<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ----------------------
[Mark One]                         FORM 10-K

   [x]             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                    For the fiscal year ended March 31, 2001

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

                         Commission file number 1-12506
                         ------------------------------
                               LUCILLE FARMS, INC.
             (Exact name of Registrant as specified in its Charter)

               Delaware                              13-2963923
      (State of incorporation)          (I.R.S. employer identification no.)

      150 River Road, P.O. Box 517                 (973) 334-6030
      Montville, NJ 07045                 (Registrant's telephone number)
      (Address of principal executive office)

           Securities registered pursuant to Section 12(b) of the Act:
                                      None
                                     ------
          Securities registered pursuant to Section 12 (g) of the Act:
                     Common Stock, par value $.001 per share
                         Preferred Stock Purchase Rights
                               (Titles of Classes)

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

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $2,613,207 based on the average bid and ask price as reported by
NASDAQ on June 18, 2001. Shares held by each officer, director, and person who
owns 10% or more of the Registrant's outstanding common stock have been excluded
in that such persons may be deemed to be affiliates. The determination of
affiliate status is not necessarily a conclusive determination for other
purposes.

The number of shares of the Registrant's common stock outstanding as of June 18,
2001 was 2,971,342.

                       Documents Incorporated by Reference
                       -----------------------------------
                                      None

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                                     PART I
                                   ---------
ITEM  1. BUSINESS

General

      Lucille Farms, Inc. (the "Company") is engaged in the manufacture and
marketing of mozzarella cheese and, to a lesser extent, other Italian variety
cheeses. Utilizing proprietary formulas and processes, the Company has developed
a line of value added, Nutritional cheeses, including reduced fat, fortified,
and organic cheeses. For the fiscal year ended March 31,2001, conventional
mozzarella cheese sales and blends accounted for over 90% of the Company's
revenues. Sales of the Company's Nutritional line of products during these
periods were not significant. The Company's products, which are primarily
manufactured in the Company's production facility in Swanton, Vermont, are made
of natural ingredients.

      The Company's conventional mozzarella cheese is sold primarily to the food
service and industrial segments of the cheese market. The food service segment
includes pizza chains and independent pizzerias, restaurants, recreational
facilities, business feeders, health care facilities, schools and other
institutions which prepare food for on premises consumption. The industrial
segment includes manufacturers that utilize cheese products as an ingredient in
processed foods and frozen entrees and side dishes.

      The Company believes that its proprietary process utilized in its
Nurtitional cheeses can be applied to a wide variety of cheeses and, plans to
continue to develop new healthful products that satisfy consumer taste and
appearance expectations.

      The Company has installed the necessary equipment enabling it to package
retail shredded cheese. The Company is negotiating with several companies to
co-pack their private label retail cheese lines in popular sizes. Additionally,
the Company has developed a distinctive Lucille Farms branded line of retail
cheeses. The Company has begun shipping to retailers in the Northeast United
States. The Company believes its retail sales will enable it to realize the
higher profit margins available in the retail marketplace. At present the
Company is considering other retail opportunities. In 2001, sales to the retail
segment of the cheese market increased to approximately 5% of the Company's
total sales.

 Health and Nutritional Concerns

      During the past twenty years, medical and dietary experts have been
advocating a diet that is lower in saturated fat, cholesterol and sodium as a
means of reducing the risk of heart disease and other health problems. The
public's concern with eating a more healthful diet has increased significantly.

                                       2
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      The Company believes that as public awareness of health and nutrition
continues to grow, consumers will increasingly purchase organic, natural and/or
fortified foods. Accordingly, the Company believes that nutritional cheeses will
represent an increasingly larger share of total cheese sales as a result of
their nutritional advantages over conventional cheeses.

Products

      The Company's products include the following:

      Conventional Cheese Group:

      Conventional Mozzarella. The Company's premium quality, all natural
      mozzarella cheese meets or exceeds all federal and industrial standards
      for purity, freshness, taste, appearance and texture. During the fiscal
      years ended March 31, 1999, 2000 and 2001, conventional mozzarella cheese
      sales and blends accounted for approximately 86%, 89% and 88%,
      respectively, of the Company's sales.

      Conventional Provolone. The Company's provolone is a premium quality, all
      natural cheese that meets or exceeds all federal and industry standards
      for purity, freshness, taste, appearance and texture. During the fiscal
      years ended March 31, 1999, 2000 and 2001, sales of conventional provolone
      accounted for approximately 5%, 4%, and 4%, respectively, of the Company's
      sales.

      Conventional Feta. The Company's Feta is a premium quality, all natural
      cheese that meets or exceeds all federal and industrial standards for
      purity, freshness, taste, appearance and texture. During the fiscal years
      ended March 31, 1999, 2000 and 2001, sales of Feta accounted for less than
      1% of the Company's sales in each of such periods.

      Nutritional Product Group:

      Organic Cheese. The Company is now marketing a line of Organic Cheeses.
      The line includes consumer sized packages of shredded and or/chunk
      Mozzarella, Cheddar, Monterey Jack, Jalapeno Jack, Garlic & Herb, and
      Swiss cheeses, sold to supermarkets, gourmet and health food stores in the
      Northeastern USA.

      Lactose Free Mozzarella: The Company's lactose free Mozzarella looks
      tastes and melts just like conventional Mozzarella, but has no lactose.
      This product is targeted at the millions of Americans who have difficulty
      digesting the lactose in dairy products.

      Mozzi-RITE(TM). The Company manufactures a proprietary mozzarella-style
      cheese substitute made with 97% pasteurized skim milk and 3% canola and
      sunflower oils. Mozzi-RITE(TM) is all natural, cholesterol free and low in
      saturated fat and sodium. A "substitute cheese" must be nutritionally
      equal or superior to its conventional counterpart,

                                       3
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      whereas "imitation cheese" (which the Company does not produce) is
      nutritionally inferior to conventional cheese. The Company believes that
      its Mozzi-RITE(TM) cheese substitute has the taste, mouth feel, texture,
      handling and cooking characteristics of conventional mozzarella.
      Mozzi-RITE(TM) differs from "conventional cheese" in that oils are used in
      its manufacture, whereas butterfat containing cholesterol and saturated
      fat is used in the manufacture of conventional cheese. To the Company's
      knowledge, there is currently no other all-natural, cholesterol-free
      mozzarella-style cheese substitutes on the market.

      Tasty-Lite Cheese(TM) - Fat Free. This all natural mozzarella cheese is
      made from 100% pasteurized skim milk, and contains no fat or cholesterol,
      is low in sodium and has reduced calories compared to conventional
      mozzarella. The Company is not aware of any other all-natural, real
      mozzarella cheese available that is both fat and cholesterol free.

      Tasty-Lite Cheese(TM) - Light. This all-natural mozzarella cheese is made
      from 100% pasteurized part-skim milk and contains nearly 60% less fat than
      whole milk mozzarella, and 50% less fat than conventional part-skim
      mozzarella. This product is low in cholesterol and sodium. Its fat
      content, however, is greater than the Company's Tasty-Light Cheese(TM) -
      Low Fat nutritional product.

      During the fiscal years ended March 31, 1999, 2000 and 2001, the Company's
      nutritional products accounted for approximately 1%, 1% and 1%,
      respectively, of the Company's total sales. While the Company's
      conventional cheeses are viewed as commodity items, the Company believes
      that its nutritional line should be viewed as "premium" products, which
      enables the Company to charge higher prices.

      Proprietary Formulas and Processes; New Product Development

      The Company's nutritional products are made using the Company's formulas
and processes, which are believed to be proprietary. The formulas and processes
for the Company's nutritional products were designed and developed by the
Company's founders specifically for these products. The rights to these formulas
and processes have been assigned by such officers to the Company. These
proprietary processes can be applied to a wide variety of cheese, and the
Company's future plans include developing other varieties of nutritional cheeses
and products (e.g., provolone, ricotta, feta and cheddar). However, there can be
no assurance that the Company will be successful in such development, or that,
if developed, such products will be accepted by the marketplace or prove
profitable.

Production Facilities

      The Company currently produces substantially all of its products at its
manufacturing plant in Swanton, Vermont.The Swanton facility, located in
Franklin County, Vermont's highest volume dairy producing area, operates 24
hours a day, 6 days a week and ships approximately 550,000 pounds of bulk
products per week. The plant currently has 99 full-time employees. The Company
has equipment for shredding, dicing, slicing, vacuum packaging, gas flush bag
packaging, and labeling its products.The manufacturing equipment is

                                       4
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of modern design and assembled in a flow through arrangement for a labor saving
operation. The production operation has been established in such a way that
changes in cheese orders, whether size, specification, packaging, labeling or
delivery dates, can be accomplished without significant effort or disruption of
operations. Due to recent improvements, the Company's facility now has the
capacity to produce approximately 600,000 pounds of bulk product per week. In
the event additional capacity is required, the Company may either (a) contract
out its excess production to, and/or rent plant time from, other manufacturers
("co-packing"), or (b) further expand its current plant facilities, subject to
appropriate financing, for which it believes it has sufficient acreage and
technical capabilities. However, there can be no assurance that co-packing
arrangements can be effectuated, or, if effectuated, that such arrangements
could be done in a timely manner and at a reasonable cost.

Whey Drying Facility

      In 1999 the Company completed construction of, and began operating, a
10,000 square foot whey drying facility adjacent to its Swanton, VT cheese
plant. This project was built in conjunction with a leading ingredient
processing company, who provided the drying equipment and has agreed to purchase
all of the whey produced at the facility.

      Whey is the residue of making cheese. It consists of water, protein,
calcium and other minerals. In the past, whey was regarded as an environmental
pollutant, and its disposal was expensive.

      Recently, whey has become a valuable product, and is now used in animal
feeds, infant formulas, protein powders, ice cream and a variety of other
products.

      The facility dries whey into a product referred to as whey popcorn, which
is milled and mixed with other ingredients for animal feed. The plant was
designed to enable the Company to upgrade it in the future in order to take
advantage of emerging new technologies in whey protein fractionalization. The
Company's ability to produce this higher value whey protein has not been proven
and there can be no assurance that this upgrade will occur.

                                       5
<PAGE>


Quality Control

      The Company is supplied with milk by the largest milk cooperative
headquartered in Vermont. Quality control starts on the local farms, which
produce the milk for the cooperative. The milk is delivered to the Company
directly from the farms on a regular and timely basis. The Company tests all
milk received. Throughout the production process, the Company subjects its
products to quality control inspection and testing in order to satisfy federal
regulation, meet customer specifications and assure consistent product quality.
The Company currently employs two persons qualified to perform the necessary
testing as prescribed by state, federal and the Company's quality standards and
specifications. Such tests are performed at the Company's on-site laboratory. A
sample of each product batch is tested promptly after the manufacture and again
before shipment for various characteristics, including taste, color, acidity,
surface tension, melt, stretch and fat retention. On a frequent basis, random
samples are sent to qualified independent labs to test for bacteria and other
microorganisms. Federal and state regulatory agencies also perform regular
inspections of the Company's products and facilities.

Raw Materials
      At present, there are adequate supplies of raw materials, primarily milk,
utilized by the Company in manufacturing its products and the Company expects
such adequate supplies to continue to be available.The Company has milk supply
contracts with several milk cooperatives and has been able to purchase as much
milk as needed for its production. The cooperatives also ensure the Company a
flexible mix of milk products, besides direct farm milk, such as extra milk,
skim milk, condensed skim milk or dry milk powder. This flexibility is an
advantage in cheese production. It enables the Company to switch from one milk
product to another on short notice with no down time.

Markets and Customers
      The Company's products are sold primarily to the food service and
industrial segment of the cheese market. The Company has begun to market its
products to the retail segment of the cheese market beginning in July of 1999,
primarily to supermarkets in the Northeastern U.S.

      The food service segment of the cheese market includes pizza chains and
independent pizzerias, restaurants, recreational facilities, transportation
hubs, business feeders, health care facilities, schools and other institutions
which utilize the company's products as ingredients in preparing foods for on
premise consumption. The Company sells its products to the food service segment
of the cheese market through a network of 20 non-exclusive food brokers that
sell to approximately 140 independent distributors that service the industry in
over 27 states and Washington, D.C. The bulk of the Company's products
distributed in the food service market are utilized by regional pizza chains and
independent pizza shops. For the fiscal years ended March 31, 1999, 2000 and
2001, sales of the Company's products to the food service segment of the cheese
market accounted for approximately 70% to 80% of revenues. Virtually all of such
sales were of the Company's conventional cheeses. In the fiscal years ended
March 31, 2001, 2000 and 1999 one customer, Lisanti Foods, Inc., accounted for
approximately 10%, 11% and 15% of sales, respectively.

                                       6
<PAGE>


      In the industrial segment of the cheese market, the Company sells its
products to manufacturers for use as an ingredient in processed foods, such as
frozen and refrigerated pizzas, a variety of Italian specialty convenience
foods, and general frozen entrees and side dishes. The finished processed foods
are then generally sold to retail supermarkets and grocery accounts under
various brand names. The majority of the Company's sales of its conventional
cheese and nutritional products to the industrial market are made directly by
the Company's in-house sales staff. For the fiscal years ended March 31, 1999,
2000 and 2001, sales of the Company's products to the industrial segment of the
cheese market accounted for approximately 9% to 19% of revenues. The retail
segment of the cheese market consists of product sold to customers for
distribution to independent and chain supermarkets, natural food stores,
warehouse club stores, and other food retailers. The retail segment accounted
for about 5% and 1% of total sales in 2001 and 2000, respectively.


Sales and Marketing

      The thrust of the Company's sales and marketing efforts have recently
shifted to emphasize its retail and shredded cheese products. We believe that
the retail and shredded cheese market offers the Company a significant marketing
opportunity. The Company is seeking to establish these products as a substantial
portion of its sales, but there can be no assurance that it will be successful
in doing so.

Competition
      The Company faces intense competition. The conventional cheese market is a
commodity, price-sensitive industry, with numerous small local, medium-sized
regional and large national competitors. The Company competes with many
established national manufactures of conventional cheese, including Kraft, Inc.,
Borden, Inc., Sargento Foods, Inc., Suprema Foods and Sorrento Cheese Company
Inc. There are also a number of national dairy cooperatives, including
Dairymen's Creamery Association Inc., Agri-Mark and D.F.A. Inc. Many of these
competitors have significantly greater financial and other resources than the
Company.

      The principal competition for the Company's nutritional products group
include many of the same major competitors listed above in the conventional
cheese industry, in addition to Century Foods, Galaxy Foods, Land O' Lakes Inc.
and Stella Foods, Inc.

         The Company's nutritional products are positioned as premium products
and are generally higher in price than certain similar competitive products. The
Company believes that the principal competitive factors in the marketing of
cheese products are quality, customer service, price and brand recognition.
While the Company believes that its products compete favorably with respect to
these factors and believes that its anticipated increased sales and marketing
efforts will result in greater product recognition and market penetration for
its existing and new products, there can be no assurance that the Company will
be able to compete successfully, particularly with respect to its new products
and its entry into new markets.

                                       7
<PAGE>


Trademarks and Patents
      The Company owns the trademarks Lucille Farms(TM), Monte Carlo(TM),
Mozzi-RITE(TM), and Tasty-Lite Cheese(TM) for its products. In addition the
Company is currently pursuing trademark protection for a number of other
potential names for existing and planned new products. The Company believes
these trademarks are an important means of establishing consumer recognition for
the Company and its products. However there can be no assurance as to the degree
that these trademarks offer protection to the Company, or that the Company will
have the financial resources to engage in litigation against any infringement of
its trademarks, or as to the outcome of any litigation if commenced.

         Although the Company believes its formulas, processes and technology
for its nutritional products are proprietary, the Company has not sought and
does not intend to seek patent protection for such technology. In not seeking
patent protection, the Company is instead relying on the complexity of its
technology, trade secrecy laws and employee confidentially agreements. However,
there can be no assurance that other companies will not acquire information
which the Company considers to be proprietary or will not independently develop
equivalent or superior products or technology and obtain patents or similar
rights with respect thereto. Although the Company believes that its technology
has been independently developed and does not infringe upon the patents of
others, certain components of the Company's manufacturing processes could
infringe existing or future patents, in which event the Company may be required
to modify its processes or obtain a license. No assurance can be given that the
Company will be able to do so in a timely manner or upon acceptable terms and
conditions, and the failure to do either of the forgoing could have a material
adverse effect on the Company.

Government Regulation
      The dairy industry is subject to extensive federal, state and local
government regulation, including the Food and Drug Administration ("FDA"), the
United States Department of Agriculture, the State of Vermont Department of
Agriculture and the Vermont Environmental Protection Agency, regarding the
quality, purity, manufacturing, marketing, advertising, labeling and
distribution of food products. The Company's plant is subject to regulation and
inspection by these agencies and failure to comply with one or more regulatory
requirements can result in fines and sanctions, including the closing of all or
a portion of the facility until the manufacturer, is able to bring its
operations or products into compliance.

      Food products are also subject to "standard of identity" requirements
mandated by both federal and state agencies to determine the permissible
qualitative and quantitative ingredient content of foods. The Company believes
that all its products meet the applicable FDA standards of identify and that the
various products it labels as "no-cholesterol," "low-sodium," "low saturated
fat," "fat-free," reduced calorie" and "source of calcium" meet the applicable
FDA standards of identity for such designations.

      The Company's manufacturing plant is believed to be operating in
compliance with all regulations, and has all the necessary licenses, permits and
approvals required to operate. The Company currently operates a facility for the
purpose of pre-treating the wastewater generated from the Company's

                                       8
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manufacturing facility. The Company entered into an Agreement with the State of
Vermont, to make significant improvements in its waste water facility. The
improvements have been completed and the Company believes the facility is in
compliance with all regulatory requirements.

Employees

      The Company and its wholly owned manufacturing subsidiary currently employ
106 full-time employees, five of which are executive officers of the Company. Of
such employees, seven are in executive and administrative positions, 94 are in
production and distribution, and five are in clerical positions. Of such
employees, 99 are located at the Swanton, Vermont facility and seven are located
at the Company's executive offices in Montville, New Jersey.

                                       9
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ITEM  2. PROPERTIES

      The Company's Swanton, Vermont manufacturing plant was constructed in 1975
in conjunction with the Target Area Development Corporation (a non-affiliated
industrial development agency), which was to retain title to the plant during a
fixed lease period expiring on December 31, 1999. Under such lease, the Company
was obligated by Target Area Development Corporation to finance the cost of
constructing the plant. On July 5, 1994 the Company exercised its right to
purchase the premises for $1.00 plus the unamortized balance of said loans. A
majority of the machinery and equipment located at the plant is also included
under the above arrangement. The Swanton facility is one floor consisting of
approximately 40,000 square feet.

      The Company currently operates a facility for the purpose of pre-treating
the wastewater generated from the Company's manufacturing facility. The Company
entered into an Agreement with the State of Vermont to make significant
improvements in the wastewater facility. The improvements have been completed
and the Company believes the facility is in compliance with all regulatory
requirements.

      In 1999 the Company completed construction, and began operating, a 10,000
square foot whey drying facility adjacent to its Swanton, VT cheese plant.

      The Company's executive offices, consisting of approximately 1,900 square
feet, are located in Montville, New Jersey. Approximately 1,000 square feet of
such premises are leased from Messrs. Gennaro and Alfonso Falivene and the
estate of Philip Falivene, officers, directors, and/or principal stockholders of
the Company, all of whom own the office condominium unit. The Company currently
pays Messrs. Falivene $1,200 per month rent for such premises, which is the fair
market value for such space, on a month-to-month basis. The remainder of the
Company's premises is occupied pursuant to a month-to-month lease from Messrs.
Gennaro and Alfonso Falivene, and the estate of Philip Falivene, pursuant to
which the Company pays $750 per month rent.

      The Company leases a parcel of land adjacent to the Vermont facility. This
parcel is owned by Messrs. Gennaro and Alfonso Falivene, and the estate of
Philip Falivene. The space is used as an employee parking lot and its use was
required in conjunction with the construction of the new Whey drying facility.
The lease is for a ten year period. Rentals are $750 monthly for the first five
years and $900 monthly for the additional five year period. Rent expense for the
years ended March 31, 2001 and 2000 was $9,000 in each of the years. This lease
has a purchase option to purchase the land at fair market value at the end of
the ten year period. This lease was assigned to the Bank in conjunction with the
Whey Plant financing.

                                       10
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ITEM  3. LEGAL PROCEEDINGS

         The Company is not a party to any material pending legal proceedings.

ITEM  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                                 NOT APPLICABLE

                                       11
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PART II

ITEM  5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS

      The Common Stock trades on the National Association of Securities Dealers
Automated quotation System ("NASDAQ") under the symbol "LUCY". The following
table sets forth the high and low bid quotations reported on NASDAQ for the
Common Stock for the periods indicated.

                                          High        Low

Year Ended March 31, 2001:

First Quarter                             5          3-1/4
Second Quarter                            4-1/8      3
Third Quarter                             4          1-1/4
Fourth Quarter                            3-1/4      1-3/8

Year Ended March 31, 2000:

First Quarter                             3-5/8      2-3/8
Second Quarter                            3-3/8      2-3/8
Third Quarter                             4-3/16     2-1/4
Fourth Quarter                            5-1/2      3-1/2

      The above quotations represent prices between dealers, do not include
retail mark-ups, markdowns or commissions and do not necessarily reflect actual
transactions.

      As of June 18, 2001 there were approximately 120 holders of record of
Common Stock. Since many shares are registered in street name, the number of
beneficial owners is considerably higher.

      The Company has never paid cash dividends on its Common Stock. Payment of
dividends, if any, will be within the discretion of the Company's Board of
Directors and will depend, among other factors, on earnings, capital
requirements and the operating and financial condition of the Company. At the
present time, the Company's anticipated capital requirements are such that it
intends to follow a policy of retaining earnings, if any, in order to finance
its business.

                                       12
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ITEM  6. SELECTED FINANCIAL DATA

      The following tables summarize certain financial data which should be read
in conjunction with the report of the Company's independent auditors and the
more detailed financial statements and the notes thereto which appear elsewhere
herein.

Statement of Operations Data (in thousands, except share and per share data)

                                      Year Ended March 31
                              ----------------------------------------------
                              2001     2000        1999       1998      1997
                              ----     -----       ----       ----      ----

Net Sales .............    $   41,374 $   42,810  $ 46,048 $ 36,175  $ 43,890

Net income (loss) .....       (1,477)        71       729   (2,138)     (935)

Net income (loss) per
share .................         (.50)       .02       .24     (.71)     (.31)

Weighted average common
and common equivalent
shares outstanding ....    2,971,342  2,971,342 2,994,711 3,002,500 3,005,513

Balance Sheet Data (in thousands)

                                           March 31
                              -----------------------------------------------
                                2001      2000      1999      1998      1997
                              -------   -------   -------   -------   -------

Total assets ..............   $17,194   $15,223   $16,156   $11,656   $13,330

Long-term debt and
capital lease
obligations ...............     9,250     7,970     8,163     4,832     2,150
Total liabilities .........    15,924    12,486    13,490     9,645     9,181
Working capital ...........     1,103     1,945     2,746     1,282       713

Stockholders' equity.......     1,270     2,737     2,666     2,011     4,149
         --------------------

                                       13
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ITEM  7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

      Results of Operations

General

      The Company's conventional cheese products, which account for
substantially all of the Company's sales, are commodity items. The Company
prices its conventional cheese products competitively with others in the
industry, which pricing, since May 1997, is referenced to the Chicago Mercantile
Exchange (and was formerly referenced to the Wisconsin Block Cheddar Market).
The price the Company pays for fluid milk, a significant component of cost of
goods sold, is not determined until the month after its cheese has been sold.
While the Company generally can anticipate a change in price of milk, it cannot
anticipate the extent thereof. By virtue of the pricing structure for its cheese
and the competitive nature of the marketplace, the Company cannot always pass
along to the customer the changes in the cost of milk in the price of its
conventional cheese. As a consequence thereof, the Company's gross profit margin
for such cheese is subject to fluctuation, which fluctuation, however slight,
can have a significant effect on profitability.

      The Company is unable to predict any future increase or decrease in the
prices in the Chicago Mercantile Exchange as such markets are subject to
fluctuation based on factors and commodity markets outside of the control of the
Company. Although the cost of fluid milk does tend to move correspondingly with
the Chicago Mercantile Exchange, the extent of such movement and the timing
thereof also is not predictable as it is subject to government control and
support. As a result of these factors, the Company is unable to predict pricing
trends.

Year ended March 31, 2001 compared to the year ended March 31, 2000

      Sales for the year ended March 31, 2001 decreased to $41,374,000 from
$42,810,000 for the comparable period in 2000, an decrease of $1,436,000 (or
3.4%). Approximately $1,205,000 (or 83.9%) of such amount was offset by an
increase in the number of pounds of cheese sold. Approximately $3,275,000 (or
228.1%) of such an decrease was due to a decrease in the average selling price
for cheese. The volume increase was due to increased demand in the commodity
cheese markets. The Company anticipates volume increases and increased demand in
the months ahead, although there can be no assurance in this regard. The
decrease in average selling price was the result of a decrease in the block
cheddar market prices resulting in a lower selling price per pound of cheese.
These decreases were offset by approximately $640,000 (or 44.6%) of increased
whey sales produced in our new facility.

      Cost of sales and gross profit margin for the year ended March 31, 2001
were $39,314,000 (or 95.0% of sales) and $2,060,000 (or 5.0% of sales),
respectively, compared to a cost of sales and gross profit margin of $40,012,000
(or 93.5% of sales) and $2,798,000 (or 6.5% of sales), respectively, for the
comparable period in 2000. The increase in cost of sales and corresponding
decrease in gross profit margin for 2001 as a percentage of sales is primarily
due to a increase in the Company's cost of raw materials as a percentage of
selling price.

                                       14
<PAGE>


      Selling, general and administrative expenses for the year ended March 31,
2001 amounted to $2,706,000 (or 6.5% of sales) compared to $2,299,000 (or 5.4%
of sales) for the comparable period in 2000. The increase in selling, general
and administrative expenses as a percentage of sales was primarily due to the
decreased sales in the period and an increase in consulting and freight costs.

      Interest expense for the year ended March 31, 2001 amounted to $841,000
compared to $691,000 for the year ended March 31, 2000 an increase of $150,000.
This increase is the result of increased borrowing due to the addition of new
plant production equipment and higher revolving credit line usage in the year.

      The provision for income tax for the years ended March 31, 2001, 2000 and
1999 of $2,000, $8,000 and $3,000, respectively, reflect minimum state taxes
with the tax benefits of operating losses being offset by the effect of changes
in the valuation allowance. Such amounts are re-evaluated each year based on the
results of the operations.

      The Company's net loss of $1,477,000 for the year ended March 31, 2001
represents a decrease of $1,548,000 from the net income of $71,000 for the
comparable period in 2000. The primary factors contributing to these changes are
discussed above.

Year ended March 31, 2000 compared to the year ended March 31, 1999

      Sales for the year ended March 31, 2000 decreased to $42,810,000 from
$46,048,000 for the comparable period in 1999, a decrease of $3,238,000 (or
7.0%). Approximately $6,068,000 (or 187.4%) of such amount was due to a decrease
in the average selling price of cheese. This decrease in sales was offset by an
increase in the number of pounds of cheese sold resulting in $1,860,000 increase
in sales when compared to the year ago period and approximately $970,000 (or
30%) was offset by increased whey sales produced in our new facility.

      Cost of sales and gross profit margin for the year ended March 31, 2000
were $40,012,000 (or 93.5% of sales) and $2,798,000 (or 6.5% of sales),
respectively, compared to a cost of sales and gross profit margin of $42,366,000
(or 92.0% of sales) and $3,682,000 (or 8.0% of sales), respectively, for the
comparable period in 1999. The increase in cost of sales and corresponding
decrease in gross profit margin for 2000 as a percentage of sales is primarily
due to a increase in the Company's cost of raw materials as a percentage of
selling price.

      Selling, general and administrative expenses for the year ended March 31,
2000 amounted to $2,299,000 (or 5.4% of sales) compared to $2,473,000 (or 5.4%
of sales) for the comparable period in 1999. Selling, general and administrative
expenses as a percentage of sales remained constant in the period.

      Interest expense for the year ended March 31, 2000 amounted to
$691,000 compared to $505,000 for the year ended March 31, 1999 an increase of
$186,000. This increase is the result of increased borrowing due to the addition
of new plant production equipment and higher revolving credit line usage in the
year.

                                       15
<PAGE>


      The provision for income tax for the year ended March 31, 2000 of $8,000
and March 31, 1999 of $3,000 reflect minimum taxes with the tax benefits of
operating loss carryforwards being offset by the effect of changes in the
valuation allowance. Such amounts are re-evaluated each year based on the
results of the operations.

      The Company's net income of $71,000 for the year ended March 31, 2000
represents a decrease of $658,000 from the net income of $729,000 for the
comparable period in 1999. The primary factors contributing to these changes are
discussed above.

      With respect to its gross profit margin, the Company is continuing its
efforts to increase sales of its value added products which are less dependent
on the Chicago Mercantile Exchange. The selling price for the Company's
nutritional line of cheeses is less dependent on the Block Cheddar Market, which
dictates the Company's commodity cheese prices. With respect to its nutritional
line of cheeses, the Company is continuing its efforts to increase sales of such
products. To date sales of nutritional cheese has not been significant. The
Company has now positioned itself to co-pack private label retail products.
However, there can be no assurance as to whether such sales can be achieved or
maintained. In addition, the Company has continued to upgrade its equipment to
enable it to reduce costs and add product lines with greater margins.

Liquidity and Capital Resources

      At March 31, 2001 the Company had working capital of $1,103,000 as
compared to working capital of $1,945,000 at March 31, 2000. The Company's
revolving bank line of credit is available for the Company's working capital
requirements.

      At March 31, 2001, $4,267,000 was outstanding under such revolving credit
line of credit and $312,000 was available for additional borrowing at that time
(based on the inventory and receivable formula). Advances under this facility
are limited to 50% of inventory and 80% of receivables. The rate of interest on
amounts borrowed against the revolving credit facility is prime plus 1%. A .25%
annual unused line fee is also charged on this facility. The agreement contains
various restrictive covenants the most significant of which reflects to
limitations on capital expenditures ($1,000,000 annually without bank consent).
In addition, the Company is required to maintain a minimum two million dollars
of net worth. The Company has obtained an agreement from the bank increasing the
limitation on annual capital expenditures to $1,500,000 and decreasing the
minimum amount of net worth to $1,200,000 for fiscal year 2001. The Company
intends to continue to utilize this line of credit as needed for operations.

      On February 8, 1999, a $4,950,000 bank loan agreement was signed. The new
loan is collateralized by the Company's plant and equipment. Provisions of the
loan are as follows:

      A $3,960,000 commercial term note with interest fixed at 9.75 percent
      having an amortization period of 20 years with a maturity in February,
      2019.

                                       16
<PAGE>


      A $990,000 commercial term note with interest fixed at 10.75 percent
      having an amortization period of 20 years with a maturity in February,
      2019.


      On May 23,2001, a new $2,000.000 bank loan agreement was signed. The new
loan is collaterized by the Company's plant and equipment. Provisions of the
loan are as follows:

      A promissory note with interest payable at 1% above the rate of interest
      established by the bank as its National Variable Rate and principal
      repayable in four consecutive annual installments of $500,000.00 with the
      first such installment due on May 1, 2003 and the last such installment
      due on May 1,2006.

      Proceeds of the new loan were used for working capital

      The Company's major source of external working capital financing has been
the revolving line of credit. For the foreseeable future the Company believes
that its current working capital, its new $2,000,000 bank loan, and its existing
lines of credit will continue to represent the Company's major source of working
capital financing besides income generated from operations.

      For the year ended March 31, 2001 cash used by operating activities was
$301,000. A loss from operations of $1,477,000 decreased cash. In addition
increases in accounts receivable of $1,570,000, and an increase in prepaid
expenses and other assets of $15,000 decreased cash. Increases in accounts
payable of $1,959,000, accrued expenses of $83,000 and a decrease in inventories
of $12,000, provided cash.

      Net cash used by investing activities was $1,135,000 for the period ended
March 31, 2001 which represented purchase of property, plant and equipment of
$1,146,000, less loan repayments of $11,000.

      Net cash provided by financing activities was $1,201,000 for the period
ended March 31, 2001. Net proceeds from the revolving credit loan of $1,150,000,
and proceeds from long-term debt of $204,000, provided cash in the period.
Payments of long-term debt and notes of $147,000, and loan costs of $6,000
decreased cash in the period.

      The Company estimates that based upon its current plans, its resources
including revenues from operations and utilization of its existing credit lines,
will be sufficient to meet its anticipated needs for at least 12 months.

Safe Harbor Statement

      This Annual Report on Form 10K (and any other reports issued by the
Company from time to time) contains certain forward-looking statements made in
reliance upon the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements, including statements
regarding the application of the Company's proprietary processes to other cheese
products, and the Company's ability to improve margins and increase retail
sales, are based on current expectations that involve

                                       17
<PAGE>


numerous risks and uncertainties. Actual results could differ materially from
those anticipated in such forward-looking statements as a result of various
known and unknown factors including, without limitation, future economic,
competitive, regulatory, and market conditions, future business decisions, the
uncertainties inherent in the pricing of cheese on the Chicago Mercantile
Exchange upon which the Company's prices are based, changes in consumer tastes,
fluctuations in milk prices, and those factors discussed above under
Management's Discussion and Analysis of Financial Condition and Results of
Operations. Words such as "believes," "anticipates," "expects," "intends,"
"may," and similar expressions are intended to identify forward-looking
statements, but are not the exclusive means of identifying such statements. The
Company undertakes no obligation to revise any of these forward-looking
statements.

ITEM  7A. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

The registrant does not utilize market rate sensitive instruments for trading or
other purposes.

ITEM  8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                               Follow on next page

                                       18
<PAGE>


Shareholders
Lucille Farms, Inc.
 and Subsidiaries

                          Independent Auditors' Report

         We have audited the accompanying consolidated balance sheet of Lucille
Farms, Inc. and Subsidiaries as at March 31, 2001 and 2000 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended March 31, 2001, 2000 and 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

         In our opinion, the aforementioned consolidated financial statements
present fairly, in all material respects, the financial position of Lucille
Farms, Inc. and Subsidiaries as at March 31, 2001 and 2000, and the results of
their operations and their cash flows for the years ended March 31, 2001, 2000
and 1999 in conformity with accounting principles generally accepted in the
United States of America.



                                             /s/ Citrin Cooperman & Company, LLP
                                             -----------------------------------
                                                 CITRIN COOPERMAN & COMPANY, LLP

New York, New York
June 8, 2001


                                       F-1

<PAGE>

                      LUCILLE FARMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                 AS AT MARCH 31,

                                                       2001             2000
                                                   ------------    -------------

                                     ASSETS
Current Assets:
   Cash and cash equivalents                       $    212,000    $    447,000
   Accounts receivable, net of allowances of
    $132,000 in 2001 and $103,000 in 2000             4,614,000       3,122,000
   Inventories                                        2,163,000       2,175,000
   Deferred income taxes                                 71,000          60,000
   Prepaid expenses and other current assets            119,000         107,000
                                                   ------------    ------------
     Total Current Assets                             7,179,000       5,911,000
                                                   ------------    ------------

Property, Plant and Equipment, net                    9,011,000       8,328,000
                                                   ------------    ------------

Other Assets:
   Due from officers                                    133,000         144,000
   Deferred income taxes                                527,000         490,000
   Deferred loan costs, net                             247,000         256,000
   Other                                                 97,000          94,000
                                                   ------------    ------------
     Total Other Assets                               1,004,000         984,000
                                                   ------------    ------------

     TOTAL ASSETS                                  $ 17,194,000    $ 15,223,000
                                                   ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                                $  5,515,000    $  3,556,000
   Current portion of long-term debt                    171,000         103,000
   Accrued expenses                                     390,000         307,000
                                                   ------------    ------------
     Total Current Liabilities                        6,076,000       3,966,000
                                                   ------------    ------------

Long-Term Liabilities:
   Long-term debt                                     4,983,000       4,853,000
   Revolving credit loan                              4,267,000       3,117,000
   Deferred income taxes                                598,000         550,000
                                                   ------------    ------------
     Total Long-Term Liabilities                      9,848,000       8,520,000
                                                   ------------    ------------

     TOTAL LIABILITIES                               15,924,000      12,486,000
                                                   ------------    ------------

Stockholders' Equity:
   Common stock, $0.001 par value, 10,000,000
    shares authorized, 3,021,342 shares issued            3,000           3,000
   Additional paid-in capital                         4,448,000       4,438,000
   Accumulated deficit                               (3,056,000)     (1,579,000)
                                                   ------------    ------------
                                                      1,395,000       2,862,000
   Less: cost of 50,000 shares of treasury stock       (125,000)       (125,000)
                                                   ------------    ------------
     Total Stockholders' Equity                       1,270,000       2,737,000
                                                   ------------    ------------

     TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY                         $ 17,194,000    $ 15,223,000
                                                   ============    ============

          See accompanying notes to consolidated financial statements.

                                      F-2

<PAGE>

                      LUCILLE FARMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                         FOR THE YEARS ENDED MARCH 31,


                                           2001          2000          1999
                                       ------------  ------------  -------------

Sales                                  $ 41,374,000  $ 42,810,000  $ 46,048,000

Cost of sales                            39,314,000    40,012,000    42,366,000
                                       ------------  ------------  ------------

Gross profit                              2,060,000     2,798,000     3,682,000
                                       ------------  ------------  ------------

Other expense (income):
  Selling                                 1,990,000     1,655,000     1,655,000
  General and administration                716,000       644,000       818,000
  Other income                                           (256,000)
  Interest income                           (12,000)      (15,000)      (28,000)
  Interest expense                          841,000       691,000       505,000
                                       ------------  ------------  ------------
    Total other expense (income)          3,535,000     2,719,000     2,950,000
                                       ------------  ------------  ------------

Income (loss) before income taxes        (1,475,000)       79,000       732,000

Provision for income taxes                    2,000         8,000         3,000
                                       ------------  ------------  ------------

Net Income (Loss)                      $ (1,477,000) $     71,000  $    729,000
                                       ============  ============  ============

Net Income (Loss) per share:
  Basic                                $      (0.50) $       0.02  $       0.24
                                       ============  ============  ============
  Diluted                              $      (0.50) $       0.02  $       0.24
                                       ============  ============  ============


Weighted average shares outstanding
  used to compute net income (loss)
  per share:
  Basic                                   2,971,342     2,971,342     2,994,711
                                       ============  ============  ============
  Diluted                                 2,971,342     2,956,817     2,984,832
                                       ============  ============  ============


          See accompanying notes to consolidated financial statements.


                                      F-3

<PAGE>

                      LUCILLE FARMS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                FOR THE YEARS ENDED MARCH 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
                                      Common Stock         Additional       Accumulated         Treasury Stock
                                  Shares        Amount   Paid-in capital      Deficit        Shares       Amount            Total
                                 ---------     -------   ---------------   ------------      ------     ----------      ------------
<S>                                <C>           <C>         <C>             <C>               <C>        <C>             <C>
Balance, March 31, 1998          3,052,500     $ 3,000     $ 4,512,000     $ (2,379,000)     50,000     $ (125,000)     $ 2,011,000

Net income                                                                      729,000                                     729,000

Purchase and retirement
of 31,158 shares of stock          (31,158)                    (74,000)                                                     (74,000)
                                 ---------     -------     -----------     ------------      ------     ----------      -----------

Balance, March 31, 1999          3,021,342       3,000       4,438,000       (1,650,000)     50,000       (125,000)       2,666,000

Net income                                                                       71,000                                      71,000
                                 ---------     -------     -----------     ------------      ------     ----------      -----------

Balance, March 31, 2000          3,021,342       3,000       4,438,000       (1,579,000)     50,000       (125,000)       2,737,000

Net loss                                                                     (1,477,000)                                 (1,477,000)

Issuance of warrants                                            10,000                                                       10,000
                                 ---------     -------     -----------     ------------      ------     ----------      -----------
Balance, March 31, 2001          3,021,342     $ 3,000     $ 4,448,000     $ (3,056,000)     50,000     $ (125,000)     $ 1,270,000
                                 =========     =======     ===========     ============      ======     ==========      ===========
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       F-4


<PAGE>

                      LUCILLE FARMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                         FOR THE YEARS ENDED MARCH 31,


<TABLE>
<CAPTION>
                                                                                        2001              2000              1999
                                                                                   ------------       -----------       ------------
<S>                                                                                     <C>               <C>                <C>
Cash Flows from Operating Activities:
  Net income (loss)                                                                $ (1,477,000)      $    71,000       $   729,000
Adjustments to reconcile net income (loss)
 to net cash provided (used) by operating activities:
    Depreciation and amortization                                                       619,000           570,000           451,000
    Provision for doubtful accounts                                                      78,000            52,000            54,000
    Non-cash compensation                                                                10,000
  (Increase) decrease in assets:
    Accounts receivable                                                              (1,570,000)          444,000          (839,000)
    Inventories                                                                          12,000          (390,000)          110,000
    Prepaid expense and other current assets                                            (12,000)           36,000           (74,000)
    Other assets                                                                         (3,000)           58,000           (29,000)
  Increase (decrease) in liabilities:
    Accounts payable                                                                  1,959,000          (767,000)          532,000
    Accrued expenses                                                                     83,000           (64,000)          147,000
                                                                                   ------------       -----------       -----------
Net cash provided (used) by operating activities                                       (301,000)           10,000         1,081,000
                                                                                   ------------       -----------       -----------

Cash Flows from Investing Activities:
  (Increase) repayment of officers' loans                                                11,000            (5,000)           30,000
  Purchase of property, plant and equipment                                          (1,146,000)       (1,199,000)       (2,726,000)
                                                                                   ------------       -----------       -----------
Net cash used by investing activities                                                (1,135,000)       (1,204,000)       (2,696,000)
                                                                                   ------------       -----------       -----------

Cash Flows from Financing Activities:
  Proceeds from (repayments of) revolving credit loan - net                           1,150,000          (183,000)          353,000
  Proceeds from long-term debt                                                          204,000                           4,964,000
  Principal payments of long-term debt                                                 (147,000)         (100,000)       (2,171,000)
  Increase in loan costs                                                                 (6,000)                           (270,000)
  Purchase of stock                                                                                                         (74,000)
                                                                                   ------------       -----------       -----------
Net cash provided (used) by financing activities                                      1,201,000          (283,000)        2,802,000
                                                                                   ------------       -----------       -----------

Net increase (decrease) in cash and cash equivalents                                   (235,000)       (1,477,000)        1,187,000

Cash and cash equivalents - beginning                                                   447,000         1,924,000           737,000
                                                                                   ------------       -----------       -----------
CASH AND CASH EQUIVALENTS -
  ENDING                                                                           $    212,000       $   447,000       $ 1,924,000
                                                                                   ============       ===========       ===========
SUPPLEMENTAL DISCLOSURE OF
  CASH FLOW INFORMATION:
  Cash paid for:
    Interest                                                                       $    819,000       $   681,000       $   554,000
    Income taxes                                                                          5,000             8,000             1,000
  Additions to property, plant and
   equipment acquired by debt issue                                                     142,000            96,000

</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5



<PAGE>

                      LUCILLE FARMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Activity

Lucille Farms, Inc. and Subsidiaries ("the Company") is engaged in the
manufacture and marketing of a variety of cheese products which are sold
primarily to retailers through independent distributors.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.

Basis of Presentation

The consolidated financial statements include the accounts of Lucille Farms,
Inc. and its wholly-owned subsidiaries. All significant intercompany balances
and transactions have been eliminated.

Statement of Cash Flows

For purposes of the consolidated statement of cash flows, the Company considers
temporary investments with a maturity of three months or less to be cash
equivalents.

Inventories

Inventories are stated at the lower of cost or market determined on a first-in,
first out method of accounting.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation and amortization
is being provided on a straight-line basis over the estimated useful lives of
the assets as follows:

                              Plant          35 years
                              Equipment      3-10 years

Deferred Loan Costs

Costs of obtaining a mortgage and term facility were deferred and are being
amortized on a straight-line basis over the term of the mortgage.

Income Taxes

The Company provides for deferred income taxes resulting from temporary
differences in reporting certain income and expense items (principally
depreciation) for income tax and financial reporting purposes. Income tax
benefits from operating loss carryforwards are recognized to the extent
available less a valuation allowance if it is more likely than not that some
portion of the deferred tax asset will not be realized.


                                      F-6
<PAGE>

                      LUCILLE FARMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Earnings per Share

Basic earnings per share is computed by dividing net earnings available to
common shareholders by the weighted average common shares outstanding for the
period. Diluted earnings per share is computed by dividing net earnings
available to common shareholders by the weighted average common shares
outstanding adjusted for the dilutive effect of options granted under the
Company's stock option plans. Basic and diluted earnings per share were the same
for 2001 since options and warrants were not included in the calculation because
their effect would have been antidilutive. The dilution for 2000 and 1999 is due
to the net incremental effect of options of 14,525 shares and 9,879 shares,
respectively.

Accounting for Stock-Based Compensation

Effective April 1, 1996, the Company adopted the fair value disclosure
requirement of SFAS No. 123, "Accounting for Stock-Based Compensation." As
permitted by SFAS No. 123, the Company did not change the method of accounting
for its employee stock compensation plans. See Note 13 for the fair value
disclosures required under SFAS No. 123.

NOTE 2 - ACCOUNTS RECEIVABLE

The Company has entered into a revolving credit facility with a bank whereby it
has pledged all of its accounts receivable as collateral (Note 6).

NOTE 3 -  INVENTORIES

Inventories consist of the following:

                                              March 31, 2001      March 31, 2000
                                              --------------      --------------

            Finished goods                     $  1,011,000        $  1,169,000
            Raw materials                           617,000             524,000
            Supplies and packaging                  535,000             482,000
                                               ------------        ------------
                                               $  2,163,000        $ 2,175,000
                                               ============        ============

Inventories are pledged as collateral under a revolving credit facility with a
bank (Note 6).

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

                                              March 31, 2001      March 31, 2000
                                              --------------      --------------
            Land                               $     25,000        $     25,000
            Plant                                 4,616,000           4,316,000
            Equipment                             8,019,000           7,128,000
            Whey facility                         2,116,000           2,020,000
                                                -----------        ------------
                                                 14,776,000          13,489,000
            Less: accumulated
            depreciation and
            amortization                          5,765,000           5,161,000
                                               ------------        ------------
                                               $  9,011,000        $  8,328,000
                                               ============        ============

                                      F-7
<PAGE>

                      LUCILLE FARMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Included in property, plant and equipment at March 31, 2001 is capitalized
interest of $121,000 and capitalized labor of $96,000. Interest of $12,000 and
labor of $11,000 was capitalized for the year ended March 31, 2001. Interest of
$3,000 and labor of $24,000 was capitalized for the year ended March 31, 2000.
Interest of $22,000 was capitalized for the year ended March 31, 1999.

NOTE 5 - DUE FROM OFFICERS

Amounts due from officers reflect advances and loans which effective June 1,
1992 are represented by promissory notes bearing interest at 9% per annum.
Interest is payable beginning on June 1, 1994 and annually thereafter, with the
principal due on June 1, 2000 which has been extended to June 1, 2002. $11,000,
$11,000 and $14,000 was included in operations as interest income for the years
ended March 31, 2001, 2000 and 1999, respectively.

NOTE 6 - REVOLVING CREDIT LOAN

The Company has available a $5,000,000 revolving credit facility at March 31,
2001 that expires on June 1, 2002. The rate of interest on amounts borrowed
against the revolving credit facility is based upon the New York prime rate plus
1% (9% at March 31, 2001 and 10% at March 31, 2000). Advances under this
facility are limited to 50% of inventory (with a cap on inventory borrowings of
$1,000,000) and 80% of receivables as defined in the agreement. The commitment
contains various restrictive covenants the most significant of which relates to
limitations on capital expenditures ($1,000,000 annually without bank consent).
In addition, the Company is required to generate an increase in its dollar
amount of net worth annually. The bank agreed to a $1,500,000 capital
expenditure limit and a reduced net worth for 2001.

This loan is secured by substantially all of the Company's assets.

NOTE 7 - LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                   March 31, 2001      March 31, 2000
                                                                   --------------      --------------
<S>                                                                      <C>                  <C>
Term loan with a bank dated February 8, 1999, secured by real
estate and equipment, payable monthly at $37,561 including
interest at 9.75% for 20 years maturing February 8, 2019.           $ 3,814,000         $ 3,889,000

Term loan with a bank dated February 8, 1999 secured by real
estate and equipment, payable monthly at $10,051 including
interest at 10.75% for 20 years maturing February 8, 2019.              958,000             974,000

Equipment notes payable in monthly installments ranging from
$972 to $3,006, including interest at rates of 9.75% to 11%,
through September 2005. The notes are collateralized by
equipment with a net book value of $314,000 at March 31, 2001.          296,000              44,000

Discounted obligations under capital leases (Note 9).                    86,000              49,000
                                                                    -----------         -----------

                                                                      5,154,000           4,956,000
Less: current portion                                                   171,000             103,000
                                                                    -----------         -----------

TOTAL                                                               $ 4,983,000         $ 4,853,000
                                                                    ===========         ===========
</TABLE>

                                      F-8

<PAGE>

                      LUCILLE FARMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - LONG-TERM DEBT

As of March 31, 2001 long-term debt matures as follows:

                   2002                   $   171,000
                   2003                       201,000
                   2004                       225,000
                   2005                       219,000
                   2006                       175,000
                   2007 and thereafter      4,163,000
                                          -----------
                                          $ 5,154,000
                                          ===========

Virtually all of the Company's property, plant and equipment are pledged as
collateral for these obligations.

In May 2001 the Company obtained a new $2,000,000 bank loan. The loan,
collateralized by the Company's plant and equipment, bears interest at 1% above
the bank's national variable rate. The loan is due in annual principal
installments of $500,000 beginning May 2003. Interest is payable monthly.

NOTE 8 - INCOME TAXES

Temporary differences and carryforwards which give rise to deferred tax assets
and liabilities are as follows:

<TABLE>
<CAPTION>
                                                           March 31, 2001                    March 31, 2000
                                                     ---------------------------      ---------------------------
                                                                       Deferred                         Deferred
                                                       Deferred           Tax           Deferred           Tax
                                                      Tax Asset        Liability       Tax Asset        Liability
                                                     ------------      ---------      ------------      ---------
<S>                                                  <C>                  <C>           <C>                  <C>
Depreciation                                         $                 $ 598,000      $                 $ 550,000
Provision for doubtful accounts                           50,000                           39,000
Reserve for compensated
 Absences                                                 21,000                           21,000
Investment tax credit carryforwards                                                        74,000
Operating loss carryforwards                           1,878,000                        1,281,000
Contribution carryforwards                                 2,000                            2,000
                                                     -----------       ---------      -----------       ---------
                                                       1,951,000         598,000        1,417,000         550,000
Valuation allowance                                   (1,353,000)                        (867,000)
                                                     -----------       ---------      -----------       ---------
                                                     $   598,000       $ 598,000      $   550,000       $ 550,000
                                                     ===========       =========      ===========       =========
</TABLE>

The net change in the valuation allowance for the periods presented were as
follows:

                                                        March 31,
                                           -------------------------------------
                                             2001          2000          1999
                                           --------      -------      ----------
Valuation allowance increase (decrease)    $486,000      $65,000      $(303,000)


The provision for income taxes represents the provision for minimum state taxes,
with the tax benefits of loss carryforwards being offset by increases or
decreases in the valuation allowance.


                                      F-9

<PAGE>

                      LUCILLE FARMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - INCOME TAXES (CONTINUED)

The provision for income taxes is different than the amount computed using the
United States Federal Statutory income tax rate for the reasons set forth below:

                                                       Years Ended March 31,
                                                 -------------------------------
                                                   2001         2000       1999
                                                 -------      -------     ------
       Expected tax at U.S. Statutory Rate       (34.0)%        30.0%      34.0%
       State and local income taxes                 .1           1.2        1.5
       Permanent differences and other              .3        (104.0)       6.3
       Valuation allowance for operating loss
         carryforwards                            33.7          82.9      (41.4)
                                                 ------       ------      -----
                                                    .1 %        10.1%        .4%
                                                 =======      ======      =====

Included in other in 2000 is the reduction of income of $256,000 of life
insurance proceeds which is not taxable.

Operating loss carryforwards totaled $4,941,000 as of March 31, 2001 and expire
on March 31, of the following years:

                             2010        $    77,000
                             2012            913,000
                             2013          2,122,000
                             2015            268,000
                             2106          1,561,000
                                         -----------
                             Total       $ 4,941,000
                                         ===========

NOTE 9 - LEASE COMMITMENTS

The Company leases automobiles for three of its officers under lease
arrangements classified as operating leases. The leases expire in December 2001,
January 2002 and October 2002. Rent expense was approximately $19,000 in the
year ended March 31, 2001 and $18,000 for each of the years ended March 31, 2000
and 1999. Future minimum payments under the leases are approximately $21,000 as
at March 31, 2001.

On December 20, 1994 the Company began leasing waste water purification
equipment under leasing arrangements classified as an operating lease. The
monthly lease payments are $3,870 for a period of 60 months. Leasing expense was
$23, 000 and $46,000 for the years ended March 31, 2000 and March 31, 1999,
respectively. The Company exercised its option to purchase the equipment during
the year ended March 31, 2000. In addition, the Company leases some equipment
under operating leases expiring through January 2004. Minimum monthly lease
payments under these leases total $1,000. Minimum annual lease payments are
$11,000 for each of the years ending in 2001, 2002 and 2003 and $4,000 in the
year ending March 31, 2004.

The Company also leases some equipment under a lease that includes an option to
purchase the equipment at the end of the lease term. Capital lease property of
$128,000 less accumulated depreciation of $6,000 is included in property, plant
and equipment.

                                      F-10
<PAGE>

                      LUCILLE FARMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - LEASE COMMITMENTS (CONTINUED)

Future minimum lease payments under capital leases are as follows:
 2001                                                                  $  32,000
 2002                                                                     35,000
 2003                                                                     35,000
 2004                                                                      9,000
                                                                       ---------
 Total minimum lease payments                                            111,000
 Less amount representing interest                                        25,000
                                                                       ---------
 Present value of net minimum payments                                    86,000
 Less: current maturities                                                 21,000
                                                                       ---------
 Long-term obligation                                                  $  65,000
                                                                       =========

NOTE 10 - RELATED PARTY TRANSACTIONS

The Company leases a parcel of land adjacent to the facility. This parcel is
owned by three of its stockholders. The space is used as an employee parking lot
and its use was required in conjunction with the construction of the new Whey
drying facility. The ten year lease term carries a monthly rental of $750 during
the first five years and $900 during the remaining five years. Rent expense for
the years ended March 31, 2001 and 2000 was $9,000 in each of the years. This
lease has a purchase option to purchase at fair market value at the end of the
ten year period. This lease was assigned to the Bank in conjunction with the
Whey Plant financing.

The Company leases space for its executive offices at $1,200 per month from
three of its stockholders on a month to month basis. Rent expense was
approximately $14,000 for each of the years ended March 31, 2001, 2000 and 1999.

The Company also leases an additional 900 square feet for $750 monthly on a
month to month basis. These premises are owned by three of its stockholders.
This space is primarily used for the Company's marketing operations. Rent
expense was $9,000 for each of the years ended March 31, 2001, 2000 and 1999.

NOTE 11 - STOCKHOLDERS' EQUITY

In May 1993, the Board of Directors of the Company adopted a resolution
authorizing the issue of 250,000 shares of Preferred Stock, par value $0.001 per
share. Such preferred stock may be issued in series, the terms of which will be
determined by the Company's Board of Directors without action by stockholders
and may include dividend and liquidation preferences to common stock, voting
rights, redemption and sinking fund provisions and conversion rights. No shares
have been issued at March 31, 2001.

In June 2001 the Company entered into an agreement to purchase plant equipment
for $540,000 of Series A Convertible Redeemable Preferred Stock. The stock can
be converted into 216,000 shares of common stock at $2.50 per share.

NOTE 12 - SIGNIFICANT CUSTOMERS

In the years ended March 31, 2001, 2000 and 1999, one customer accounted for
approximately 10%, 11% and 15% of sales, respectively.

                                      F-11

<PAGE>
                      LUCILLE FARMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - OTHER EVENTS

a. Employment Agreements

In April 1993, the Company entered into four year employment agreements to be
effective upon the closing of the public offering with its three principal
officers and three other newly employed individuals pursuant to which the three
officers each shall be paid salaries of $100,000, $100,000 and $90,000 per
annum, respectively, and the other three individuals shall be paid salaries of
$110,000, $88,000 and $85,000 per annum, respectively. Such salaries increased
each year to the extent of any cost-of living increases. In December 1995 the
agreement with the individual earning $110,000 was terminated. Effective April
1, 1997 all employment agreements expired and the officers continue employment
at the salaries applicable in the final year of their agreements. During the
year ended March 31, 2001 the Company engaged a new employee under an agreement
expiring in August 2002. The agreement requires an annual salary of $100,000
plus a bonus.

b. 1993 Stock Option Plan

On April 1, 1993 the Company adopted its 1993 Stock Option Plan. An aggregate of
200,000 shares of Common Stock were reserved for issuance upon exercise of
options which may be granted from time to time in accordance with the plan. The
aggregate shares reserved was increased to 500,000 in 2001. Options may be
granted to employees, including officers, directors, consultants and advisors.
Options shall be designated as either Incentive Stock Options or Non-Incentive
Stock Options being issued at a purchase price of not less than 100% (110% in
case of optionees who own more than 10% of the voting power of all classes of
stock of the Company) of fair market value of the Common Stock on the date the
option is granted. In April 1995, options to purchase 10,000 shares were granted
to each of two employees at an exercise price of $3.625. The options shall
expire on April 4, 2005. In May 1996, options to purchase 50,000 shares were
granted to a newly hired employee at an exercise price of $4.00. These options
vest and are exercisable ratably over a five year period beginning one year from
date of employment. The options expire upon plan termination, April 1, 2003. In
January 1998, options to purchase 25,000 shares were granted to a director of
the Company in his capacity as consultant at an exercise price of $1.50 per
share. The options expire on January 2008 and vest to the extent of 5,000 shares
on date of issue and 5,000 shares on each of the next four anniversary dates. On
March 1, 1999 the Company granted an option to a consultant to purchase 7,500
shares of common stock at $4.00 per share for a period of three years. During
the year ended March 31, 2000 the agreement was terminated and the options
canceled. On August 14, 2000 the Company granted an option to an employee to
purchase 150,000 share of common stock at $3.9375 per share for a period of ten
years. The options vest to the extent of 30,000 shares on the date of issue and
30,000 shares on each of the next four anniversary dates thereof. The per share
fair value of stock options granted during the years ended March 31, 2001 and
1999 was $2.87 and $1.65, respectively, and the per share value of warrants
granted during the year ended March 31, 2001 was $1.29, on the date of grant
using the Black Scholes option-pricing model with the following assumptions:

                                           March 31, 2001         March 31, 1999
                                       -----------------------    --------------
                                        Options       Warrants
                                       --------       --------
       Expected dividend yield             -0-%          -0-%            -0-%
       Risk free interest rate             5.0%          5.0%            5.5%
       Expected stock volatility          58.6%         59.4%           62.3%
       Expected option life            10 years       2 years         3 years

                                      F-12
<PAGE>

                      LUCILLE FARMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - OTHER EVENTS (CONTINUED)

The Company applies APB Opinion No. 25 in accounting for its Plan, and
accordingly, no compensation costs has been recognized in the financial
statements for its stock options which have an exercise price equal to the fair
value of the stock on the date of the grant. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options and warrants under SFAS No. 123, the Company's net income would have
been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                            Years Ended
                                        March 31, 2001    March 31, 2000    March 31,1999
                                        --------------    --------------    -------------
         <S>                                  <C>                <C>             <C>
        Net income (loss):
        As reported...................   $(1,477,000)         $ 71,000        $ 729,000
        Pro forma.....................   $(1,572,000)         $ 49,000        $ 707,000

        Net earnings (loss) per share:
        As reported...................   $      (.50)         $    .02        $     .24
        Pro forma.....................   $      (.53)         $    .02        $     .24
</TABLE>

The full impact of calculating compensation cost for stock options under SFAS
No. 123 is not reflected in the pro forma net income amounts presented above
because compensation cost is reflected over the options' vesting period.

Stock options are summarized as follows:

                           Exercise price        2001         2000         1999
                           --------------      -------      -------      -------
Outstanding - beginning    $1.50 to $4.00       95,000      102,500       95,000
Issued                     3.9375 to 4.00      150,000                     7,500
Terminated                     4.00                           7,500
                                               -------      -------      -------
Outstanding - ending       $1.50 to $4.00      245,000       95,000      102,500
                                               =======      =======      =======

At March 31, 2001 options for 110,000 shares were exercisable.

In April, 2000 the Company entered into an agreement with an investment banking
firm wherein for one year such firm would act as the Company's exclusive
financial advisor with respect to a combination. For such services the Company
granted the firm a seven-year warrant to acquire 90,000 shares of the Company's
common stock at $4.63 per share, the closing price of the of the Company's
common stock on the date the agreement was entered into. The warrant will vest
only upon the conclusion of a transaction during the term. In the event no
combination is consummated the warrants will be terminated. In April, 2001 the
agreement was terminated and the warrants canceled.

In July, 2000 the Company entered into a service agreement with an individual.
As additional compensation under the agreement warrants to purchase 15,000
shares of common stock were issued in lieu of additional cash compensation of
$10,000. The warrants are exercisable for a period of two years with an exercise
price of $5.00 per share. The warrants were valued at the value of the services
provided of $10,000.

In June, 2001 the Company issued options for consulting services and for a
directorship. The ten year options were for 10,000 shares at the fair market
value on the date of grant.

                                      F-13
<PAGE>

                      LUCILLE FARMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13 - OTHER EVENTS (CONTINUED)

c. Purchase of Stock

In April of 1996 the Company purchased 50,000 share of its common stock for cash
at a total cost of $125,000 from one of its former officers. In February of
1999, the Company purchased and retired 31,158 shares of its common stock for
cash at a total cost of $74,000.

d. Preferred Share Purchase Rights

On June 2, 1997, the Board of Directors declared a dividend distribution of one
preferred share purchase right on each outstanding share of common stock. The
rights will be exercisable only if a person or group acquires 20% or more of the
Company's common stock or announces a tender offer the consummation of which
would result in ownership by a person or group of 20% or more of the common
stock. Each right will entitle stockholders to buy one one-hundredth of a share
of a new series of preferred stock at an exercise price of $8.00. In the event
of an acquisition, merger, or other business combination transaction after a
person has acquired 20% or more of the Company's outstanding common stock, each
right will entitle its holder to purchase, at the right's then-current exercise
price, a number of the acquiring company's common shares having a market value
of twice such price. In addition, if a person or group acquires 20% or more of
Company's outstanding common stock, each right will entitle its holder (other
than such person or members of such group) to purchase, at the right's
then-current price, a number of the Company's common shares having a market
value of twice such price. Following the acquisition by a person or group of
beneficial ownership of 20% or more of the Company's common stock and prior to
an acquisition of 50% or more of the common stock, the Board of Directors may
exchange the rights (other than rights owned by such person or group), in whole
or in part, at an exchange ratio of one share of common stock (or approximately
one one-hundredth of a share of the new series of junior participating preferred
stock) per right. Prior to the acquisition by a person or group of beneficial
ownership 20% or more of the Company's common stock, the rights are redeemable
for one tenth of one cent per right at the option of the Board of Directors.

NOTE 14 - FAIR VALUE AND CREDIT RISK

The Company provides credit to customers on an unsecured basis after evaluating
customer credit worthiness. Since the Company sells to a broad range of
customers with a wide geographical dispersion, concentrations of credit risk are
limited. in addition, the Company provides a reserve for bad debts for accounts
receivable, which are potentially uncollectable.

The Company maintains cash accounts with several major financial institutions.
At March 31, 2001 approximately $584,000 of the Company's cash was in excess of
FDIC insured limits.

The Company considers the fair value of all financial instruments to be not
materially different from their carrying value at year-end.

                                      F-14

<PAGE>


ITEM  9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

                                 NOT APPLICABLE

                                    PART III

ITEM  10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The directors and executive officers of the Company as of June 18, 2001 are as
follows:

          Name       Age       Present office or Position
          ----       ---       --------------------------

 Gennaro Falivene     71    Chairman of the Board of Directors
                              and Executive Vice President-Quality Control

 Alfonso Falivene     59    Director, President and Chief Executive Officer

 David McCarty        45    Vice President-Sales and Marketing

 Stephen M. Katz      66    Director, Vice-President-Finance and
                              Administration, Chief Financial Officer
                              and Secretary

 Howard S. Breslow    61    Director

 Jay M. Rosengarten   56    Director

 Joseph J. Arcata     54    Vice President- Production.

 Dr. Mali Reddy       54    Director

                                       19
<PAGE>


      Mr. Gennaro Falivene is a founder of the Company and has been a director
of the Company since inception in 1976. He served as Vice president and
Treasurer of the Company from inception until April 1993 when he was appointed
Vice chairman of the Board and Executive Vice president-Quality control.

      Mr. Alfonso Falivene is a founder of the Company and has been a director
of the Company since inception in 1976. He served as Vice President and
Secretary of the Company until April 1993 when he was appointed President and
Chief Executive Officer.

      Mr. David McCarty has been Vice President-Marketing and Sales of the
Company since April 1993. From July 1991 to March 1993, Mr. McCarty was the Vice
President of Braff & Company, Inc., a New York, New York based marketing and
public relations firm which specializes in consumer products, particularly in
the food industry. Braff & Company, Inc. has represented a broad range of
clients, including The Dannon Company, Kraft General Foods and The Seagram
Beverage company and has played an integral role in the start--up, launch and
promotion of such products as The Dove Bar and Micro Magic Foods. From February
1990 to July 1991, Mr. McCarty was the New York area Manager for Good Humor, a
division of Thomas J. Lipton, where he established a new distribution network,
created a sales promotion program and aided in reversing a sales decline and
increasing sales. From August 1986 to February 1990, Mr. McCarty was the
Director of Marketing of Braff & Company, Inc. From 1982 to 1986, Mr. McCarty
was the Director of Marketing (1985 and 1986) and National Sales Manager
(1982--1985) for Ginseng VP Corp., a "New Age" beverage corporation.

      Mr. Stephen M. Katz has been a director of the Company, its Vice
President-Finance and Administration and chief Financial Officer and Secretary
since April 1993. Mr. Katz was a partner in the certified public accounting firm
of Drogin & Katz, a position he held since 1970. Drogin & Katz was the company's
accounting firm from 1973 to March 1993. Mr. Katz is a certified public
accountant licensed in New York and Florida.

      Mr. Howard S. Breslow has been a director of the Company since April 1993.
He has been a practicing attorney in New York for more than 35 years and has
been a member of the law firm of Breslow & Walker, LLP New York, New York for
more than 30 years, which firm is counsel to the Company. Mr. Breslow currently
serves as a director of Cryomedical Sciences, Inc., a publicly--held company
engaged in the research, development and sale of products for use in low
temperature medicine, Vikonics, Inc., a publicly--held company engaged in the
design and sale of computer-based security systems, and Excel Technology, Inc.,
a publicly--held company engaged in the development and sale of laser products
and Find/SVP,Inc., a publicly held business advisory and research company.

      Mr. Jay Rosengarten was appointed to the Board of Directors effective
February 1, 1998. Mr. Rosengarten, the former Board Chairman of Shopwell,
Chicago is an internationally recognized consultant, author and lecturer on
Consumer Marketing, Ethnic Marketing and Business Management. He has been the
keynote speaker at numerous national trade association meetings and major
corporate events. Mr. Rosengarten has a J.D., from Fordham University Law
School. Mr. Rosengarten is a principal in the Rosengarten Group, a management
consulting firm, a position he has held from 1993 to present.

                                       20
<PAGE>


      Mr Joseph J. Arcata Jr. has been Vice-President of Production since
December 6, 2000. Prior thereto he was the Vice President of operations for
Concord Marketing Inc. from 1992 to 1999. He was responsible for production and
general operations. He has done consulting work for Sorrento Cheese, Land O'
Lakes, and other cheese manufactures.

      Dr. Mali Reddy has been a director of the Company since June 4, 2001. He
is currently the president of ADFAC (American Dairy and Food Culturing Labs.), a
position he has held for over fifteen years. He holds approximately one hundred
and fifty U.S. and international patents. Dr. Reddy was the recipient of the
prestigious Richard M. Hoyt Memorial Award from the American Dairy Science
Association. He has served as a consultant to over sixty five leading firms in
the U.S. and abroad.

      Gennaro Falivene is the uncle of Alfonso Falivene. No other family
relationship exists between any director or executive officer and any other
director or executive officer of the Company.

      Officers serve at the discretion of the Board of Directors and are elected
at the annual meeting of the Board of Directors. Directors are elected at the
annual meeting of stockholders for a term of one year. The Company's Certificate
of Incorporation provides that no director shall be personally liable to the
company or its stockholders for monetary damages for breach of fiduciary duty
except for: (a) any breach of the duty of loyalty; (b) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (c) improper distributions to stockholders or loans to officers or
directors; or (d) any transactions from which a director derives an improper
personal benefit. The company currently maintains insurance to indemnify
directors and officers.

 Section 16A Benefical Ownership Reporting Compliance

      The Company is not aware of any late filings of, or failure to file, the
reports required by Section 16(a) of the Securities Exchange Act of 1934, as
amended, except that there were late filings of form 3s for Joseph J. Arcata and
Jay Rosengarten.

ITEM  11. EXECUTIVE COMPENSATION

      The following table sets forth certain information regarding compensation
paid by the Company during each of the Company's last three fiscal years to the
Company's Chief Executive Officer and to each of the Company's executive
officers (other than the Chief Executive Officer) who received salary and bonus
payments in excess of $100,000 during the year ended March 31, 2001. None of
such persons owns, or ever has been granted, stock options of the Company.

                                       21
<PAGE>


                           SUMMARY COMPENSATION TABLE
                           --------------------------
                                             Annual Compensation
                                       -------------------------------------
Name and Principal            Fiscal                        Other Annual
    Positions                  Year    Salary     Bonus     Compensation (1)
    ---------                  ----    ------     -----     ----------------

Alfonso Falivene               2001   $106,000      --         $  9,000
  President and Chief          2000    110,000      --            9,000
      Executive Officer        1999    110,000      --            8,000

  Gennaro Falivene             2001    106,000      --            5,000
      Executive Vice           2000    108,000      --            5,000
        President -- Quality   1999    106,000                    4,000
        Control

----------
(1)   Represents automobile allowances and/or automobile lease payments for the
      benefit of such employee.

Employment Agreements

      During the year ended March 31, 2001 the Company engaged a new employee
under an agreement expiring in August 2002. The agreement requires an annual
salary of $100,000 plus a bonus.

Compensation of Directors

      The Company has not compensated its directors for their services in such
capacity.

Compensation Committee Interlocks and Insider Participation

      During the year ended March 31, 2001, Messrs. Alfonso Falivene, Gennaro
Falivene, and Stephen Katz were each officers of the Company as well as
directors of the company who participated in deliberations of the Company's
Board of Directors concerning executive officer compensation. Reference is made
to Item 13 "Certain Relationships and Related Transactions".

                                       22
<PAGE>


ITEM  12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table, as of June 18, 2001, sets forth certain information
concerning each stockholder known by the Company to be the beneficial owner of
more than 5% of the Company's outstanding Common Stock, each director of the
Company, the named executive officers set forth in the table in Item 11, and all
executive officers and directors of the Company as a group. Unless expressly
indicated otherwise, each stockholder exercises sole voting and investment power
with respect to the shares beneficially owned.
                                                   Amount and
                                                    Nature of         Percent
         Name (and Address of 5%                    Beneficial           of
         Owners)                                    Ownership          Class
         -------                                    ---------          -----
         Gennaro Falivene                            327,417           11.0%
         Box 125
         Swanton, VT 05488

         Alfonso Falivene (1)                        464,917           15.6%
         150 River Rd., P.O. Box 517
         Montville, NJ 07045

         The Estate of
         Philip Falivene                             219,917            7.4%
         Box 125
         Swanton, VT 05488

         Stephen Katz (2)                             85,750            2.9%


         B&W Investment Associates                   193,799            6.5%
         c/o Breslow and Walker
         100 Jericho Quadrangle
         Jericho, NY 11753

         Howard S. Breslow                           193,799(3)         6.5%
         100 Jericho Quadrangle
         Jericho, NY 11753

         David Mccarty                                81,250            2.7%

         Jay M. Rosengarten                           25,000(4)           *

         Joseph J Arcata                             150,000(5)        4.8%
         150 River Road
         PO Box 517
         Montville, NJ 07045

         Dr Mali Reddy                                10,000(6)           *

         All officers and
         directors as a group                      1,558,050(7)        49.4%

                                       23
<PAGE>


(1)   Includes 7,500 shares owned by Mr. Falivenes wife and 20,000 shares owned
      by one of his children.
(2)   Includes 40,000 shares owned by Mr. Katz's wife.
(3)   Represents all of the shares owned by B&W Investment Associates, a
      partnership of which Howard S. Breslow, a director of the Company, is a
      partner.
(4)   Includes 25,000 shares issuable under outstanding options.
(5)   Includes 150,000 shares issuable under outstanding options.
(6)   Includes 10,000 shares issuable under outstanding options.
(7)   Includes 185,000 shares issuable under outstanding options.
*     Less than 1%

ITEM  13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      At March 31, 2001, Alfonso Falivene, Gennaro Falivene and the Estate of
Philip Falivene each was indebted to the Company in the amount of $30,167,
$30,166 and $36,365, respectively. Such indebtedness is represented by
promissory notes, dated as of June 1, 1992, with the principal due on June 1,
2000, which has been extended to June 1,2002. The notes bear interest at the
rate of 9% per annum, which interest is payable annually commencing June 1,
1994.

      The Company leases a parcel of land adjacent to its facility. This parcel
is owned by Alfonso Falivene, Gennaro Falivene and the Estate of Philip
Falivene. The space is used as an employee parking lot and its use was required
in conjunction with the construction of the new Whey drying facility. The lease
is for a ten year period. Rentals are $750 monthly for the first five years and
$900 monthly for the additional five year period. Rent expense for the years
ended March 31, 2001 and 2000 was $9,000 and $9,000 respectively. This lease has
a purchase option to purchase at fair market value at the end of the ten year
period. This lease was assigned to the Bank in conjunction with the Whey Plant
financing.

      The Company leases a portion of its Montville, New Jersey offices from
Messrs. Alfonso Falivene, Gennaro Falivene, and the Estate of Philip Falivene
the joint owners of the office condominium unit. During the fiscal years ended
March 31, 1999, 2000 and 2001, the Company paid approximately $14,000, $14,000
and $14,000, respectively, towards the rental of such offices. The Company
currently pays $1,200 per month rent for such premises on a month--to-month
basis. The Company also leases an additional 900 adjacent square feet for $750
monthly on a month--to--month basis. These premises are also owned by Messrs.
Alfonso Falivene, Gennaro Falivene, and the Estate of Philip Falivene. This
space is primarily used for marketing operations. Rent expense for this space
was $9,000, $9,000 and $9,000, respectively, for the years ended March 31, 1998,
1999 and 2000.

      The Company has retained Jay Rosengarten as an independent consultant. Mr.
Rosengarten has been paid $50,000 per annum for his services.

      The Company is the owner and beneficiary of life insurance policies on the
lives of Messrs. Alfonso and Gennaro Falivene, each in the amount of $300,000.
In the event of the death of any such insured, the Company has

                                       24
<PAGE>


agreed (subject to tender) to utilize the proceeds of such policy to purchase
shares of Common Stock from the deceased's estate at the market value of such
shares on the date of death.

                                     PART IV
                                     -------
ITEM  14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 10-K

(a)   The following documents are filed as part of this report:

      1.    Consolidated Financial Statements (included in Part II, Item 8):

            Independent Auditors' Report

            Consolidated Balance Sheet as at March 31, 2001 and March 31, 2000

            Consolidated Statement of Operations for the years ended March 31,
            2001, March 31, 2000 and March 31, 1999

            Consolidated Statement of Stockholders' Equity for the years ended
            March 31, 2001, March 31, 2000 and March 31, 1999

            Consolidated Statement of Cash Flows for the years ended March 31,
            2001, March 31, 2000 and March 31, 1999

            Notes to Consolidated Financial Statements
      2.    Consolidated Financial Statement Schedules (included in Part II,
            Item 8)

      3.    Exhibits included herein: Index to Exhibits for exhibits filed as
            part of this Form 10-K annual report.

(b)   Reports on Form 8-K: None

            Financial statement schedules are omitted because they are either
            not applicable or not required, or because the information sought is
            included in the consolidated Financial Statements or the Notes
            thereto.

                               INDEX TO EXHIBITS

Exhibit Number                             Document
--------------                             --------

     3.1          Restated Certificate of Incorporation of the Company (1)

     3.2          By-Laws of the company, as amended (1)

     4.1          Specimen Common Stock Certificate (1)

     4.2          Certificate of Designation of Series A Convertible Redeemable
                  Preferred Stock of the Company.

                                       25
<PAGE>


     10.1         1993 Stock Option Plan (1)

     10.2         Loan facility with Chittenden Bank,includingCommitment Letter,
                  dated April 30, 1996, Loan Agreement, dated June 13, 1996, and
                  Promissory Notes, dated June 13, 1996, relating to short term
                  working capital facility and capital expenditures line of
                  credit (3) and amendment thereto dated June 11, 1997 (4)

     10.3         Loan facility with First International Bank, N.A., including
                  Collateral Assignments, Financial Condition Affidavits, Loan
                  Agreements and Promissory Notes, dated February 8, 1999,
                  Assignment of Contract Rights, Security Agreement, dated
                  February 8, 1999, and Commercial Mortgage and Security
                  Agreement, dated February 8, 1999.(5)

     10.4         Employment Agreement, dated August 14,2000, between the
                  Registrant and Joseph J. Arcata.(6)

     10.5         Loan facility with CoBANK,ACB including Single Advance Term
                  Loan Supplement, dated May 23,2001, Master Loan
                  Agreement,dated May 23, 2001, Real Estate Mortgage, dated May
                  23, 2001, Security Agreement, dated May 23, 2001 and
                  Continuing Guarantees, dated May 23,2001.

     10.6         Production and Sales Agreement dated the 27 day of February
                  1998 with International Ingredien Corporation and amendment
                  thereto dated June 12, 2001.

     10.7         Equipment Purchase Agreement dated June 12, 2001 with
                  International Ingredient Corporation.

     21           List of subsidiaries of the Company (1)

     23           Consent of Citrin Cooperman & Company, LLP

(1)  Incorporated by reference to the Company's Registration Statement Form
     S-1, File No. 33-64868.
(2)  Incorporated by reference to the Company's Annual Report on Form 10-K for
     the fiscal year ended March 31, 1994.
(3)  Incorporated by reference to the company's Annual Report on Form 10-K the
     fiscal year ended March 31, 1996.
(4)  Incorporated by reference to the Company's Annual Report on Form 10-K for
     the fiscal year ended March 31, 1997.

                                       26
<PAGE>


(5)  Incorporated by reference to the Company's Annual Report on Form 10-K for
     the fiscal year ended March 31,1999.
(6)  Incorporated by reference to the Company's form 10Q-A for the quarterly
     period ended September 30,2000.

                                       27
<PAGE>


SIGNATURES

      PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

                                         LUCILLE FARMS, INC.

                                         By:/s/Alfonso Falivene
                                            -----------------------------------
                                         Alfonso Falivene, President (Principal
                                         Executive Officer)

                                         By:/s/Stephen Katz
                                            -----------------------------------
                                         Stephen Katz, Vice President-- Finance
                                         and Administration
                                            (Principal Financial and
                                             Accounting Officer

Date: June 22, 2000
      PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.


Signature                                     Title                   Date
---------                                     -----                   ----

/s/Gennaro Falivene                          Director             June 26,2001
---------------------------
Gennaro Falivene


/s/Alfonso Falivene                          Director             June 26,2001
---------------------------
Alfonso Falivene


/s/Stephen M. Katz                           Director             June 26,2001
----------------------------
Stephen M. Katz


/s/Howard S. Breslow                         Director             June 26,2001
----------------------------
Howard S. Breslow


/s/Jay M. Rosengarten                        Director             June 26,2001
----------------------------
Jay M. Rosengarten


/s/Dr. Mali Reddy                            Director             June 26,2001
----------------------------
Dr. Mali Reddy