##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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

For the quarterly period ended March 31, 2003

[ ] 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.

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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Minnesota                                                      |  | 41-0948334                       
|                                                               |  |                                  
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer Identification No.)

|                                         |  |           
|---------------------------------------- |  | ----------
|3515 Lyman Boulevard
Chaska, Minnesota   |  | 55318     
|                                         |  |           
|(Address of principal executive
offices) |  | (Zip Code)

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

Indicate by checkmark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

|    |  |   |  |   
|--- |  | - |  | --
|Yes |  | X |  | No

The number of shares outstanding of the registrants Common Stock, $.01 par
value, as of April 30, 2003 was 12,885,417 shares.

1



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TABLE OF CONTENTS



|                                                   |                                                                                               |                                                      |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                    
|                                                   | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                                   |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                                                   |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                                   |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                   |                                                                                               | 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  FINANCIAL INFORMATION                   
|                                                   | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                        
|CERTIFICATION                                     
|EX-99.1 Certification Pursuant to 18 USC Sec. 1350
|EX-99.2 Certification Pursuant to 18 USC Sec. 1350



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##### Table of Contents



LIFECORE BIOMEDICAL, INC. AND SUBSIDIARIES

FORM 10-Q

INDEX

|               |  |                                                                                                                |  |      
|-------------- |  | -------------------------------------------------------------------------------------------------------------- |  | -----
|               |  |                                                                                                                |  | Page 
|Part I         |  | Financial Information                                                                                          |  |      
|Item 1.        |  | Financial Statements                                                                                           |  |      
|               |  | Condensed Consolidated Balance Sheets at
March 31, 2003 and June 30, 2002                                      |  | 3    
|               |  | Condensed Consolidated Statements of Operations for Three
Months and Nine Months Ended March 31, 2003 and 2002 |  | 4    
|               |  | Condensed Consolidated Statements of Cash Flows for
Nine Months Ended March 31, 2003 and 2002                  |  | 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 6.        |  | Exhibits and Reports on Form 8-K                                                                               |  |      
|               |  | a.       Exhibit Index                                                                                         |  | 17   
|               |  | b.       Reports on Form 8-K                                                                                   |  | 17   
|Signatures     |  |                                                                                                                |  | 18   
|Certifications |  |                                                                                                                |  | 19-20

2



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##### Table of Contents












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

(Unaudited)

|                                     |                                             |                           |            |             |            |          |            |             |            | 
|------------------------------------ | ------------------------------------------- | ------------------------- | ---------- | ----------- | ---------- | -------- | ---------- | ----------- | ---------- | 
|                                     |                                             |                           |            | March 31,   |            | June 30,
|                                     |                                             |                           |            | 2003        |            | 2002    
|                                     |                                             |                           |            |             |            |         
|ASSETS                               |                                             |                           |            |             |            |          |            |            
|Current Assets                       |                                             |                           |            |             |            |          |            |            
|                                     | Cash and cash equivalents                   |                           | $          | 3,277,000   |            |          | $          | 2,528,000   |           
|                                     | Accounts receivable, less allowances        |                           |            | 7,253,000   |            |          |            | 7,882,000   |           
|                                     | Inventories                                 |                           |            | 12,695,000  |            |          |            | 11,810,000  |           
|                                     | Prepaid expenses                            |                           |            | 950,000     |            |          |            | 997,000     |           
|                                     |                                             |                           |            |             |            |          |            |            
|                                     |                                             | Total current assets      |            |             | 24,175,000 |          |            |             | 23,217,000 | 
|                                     |                                             |                           |            |             |            |          |            |            
|Property, plant and equipment        |                                             |                           |            |             |            |          |            |            
|                                     | Land, building and equipment                |                           |            | 44,619,000  |            |          |            | 43,988,000  |           
|                                     | Less accumulated depreciation               |                           |            | (19,188,000 | )          |          |            | (17,194,000 | )         
|                                     |                                             |                           |            |             |            |          |            |            
|                                     |                                             |                           | 25,431,000 |             |            |          | 26,794,000 |            
|Other Assets                         |                                             |                           |            |             |            |          |            |            
|                                     | Intangibles                                 |                           |            | 4,685,000   |            |          |            | 4,850,000   |           
|                                     | Security deposits                           |                           |            | 835,000     |            |          |            | 845,000     |           
|                                     | Inventories                                 |                           |            | 2,873,000   |            |          |            | 3,316,000   |           
|                                     | Other                                       |                           |            | 891,000     |            |          |            | 1,074,000   |           
|                                     |                                             |                           |            |             |            |          |            |            
|                                     |                                             |                           | 9,284,000  |             |            |          | 10,085,000 |            
|                                     |                                             |                           |            |             |            |          |            |            
|                                     |                                             | $                         | 58,890,000 |             |            | $        | 60,096,000 |            
|                                     |                                             |                           |            |             |            |          |            |            
|LIABILITIES AND SHAREHOLDERS EQUITY |                                             |                           |            |             |            |          |            |            
|Current Liabilities                  |                                             |                           |            |             |            |          |            |            
|                                     | Current maturities of long-term obligations |                           | $          | 139,000     |            |          | $          | 139,000     |           
|                                     | Accounts payable                            |                           |            | 1,763,000   |            |          |            | 3,500,000   |           
|                                     | Accrued compensation                        |                           |            | 1,258,000   |            |          |            | 1,053,000   |           
|                                     | Accrued expenses                            |                           |            | 833,000     |            |          |            | 742,000     |           
|                                     |                                             |                           |            |             |            |          |            |            
|                                     |                                             | Total current liabilities |            |             | 3,993,000  |          |            |             | 5,434,000  | 
|                                     |                                             |                           |            |             |            |          |            |            
|Long-term obligations                |                                             |                           | 6,024,000  |             |            |          | 6,114,000  |            
|Shareholders equity                 |                                             |                           | 48,873,000 |             |            |          | 48,548,000 |            
|                                     |                                             |                           |            |             |            |          |            |            
|                                     |                                             | $                         | 58,890,000 |             |            | $        | 60,096,000 |            
|                                     |                                             |                           |            |             |            |          |            |            

See accompanying notes to condensed consolidated financial statements.

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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

(Unaudited)

|                                    |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |            |  
|----------------------------------- | -------------------------- | - | ---------------------------- | ---------- | --------------------------- | - | ---------- | ---------- | ---- | - | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                    |                            |   | Three months ended March 31, |            | Nine months ended March 31,
|                                    |                            |   |                              |            |                            
|                                    |                            |   | 2003                         |            | 2002                        |   | 2003       |            | 2002
|                                    |                            |   |                              |            |                             |   |            |            |     
|Net sales                           |                            | $ | 11,833,000                   |            |                             | $ | 10,254,000 |            |      | $ | 31,067,000 |            |   | $ | 27,072,000 |           
|Cost of goods sold                  |                            |   | 5,413,000                    |            |                             |   | 5,653,000  |            |      |   | 14,487,000 |            |   |   | 15,911,000 |           
|                                    |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |           
|Gross profit                        |                            |   | 6,420,000                    |            |                             |   | 4,601,000  |            |      |   | 16,580,000 |            |   |   | 11,161,000 |           
|                                    |                            |   |                              |            |                             |   |            |           
|Operating expenses                  |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |           
|                                    | Research and development   |   |                              | 890,000    |                             |   |            | 1,057,000  |      |   |            | 2,858,000  |   |   |            | 3,820,000  |  
|                                    | Marketing and sales        |   |                              | 3,154,000  |                             |   |            | 2,778,000  |      |   |            | 9,059,000  |   |   |            | 7,913,000  |  
|                                    | General and administrative |   |                              | 1,404,000  |                             |   |            | 1,217,000  |      |   |            | 4,108,000  |   |   |            | 3,566,000  |  
|                                    |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |           
|                                    |                            |   | 5,448,000                    |            |                             |   | 5,052,000  |            |      |   | 16,025,000 |            |   |   | 15,299,000 |           
|                                    |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |           
|Operating income (loss)             |                            |   | 972,000                      |            |                             |   | (451,000   | )          |      |   | 555,000    |            |   |   | (4,138,000 | )         
|                                    |                            |   |                              |            |                             |   |            |           
|Other income (expense)              |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |           
|                                    | Interest income            |   |                              | 3,000      |                             |   |            | (26,000    | )    |   |            | 38,000     |   |   |            | 52,000     |  
|                                    | Interest expense           |   |                              | (163,000   | )                           |   |            | (178,000   | )    |   |            | (591,000   | ) |   |            | (571,000   | )
|                                    | Other                      |   |                              | 135,000    |                             |   |            | (2,000     | )    |   |            | 211,000    |   |   |            | (12,000    | )
|                                    |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |           
|                                    |                            |   | (25,000                      | )          |                             |   | (206,000   | )          |      |   | (342,000   | )          |   |   | (531,000   | )         
|                                    |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |           
|Net income (loss)                   |                            | $ | 947,000                      |            |                             | $ | (657,000   | )          |      | $ | 213,000    |            |   | $ | (4,669,000 | )         
|                                    |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |           
|Net income (loss) per share         |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |           
|                                    | Basic                      |   | $                            | 0.07       |                             |   | $          | (0.05      | )    |   | $          | 0.02       |   |   | $          | (0.37      | )
|                                    |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |           
|                                    | Diluted                    |   | $                            | 0.07       |                             |   | $          | (0.05      | )    |   | $          | 0.02       |   |   | $          | (0.37      | )
|                                    |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |           
|Weighted average shares outstanding |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |           
|                                    | Basic                      |   |                              | 12,885,206 |                             |   |            | 12,806,177 |      |   |            | 12,880,683 |   |   |            | 12,785,059 |  
|                                    |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |           
|                                    | Diluted                    |   |                              | 12,962,378 |                             |   |            | 12,806,177 |      |   |            | 12,965,972 |   |   |            | 12,785,059 |  
|                                    |                            |   |                              |            |                             |   |            |            |      |   |            |            |   |   |            |           

See accompanying notes to condensed consolidated financial statements.

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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

(Unaudited)

|                                                                                     |                                                                 |          |                     |           |                             |            |            |           |         |           |  
|------------------------------------------------------------------------------------ | --------------------------------------------------------------- | -------- | ------------------- | --------- | --------------------------- | ---------- | ---------- | --------- | ------- | --------- | -
|                                                                                     |                                                                 |          |                     |           | Nine months ended March 31,
|                                                                                     |                                                                 |          |                     |           |                            
|                                                                                     |                                                                 |          |                     |           | 2003                        |            | 2002      
|                                                                                     |                                                                 |          |                     |           |                             |            |           
|Cash flows from operating activities:                                                |                                                                 |          |                     |           |                             |            |            |          
|Net income (loss)                                                                    |                                                                 | $        | 213,000             |           |                             | $          | (4,669,000 | )        
|Adjustments to reconcile net income (loss) to net cash used in
operating activities: |                                                                 |          |                     |           |                             |            |            |          
|                                                                                     | Depreciation and amortization                                   |          |                     | 2,248,000 |                             |            |            | 2,274,000 |        
|                                                                                     | Allowance for doubtful accounts                                 |          |                     | 63,000    |                             |            |            | 126,000   |        
|                                                                                     | Changes in operating assets and liabilities
Accounts receivable |          |                     | 566,000   |                             |            |            | (336,000  | )      
|                                                                                     |                                                                 |          | Inventories         |           |                             | (442,000   | )          |           |         | 1,916,000 |  
|                                                                                     |                                                                 |          | Prepaid expenses    |           |                             | 47,000     |            |           |         | (257,000  | )
|                                                                                     |                                                                 |          | Accounts payable    |           |                             | (1,738,000 | )          |           |         | (553,000  | )
|                                                                                     |                                                                 |          | Accrued liabilities |           |                             | 295,000    |            |           |         | 343,000   |  
|                                                                                     |                                                                 |          |                     |           |                             |            |            |          
|Net cash provided by (used in) operating activities                                  |                                                                 |          | 1,252,000           |           |                             |            | (1,156,000 | )        
|                                                                                     |                                                                
|Cash flows from investing activities:                                                |                                                                 |          |                     |           |                             |            |            |          
|                                                                                     | Purchases of property, plant and equipment                      |          |                     | (631,000  | )                           |            |            | (643,000  | )      
|                                                                                     | Purchases of intangibles                                        |          |                     | (80,000   | )                           |            |            | (60,000   | )      
|                                                                                     | Decrease in security deposits                                   |          |                     | 9,000     |                             |            |            |          |        
|                                                                                     | Decrease (increase) in other assets                             |          |                     | 176,000   |                             |            |            | (223,000  | )      
|                                                                                     |                                                                 |          |                     |           |                             |            |            |          
|Net cash used in investing activities                                                |                                                                 |          | (526,000            | )         |                             |            | (926,000   | )        
|                                                                                     |                                                                
|Cash flows from financing activities:                                                |                                                                 |          |                     |           |                             |            |            |          
|                                                                                     | Payments on long-term obligations                               |          |                     | (90,000   | )                           |            |            | (193,000  | )      
|                                                                                     | Proceeds from stock issuance                                    |          |                     | 113,000   |                             |            |            | 443,000   |        
|                                                                                     |                                                                 |          |                     |           |                             |            |            |          
|Net cash provided by financing activities                                            |                                                                 |          | 23,000              |           |                             |            | 250,000    |          
|                                                                                     |                                                                 |          |                     |           |                             |            |            |          
|Net increase (decrease) in cash and cash equivalents                                 |                                                                 |          | 749,000             |           |                             |            | (1,832,000 | )        
|Cash and cash equivalents at beginning of period                                     |                                                                 |          | 2,528,000           |           |                             |            | 2,310,000  |          
|                                                                                     |                                                                 |          |                     |           |                             |            |            |          
|Cash and cash equivalents at end of period                                           |                                                                 | $        | 3,277,000           |           |                             | $          | 478,000    |          
|                                                                                     |                                                                 |          |                     |           |                             |            |            |          
|Supplemental disclosure of cash flow information:                                    |                                                                 |          |                     |           |                             |            |            |          
|                                                                                     | Cash paid during the period for:                                |          |                     |           |                             |            |            |           |        
|                                                                                     |                                                                 | Interest |                     | $         | 541,000                     |            |            | $         | 582,000 |          

See accompanying notes to condensed consolidated financial statements.

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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

March 31, 2003

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 March 31,
2003, and the results of operations for the three and nine month periods ended
March 31, 2003 and 2002 and cash flows for the nine month periods ended March
31, 2003 and 2002. The results of operations for the nine months ended March
31, 2003 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:

|                 |  |           |            |          |  |   |            | 
|---------------- |  | --------- | ---------- | -------- |  | - | ---------- | 
|                 |  | March 31, |            | June 30,
|                 |  | 2003      |            | 2002    
|                 |  |           |            |         
|Raw materials    |  | $         | 2,993,000  |          |  | $ | 2,902,000  | 
|Work in progress |  |           | 306,000    |          |  |   | 272,000    | 
|Finished goods   |  |           | 12,269,000 |          |  |   | 11,952,000 | 
|                 |  |           |            |          |  |   |            | 
|                 |  | $         | 15,568,000 |          |  | $ | 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.)

March 31, 2003

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 March 31, 2003 and a $40,000 impairment was recorded
for the nine month period ended March 31, 2003.

Intangibles consisted of the following:

|                         |  |           |            |          |  |   |            |  
|------------------------ |  | --------- | ---------- | -------- |  | - | ---------- | -
|                         |  | March 31, |            | June 30,
|                         |  | 2003      |            | 2002    
|                         |  |           |            |         
|Goodwill                 |  | $         | 8,245,000  |          |  | $ | 8,245,000  |  
|Customer list            |  |           | 725,000    |          |  |   | 725,000    |  
|Patents                  |  |           | 387,000    |          |  |   | 387,000    |  
|Accumulated amortization |  |           | (4,672,000 | )        |  |   | (4,507,000 | )
|                         |  |           |            |          |  |   |            |  
|                         |  | $         | 4,685,000  |          |  | $ | 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 ferric hyaluronan-based product. Lifecore has granted ETHICON
exclusive worldwide marketing rights through 2008 to the products developed by
Lifecore within defined fields of use. On March 27, 2003, the Company
announced that GYNECARE voluntarily suspended global marketing and sales of
INTERGEL Solution and has voluntarily withdrawn the product from the market in
order to assess information obtained from postmarketing experience with the
device. The assessment will include a review of technical issues, surgical
techniques, and circumstances associated with the postmarketing events,
including reports from off-label use. Since the launch of the product in
August of 1998 to February 2003, the worldwide complaint rate has been 0.29
percent of units sold. The contribution of the device to these events is
unknown. The Company currently expects that such review will be conducted
expeditiously and that the product will return to the market following
completion of the review and implementation of any appropriate action. As a
result of GYNECARES voluntary withdrawal of INTERGEL Solution from the market,
the Company expects to reduce production levels beginning the quarter ending
June 30, 2003, which will result in increased unused manufacturing capacity
charges. Further, the Company expects increased expenditures related to the
process for assessment of information obtained from postmarketing experience
with the device. Management does not believe there has been an impairment of
assets as of March 31, 2003.



|* |  | Trademark of ETHICON, INC.
|- |  | --------------------------

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 (cont.)

March 31, 2003

NOTE E  LINE OF CREDIT

The Company has a $5,000,000 credit facility with a bank which has a maturity
date of December 31, 2005. The agreement allows for advances against eligible
accounts receivable and inventories, subject to a borrowing base certificate.
Interest is accrued at the prime rate at March 31, 2003, which was 4.25% and at
the prime rate plus 1%, or 5.75%, as of June 30, 2002 under a previous credit
facility agreement. At March 31, 2003 and June 30, 2002, there were no
balances outstanding under the line of credit. The terms of the agreement
require the Company to comply with various financial covenants including
minimum tangible net worth, liabilities to tangible net worth ratio and
profitability. At March 31, 2003 and June 30, 2002, the Company was in
compliance with all covenants.

NOTE F  STOCK PLAN INFORMATION

The Company has various stock option plans that provide for the granting of
stock options to officers, key employees and directors. The Company accounts
for stock-based compensation using the intrinsic value method prescribed in APB
No. 25, Accounting for Stock Issued to Employees, whereby the options are
granted at market price, and therefore no compensation costs are recognized.
The Company has elected to retain its current method of accounting as described
above and has adopted the disclosure requirements of SFAS Nos. 123 and 148.
If compensation expense for the Companys various stock option plans had been
determined based upon the projected fair values at the grant dates for awards
under those plans in accordance with SFAS No. 123, the Companys pro-forma net
income (loss), and basic and diluted income (loss) per common share would have
been as follows:

|                                                                                                                                  |                       |   |                              |      |                             |   |          |       |      |   |         |      |  |   |            |       |  
|--------------------------------------------------------------------------------------------------------------------------------- | --------------------- | - | ---------------------------- | ---- | --------------------------- | - | -------- | ----- | ---- | - | ------- | ---- |  | - | ---------- | ----- | -
|                                                                                                                                  |                       |   | Three months ended March 31, |      | Nine months ended March 31,
|                                                                                                                                  |                       |   |                              |      |                            
|                                                                                                                                  |                       |   | 2003                         |      | 2002                        |   | 2003     |       | 2002
|                                                                                                                                  |                       |   |                              |      |                             |   |          |       |     
|Net income (loss), as reported                                                                                                    |                       | $ | 947,000                      |      |                             | $ | (657,000 | )     |      | $ | 213,000 |      |  | $ | (4,669,000 | )    
|Deduct: Total stock-based employee compensation
expense determined under fair value method for
awards, net of related tax effects |                       |   | (6,000                       | )    |                             |   | (12,000  | )     |      |   | (73,000 | )    |  |   | (521,000   | )    
|                                                                                                                                  |                       |   |                              |      |                             |   |          |       |      |   |         |      |  |   |            |      
|Pro forma net income (loss)                                                                                                       |                       | $ | 941,000                      |      |                             | $ | (669,000 | )     |      | $ | 140,000 |      |  | $ | (5,190,000 | )    
|                                                                                                                                  |                       |   |                              |      |                             |   |          |       |      |   |         |      |  |   |            |      
|Net income (loss) per common equivalent share:                                                                                    |                       |   |                              |      |                             |   |          |       |      |   |         |      |  |   |            |      
|                                                                                                                                  | Basic  as reported   |   | $                            | 0.07 |                             |   | $        | (0.05 | )    |   | $       | 0.02 |  |   | $          | (0.37 | )
|                                                                                                                                  | Basic  pro-forma     |   | $                            | 0.07 |                             |   | $        | (0.05 | )    |   | $       | 0.01 |  |   | $          | (0.41 | )
|                                                                                                                                  | Diluted  as reported |   | $                            | 0.07 |                             |   | $        | (0.05 | )    |   | $       | 0.02 |  |   | $          | (0.37 | )
|                                                                                                                                  | Diluted  pro-forma   |   | $                            | 0.07 |                             |   | $        | (0.05 | )    |   | $       | 0.01 |  |   | $          | (0.41 | )

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 (cont.)

March 31, 2003

NOTE G 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 and nine month periods ended March 31, 2003 the Company reported
net income and as a result, 77,172 and 85,289 common share equivalents,
respectively, were included in the computation of diluted net income per share.
For the three and nine month periods ended March 31, 2002 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 and nine month periods ended March 31, 2002,
351,278 and 279,865 common share equivalents, respectfully, would have been
included in the computation of diluted net income per share.

Options to purchase 2,510,494 and 2,501,494 shares of common stock with a
weighted average exercise price of $12.69 and $12.71 for the three-month and
nine-month periods ended March 31, 2003 and options to purchase 1,411,168 and
1,549,918 shares of common stock with a weighted average exercise price of
$16.07 and $15.47 for the three-month and nine-month periods ended March 31,
2002, 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.

NOTE H 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 March 31, |           | Nine months ended March 31,
|                              |                           |   |                              |           |                            
|                              |                           |   | 2003                         |           | 2002                        |   | 2003       |           | 2002
|                              |                           |   |                              |           |                             |   |            |           |     
|Net sales                     |                           |   |                              |           |                             |   |            |           |      |   |            |            |   |   |            |           
|                              | Hyaluronan products       |   | $                            | 4,547,000 |                             |   | $          | 4,717,000 |      |   | $          | 11,656,000 |   |   | $          | 10,270,000 |  
|                              | Oral restorative products |   |                              | 7,286,000 |                             |   |            | 5,537,000 |      |   |            | 19,411,000 |   |   |            | 16,802,000 |  
|                              |                           |   |                              |           |                             |   |            |           |      |   |            |            |   |   |            |           
|                              |                           | $ | 11,833,000                   |           |                             | $ | 10,254,000 |           |      | $ | 31,067,000 |            |   | $ | 27,072,000 |           
|                              |                           |   |                              |           |                             |   |            |           |      |   |            |            |   |   |            |           
|Income (loss) from operations |                           |   |                              |           |                             |   |            |           |      |   |            |            |   |   |            |           
|                              | Hyaluronan products       |   | $                            | 595,000   |                             |   | $          | 93,000    |      |   | $          | 732,000    |   |   | $          | (3,239,000 | )
|                              | Oral restorative products |   |                              | 377,000   |                             |   |            | (544,000  | )    |   |            | (177,000   | ) |   |            | (899,000   | )
|                              |                           |   |                              |           |                             |   |            |           |      |   |            |            |   |   |            |           
|                              |                           | $ | 972,000                      |           |                             | $ | (451,000   | )         |      | $ | 555,000    |            |   | $ | (4,138,000 | )         
|                              |                           |   |                              |           |                             |   |            |           |      |   |            |            |   |   |            |           

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 (cont.)

March 31, 2003

NOTE I 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, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure. SFAS No. 148 amends SFAS
No. 123, Accounting for Stock-Based Compensation, to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of Accounting Principles Board (APB)
Opinion No. 28, Interim Financial Reporting, to require pro-forma disclosure in
interim financial statements by companies that elect to account for stock-based
compensation using the intrinsic value method prescribed in APB Opinion No. 25.
The Company continues to use the intrinsic value method of accounting for
stock-based compensation. As a result, the transition provisions will not have
an effect on the Companys consolidated financial statements. The Companys
interim disclosures are presented in Note F.

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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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 No. 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.

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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 March 31, 2003 Compared to Three Months Ended March 31,
2002:

|                        |                            |   |            |         |                  |   |              |         |      |   |           |           |      |   |           |           |  |   |            |           |  |   |            |           | 
|----------------------- | -------------------------- | - | ---------- | ------- | ---------------- | - | ------------ | ------- | ---- | - | --------- | --------- | ---- | - | --------- | --------- |  | - | ---------- | --------- |  | - | ---------- | --------- | 
|                        |                            |   | Hyaluronan |         | Oral Restorative |   |              |         |      |   |           |           |     
|                        |                            |   | Division   |         | Division         |   | Consolidated
|                        |                            |   |            |         |                  |   |             
|                        |                            |   | 2003       |         | 2002             |   | 2003         |         | 2002 |   | 2003      |           | 2002
|                        |                            |   |            |         |                  |   |              |         |      |   |           |           |     
|Net sales               |                            | $ | 4,547,000  |         |                  | $ | 4,717,000    |         |      | $ | 7,286,000 |           |      | $ | 5,537,000 |           |  | $ | 11,833,000 |           |  | $ | 10,254,000 |          
|Cost of goods sold      |                            |   | 2,619,000  |         |                  |   | 3,278,000    |         |      |   | 2,794,000 |           |      |   | 2,375,000 |           |  |   | 5,413,000  |           |  |   | 5,653,000  |          
|                        |                            |   |            |         |                  |   |              |         |      |   |           |           |      |   |           |           |  |   |            |           |  |   |            |          
|Gross profit            |                            |   | 1,928,000  |         |                  |   | 1,439,000    |         |      |   | 4,492,000 |           |      |   | 3,162,000 |           |  |   | 6,420,000  |           |  |   | 4,601,000  |          
|                        |                            |   |            |         |                  |   |             
|Operating expenses      |                            |   |            |         |                  |   |              |         |      |   |           |           |      |   |           |           |  |   |            |           |  |   |            |          
|                        | Research and development   |   |            | 668,000 |                  |   |              | 815,000 |      |   |           | 222,000   |      |   |           | 242,000   |  |   |            | 890,000   |  |   |            | 1,057,000 | 
|                        | Marketing and sales        |   |            | 164,000 |                  |   |              | 54,000  |      |   |           | 2,990,000 |      |   |           | 2,724,000 |  |   |            | 3,154,000 |  |   |            | 2,778,000 | 
|                        | General and administrative |   |            | 501,000 |                  |   |              | 477,000 |      |   |           | 903,000   |      |   |           | 740,000   |  |   |            | 1,404,000 |  |   |            | 1,217,000 | 
|                        |                            |   |            |         |                  |   |              |         |      |   |           |           |      |   |           |           |  |   |            |           |  |   |            |          
|                        |                            |   | 1,333,000  |         |                  |   | 1,346,000    |         |      |   | 4,115,000 |           |      |   | 3,706,000 |           |  |   | 5,448,000  |           |  |   | 5,052,000  |          
|                        |                            |   |            |         |                  |   |              |         |      |   |           |           |      |   |           |           |  |   |            |           |  |   |            |          
|Operating income (loss) |                            | $ | 595,000    |         |                  | $ | 93,000       |         |      | $ | 377,000   |           |      | $ | (544,000  | )         |  | $ | 972,000    |           |  | $ | (451,000   | )        
|                        |                            |   |            |         |                  |   |              |         |      |   |           |           |      |   |           |           |  |   |            |           |  |   |            |          

Net sales for the quarter ended March 31, 2003 increased $1,579,000 or 15% as
compared to the same quarter of last fiscal year. Hyaluronan product sales for
the current quarter decreased $170,000 or 4% as compared to the same quarter of
last fiscal year. The sales decrease was due to lower veterinary and
gynecologic hyaluronan shipments. Oral restorative product sales for the
current quarter increased $1,749,000 or 32% compared to the same quarter of
last fiscal year. International sales of oral restorative products increased
50% and domestic sales increased 17% as compared to the same quarter of last
fiscal year.

Consolidated gross margin increased to 54% for the current quarter from 45% for
the same quarter of last fiscal year. The gross margin for the Hyaluronan
Division increased to 42% from a gross margin of 31% due to absorption of
unused manufacturing capacity charges associated with increased hyaluronan
production and product mix. The gross margin for the Oral Restorative Division
increased to 62% for the current quarter from 57% for the same quarter of last
fiscal year. The gross margin increase is due to sales mix and reduced
material costs.

Research and development expenses decreased $167,000 or 16% 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 $376,000 or 14% in the current quarter
as compared to the same quarter of last fiscal year due to increased costs
associated with oral restoratives international expansion.

General and administrative expenses increased $187,000 or 15% 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 oral
restoratives 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 $181,000 or 88% for the current quarter as compared
to the same quarter of last fiscal year. The decrease is primarily due to the
$137,000 increase in other income from currency gains realized on Euro
denominated intercompany transactions.

Nine Months Ended March 31, 2003 Compared to Nine Months Ended March 31, 2002:

|                        |                            |   |            |           |                  |   |              |           |      |   |            |           |      |   |            |           |  |   |            |           |  |   |            |           | 
|----------------------- | -------------------------- | - | ---------- | --------- | ---------------- | - | ------------ | --------- | ---- | - | ---------- | --------- | ---- | - | ---------- | --------- |  | - | ---------- | --------- |  | - | ---------- | --------- | 
|                        |                            |   | Hyaluronan |           | Oral Restorative |   |              |           |      |   |            |           |     
|                        |                            |   | Division   |           | Division         |   | Consolidated
|                        |                            |   |            |           |                  |   |             
|                        |                            |   | 2003       |           | 2002             |   | 2003         |           | 2002 |   | 2003       |           | 2002
|                        |                            |   |            |           |                  |   |              |           |      |   |            |           |     
|Net sales               |                            | $ | 11,656,000 |           |                  | $ | 10,270,000   |           |      | $ | 19,411,000 |           |      | $ | 16,802,000 |           |  | $ | 31,067,000 |           |  | $ | 27,072,000 |          
|Cost of goods sold      |                            |   | 6,707,000  |           |                  |   | 8,901,000    |           |      |   | 7,780,000  |           |      |   | 7,010,000  |           |  |   | 14,487,000 |           |  |   | 15,911,000 |          
|                        |                            |   |            |           |                  |   |              |           |      |   |            |           |      |   |            |           |  |   |            |           |  |   |            |          
|Gross profit            |                            |   | 4,949,000  |           |                  |   | 1,369,000    |           |      |   | 11,631,000 |           |      |   | 9,792,000  |           |  |   | 16,580,000 |           |  |   | 11,161,000 |          
|                        |                            |   |            |           |                  |   |             
|Operating expenses      |                            |   |            |           |                  |   |              |           |      |   |            |           |      |   |            |           |  |   |            |           |  |   |            |          
|                        | Research and development   |   |            | 2,171,000 |                  |   |              | 3,132,000 |      |   |            | 687,000   |      |   |            | 688,000   |  |   |            | 2,858,000 |  |   |            | 3,820,000 | 
|                        | Marketing and sales        |   |            | 517,000   |                  |   |              | 183,000   |      |   |            | 8,542,000 |      |   |            | 7,730,000 |  |   |            | 9,059,000 |  |   |            | 7,913,000 | 
|                        | General and administrative |   |            | 1,529,000 |                  |   |              | 1,293,000 |      |   |            | 2,579,000 |      |   |            | 2,273,000 |  |   |            | 4,108,000 |  |   |            | 3,566,000 | 
|                        |                            |   |            |           |                  |   |              |           |      |   |            |           |      |   |            |           |  |   |            |           |  |   |            |          
|                        |                            |   | 4,217,000  |           |                  |   | 4,608,000    |           |      |   | 11,808,000 |           |      |   | 10,691,000 |           |  |   | 16,025,000 |           |  |   | 15,299,000 |          
|                        |                            |   |            |           |                  |   |              |           |      |   |            |           |      |   |            |           |  |   |            |           |  |   |            |          
|Operating income (loss) |                            | $ | 732,000    |           |                  | $ | (3,239,000   | )         |      | $ | (177,000   | )         |      | $ | (899,000   | )         |  | $ | 555,000    |           |  | $ | (4,138,000 | )        
|                        |                            |   |            |           |                  |   |              |           |      |   |            |           |      |   |            |           |  |   |            |           |  |   |            |          

Net sales for the nine months ended March 31, 2003 increased $3,995,000 or 15%
as compared to the same period of last fiscal year. Hyaluronan product sales
for the current period increased $1,386,000 or 13% as compared to the same
period of last fiscal year. The sales increase was due to higher ophthalmic
and orthopedic hyaluronan shipments. Oral restorative product sales for the
current period increased $2,609,000 or 16% compared to the same period of last
fiscal year. International sales of oral restorative products increased 30% and
domestic sales increased 5% compared to the same period of last fiscal year.

Consolidated gross margin increased to 53% for the current period from 41% for
the same period of last fiscal year. The gross margin for the Hyaluronan
Division increased to 42% from a gross margin of 13% due to absorption of
unused manufacturing capacity charges associated with increased hyaluronan
production and product mix. The gross margin for the Oral Restorative Division
increased to 60% for the current period from 58% for the same quarter of last
fiscal year. The gross margin increase is due to sales mix and reduced
material costs.

Research and development expenses decreased $962,000 or 25% 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 $1,146,000 or 14% in the current period
as compared to the same period of last fiscal year due to an increased costs
associated with oral restoratives international expansion.

General and administrative expenses increased $542,000 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 oral
restoratives international expansion.

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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 $189,000 for the current period as compared to the
same period of last fiscal year. The decrease is primarily due to the $223,000
increase in other income from 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 nine month period ended March 31, 2003, the Company had positive cash
flow from operations of $1,252,000. Cash flow from operations was positive in
fiscal years 2002, 2001 and 2000. Although decreasing significantly in the
last two quarters, charges for unused manufacturing 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. Prior to the current fiscal year, charges for unused capacity were
due to an unanticipated delay in receiving INTERGEL Solution marketing approval
in the U.S. from the FDA. As a result of GYNECARES voluntary withdrawal of
INTERGEL Solution from the market (see NOTE D), the Company expects to reduce
production levels beginning the quarter ending June 30, 2003, which will result
in increased unused manufacturing capacity charges. Further, the Company
expects increased expenditures related to the process for assessment of
information obtained from postmarketing experience with the device. 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 a $5,000,000 credit facility with a bank which has a maturity
date of December 31, 2005. The agreement allows for advances against eligible
accounts receivable and inventories, subject to a borrowing base certificate.
Interest is accrued at the prime rate at March 31, 2003, which was 4.25% and at
the prime rate plus 1%, or 5.75%, as of June 30, 2002 under a previous credit
facility agreement. At March 31, 2003 and June 30, 2002, there were no
balances outstanding under the line of credit. The terms of the agreement
require the Company to comply with various financial covenants including
minimum tangible net worth, liabilities to tangible net worth ratio and
profitability. At March 31, 2003 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 sustain 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.

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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 refer to the potential return of INTERGEL Solution to the
market and the timing of such return; the extent of the impact on Hyaluronan
Division margins from increased unused manufacturing capacity charges; the
level of expenditures related to process associated with the assessment of
information obtained from postmarketing experience with the device; the
likelihood of adequate cash flow and access to financial markets; expected
production levels; 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 assessing information
obtained from postmarketing experience with INTERGEL Solution, 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.

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LIFE 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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LIFE BIOMEDICAL, INC. AND SUBSIDIARIES




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])                                                                                                                                                                                          
|
| | 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                                                                                                                                                                                                         
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | A report on Form 8-K was filed on April 17, 2003 (dated April 15,
2003) to report under Item 9 the Companys third quarter financial
results.                                                                               
|
| |    |  | A report on Form 8-K was filed on March 31, 2003 (dated March 27,
2003) to report under Item 9 that Gynecare voluntarily suspends
marketing and sales of anti-adhesion product pending evaluation of
postmarketing events.

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LIFE BIOMEDICAL, INC. AND SUBSIDIARIES
PART II  FINANCIAL 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: May 12, 2003 |  | /s/ James W. BrackeJames W. Bracke
   President & Chief Executive Officer                                                            | 
|                   
|Dated: May 12, 2003 |  | /s/ Dennis J. AllinghamDennis 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: May 12, 2003 |  | By    /s/ James W. BrackeJames W. Bracke, Ph.D.President, Chief Executive Officer
(principal executive officer), Secretary and Director | 

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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: May 12, 2003 |  | By        /s/ Dennis J. AllinghamDennis J. AllinghamExecutive Vice President and Chief Financial Officer
(principal financial officer)

20