 67,000  |              |   |           | 2,878,000 |  |   |           | 2,624,000 |  |      |            | 3,057,000 |  |   |            | 2,691,000 | 
|                        | General and administrative |   |            | 577,000 |  |                  |            | 416,000 |              |   |           | 968,000   |  |   |           | 887,000   |  |      |            | 1,545,000 |  |   |            | 1,303,000 | 
|                        |                            |   |            |         |  |                  |            |         |              |   |           |           |  |   |           |           |  |     
|                        |                            |   | 1,550,000  |         |  |                  | 1,367,000  |         |              |   | 4,063,000 |           |  |   | 3,754,000 |           |  |      | 5,613,000  |           |  |   | 5,121,000  |          
|                        |                            |   |            |         |  |                  |            |         |              |   |           |           |  |   |           |           |  |     
|Operating income (loss) |                            | $ | 572,000    |         |  | $                | (1,768,000 | )       |              | $ | (88,000   | )         |  | $ | (92,000   | )         |  | $    | 484,000    |           |  | $ | (1,860,000 | )        
|                        |                            |   |            |         |  |                  |            |         |              |   |           |           |  |   |           |           |  |     

Net sales for the quarter ended December 31, 2002 increased $1,678,000 or 20% as compared to the same quarter of
last fiscal year. Hyaluronan product sales for the current quarter increased $886,000 or 35% as compared to the
same quarter of last fiscal year. The sales increase was due to higher sales of ophthalmic and orthopedic
hyaluronan shipments. Oral restorative product sales for the current quarter increased $792,000 or 13% compared
to the same quarter of last fiscal year. International sales of oral restorative products increased 23% and
domestic sales increased 6% as compared to the same quarter of last fiscal year.

Consolidated gross margin increased to 59% for the current quarter from 38% for the same quarter of last fiscal
year. The gross margin for the Hyaluronan Division increased to 62% from a gross margin of -16% due to
absorption of excess capacity costs associated with increased hyaluronan production and product mix. The gross
margin for the Oral Restorative Division decreased to 58% for the current quarter from 60% for the same quarter
of last fiscal year. The gross margin decrease is primarily attributed to sales mix.

Research and development expenses decreased $116,000 or 10% in the current quarter as compared to the same
quarter of last fiscal year. The decrease is due to the decline in consulting and professional fees related to
the regulatory review process of INTERGEL Solution. The Company received FDA
approval to market this product in the United States in November 2001.

Marketing and sales expenses increased $366,000 or 14% in the current quarter as compared to the same quarter of
last fiscal year due to an increase in marketing expenses and costs associated with international expansion.

General and administrative expenses increased $242,000 or 19% for the current quarter as compared to the same
quarter of last fiscal year. The increase resulted from higher personnel related expenses primarily associated
with international expansion.

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##### Table of Contents



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

Net other expense decreased $48,000 or 22% for the current quarter as compared to the same quarter of last fiscal
year. Interest expense increased $39,000 due to line of credit fees for both the expiring and new line of credit
arrangements. Other income increased $91,000 due to currency gains realized on Euro denominated intercompany
transactions.

Six Months Ended December 31, 2002 Compared to Six Months Ended December 31, 2001:

|                        |                            |   |            |           |  |                  |            |           |              |   |            |           |  |   |            |           |  |      |            |           |  |   |            |           | 
|----------------------- | -------------------------- | - | ---------- | --------- |  | ---------------- | ---------- | --------- | ------------ | - | ---------- | --------- |  | - | ---------- | --------- |  | ---- | ---------- | --------- |  | - | ---------- | --------- | 
|                        |                            |   | Hyaluronan |           |  | Oral Restorative |            |           |              |   |            |           |  |   |           
|                        |                            |   | Division   |           |  | Division         |            |           | Consolidated |  
|                        |                            |   |            |           |  |                  |            |           |              |  
|                        |                            |   | 2002       |           |  | 2001             |            |           | 2002         |   |            | 2001      |  |   | 2002       |           |  | 2001 |           
|                        |                            |   |            |           |  |                  |            |           |              |   |            |           |  |   |            |           |  |      |           
|Net sales               |                            | $ | 7,109,000  |           |  | $                | 5,553,000  |           |              | $ | 12,125,000 |           |  | $ | 11,265,000 |           |  | $    | 19,234,000 |           |  | $ | 16,818,000 |          
|Cost of goods sold      |                            |   | 4,088,000  |           |  |                  | 5,623,000  |           |              |   | 4,986,000  |           |  |   | 4,635,000  |           |  |      | 9,074,000  |           |  |   | 10,258,000 |          
|                        |                            |   |            |           |  |                  |            |           |              |   |            |           |  |   |            |           |  |     
|Gross profit (loss)     |                            |   | 3,021,000  |           |  |                  | (70,000    | )         |              |   | 7,139,000  |           |  |   | 6,630,000  |           |  |      | 10,160,000 |           |  |   | 6,560,000  |          
|                       
|Operating expenses      |                            |   |            |           |  |                  |            |           |              |   |            |           |  |   |            |           |  |      |            |           |  |   |            |          
|                        | Research and development   |   |            | 1,503,000 |  |                  |            | 2,317,000 |              |   |            | 465,000   |  |   |            | 446,000   |  |      |            | 1,968,000 |  |   |            | 2,763,000 | 
|                        | Marketing and sales        |   |            | 353,000   |  |                  |            | 129,000   |              |   |            | 5,552,000 |  |   |            | 5,006,000 |  |      |            | 5,905,000 |  |   |            | 5,135,000 | 
|                        | General and administrative |   |            | 1,028,000 |  |                  |            | 816,000   |              |   |            | 1,676,000 |  |   |            | 1,533,000 |  |      |            | 2,704,000 |  |   |            | 2,349,000 | 
|                        |                            |   |            |           |  |                  |            |           |              |   |            |           |  |   |            |           |  |     
|                        |                            |   | 2,884,000  |           |  |                  | 3,262,000  |           |              |   | 7,693,000  |           |  |   | 6,985,000  |           |  |      | 10,577,000 |           |  |   | 10,247,000 |          
|                        |                            |   |            |           |  |                  |            |           |              |   |            |           |  |   |            |           |  |     
|Operating income (loss) |                            | $ | 137,000    |           |  | $                | (3,332,000 | )         |              | $ | (554,000   | )         |  | $ | (355,000   | )         |  | $    | (417,000   | )         |  | $ | (3,687,000 | )        
|                        |                            |   |            |           |  |                  |            |           |              |   |            |           |  |   |            |           |  |     

Net sales for the six months ended December 31, 2002 increased $2,416,000 or 14% as compared to the same period
of last fiscal year. Hyaluronan product sales for the current period increased $1,556,000 or 28% as compared to
the same period of last fiscal year. The sales increase was due to higher sales of ophthalmic and orthopedic
hyaluronan shipments. Oral restorative product sales for the current period increased $860,000 or 8% compared to
the same period of last fiscal year. International sales of oral restorative products increased 19% and domestic
sales were flat compared to the same period of last fiscal year.

Consolidated gross margin increased to 53% for the current period from 39% for the same period of last fiscal
year. The gross margin for the Hyaluronan Division increased to 42% from a gross margin of -1% due to absorption
of excess capacity costs associated with increased hyaluronan production and product mix. The gross margin for
the Oral Restorative Division was 59% for the current period and the same period of last fiscal year.

Research and development expenses decreased $795,000 or 29% in the current period as compared to the same period
of last fiscal year. The decrease is due to the decline in consulting and professional fees related to the
regulatory review process of INTERGEL Solution. The Company received FDA approval
to market this product in the United States in November 2001.

Marketing and sales expenses increased $770,000 or 15% in the current period as compared to the same period of
last fiscal year due to an increase in marketing expenses and costs associated with international expansion.

General and administrative expenses increased $355,000 or 15% for the current period as compared to the same
period of last fiscal year. The increase resulted from higher personnel related expenses primarily associated
with international expansion.

13



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##### Table of Contents



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

Net other expense decreased $8,000 for the current period as compared to the same period of last fiscal year.
Interest income decreased $43,000 due to a lower average amount of cash to invest than in the same period of last
fiscal year combined with a lower rate of return. Interest expense increased $35,000 due to line of credit fees
for both the expiring and new line of credit arrangements. Other income increased $86,000 due to currency gains
realized on Euro denominated intercompany transactions

Liquidity and Capital Resources

The Companys Annual Report on Form 10-K for the year ended June 30, 2002 contains a detailed discussion of
Lifecores liquidity and capital resources. In conjunction with this Quarterly Report on Form 10-Q, investors
should read the 2002 Form 10-K.

For the six month period ended December 31, 2002, the Company had negative cash flow from operations of
$1,892,000. Cash flow from operations was positive in fiscal years 2002, 2001 and 2000. Although decreasing
significantly in the current quarter, charges for unused capacity associated with the Companys hyaluronan
production and additional costs associated with the regulatory review process for INTERGEL Solution have
negatively impacted operating results in the current fiscal year, as well as in fiscal 2002, 2001 and 2000.
Charges for unused capacity are a result of an unanticipated delay in receiving INTERGEL Solution marketing
approval in the U.S. from the FDA. As the Hyaluronan Divisions production levels increase, its related
production efficiencies will increase and charges for unused capacity will decrease. Also, marketing and sales
expenses for the oral restorative products are expected to continue at a high level with continued international
expansion and increased personnel costs.

The loan agreement between the Company and the holder of the industrial development revenue bonds issued to
finance the Companys Chaska, Minnesota facility was amended in June 2002 to waive the fixed charge coverage
ratio and the cash flow coverage ratio through June 30, 2003. With respect to certain of these covenants, the
Company may be required to obtain further waivers for fiscal 2004. There can be no assurance that future waivers
will be granted to the Company.

The Company has established a new $5,000,000, credit facility with a bank as set forth in Exhibit 10.1 The
agreement has a maturity date of December 31, 2005. This agreement replaces a credit facility with a different
bank which expired on December 31, 2002. Both agreements allow for advances against eligible accounts receivable
and inventories, subject to a borrowing base certificate. Interest is accrued at the prime rate at December 31,
2002, which was 4.75% and at the prime rate plus 1%, or 5.75%, under the previous agreement. A balance of
$550,000 was outstanding under this line of credit at December 31, 2002 and there was no balance outstanding at
June 30, 2002. The terms of the new agreement require the Company to comply with various financial covenants
including minimum tangible net worth, liabilities to tangible net worth ratio and profitability. At December 31,
2002 and June 30, 2002, the Company was in compliance with all covenants.

The Company expects to finance its future business operations with cash generated from anticipated operations and
the availability of the line of credit. No assurance can be given that the Company will achieve positive cash
flow from operations. The Companys ability to generate positive cash flow from operations and achieve
profitability is dependent upon the continued expansion of revenue from its hyaluronan and oral restorative
businesses. Growth in the Hyaluronan Division is unpredictable due to the complex governmental regulatory
environment for new medical products and to the uncertainty of product acceptance within the medical community.
Similarly, expansion of the Companys Oral Restorative Division sales is also dependent upon increased revenue
from new and existing customers, as well as successfully competing in a more mature market. While the Companys
capital resources appear adequate today, the Company may need additional financing in the future. If additional
financing is necessary, no assurance can be given that such financing will be available and, if available, will
be on terms favorable to the Company and its shareholders.

14



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##### Table of Contents



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

Cautionary Statement

Certain statements in this Form 10-Q are forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements, which include statements relating to anticipated
regulatory outcomes, continued financial improvement, adequate cash flow, access to financial markets, increased
production levels, the successful market acceptance of INTERGEL Solution in the U.S., the reduction of research
and development expenses related to the INTERGEL Solution regulatory review process, the negative impact on
Hyaluronan Division margins from the unused capacity, and the future marketing and sales success of Oral
Restorative Division products, are subject to change. These statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from historical results and those presently
anticipated or projected, such as, unforeseen difficulties or delays in interactions with the FDA, and lack of
cooperation or marketing success from marketing partners for the hyaluronan products. Investors are referred to
a more detailed discussion of those risks presented in Managements Discussion and Analysis of Financial
Condition and Results of Operations section in the Companys Annual Report on Form 10-K for the year ended June
30, 2002 as well as Exhibit 99.1 to such Form 10-K.

GYNECARE INTERGEL Adhesion Prevention Solution, GYNECARE, and ETHICON, INC. are registered trademarks of ETHICON,
INC.

15



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##### Table of Contents






LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company invests its excess cash in money market mutual funds and highly rated corporate debt securities. All
investments are held-to-maturity. The market risk on such investments is minimal.

Receivables from sales to foreign customers are denominated in U.S. Dollars. Transactions at the Companys
foreign subsidiaries are denominated in European Euros at Lifecore Biomedical SpA and Lifecore Biomedical GmbH
and are denominated in Swedish Krona at Lifecore Biomedical AB. The Company has historically had minimal exposure
to changes in foreign currency exchange rates, and as such, has not used derivative financial instruments to
manage foreign currency fluctuation risk.

The Companys outstanding long-term debt carries interest at a fixed rate. There is no material market risk
relating to the Companys long-term debt.




ITEM 4. CONTROLS AND PROCEDURES

(a)  Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of our management, including the Companys Chief Executive
Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a  14(c) under the Exchange Act) as of a date (the Evaluation
Date) within 90 days prior to the filing date of this report. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and
procedures are effective in timely alerting them to the material information relating to us (or our consolidated
subsidiaries) required to be included in our periodic SEC filings.

(b)  Changes in internal controls.

There were no significant changes made in our internal controls during the period covered by this report or, to
our knowledge, in other factors that could significantly affect these controls subsequent to the date of their
evaluation.

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##### Table of Contents






LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART II  OTHER INFORMATION




Item 4. Submission of Matters to a Vote of
Security Holders



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On November 14, 2002, the Company held its Annual Meeting of Shareholders. At the meeting, the shareholders elected
directors James W. Bracke, Ph.D. (with 12,345,102 affirmative votes and 41,720 votes withheld), Joan L. Gardner (with
12,172,291 affirmative votes and 214,531 votes withheld), Thomas H. Garrett (with 12,179,865 affirmative votes and
206,957 votes withheld), and John E. Runnells (with 12,345,916 affirmative votes and 40,906 votes withheld).
|
| | The shareholders also ratified and approved the appointment of Grant Thornton LLP as independent certified public
accountants of the Company for the current fiscal year ending
June 30, 2003 (with 12,336,985 affirmative votes, 33,847
negative votes and 15,990 votes abstained).                                                                                                                                                                                     




Item 6. Exhibits and Reports on
Form 8-K






| |                              
| | -----------------------------
| | a. Exhibits and Exhibit Index

| |  |  |      |  |  |                                                                                                                                                                                                                                                                                                                             
| |  |  | ---- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 3.1  |  |  | Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 19(a) to
Amendment No. 1 on Form 8, dated July 13, 1988, to Form 10-Q for the quarter ended December 31,
1987), as amended by Amendment No. 2, (incorporated by reference to Exhibit 3.1 to Form 10-K
for the year ended June 30, 1997)
| |  |  |      |  |  |                                                                                                                                                                                                                                                                                                                             
| |  |  | 3.2  |  |  | Amended Bylaws, (incorporated by reference to Exhibit 3.2 to Form 10-K/A for the year ended
June 30, 1995)                                                                                                                                                                                                                  
| |  |  |      |  |  |                                                                                                                                                                                                                                                                                                                             
| |  |  | 3.3  |  |  | Form of Rights Agreement, dated as of May 23, 1996, between the Company and Norwest Bank Minnesota, National Association
(incorporated by reference to Exhibit 1 to the Companys Form 8-A Registration Statement dated
May 31, 1996)                                                                                       
| |  |  |      |  |  |                                                                                                                                                                                                                                                                                                                             
| |  |  | 4.1  |  |  | Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to 1987 S-2
Registration Statement [File No. 33-12970])                                                                                                                                                                                          
| |  |  |      |  |  |                                                                                                                                                                                                                                                                                                                             
| |  |  | 10.1 |  |  | Revolving Credit and Security Agreement dated December 18, 2002 between M & I Marshall & Ilsley Bank and
the Company, filed herewith                                                                                                                                                                                        
| |  |  |      |  |  |                                                                                                                                                                                                                                                                                                                             
| |  |  | 99.1 |  |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002                                                                                                                                                                                                      
| |  |  |      |  |  |                                                                                                                                                                                                                                                                                                                             
| |  |  | 99.2 |  |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002                                                                                                                                                                                                      






| |                       
| | ----------------------
| | b. Reports on Form 8-K



| |     
| | ----
| | None

17



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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART II  OTHER INFORMATION




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.

|       |  |                  |  |  |                           |                                                   
|------ |  | ---------------- |  |  | ------------------------- | --------------------------------------------------
|       |  |                  |  |  | LIFECORE BIOMEDICAL, INC.
|       |  |                  |  |  |                           |                                                   
|       |  |                  |  |  |                           |                                                   
|Dated: |  | February 7, 2003 |  |  | /s/                       | James W. Bracke                                   
|       |  |                  |  |  |                          
|       |  |                  |  |  |                           | James W. Bracke                                   
|       |  |                  |  |  |                           | President & Chief Executive Officer               
|       |  |                  |  |  |                           |                                                   
|       |  |                  |  |  |                           |                                                   
|       |  |                  |  |  |                           |                                                   
|       |  |                  |  |  |                           |                                                   
|Dated: |  | February 7, 2003 |  |  | /s/                       | Dennis J. Allingham                               
|       |  |                  |  |  |                          
|       |  |                  |  |  |                           | Dennis J. Allingham                               
|       |  |                  |  |  |                           | Executive Vice President
& Chief Financial Officer
|       |  |                  |  |  |                           | (Principal Financial Officer)                     

18



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##### Table of Contents






CERTIFICATION

Chief Executive Officer

I, James W. Bracke, Ph.D., certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Lifecore Biomedical, Inc.;                                                                                                                                                                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly 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 quarterly
report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial information included in this
quarterly 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 quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:                                                                                                      



| |  |  | designed such disclosure controls and procedures 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 quarterly report is being prepared;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within
90 days prior to the filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| |  |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on our most recent evaluation, to
the registrants auditors and the audit committee of registrants board of directors (or persons performing
the equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all significant deficiencies in the design or operation of internal controls which could adversely
affect the registrants ability to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in internal controls; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this quarterly report whether or not
there were significant changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |    |                                                       |                    
|----------------------- |  | -- | ----------------------------------------------------- | -------------------
|Dated: February 7, 2003 |  | By |                                                       | /s/ James W. Bracke
|                        |  |    |                                                      
|                        |  |    | James W. Bracke, Ph.D.                               
|                        |  |    | President, Chief Executive Officer                   
|                        |  |    | (principal executive officer), Secretary and Director

19



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##### Table of Contents



CERTIFICATION

Chief Financial Officer

I, Dennis J. Allingham, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Lifecore Biomedical, Inc.;                                                                                                                                                                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly 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 quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial information included in this
quarterly 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 quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:                                                                                                      



| |  |  | designed such disclosure controls and procedures 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 quarterly report is being prepared;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within
90 days prior to the filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| |  |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on our most recent evaluation, to
the registrants auditors and the audit committee of registrants board of directors (or persons performing
the equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all significant deficiencies in the design or operation of internal controls which could adversely
affect the registrants ability to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in internal controls; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this quarterly report whether or not
there were significant changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |    |                                                      |                        
|----------------------- |  | -- | ---------------------------------------------------- | -----------------------
|Dated: February 7, 2003 |  | By |                                                      | /s/ Dennis J. Allingham
|                        |  |    |                                                     
|                        |  |    | Dennis J. Allingham                                 
|                        |  |    | Executive Vice President and Chief Financial Officer
|                        |  |    | (principal financial officer)                       

20