##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2006
 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: 0-4136
 Lifecore Biomedical, Inc.
  Minnesota
    
    41-0948334(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation or organization)3515 Lyman BoulevardChaska, Minnesota
    
    55318(Address of principal executive
    
    (Zip Code)offices)
 952-368-4300
 Not Applicable
  þ o
  o þ o
  o þ




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##### 



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
 FORM 10-Q
 TABLE OF CONTENTS
 PagePart I.
    
    Financial InformationItem 1. Financial Statements  UnauditedCondensed Consolidated Balance Sheets at
March 31, 2006 and June 30, 2005
    
    
    2Condensed Consolidated Statements of Operations for Three
Months and Nine Months Ended March 31, 2006 and 2005
    
    
    3Condensed Consolidated Statements of Cash Flows for
Nine Months Ended March 31, 2006 and 2005
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5-12Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    13-21Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4.
    
    Controls and Procedures
    
    
    22Part II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    23Item 6.
    
    Exhibits
    
    
    24Signatures
    
    
    25Exhibit Index
    
    
    26Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  1




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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
 
 PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
  March 31,
    
    
    June 30,2006
    
    
    2005ASSETSCurrent AssetsCash and cash equivalents
    
    $
    22,134,000
    
    
    $
    18,508,000Accounts receivable, less allowances
    
    
    11,767,000
    
    
    
    10,171,000Inventories
    
    
    12,048,000
    
    
    
    9,456,000Deferred income taxes, net
    
    
    5,183,000
    
    
    
    4,190,000Prepaid expenses
    
    
    1,032,000
    
    
    
    780,000Total current assets
    
    
    52,164,000
    
    
    
    43,105,000Property, plant and equipmentLand, building and equipment
    
    
    48,719,000
    
    
    
    47,400,000Less accumulated depreciation
    
    
    (25,601,000
    )
    
    
    (24,211,000
    )23,118,000
    
    
    
    23,189,000Other AssetsIntangibles, net
    
    
    5,247,000
    
    
    
    4,799,000Inventories
    
    
    1,977,000
    
    
    
    2,409,000Deferred income taxes, net
    
    
    2,558,000
    
    
    
    6,062,000Other
    
    
    368,000
    
    
    
    302,00010,150,000
    
    
    
    13,572,000$
    85,432,000
    
    
    $
    79,866,000LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesCurrent maturities of long-term obligations
    
    $
    285,000
    
    
    $
    285,000Accounts payable
    
    
    3,020,000
    
    
    
    3,418,000Accrued compensation
    
    
    1,442,000
    
    
    
    1,920,000Accrued expenses
    
    
    1,371,000
    
    
    
    1,293,000Total current liabilities
    
    
    6,118,000
    
    
    
    6,916,000Long-term obligations
    
    
    4,902,000
    
    
    
    5,089,000Shareholders equity
    
    
    74,412,000
    
    
    
    67,861,000$
    85,432,000
    
    
    $
    79,866,000
  2




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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  Three months ended March 31,
    
    
    Nine months ended March 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    16,775,000
    
    
    $
    14,247,000
    
    
    $
    45,409,000
    
    
    $
    40,770,000Cost of goods sold
    
    
    6,208,000
    
    
    
    5,587,000
    
    
    
    17,399,000
    
    
    
    16,138,000Gross profit
    
    
    10,567,000
    
    
    
    8,660,000
    
    
    
    28,010,000
    
    
    
    24,632,000Operating expensesResearch and development
    
    
    881,000
    
    
    
    1,235,000
    
    
    
    2,878,000
    
    
    
    3,254,000Marketing and sales
    
    
    4,525,000
    
    
    
    3,661,000
    
    
    
    12,661,000
    
    
    
    10,713,000General and administrative
    
    
    1,720,000
    
    
    
    1,660,000
    
    
    
    5,275,000
    
    
    
    4,706,0007,126,000
    
    
    
    6,556,000
    
    
    
    20,814,000
    
    
    
    18,673,000Operating income
    
    
    3,441,000
    
    
    
    2,104,000
    
    
    
    7,196,000
    
    
    
    5,959,000Other income (expense)Interest income
    
    
    203,000
    
    
    
    67,000
    
    
    
    495,000
    
    
    
    109,000Interest expense
    
    
    (65,000
    )
    
    
    (53,000
    )
    
    
    (181,000
    )
    
    
    (221,000
    )Bond retirement expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (290,000
    )Currency transaction gains (losses)
    
    
    
    
    
    
    122,000
    
    
    
    (73,000
    )
    
    
    320,000Other
    
    
    5,000
    
    
    
    (3,000
    )
    
    
    (14,000
    )
    
    
    249,000143,000
    
    
    
    133,000
    
    
    
    227,000
    
    
    
    167,000Income before income tax expense
    
    
    3,584,000
    
    
    
    2,237,000
    
    
    
    7,423,000
    
    
    
    6,126,000Income tax expense
    
    
    1,391,000
    
    
    
    129,000
    
    
    
    2,794,000
    
    
    
    359,000Net income
    
    $
    2,193,000
    
    
    $
    2,108,000
    
    
    $
    4,629,000
    
    
    $
    5,767,000Net income per shareBasic
    
    $
    0.17
    
    
    $
    0.16
    
    
    $
    0.35
    
    
    $
    0.45Diluted
    
    $
    0.16
    
    
    $
    0.15
    
    
    $
    0.34
    
    
    $
    0.43Weighted average shares outstandingBasic
    
    
    13,180,859
    
    
    
    12,993,379
    
    
    
    13,134,280
    
    
    
    12,957,033Diluted
    
    
    13,572,205
    
    
    
    13,670,465
    
    
    
    13,505,079
    
    
    
    13,279,991
  3




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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Nine months ended March 31,2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    4,629,000
    
    
    $
    5,767,000Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    1,470,000
    
    
    
    1,523,000Allowance for doubtful accounts
    
    
    106,000
    
    
    
    333,000Deferred income taxes
    
    
    2,511,000
    
    
    
    Stock compensation
    
    
    786,000
    
    
    
    106,000Tax benefit related to stock-based compensation plans
    
    
    56,000
    
    
    
    Accumulated currency translation adjustment
    
    
    90,000
    
    
    
    65,000Changes in operating assets and liabilities, net of
effects of acquisition:Accounts receivable
    
    
    (1,986,000
    )
    
    
    (1,204,000
    )Inventories
    
    
    (2,058,000
    )
    
    
    716,000Prepaid expenses
    
    
    (251,000
    )
    
    
    (182,000
    )Accounts payable
    
    
    (409,000
    )
    
    
    (526,000
    )Accrued liabilities
    
    
    (413,000
    )
    
    
    (81,000
    )Net cash provided by operating activities
    
    
    4,531,000
    
    
    
    6,517,000Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (1,287,000
    )
    
    
    (1,113,000
    )Acquisition, net of cash acquired
    
    
    (346,000
    )
    
    
    Refunds of security deposits
    
    
    
    
    
    
    830,000Increase in other assets
    
    
    (75,000
    )
    
    
    (121,000
    )Net cash used in investing activities
    
    
    (1,708,000
    )
    
    
    (404,000
    )Cash flows from financing activities:Payments on long-term obligations
    
    
    (187,000
    )
    
    
    (187,000
    )Issuance of industrial revenue bonds
    
    
    
    
    
    
    5,630,000Retirement of industrial revenue bonds
    
    
    
    
    
    
    (5,986,000
    )Proceeds from stock options exercised
    
    
    990,000
    
    
    
    656,000Net cash provided by financing activities
    
    
    803,000
    
    
    
    113,000Net increase in cash and cash equivalents
    
    
    3,626,000
    
    
    
    6,226,000Cash and cash equivalents at beginning of period
    
    
    18,508,000
    
    
    
    8,553,000Cash and cash equivalents at end of period
    
    $
    22,134,000
    
    
    $
    14,779,000Supplemental disclosure of cash flow information:Cash paid during the period for:Interest
    
    $
    166,000
    
    
    $
    271,000Taxes
    
    
    253,000
    
    
    
    347,000
  4




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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
 
 NOTES TO CONDENSED CONSOLIDATED STATEMENTS  UNAUDITED
         March 31,
    
    
    June 30,2006
    
    
    2005Raw Materials
    
    $
    4,540,000
    
    
    $
    3,102,000Work-in-process
    
    
    908,000
    
    
    
    426,000Finished goods-current
    
    
    6,600,000
    
    
    
    5,928,00012,048,000
    
    
    
    9,456,000Finished goods-long term
    
    
    1,977,000
    
    
    
    2,409,000$
    14,025,000
    
    
    $
    11,865,000
 5




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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED (continued)
       March 31,
    
    
    June 30,2006
    
    
    2005Goodwill
    
    $
    4,870,000
    
    
    $
    4,352,000Patents
    
    
    387,000
    
    
    
    387,000Distribution rights and licenses
    
    
    350,000
    
    
    
    350,000Accumulated amortization
    
    
    (360,000
    )
    
    
    (290,000
    )$
    5,247,000
    
    
    $
    4,799,000
     6




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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED (continued)
    Three months ended
    
    
    Nine months endedMarch 31, 2006
    
    
    March 31, 2006Cost of goods sold
    
    $
    11,000
    
    
    $
    32,000Research and development
    
    
    14,000
    
    
    
    43,000Marketing and sales
    
    
    125,000
    
    
    
    231,000General and administrative
    
    
    112,000
    
    
    
    327,000Total stock-based compensation expense
    
    $
    262,000
    
    
    $
    633,000Effect on earnings per share, net of tax effects:Basic
    
    $
    0.02
    
    
    $
    0.04Diluted
    
    $
    0.02
    
    
    $
    0.04
    Three months ended
    
    
    Nine months endedMarch 31, 2005
    
    
    March 31, 2005Reported net income
    
    $
    2,108,000
    
    
    $
    5,767,000Stock-based compensation
determined under the fair value
based method, net of related tax
effects
    
    
    (432,000
    )
    
    
    (847,000
    )Pro forma net income
    
    $
    1,676,000
    
    
    $
    4,920,000Income per common equivalent share:Basic as reported
    
    $
    0.16
    
    
    $
    0.45Diluted  as reported
    
    $
    0.15
    
    
    $
    0.43Basic  pro forma
    
    $
    0.13
    
    
    $
    0.38Diluted  pro forma
    
    $
    0.12
    
    
    $
    0.37
 7




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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED (continued)
    Three Months Ended
    
    Three Months Ended
    
    Three Months EndedMarch 31,
    
    December 31,
    
    September 30,2006
    
    2005
    
    2005
    
    2004
    
    2005
    
    2004Risk-free interest rate
    
    
    4.85
    %
    
    
    3.9
    %
    
    
    4.33
    %
    
    
    3.9
    %
    
    
    4.27
    %
    
    
    3.9
    %Expected volatility
    
    
    58.2
    %
    
    
    69.6
    %
    
    
    60.8
    %
    
    
    69.6
    %
    
    
    69.5
    %
    
    
    69.6
    %Expected life (in years)
    
    
    5.7
    
    
    
    5.4
    
    
    
    5.7
    
    
    
    5.4
    
    
    
    5.6
    
    
    
    5.4Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   Number of
    
    
    Weighted AverageShares
    
    
    Exercise PriceOutstanding at June 30, 2005
    
    
    1,720,706
    
    
    $
    10.19Granted
    
    
    41,300
    
    
    
    10.86Exercised
    
    
    (101,100
    )
    
    
    7.00Canceled
    
    
    (12,750
    )
    
    
    9.35Outstanding at September 30, 2005
    
    
    1,648,156
    
    
    
    10.41Granted
    
    
    56,000
    
    
    
    14.06Exercised
    
    
    (18,233
    )
    
    
    9.71Canceled
    
    
    (11,400
    )
    
    
    8.28Outstanding at December 31, 2005
    
    
    1,674,523
    
    
    
    10.52Granted
    
    
    84,500
    
    
    
    15.02Exercised
    
    
    (13,375
    )
    
    
    7.89Canceled
    
    
    (49,250
    )
    
    
    14.10Outstanding at March 31, 2006
    
    
    1,696,398
    
    
    $
    10.66
 Number of
    
    
    Weighted AverageShares
    
    
    Exercise PriceOptions exercisable at March 31, 2006
    
    
    1,362,473
    
    
    $
    10.68
 8




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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED (continued)
    Options OutstandingRange of
    
    Number
    
    
    Weighted Average Remaining
    
    
    Weighted AverageExercise Price
    
    Outstanding
    
    
    Contractual Life
    
    
    Exercise Price$3.55      5.82
    
    
    75,750
    
    
    6.24 years
    
    
    $
    5.205.83        8.75
    
    
    688,730
    
    
    6.25 years
    
    
    
    7.298.76      13.12
    
    
    409,875
    
    
    6.45 years
    
    
    
    10.2213.13    19.68
    
    
    491,043
    
    
    3.70 years
    
    
    
    15.9119.69    23.38
    
    
    31,000
    
    
    1.76 years
    
    
    
    21.551,696,398
    
    
    
    
    
    
    $
    10.66
 Options ExercisableRange of
    
    Number
    
    Weighted AverageExercise Price
    
    Exercisable
    
    Exercise Price$3.55      5.82
    
    
    54,000
    

    
    $  5.325.83        8.75
    
    
    611,605
    

    
    7.288.76      13.12
    
    
    257,200
    
    
    10.0613.13    19.68
    
    
    413,668
    
    
    16.1119.69    23.38
    
    
    26,000
    

    
    21.581,362,473
    

    
    $10.68
 Restricted Stock Awards
    9




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##### Table of Contents



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




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED (continued)
    Three months ended March 31,
    
    
    Nine months ended March 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Net salesHyaluronan products
    
    $
    5,347,000
    
    
    $
    5,034,000
    
    
    $
    14,639,000
    
    
    $
    14,205,000Oral restorative products
    
    
    11,428,000
    
    
    
    9,213,000
    
    
    
    30,770,000
    
    
    
    26,565,000$
    16,775,000
    
    
    $
    14,247,000
    
    
    $
    45,409,000
    
    
    $
    40,770,000Income from operationsHyaluronan products
    
    $
    1,493,000
    
    
    $
    1,020,000
    
    
    $
    3,547,000
    
    
    $
    3,192,000Oral restorative products
    
    
    1,948,000
    
    
    
    1,084,000
    
    
    
    3,649,000
    
    
    
    2,767,000$
    3,441,000
    
    
    $
    2,104,000
    
    
    $
    7,196,000
    
    
    $
    5,959,000
      11




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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS (continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED (continued)
      12




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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Critical Accounting Policies
  Revenue Recognition:
  Allowance for Uncollectible Accounts Receivable:
  Inventories:
  Goodwill, Intangibles and Other Long-Lived Assets:
    13




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 Accounting for Income Taxes:
   Stock-based compensation:
  14




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 Overview
      Ô
  Acquisition of Bardo-Biotech SAS
   15




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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 Results of Operations
  Hyaluronan
    
    
    Oral RestorativeDivision
    
    
    Division
    
    
    Consolidated2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    5,347,000
    
    
    $
    5,034,000
    
    
    $
    11,428,000
    
    
    $
    9,213,000
    
    
    $
    16,775,000
    
    
    $
    14,247,000Cost of goods sold
    
    
    2,449,000
    
    
    
    2,317,000
    
    
    
    3,759,000
    
    
    
    3,270,000
    
    
    
    6,208,000
    
    
    
    5,587,000Gross profit
    
    
    2,898,000
    
    
    
    2,717,000
    
    
    
    7,669,000
    
    
    
    5,943,000
    
    
    
    10,567,000
    
    
    
    8,660,000Operating expensesResearch and
development
    
    
    516,000
    
    
    
    952,000
    
    
    
    365,000
    
    
    
    283,000
    
    
    
    881,000
    
    
    
    1,235,000Marketing and sales
    
    
    149,000
    
    
    
    133,000
    
    
    
    4,376,000
    
    
    
    3,528,000
    
    
    
    4,525,000
    
    
    
    3,661,000General and
administrative
    
    
    740,000
    
    
    
    612,000
    
    
    
    980,000
    
    
    
    1,048,000
    
    
    
    1,720,000
    
    
    
    1,660,0001,405,000
    
    
    
    1,697,000
    
    
    
    5,721,000
    
    
    
    4,859,000
    
    
    
    7,126,000
    
    
    
    6,556,000Operating income
    
    $
    1,493,000
    
    
    $
    1,020,000
    
    
    $
    1,948,000
    
    
    $
    1,084,000
    
    
    $
    3,441,000
    
    
    $
    2,104,000
 Net Sales
   Gross profit
   Research and development
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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 Marketing and sales
 General and administrative
 Other income (expense)
 Provision for income taxes.
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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
  Hyaluronan
    
    
    Oral RestorativeDivision
    
    
    Division
    
    
    Consolidated2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    14,639,000
    
    
    $
    14,205,000
    
    
    $
    30,770,000
    
    
    $
    26,565,000
    
    
    $
    45,409,000
    
    
    $
    40,770,000Cost of goods sold
    
    
    6,858,000
    
    
    
    6,518,000
    
    
    
    10,541,000
    
    
    
    9,620,000
    
    
    
    17,399,000
    
    
    
    16,138,000Gross profit
    
    
    7,781,000
    
    
    
    7,687,000
    
    
    
    20,229,000
    
    
    
    16,945,000
    
    
    
    28,010,000
    
    
    
    24,632,000Operating expensesResearch and
development
    
    
    1,728,000
    
    
    
    2,451,000
    
    
    
    1,150,000
    
    
    
    803,000
    
    
    
    2,878,000
    
    
    
    3,254,000Marketing and sales
    
    
    433,000
    
    
    
    375,000
    
    
    
    12,228,000
    
    
    
    10,338,000
    
    
    
    12,661,000
    
    
    
    10,713,000General and
administrative
    
    
    2,073,000
    
    
    
    1,669,000
    
    
    
    3,202,000
    
    
    
    3,037,000
    
    
    
    5,275,000
    
    
    
    4,706,0004,234,000
    
    
    
    4,495,000
    
    
    
    16,580,000
    
    
    
    14,178,000
    
    
    
    20,814,000
    
    
    
    18,673,000Operating income
    
    $
    3,547,000
    
    
    $
    3,192,000
    
    
    $
    3,649,000
    
    
    $
    2,767,000
    
    
    $
    7,196,000
    
    
    $
    5,959,000
 Net Sales
   Gross profit
   Research and development
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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 Marketing and sales
 General and administrative
 Other income (expense)
 Provision for income taxes.
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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 Liquidity and Capital Resources
 
      Seasonality
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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 Cautionary Statement
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LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART I  FINANCIAL INFORMATION
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES
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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
 
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Shumbo-Poissant v. Ethicon, Inc., et al.
  Renee Contratto v. Ethicon,
Inc., d/b/a Gynecare Worldwide, Johnson & Johnson, Lifecore Biomedical, Inc. and Vital Pharma,
Inc Black v. Ethicon, Inc., et al
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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES
PART II  OTHER INFORMATION
 
 ITEM 6. EXHIBITS
 3.1
    
    Amended and Restated Articles of Incorporation, as adopted on January 18,
2006 (incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form
8-K filed on January 24, 2006)3.2
    
    Amended Bylaws, as adopted on January 18, 2006 (incorporated by reference to
Exhibit 3.2 to the Companys Current Report on Form 8-K filed on January 24, 2006)4.1
    
    Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to
1987 S-2 Registration Statement [File No. 33-12970])4.2
    
    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)31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification of the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification of the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
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##### Table of Contents



SIGNATURES
  LIFECORE BIOMEDICAL, INC.By:Dated: May 10, 2006
    
    /s/ Dennis J. AllinghamDennis J. AllinghamPresident, Chief Executive Officer, Secretary and Director(duly authorized officer)Dated: May 10, 2006
    
    /s/ David M. NoelDavid M. NoelVice President of Finance and Chief Financial Officer(principal financial and accounting officer)
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##### Table of Contents



Exhibit Index
 3.1
    
    Amended and Restated Articles of Incorporation, as adopted on January 18,
2006 (incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form
8-K filed on January 24, 2006)3.2
    
    Amended Bylaws, as adopted on January 18, 2006 (incorporated by reference to
Exhibit 3.2 to the Companys Current Report on Form 8-K filed on January 24, 2006)4.1
    
    Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to
1987 S-2 Registration Statement [File No. 33-12970])4.2
    
    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)31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification of the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification of the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 26