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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

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|/x/ | Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
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For the fiscal year ended June 30, 2000

Commission file number: 0-4136

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LIFECORE BIOMEDICAL, INC.(Exact name of registrant as specified in its charter)

Minnesota(State or other jurisdiction
of incorporation or organization)

41-0948334(IRS Employer
Identification No.)


3515 Lyman Boulevard
Chaska, Minnesota 55318-3051(Address of principal executive offices)

Registrant's
telephone number, including area code:(952) 368-4300

Securities
registered pursuant to Section 12(b) of the Act:None

Securities
registered pursuant to Section 12(g) of the Act: Common Stock ($.01 stated value)
Preferred Stock Purchase Rights(Title of Class)

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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. / /

The
aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $96,865,000 at August 22, 2000 when the last sale price of such
stock, as reported by the Nasdaq National Market, was $7.813.

The
number of shares outstanding of the Registrant's Common Stock, $.01 stated value, as of August 22, 2000 was 12,606,124 shares.

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DOCUMENTS INCORPORATED BY REFERENCE

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PART I

Item 1. Business

General

Lifecore Biomedical, Inc. ("Lifecore" or the "Company") develops, manufactures, and markets biomaterials and surgical devices through two divisions, the
Hyaluronan Division and the Oral Restorative Division. Further information about Lifecore can be obtained from Lifecore's Internet website at www.lifecore.com, however, the contents of the website are
not intended to be a part of this Form 10-K and are not incorporated by
reference. The Company was incorporated in the State of Minnesota in 1965.

The
Company's Hyaluronan Division is principally involved in the development and manufacture of products utilizing hyaluronan, a naturally occurring carbohydrate that moisturizes or
lubricates the soft tissues of the body. The Hyaluronan Division's primary development project involves a version of Lifecore's patented ferric hyaluronan technology, GYNECARE INTERGEL
Adhesion Prevention Solution ("INTERGEL Solution"). INTERGEL Solution is a second-generation product with potential application in reducing the incidence of post-surgical adhesions.
INTERGEL Solution is intended to reduce the incidence of fibrous tissue adhesions commonly formed as part of the body's natural healing process when tissues are subject to accidental or surgical
trauma. These adhesions may cause internal complications that often require costly post-surgical intervention, particularly with respect to abdominal, cardiovascular, orthopedic,
reproductive, and thoracic surgeries,. Government sources recently estimated the annual cost for treatment of adhesion complications in the female lower abdomen alone, a common site for the occurrence
of adhesions, at $1.4 billion in the United States. Since June 1998, the Company's exclusive worldwide marketing partner, GYNECARE, the women's healthcare division of
ETHICON, INC., a Johnson & Johnson Company, has been marketing INTERGEL Solution in Europe.

The
Company produces hyaluronan through a proprietary fermentation process. Currently, the primary commercial use for the Company's hyaluronan is as a component in ophthalmic surgical
solutions for cataract surgery. Lifecore is pursuing other applications of hyaluronan through corporate partners for drug delivery and wound care applications. The Company also is leveraging its
hyaluronan manufacturing skills to provide specialized contract aseptic manufacturing services.

The
Company's Oral Restorative Division markets a comprehensive line of titanium-based dental implants for replacement of lost or extracted teeth. Through various acquisitions, the
Company acquired the SUSTAIN® Dental Implant System, the RESTORE® Dental Implant System, and the Implant Support Systems ("ISS") line of compatible components. The Company has
substantially enhanced and expanded these product lines since their acquisition. In September 1999, the Company introduced the STAGE-1 Single Stage Implant System in
the U.S. The Oral Restorative Division also manufactures and markets tissue regeneration products for the restoration of soft tissue and bone resulting from deterioration due to periodontal disease
and tooth loss. In May 1997, Lifecore acquired the TefGen Regenerative Membrane from Bridger Biomed, Inc. ("Bridger"). The acquisition expanded and complemented the
Company's growing line of tissue regenerative products by adding a nonresorbable membrane to address a current clinical practice referred to as guided tissue regeneration. From June 1997 until
recently, Lifecore expanded its tissue regeneration business to include soft tissue applications with the addition of AlloDerm® Dermal Graft, which the Company distributed on an exclusive
basis to the U.S. dental market for LifeCell Corporation ("LifeCell"). In August 2000, the distribution agreement with LifeCell expired. In May 2000, Lifecore began exclusive dental
industry representation of the bone allograft tissue products distributed by the Musculoskeletal Transplant Foundation ("MTF"), the world's largest bone tissue procurement and distribution service.
These bone allografts are used as substitutes for the patient's own bone in dental surgeries requiring grafting. Lifecore receives a representation fee for coordinating the relationship between MTF
and the

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dental surgeon. The Oral Restorative Division's products are marketed in the U.S. through the Company's direct sales force and through 22 international distributors in 35 countries. The Company also
operates foreign subsidiaries in Italy and Germany and a joint venture in Sweden.

Hyaluronan Division

Background

Hyaluronan is a critical, naturally occurring carbohydrate component of physiological fluids that lubricate, moisturize or otherwise protect the body's soft
tissues. Due to its widespread presence in tissues and its high degree of biocompatibility, the Company believes that hyaluronan can be used for a wide variety of medical applications.

Hyaluronan
(also referred to as hyaluronic acid or sodium hyaluronate) was first demonstrated to have commercial medical utility as a viscoelastic (elastic yet fluid) solution in
cataract surgery. In this application, its use for coating and lubricating tissues during the implantation of intraocular lenses dramatically improved the existing surgical success rates. The first
commercial ophthalmic hyaluronan product produced by extraction from rooster comb tissue became commercially available in the United States in 1981. Hyaluronan-based products, produced both by rooster
comb extraction and by fermentation processes such as the Company's, have since gained widespread acceptance in ophthalmology and are currently used in the majority of cataract extraction procedures
in the world. The Company's hyaluronan has been utilized in veterinary applications such as cryopreservation and traumatic arthritis since 1994.

Other
hyaluronan applications currently being investigated by Lifecore or its partners include post-surgical prevention of adhesions and drug delivery (as a vehicle to
carry wound management agents). The Company believes that the use of hyaluronan for the prevention of post-surgical adhesions currently represents the most significant potential
application for hyaluronan.

Strategy

The Company intends to use its proprietary fermentation process to be a leader in the development of hyaluronan-based products for multiple applications.
Elements of the Company's strategy include the following:



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Hyaluronan Division Products

The following chart summarizes the principal products and development projects of the Hyaluronan Division, along with their applications and the companies with
which Lifecore has related strategic alliances:

|PRODUCT                                                              |  | STRATEGIC ALLIANCE                                                                                                                                                                                   |  | MARKET                                           |  | STATUS*                                                                                                                                    
|-------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------
|GYNECOLOGICAL SURGERY GYNECARE INTERGELAdhesion Prevention Solution |  | Lifecore's proprietary product under development; GYNECARE, the women's healthcare division of ETHICON has exclusive worldwide marketing rights for adhesion prevention applications and orthopedics |  | Adhesion prevention                              |  | Pending U.S. FDA Pre-Market Approval, marketed by GYNECARE, the women's healthcare division of ETHICON in Europe for abdominal applications
|OPHTHALMIC Viscoat® Ophthalmic Viscoelastic Solution                 |  | Lifecore supplies proprietary hyaluronan powder for inclusion in Alcon's viscoelastic solution                                                                                                       |  | Cataract surgery                                 |  | Commercial sales since 1983                                                                                                                
|Amvisc® and Amvisc Plus® Ophthalmic Solutions                        |  | Lifecore supplies finished syringes to Bausch & Lomb, who markets the products                                                                                                                       |  | Cataract surgery                                 |  | Lifecore export shipments commenced in December 1995; U.S. sales pending Bausch & Lomb PMA supplement approval                             
|LUROCOAT® Ophthalmic Solution                                        |  | Lifecore supplies its proprietary product for marketing on a non-exclusive basis outside the U.S.                                                                                                    |  | Cataract surgery                                 |  | Lifecore export shipments commenced in June 1997                                                                                           
|WOUND MANAGEMENT Wound healing agent                                 |  | Lifecore supplies process development services and hyaluronan powder to Johnson & Johnson Medical, Ltd. for use as a delivery vehicle                                                                |  | Wound management                                 |  | JJML commenced clinical trials in 1997                                                                                                     
|OTHER APPLICATIONS MAP-5 Embryo Cryopreservation Solution           |  | Lifecore supplies hyaluronan in vials to Vetrepharm, Inc., who markets the product                                                                                                                   |  | Veterinary cryopreservation, traumatic arthritis |  | Commercial sales since 1994                                                                                                                

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The Company is developing a product using a version of its patented ferric hyaluronan technology, INTERGEL Solution, for potential application in reducing the
incidence of post-surgical adhesions.

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GYNECARE, the women's healthcare division of ETHICON, INC., has worldwide, exclusive distribution rights for INTERGEL Solution.

Following
surgical procedures fibrous tissue, or adhesions, commonly form as part of the body's natural healing process resulting from trauma to tissues or organs during surgery.
Particularly with respect to abdominal, cardiovascular, gynecological, orthopedic, reproductive and thoracic surgeries, these adhesions may cause internal complications that require costly additional
surgical intervention. For example, adhesions following gynecological surgery can cause infertility, life threatening bowel obstructions, or complicate subsequent surgical interventions. The Company
believes that successful penetration of this market will require a product with low toxicity, easy application, high procedural flexibility, broad effectiveness and appropriate pricing.

Laparotomy.Prior to 1994 Lifecore and ETHICON were jointly developing an anti-adhesion product. In 1994,
Lifecore assumed responsibility for completion of this project. Lifecore subsequently completed the pre-clinical studies and submitted an application to the FDA for an Investigational
Device Exemption ("IDE") to begin human clinical trials to evaluate the safety and efficacy of INTERGEL Solution. In April 1995, the FDA approved the IDE. A pilot human clinical trial,
involving 23 female patients undergoing peritoneal cavity surgery with preservation of fertility, was completed at a single United States clinical center in December 1995. Patients were
randomly selected to receive either INTERGEL Solution or a control solution applied in a final step prior to completion of surgery by laparotomy (conventional or open surgery). The primary goals of
the pilot study were the preliminary assessment of the safety of INTERGEL Solution and an evaluation of the experimental clinical protocol. A secondary goal was the preliminary assessment of the
effectiveness of INTERGEL Solution in reducing post-surgical adhesions by second-look laparoscopy. Second-look laparoscopy is a standard surgical practice with
fertility patients, and consists of a less invasive follow-up evaluation of the patients' internal abdominal anatomy. The laparoscopy enabled clinicians to gather data comparing
post-surgical adhesions in the two patient treatment groups. Analysis of the pilot clinical data indicated that patients who received INTERGEL Solution experienced a 45% lower incidence of
a broad range of adhesions than control patients (p<0.02). Further, the study showed that when adhesions did occur, those of the INTERGEL Solution patient group were significantly less
extensive and less severe than those of the control group (p<0.01). Finally, physicians indicated that the test material was easily administered during clinical procedures.

Based
on these results the Company initiated a pivotal human clinical trial in March 1996. That study was completed in December 1998. It involved 281 patients in a
blinded study at twelve clinical sites in the United States and five clinical sites in Europe. These patients underwent a similar randomized treatment protocol and were evaluated for adhesion
formation at 24 anatomical sites by second-look laparoscopy. The Company submitted an application for FDA Pre-Market Approval ("PMA") in March 1999, which was accepted
by the FDA in May 1999 for expedited review. In January 2000, an advisory panel to the FDA recommended to the FDA that INTERGEL Solution not be approved for use in the United States.
After consulting with the FDA, the Company prepared and submitted an amendment to the existing PMA in June 2000 to address concerns raised by the advisory panel. There can be no assurance that
the FDA will ultimately give marketing clearance for INTERGEL Solution in the future. See "Government Regulation."

Laparoscopy.In 1997, the Company began a second series of human clinical trials to evaluate INTERGEL Solution as an
adjunct in less invasive, microsurgical procedures. Since laparoscopic procedures are rapidly becoming a preferred surgical interventional method, the Company wished to ensure the utility of INTERGEL
Solution under the more physically restrictive demands of laparoscopic techniques in comparison to laparotomy techniques. A pilot trial was completed showing results similar to that of the product in
the pilot laparotomy trial. Enrollment in a subsequent multi-center clinical trial was completed in June 2000. The results of this trial are currently undergoing analysis.

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In August 1994 when responsibility for development of this project was shifted to Lifecore, the Company and ETHICON entered into a Conveyance, License, Development and Supply
Agreement (the "ETHICON Agreement") to carry out the shift of responsibility. The ETHICON Agreement transferred to the Company the intellectual property developed to date from the
anti-adhesion project, including pending patent rights and data from research, product development, clinical safety and efficacy, and marketing evaluations. The Company assumed
responsibility for continuing the development project, including conducting human clinical trials with INTERGEL Solution. Furthermore, the Company granted ETHICON exclusive worldwide marketing rights
to INTERGEL Solution for post-surgical adhesion prevention and certain orthopedic applications in return for an exclusive supply contract through 2008 with provisions for renewal. The
Company currently receives certain technical support in return for a specified annual fee under the provisions of an associated consulting agreement. Under this agreement, the primary ETHICON
scientist responsible for supervising the anti-adhesion project since its inception reports directly to Lifecore management.



Cataract Surgery.Currently, the primary commercial application for the Company's hyaluronan is in cataract surgery.
During the process of cataract surgery, hyaluronan, in the form of a viscoelastic solution, is used to coat and lubricate the anterior chamber of the eye during intraocular lens implantation. These
solutions have been shown to reduce surgical trauma and thereby contribute to more rapid recovery with fewer complications than were experienced prior to the use of viscoelastics. The Company
currently sells hyaluronan for this application to several customers, including Alcon and Bausch & Lomb. Alcon and Bausch & Lomb are two of the leading producers of ophthalmic surgical
products in the world. The Company also has agreements to supply its LUROCOAT Solution under private label relationships outside the United States and Canada.

Hyaluronan-based
products are used in the majority of cataract surgeries in the world. The Company estimates that the worldwide market for hyaluronan for cataract surgery, on a
hospital cost basis, is approximately $140 million per year. The market share of products using fermented hyaluronan is increasing relative to the market share of products using hyaluronan
extracted from rooster combs.

Alcon
purchases the Company's hyaluronan for inclusion in Viscoat® Ophthalmic Viscoelastic Solution, which is used during cataract surgery. The Company's relationship with
Alcon and its predecessors commenced in 1983, when the Company's hyaluronan was specified as a raw material component of the Viscoat product, which received marketing clearance from the FDA in 1986.
Until 1990, Alcon's predecessors had the exclusive rights to purchase the Company's hyaluronan for ophthalmic applications. In 1990, the arrangement with Alcon became non-exclusive. Since
that time, sales of hyaluronan to Alcon have continued to be made pursuant to supply agreements. The current Alcon supply agreement, as renewed in December 1998, is for a term of two years
through December 31, 2000. Management does not anticipate any issues related to negotiating an extension of this supply agreement. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

In
December 1994 the Company entered into a supply agreement with Bausch & Lomb. Under the agreement, the Company has been selling its hyaluronan to Bausch & Lomb
for export in packaged syringes in connection with two of Bausch & Lomb's ophthalmic viscoelastic surgical products, Amvisc® and Amvisc Plus® Ophthalmic Solutions. The
Company has validated its manufacturing facility to produce these products, and Bausch & Lomb is in the process of obtaining a PMA supplement with the FDA to allow the Company to manufacture
these products for U.S. sale. The sale by Bausch & Lomb in the United States of Amvisc and Amvisc Plus syringes supplied by the Company is dependent upon FDA approval of such supplement. In
December 1995 Bausch & Lomb commenced shipments of
finished products supplied by the Company to Europe. The supply agreement with Bausch & Lomb will terminate on December 31, 2000. The Company does not expect the supply

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agreement with Bausch & Lomb to be renewed, although sales are scheduled to continue for an indefinite period on a non-contractual basis.

The
Company has developed its own viscoelastic solution, LUROCOAT Solution. The Company received CE marking for LUROCOAT Solution during fiscal year 1997 allowing LUROCOAT Solution to
be marketed and sold in Europe. The Company has private label agreements to supply LUROCOAT Solution outside the United States and Canada. Export shipments of LUROCOAT Solution began in fiscal year
1997.



In its work with hyaluronan, the Company developed specialized packaging skills with materials that, due to their perishable nature or complex viscous handling
properties, cannot be sterilized in a conventional manner and require rigorous aseptic manufacturing and packaging protocols. The Company is leveraging these skills to initiate
non-ophthalmic development projects for the manufacture of hyaluronan and non-hyaluronan products in other medical areas.

One
such application is the use of hyaluronan as a drug delivery vehicle for a product being developed by JJML. JJML is developing a product that utilizes the Company's hyaluronan and
process development expertise to produce a drug delivery vehicle that enhances topical wound healing. JJML is now in the clinical trial phase with this product. There can be no assurance that this
product will be brought to market.

The
Hyaluronan Division undertakes its own product development activities for both hyaluronan-based and non-hyaluronan-based applications, as well as on a contract basis
with certain clients. The majority of outside projects are initiated by a client to demonstrate that the Company's hyaluronan is suitable for a particular medical application. Suitability is often
measured by detailed specifications for product characteristics such as purity, stability, viscosity, and molecular weight, as well as efficacy for a particular medical application.

The
Company currently manufactures Vetrepharm, Inc.'s MAP-5 Embryo Cryopreservation Solution, an aseptically-packaged hyaluronan solution, for the
cryopreservation of fertilized animal embryos. MAP-5 Solution is used to preserve the embryos for transportation to local veterinarians. Sales to Vetrepharm, Inc. have been made
since 1994 pursuant to annual purchase orders that specify the quantity and unit price.

There
can be no assurance that products currently under development by the Company or others will be successfully developed or, if so developed, will be successfully and profitably
marketed.

Oral Restorative Division

Background

Dental implants are increasingly accepted as a replacement for missing or extracted teeth and serve as supports for dentures, crowns, and bridges. In
comparison to conventional restorative procedures, dental implants are surgically placed in the jawbone simulating the anchoring of a tooth by its root. The implant maintains underlying bone structure
and provides superior fixation of restorations, minimizing loosening of fixtures against surrounding teeth and gingiva. The titanium cylinder or cylindrically-screw shaped implant is categorized by
shape and method of implantation. For example, the threaded cylinder implant is screwed into the jawbone, while an alternate form, the press-fit cylinder, is placed into a
precision-drilled hole with a friction fit. To further enhance bone fixation, various implant styles may be spray-coated with hydroxylapatite-or metal and/or then grit blasted to create a roughened
surface. The Company believes the current annual worldwide dental implant market is approximately $500 million.

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Bone graft substitutes are used for the restoration of deteriorated hard tissue caused by periodontal disease and tooth loss. Historically, bone-filling material needed to
fill holes or restore deteriorated bone was only available from cadavers, live donor bone or autologous bone (self-donated from another part of the patient's body). These sources have
quality and convenience limitations. The current annual U.S. market for synthetic bone substitute products is limited to approximately $10 million. The addition of supplemental hard tissue
regeneration products has expanded that annual market to approximately
$25 million. In addition, the annual U.S. market for dental purchases of freeze dried donor bone is estimated to be approximately $10 million. The Company's TefGen Regenerative Membrane
and CAPSET® Calcium Sulfate Bone Graft Barrier products address this market opportunity. In May 2000, the Company entered into a distribution agreement with Musculoskeletal
Transplant Foundation to solicit orders for its MTF® Bone Allograft Tissue for a representation fee. This product addresses the donor bone market. Similarly, a market for soft tissue
regenerative products has developed to address the area of soft tissue replacement in adding to or replacing gingival tissue. The estimated annual U.S. market potential for a soft tissue regenerative
product is approximately $50 million. The Company distributed AlloDerm Dermal Graft to address this market opportunity until July 2000. At that time, the initial three-year
contract with LifeCell for AlloDerm Dermal Graft was not renewed.

Strategy

The Company intends to be a leader in the oral restorative surgical products industry. The Company has steadily increased the market share for its implant
products by implementing the following strategies:



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Oral Restorative Division Products

The following chart summarizes the principal products of the Company's Oral Restorative Division:

|PRODUCT                                      |  | MARKET                                                                                                                   |  | STATUS                                     
|-------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------
|SUSTAIN® and RESTORE® Dental Implant Systems |  | Replacement of lost or extracted teeth                                                                                   |  | Commercial sales                           
|STAGE-1 Single Stage Implant System         |  | One-stage surgical procedure with self-tapping implant design for easier placement and Morse taper prosthetic connection |  | Commercial sales                           
|SuperCAT Super Self-Tapping Implant         |  | Faster and more efficient implant installation to reduce surgical time                                                   |  | Commercial sales                           
|Implant Support Systems                      |  | Precision oral restorative components compatible with implants                                                           |  | Commercial sales                           
|CAPSET® Calcium Sulfate Bone Graft Barrier   |  | For use with natural and synthetic bone graft materials as a resorbable barrier cap and/or binding agent                 |  | Commercial sales                           
|CAPSET® SlowSet Barrier                     |  | Repair of multiple periodontal bone defects                                                                              |  | Commercial sales                           
|TefGen Regenerative Membrane                |  | Nonresorbable membrane for guided tissue regeneration                                                                    |  | Commercial sales                           
|HAPSET® Hydroxylapatite Bone Graft Plaster   |  | Repair of jawbone structure requiring a non-resorbable bone matrix                                                       |  | Commercial sales                           
|MTF® Bone Allograft Tissue                   |  | Grafting material for restoration of dental bone defects                                                                 |  | Distributed by MTF, represented by Lifecore



The Company offers the RESTORE Dental Implant System, the SUSTAIN Dental Implant System and the STAGE-1 Single Stage Implant System.

The
RESTORE System is based on a classic threaded titanium implant design that pioneered the commercialization of these devices in general oral restorative surgery. In
July 1993, the Company acquired this implant design in connection with its acquisition of Implant Support Systems, Inc., a manufacturer of dental implant products. The Company has since
enhanced and expanded the original ISS line into a broad range of implant options, marketed under the RESTORE System name. Included in the ISS acquisition was a line of dental implant prosthetic
components that the Company continues to market under the Implant Support Systems brand. These components are compatible and interchangeable with several other dental implant manufacturers' systems,
as well as miscellaneous dental implant support products, permitting the Company to market its products to dental offices that currently use competitors' implant systems.

The
SUSTAIN System is based on a newer innovative design that embraces both threaded and press-fit cylinder formats with added "bone-like" hydroxylapatite. In
May 1992, the Company acquired

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the basic SUSTAIN System from Bio-Interfaces, Inc. after serving as an exclusive distributor for the SUSTAIN System since 1990. The SUSTAIN System, like the RESTORE System, is
complemented by a complete line of prosthetic components.

The
STAGE-1 Single Stage Implant System is the Company's newest implant line. It has been designed to allow for a one-stage surgical procedure. The
STAGE-1 System uses a self-tapping implant design for easier placement and includes the reliable Morse taper prosthetic connection. Commercial sales began in
September 1999.

Lifecore
has enhanced and expanded its product lines, creating numerous new products with a combination of innovative features from its existing systems. This gives the Company a
broad product line and offers practitioners maximum flexibility in choice of treatment modalities with over 1,000 products.



The Company offers products that address various bone and tissue regeneration procedures.

CAPSET
Calcium Sulfate Bone Graft Barrier received 510(k) clearance and was introduced to the market in 1995. CAPSET SlowSet Barrier was introduced in July 1999. These products
are based on a calcium sulfate plaster technology developed by and licensed from Wright Medical, Inc., an orthopedic product manufacturer based in Memphis, Tennessee. CAPSET Barrier and CAPSET
SlowSet Barrier allow the clinician to more efficiently use demineralized freeze-dried bone grafts to restore missing bone, particularly in periodontal defects, without resorting to more elaborate
treatment techniques or no treatment at all.

TefGen
Regenerative Membrane technology was acquired by the Company from Bridger Biomed, Inc. in May 1997. This non-resorbable membrane is based on
nanoporousPTFE Biomaterials("nPTFE"); competitive with the market's leading product produced by W.L. Gore. TefGen Regenerative Membrane allows the
dental surgeon to cover a treated defect in bone and prevent the invasion of soft tissue while the slower growing bone tissue underneath has time to establish itself.

HAPSET
Hydroxylapatite Bone Graft Plaster is a moldable, partially resorbable form of hydroxylapatite graft substitute that can be contoured to fill a bone defect during surgery. It
consists of the Company's hydroxylapatite particle in a carrier of the same calcium sulfate plaster used in CAPSET Barrier.

MTF
Bone Allograft Tissue is human donor bone tissue processed and distributed by Musculoskeletal Transplant Foundation ("MTF") and represented by the Company. MTF Bone Allograft
Tissue is available in mineralized or demineralized bone tissue to be used as a grafting material for restoration of dental bone defects. The Company entered into a three-year
representation agreement with MTF in May 2000.

Through
July 31, 2000, the Company distributed AlloDerm® Acellular Dermal Graft, a freeze-dried, chemically processed, human donor skin that can be used as a
substitute for soft tissue grafts taken from the roof of the patient's mouth. In June 1997, Lifecore entered into a three year exclusive U.S. distribution agreement with LifeCell Corporation to
market and distribute AlloDerm Graft in the
dental market. The distribution agreement with LifeCell was not renewed after its initial three-year term expired.

Product Development

The Oral Restorative Division is also involved in product development activities to improve existing components and packaging, and to add new components to the
dental implant systems. These development activities enhance the suitability and ease of use of the products for specific surgical

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applications and reflect changing trends in dental implant technology. There can be no assurance, however, that products which are currently under development by the Company will be successfully
developed, or if so developed, will be successfully and profitably marketed.

Sales and Marketing

Hyaluronan Division Products

The Company generally markets and distributes its hyaluronan products to end-users through corporate partners. The Company sells hyaluronan to
these partners in a variety of forms, including powders, gels and solutions packaged in bulk or single-application units. The Company sells its ophthalmic grade hyaluronan powder to Alcon for Viscoat
solution and supplies Bausch & Lomb's Amvisc products for sale in Europe. The Company has private label agreements to supply LUROCOAT Solution to customers outside the United States and Canada.
The Company also sells hyaluronan solutions to Vetrepharm, Inc. for veterinary embryo cryopreservation and to Bexco Pharma, Inc. for veterinary orthopedic indications outside the U.S.

The
Company has an agreement with GYNECARE, the women's healthcare division of ETHICON for exclusive distribution of INTERGEL Solution. The Company believes that ETHICON is the
worldwide market leader in the area of surgical products and has one of the largest marketing and sales forces in the industry. Commercialization of INTERGEL Solution is dependent on receipt of FDA
marketing
clearance, successful manufacturing of commercial quantities, and the efforts of ETHICON to develop the market for the product. No assurance can be given that any or all of these conditions will be
met.

The
Company also sells various forms of medical grade hyaluronan directly to third parties for development and evaluation of new applications to be marketed and distributed through
those companies' distribution systems or a jointly developed distribution system.

Oral Restorative Division Products

The Company is focused on expanding its oral restorative product line, improving product quality, and developing increased sales and marketing support. The
dental implant market is highly specialized. Products are marketed to oral surgeons, periodontists, implantologists, prosthodontists, general dental practitioners and dental laboratories. Accordingly,
management believes it must maintain a highly experienced direct sales force in the United States for proper distribution of these products. The Company believes that its sales force offers better
customer service, technical support and regulatory control than could be achieved through an independent distributor network in the United States. The Company employs twenty-three individuals
dedicated to sales in the United States and five U.S.-based salespersons dedicated to international sales. The Oral Restorative Division products are marketed internationally through 22 distributors.
In addition, the products are marketed in Italy through its subsidiary, Lifecore Biomedical SpA, which currently utilizes ten sales agents and in Germany through its subsidiary, Lifecore Biomedical
GmbH, which utilizes two sales agents. The Company also markets its products in Scandinavia through a joint venture in Sweden.

The
Company's marketing activities are designed to support its direct sales force and include advertising and product publicity in trade journals, direct mail catalogs, newsletters,
continuing education programs, telemarketing, and attendance at trade shows and professional association meetings. Industry estimates indicate a need for replacement of approximately
100 million teeth in the adult population of the United States. That represents a potential market for implant companies such as Lifecore of approximately $20 billion.

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Manufacturing

The commercial production of hyaluronan by the Company requires fermentation, separation and purification capabilities, and aseptic packaging of product in a
variety of formats. In addition, the production of the INTERGEL Solution requires high volume precision mixing of viscous fluids.

The
Company produces its hyaluronan through a proprietary process of fermentation. Until the introduction of the Company's medical grade hyaluronan, the only commercial source for
medical hyaluronan was through an animal rendering process of extraction from rooster combs. The Company believed that the rooster comb extraction method would not be capable of producing large
quantities of hyaluronan in an efficient manner if competition for the use of medical grade hyaluronan greatly increased. In addition, changing regulatory requirements make medical use of animal
extracts increasingly problematic. Consequently, the Company developed its proprietary fermentation process for hyaluronan using existing knowledge of other successful fermentation manufacturing
processes. The Company believes that the fermentation manufacturing approach is superior to rooster comb extraction because of greater efficiency, flexibility, a more favorable long-term
regulatory environment, and better economies of scale in producing large commercial quantities.

The
Company's 110,000 square foot facility is used primarily for the proprietary hyaluronan manufacturing process. The Company has been building hyaluronan inventory levels in
anticipation of the demand for INTERGEL Solution, once the product receives PMA marketing clearance from the FDA for sales in the U.S. The Company believes that the current inventory
on-hand, together with its manufacturing capacity, will be sufficient to allow it to meet the needs of its current customers for the foreseeable future.

The
Company provides versatility in the simultaneous manufacturing of various types of finished products. Currently, the Company supplies several different formulations of hyaluronan
(e.g., varied molecular weight fractions) in powders, solutions and gels, and in a variety of bulk and single-use finished packages. The Hyaluronan Division is continuously conducting
development work relating to the techniques utilized in hyaluronan manufacturing. Such development activity is designed to improve production efficiencies and expand the Company's capabilities to
achieve a wider range of hyaluronan product specifications. The Company's specialized fluid handling and aseptic packaging capabilities also provide the opportunity for the Company to offer contract
packaging for other technically challenging non-hyaluronan fluids.

In
anticipation of significant commercial demand for hyaluronan products, specifically INTERGEL Solution, the Company has expanded its warehouse and distribution capabilities and its
aseptic
formulation and packaging facilities for finished products. The scale-up of the aseptic operations requires the purchase and validation of additional equipment and training of additional
personnel. See "Management's Discussion and Analysis of Financial Condition and Results of Operations".

The
Company's facility was designed to meet applicable regulatory requirements and has been cleared by the FDA for the manufacture of both device and pharmaceutical products. The FDA
periodically inspects the Company's manufacturing systems, and requires conformance to the FDA's Quality Systems Regulations ("QSR"). In addition, the Company's corporate partners are required by the
FDA to conduct intensive regulatory audits of the facilities. The Company also regularly contracts with independent regulatory consultants to conduct audits of the Company's operations. The Company
has received certification of conformance to ISO 9001 Standards and Medical Device Directives, as well as theCommission European(CE) Mark of
Conformity from TUV Product Services of Munich, Germany. These approvals represent international symbols of quality system assurance and compliance with applicable European Medical Device Directives,
which greatly assist in the marketing of the Company's products in the European Union.

12

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The Company uses outside metal finishing vendors to produce its dental implant devices and related components. The Company inspects vendors' quality assurance and control functions,
and performs its own finished packaging related to the implant product lines.

The
Company purchases raw materials for its production of hyaluronan and hydroxylapatite from outside vendors. While these materials are available from a variety of sources, the
Company principally uses limited sources for some of its key materials to better monitor quality and achieve cost efficiencies. Wright Medical, Inc. exclusively supplies the key raw material
for CAPSET Barrier. The Company believes Wright Medical is able to provide adequate amounts of the raw materials for CAPSET Barrier. The Company utilizes a supply agreement with Bridger
Biomed, Inc. to supply the TefGen Regenerative Membrane product line.

Competition

The competitors of the Company include major chemical, dental, medical, and pharmaceutical companies, as well as smaller specialized firms. Many of these
companies have significantly greater financial, manufacturing, marketing, and research and development resources than the Company.

Hyaluronan Products

A number of companies produce hyaluronan products and thus directly or indirectly compete with Lifecore or its corporate partners. Several companies are
pursuing anti-adhesion product development, including Alliance Pharmaceuticals, Inc., Anika Therapeutics, Inc., Biomatrix, Inc., Focal, Inc., Genzyme
Corporation ("Genzyme"), Gliatech, Inc., Life Medical Sciences, Osteotech, and W.L. Gore & Associates, Inc. Genzyme is developing hyaluronan-based formulations for surgical
anti-adhesion applications that could compete with the Company's INTERGEL Solution product, if and when cleared for marketing by the FDA. If the products obtain commercial acceptance the
Company's prospects for INTERGEL Solution, if and when approved, may be adversely affected.

In
addition to Genzyme several companies produce hyaluronan through a fermentation process including Bio-Technology General Corporation, Kyowa Hakko, Nippon, Seikagaku,
and Miles Laboratories. Genzyme currently sells a high molecular weight fermentation version of hyaluronan to the Company's ophthalmic customer, Alcon, for use in its Provisc® solution. In
addition, several companies manufacture hyaluronan by using rooster comb extraction methods. These companies primarily include Anika Therapeutics, Inc., Biomatrix, Inc., Chesapeake
Biological Labs, Fidia SpA, and Pharmacia & Upjohn. The Company believes that its patented fermentation process may offer production and regulatory advantages over the traditional rooster comb
extraction method. The Company's competitors have filed or obtained patents covering aspects of fermentation production or uses of hyaluronan. These patents may cover the same applications as the
Company's. Although there can be no assurance, the Company believes that it does not infringe the patents of its competitors. See "Patents and Proprietary Rights."

The
Company believes that competition in the ophthalmic and medical grade hyaluronan market is primarily based on product performance and manufacturing capacity, as well as product
development capabilities. Future competition may be based on the existence of established supply relationships, regulatory approvals, intellectual property, and product price. After a manufacturer has
taken a product through the FDA marketing approval process, a change in suppliers can involve significant cost and delay because significant manufacturing issues may be encountered and supplemental
FDA review may be required.

Oral Restorative Products

The dental implant market is also highly competitive. Major market competitors include Sulzer Calcitek, Inc., Paragon, Biomet, Inc., formerly
Implant Innovations, Inc., Straumann AG and Nobel

13

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Biocare AB. A number of these competitors are established companies with dominant market shares. The Company believes that competition in the dental implant market is based primarily on product
performance and quality, strong sales support, and education.

The
Company believes that its broad product line facilitates the conversion of competitive implant users to a Lifecore system. In addition, the Company has developed several
innovative education and marketing support programs which are designed to increase the client's implant business. The Company believes it has established a strong reputation for quality products due
to its stringent design and inspection criteria. No assurance can be given, however, that the Company can effectively compete with other manufacturers of dental implant systems.

The
market for the Company's tissue regeneration products is also competitive. The major competitors include Biomet, Inc., W. L. Gore (GORE-TEX), and Sulzer
Calcitek Inc. (Biomend). While the Company believes its product line and experienced sales representation are an advantage in this area, no assurance can be given that it can gain significant
market share from its more established competitors.

Patents and Proprietary Rights

The Company pursues a policy of obtaining patent protection for patentable subject matter in its proprietary technology. In May 1985, the Company
received a United States patent covering certain aspects of its hyaluronan fermentation process. The Company has also licensed a 1991 patent for the recombinant DNA encoding of hyaluronan synthase,
exclusively in the United States and non-exclusively outside the United States. In August 1994, in connection with the ETHICON Agreement, the Company was assigned a pending patent
covering the composition and use of INTERGEL Solution, with applications filed in the United States, Australia, Brazil, Canada, Europe, Greece, and Japan. Subsequently, the patent has been issued in
Australia, Canada, Greece, Japan, and the United States. The Company also has a United States patent covering the processes used in the manufacture of hydroxylapatite and a second patent covering the
hydroxylapatite product produced by that process. The Company licenses a patent covering the dental surgical use of calcium sulfate from Wright
Medical, Inc. The Company also licenses patented technology used in the production of calcium sulfate from Wright Medical and the University of North Carolina. In conjunction with the purchase
of the TefGen Regenerative Membrane product line, the Company obtained the rights to the patent for composition, manufacture and use of the nPTFE material. The Company has received a patent on its
dental implant packaging and a patent on its SuperCAT Super Self-Tapping Dental Implant.

The
Company believes that patent protection is significant to its business. However, if other manufacturers were to infringe on its patents, there can be no assurance that the Company
would be successful in challenging, or would have adequate resources to challenge, such infringement. The Company also relies upon trade secrets, proprietary know-how and continuing
technological innovation to develop and maintain its competitive position. There can be no assurance that others will not obtain or independently develop technologies which are the same as or similar
to the Company's technologies. The Company pursues a policy of requiring employees, temporary staff, consultants and customers (which have access to some of its proprietary information) to sign
confidentiality agreements. There can be no assurance that the Company will be able to adequately protect its proprietary technology through patents or other means.

The
Company is aware that one or more of its competitors have obtained, or are attempting to obtain, patents covering fermentation and other processes for producing hyaluronan. Other
patents have been, or may be, issued in the future in product areas of interest to the Company. Although the Company is not aware of any claims that its current or anticipated products infringe on
patents held by others, no assurance can be given that there will not be an infringement claim against the Company in the future. The costs of any Company involvement in legal proceedings could be
substantial, both in

14

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terms of legal costs and the time spent by management of the Company in connection with such proceedings. It is also possible that the Company, to manufacture and market some of its products, may be
required to obtain additional licenses, which may require the payment of initial fees, minimum annual royalty fees and ongoing royalties on net sales. There can be no assurance that the Company would
be able to license technology developed by others, on favorable terms or at all, that may be necessary for the manufacture and marketing of its products.

Government Regulation

Government regulation in the United States and other countries is a significant factor in the marketing of the Company's products and in the Company's ongoing
research and development activities. The Company's products are subject to extensive and rigorous regulation by the FDA, which regulates the
products as medical devices and which, in some cases, requires a PMA, and by foreign countries, which regulate the products as medical devices or drugs. Under the Federal Food, Drug, and Cosmetic Act
("FDC Act"), the FDA regulates clinical testing, manufacturing, labeling, distribution, sale, and promotion of medical devices in the United States.

Following
the enactment of the Medical Device Amendments of 1976 to the FDC Act, the FDA classified medical devices in commercial distribution at the time of enactment ("old devices")
into one of three classesClass I, II, or III. This classification is based on the controls necessary to reasonably ensure the safety and effectiveness of medical devices.
Class I devices are those whose safety and effectiveness can reasonably be ensured through general controls, such as labeling, premarket notification (the "510(k) Notification"), and adherence
to FDA-mandated current QSR requirements for devices. Class II devices are those whose safety and effectiveness can reasonably be ensured through the use of special controls, such
as performance standards, post-market surveillance, patient registries, and FDA guidelines. Class III devices are devices that must receive a PMA from the FDA to ensure their safety
and effectiveness. Ordinarily, a PMA requires the performance of at least two independent, statistically significant clinical trials that demonstrate the device's safety and effectiveness.
Class III devices are generally life-sustaining, life-supporting, or implantable devices, and also include most devices that were not on the market before May 28,
1976 ("new devices") and for which the FDA has not made a finding of substantial equivalence based upon a 510(k) Notification. An old Class III device does not require a PMA unless and until
the FDA issues a regulation requiring submission of a PMA application for the device.

The
FDA invariably requires clinical data for a PMA application and has the authority to require such data for a 510(k) Notification. If clinical data are necessary, the manufacturer
or distributor is ordinarily required to obtain an IDE authorizing the conduct of human studies. Once in effect, an IDE permits evaluation of devices under controlled clinical conditions. After a
clinical evaluation process, the resulting data may be included in a PMA application or a 510(k) Notification. The PMA may be approved, or the 510(k) Notification cleared by the FDA, only after a
review process that may include requests for additional data, sometimes requiring further studies.

If
a manufacturer or distributor of medical devices can establish to the FDA's satisfaction that a new device is substantially equivalent to what is called a "predicate device," i.e.,
a legally marketed Class I or Class II medical device or a legally marketed Class III device for which the FDA has not required a PMA, the manufacturer or distributor may market
the new device. In the 510(k) Notification, a manufacturer or distributor makes a claim of substantial equivalence, which the FDA may require to be supported by various types of information, including
data from clinical studies, showing that the new device is as safe and effective for its intended use as the predicate device.

Following
submission of the 510(k) Notification, the manufacturer or distributor may not place the new device into commercial distribution until an order is issued by the FDA finding
the new device to be substantially equivalent. The FDA has no specific time limit by which it must respond to a 510(k)

15

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Notification. The 510(k) Notification process can take up to eighteen months or more. The FDA may agree with the manufacturer or distributor that the new device is substantially equivalent to a
predicate device, and allow the new device to be marketed in the United States. The FDA may, however, determine that the new device is not substantially equivalent and require the manufacturer or
distributor to submit a PMA or require further information, such as additional test data, including data from clinical studies, before it is able to make a determination regarding substantial
equivalence. Although the PMA process is significantly more complex, time-consuming, and expensive than the 510(k) Notification process, the latter process can also be expensive and
substantially delay the market introduction of a product.

Hyaluronan
products are generally Class III devices. In cases where the Company is supplying hyaluronan to a corporate partner as a raw material or producing a finished product
under a license for the partner, the corporate partner will be responsible for obtaining the appropriate FDA clearance or approval. Export of the Company's hyaluronan products generally requires
approval of the importing country.

The
Company's TefGen Regenerative Membrane product line is a Class II device. CAPSET Barrier and HAPSET Plaster have received market clearance through 510(k) Notifications but
are unclassified.

Other
regulatory requirements are placed on a medical device's manufacture and the quality control procedures in place, such as the FDA's device QSR regulations. Manufacturing
facilities are subject to periodic inspections by the FDA to ensure compliance with device QSR requirements. The Company's facility is subject to inspections as both a device and a drug manufacturing
operation. Other applicable FDA requirements include the medical device reporting regulation, which requires that the Company provide information to the FDA on deaths or serious injuries alleged to
have been associated with the use of its devices, as well as product malfunctions that would likely cause or contribute to death or serious injury if the malfunction were to recur.

If
the Company is not in compliance with FDA requirements, the FDA or the federal government can order a recall, detain the Company's devices, withdraw or limit 510(k) Notification
clearances or PMA approvals, institute proceedings to seize the Company's devices, prohibit marketing and sales of the
Company's devices, and assess civil money penalties and impose criminal sanctions against the Company, its officers, or its employees.

There
can be no assurance that any of the Company's clinical studies will show safety or effectiveness; that 510(k) Notifications or PMA applications will be submitted or, if
submitted, accepted for filing; that any of the Company's products that require clearance of a 510(k) Notification or approval of a PMA application will obtain such clearance or approval on a timely
basis, on terms acceptable to the Company for the purpose of actually marketing the products, or at all; or that following any such clearance or approval previously unknown problems will not result in
restrictions on the marketing of the products or withdrawal of clearance or approval.

Product Liability

Product liability claims may be asserted with respect to the Company's products. In addition, the Company may be subject to claims for products of its
customers that incorporate Lifecore's materials. The Company maintains product liability insurance coverage of $1.0 million per claim, with an aggregate maximum of $2.0 million. The
Company also carries a $10.0 million umbrella insurance policy that also covers product liability claims. Lifecore Biomedical SpA also carries product liability insurance in the amount of
$1.0 million per claim with an aggregate maximum of $2.0 million. There can be no assurance that the Company will have sufficient resources to satisfy product claims if they exceed
available insurance coverage.

16

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Employees

As of July 31, 2000, the Company employed 170 persons on a full-time basis, two part-time employees and five temporary
employees. None of the Company's employees is represented by a labor organization, and the Company has never experienced a work stoppage or interruption due to labor disputes. Management believes its
relations with employees are good.

Executive Officers of the Registrant

Executive Officers

The following sets forth the names of the executive officers of Lifecore, in addition to information about their positions with Lifecore, their periods of
service in such capacities, and their business experience for at least the past five years. There are no family relationships among them. All executive officers named are elected or appointed by the
Board of Directors for a term of office from the time of election or appointment until the next annual meeting of directors (held following the annual meeting of shareholders) and until their
respective successors are elected and have qualified.

James W. Bracke, Ph.D.Dr. Bracke has been President and Chief Executive Officer and a director since
August 1983 and Secretary since March 1995. He joined the Company in February 1981 as Senior Research Scientist.

Dennis J. Allingham.Mr. Allingham was appointed Executive Vice President in November 1997. He has been
Chief Financial Officer of the Company since January 1996. Mr. Allingham has also been General Manager of the Hyaluronan Division since November 1996 and General Manager of the
Oral Restorative Division since November 1997. From June 1995 until January 1996, Mr. Allingham served as Senior Vice President and Chief Financial Officer of Premier
Salons International, Inc., a leading private hair salon chain in North America. From June 1993 until May 1995, Mr. Allingham served as Executive Vice President, Chief
Financial Officer and director of TitleWave Stores, Inc., a leading chain retailer of home entertainment software.

Brian J. Kane.Mr. Kane was appointed Vice President of New Business Development and Marketing in
December 1997. He had been Vice President of New Business Development for the Company since July 1991. He joined the Company as Vice President of Marketing in June 1986.

Colleen M. Olson.Ms. Olson has been Vice President of Corporate Administrative Operations of the Company since
May 1991. Prior to that time, she was Vice President of Human Resources and Administration from June 1990 to May 1991, and Director of Human Resources and Administration from
October 1984 to June 1990. She joined the Company in January 1980 as Office Manager.

Item 2. Properties

The Company's operations are all conducted in its 110,000 square foot building in Chaska, Minnesota. The Company completed its facility expansion during fiscal
1998. See "Management's Discussion and Analysis of Financial Condition and Results of Operation".

Item 3. Legal Proceedings

In March 2000, the Company was served with a lawsuit by The Straumann Company alleging unfair competition and trade dress infringement surrounding the
Company's STAGE-1 Single Stage Implant System. Straumann Company moved for a preliminary injunction, seeking a court order prohibiting Lifecore's continued sale of STAGE-1
Single Stage Implants. The federal court denied Straumann's motion, ruling that Straumann had failed to prove that the claimed "trade dress" was nonfunctional in nature. The Company believes the
lawsuit is without merit and intends to vigorously defend this position.

17

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

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

The Company's Common Stock is traded on the Nasdaq National Market under the symbol LCBM. The following table sets forth for each quarter of fiscal 2000 and
1999 the range of high and low closing sale prices of the Common Stock on the Nasdaq National Market. These quotations represent prices between dealers and do not include retail mark-ups,
markdowns or commissions and may not represent actual transactions.

Fiscal year

Low

High2000First Quarter

$
83/4

$
133/4Second Quarter


111/4


211/2Third Quarter


63/4


233/4Fourth Quarter


55/8


91/21999First Quarter

$
71/4

$
17Second Quarter


53/4


103/8Third Quarter


89/16


141/2Fourth Quarter


83/16


131/16


The
Company has not paid cash dividends on its Common Stock and does not plan to pay cash dividends in the near future. The Company expects to retain any future earnings to finance
its business. The Company has a loan agreement that restricts its ability to pay dividends. See Note D to Consolidated Financial Statements.

At
July 31, 2000, the Company had 654 shareholders of record.

18

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## 

Item 6. Selected Financial Data

SELECTED CONSOLIDATED FINANCIAL DATA(In thousands, except per share amounts)

The
following sets forth selected historical financial data with respect to the Company and its subsidiaries. The data given below as of and for the five years ended June 30,
2000 has been derived from the Company's Consolidated Financial Statements audited by Grant Thornton LLP, independent certified public accountants. Such data should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto included elsewhere herein and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

|                                                                 |                            | Years Ended June 30, |       
|---------------------------------------------------------------- | -------------------------- | -------------------- | ------
|
|Statements of Operations Data:                                   |                            |                      |       
|Net sales                                                        |                            | $                    | 32,823
|Costs of goods sold                                              |                            |                      | 17,618
|                                                                 |                            |                      |       
|Gross profit                                                     |                            |                      | 15,205
|Operating expenses                                               |                            |                      |       
|                                                                 | Research and development   |                      |       
|                                                                 | Marketing and sales        |                      |       
|                                                                 | General and administrative |                      |       
|                                                                 | Insurance proceeds, net    |                      |       
|                                                                 |                            |                      |       
|                                                                 |                            |                      | 15,967
|                                                                 |                            |                      |       
|Income (loss) from operations                                    |                            |                      | (762  
|Other income (expense)                                           |                            |                      | (837  
|                                                                 |                            |                      |       
|Net income (loss)                                                |                            | $                    | (1,599
|                                                                 |                            |                      |       
|Net income (loss) per common share                               |                            |                      |       
|                                                                 |                            | Basic                |       
|                                                                 |                            |                      |       
|                                                                 |                            | Diluted              |       
|                                                                 |                            |                      |       
|Weighted average common and common equivalent shares outstanding |                            |                      |       
|                                                                 |                            | Basic                |       
|                                                                 |                            |                      |       
|                                                                 |                            | Diluted              |       
|                                                                 |                            |                      |       

|                      |  | As of June 30,
|--------------------- |  | --------------
|
|Balance Sheet Data:   |  |               
|Working capital       |  | $             
|Total assets          |  |               
|Long-term obligations |  |               
|Shareholders' equity  |  |               

19

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

General

The Company develops, manufactures and markets surgical devices through its Hyaluronan and the Oral Restorative Divisions.

The
Company has a number of relationships with corporate partners relating to the development and marketing of hyaluronan-based products for a variety of medical applications, as well
as certain non-hyaluronan-based applications that utilize the Company's specialized manufacturing capabilities. Currently, the primary commercial application for the Company's hyaluronan
is as a component in ophthalmic surgical products marketed by Alcon and Bausch & Lomb for cataract surgery. Sales to Alcon are made under a supply agreement that extends through
December 31, 2000. The agreement contains minimum purchase requirements totaling $2.5 million in each of calendar years 1999 and 2000. The Company supplies Bausch & Lomb with
aseptically packaged syringes under a supply agreement that extends through December 31, 2000. Bausch & Lomb is marketing the Company's product in Europe and is awaiting approval from
the FDA on its PMA supplement for the Company's product in the United States. The Company does not expect the supply agreement with Bausch & Lomb to be renewed after December 31, 2000,
although sales are scheduled to continue for an indefinite period on a non-contractual basis. Initial sales of INTERGEL Solution occurred during fiscal 1998, as GYNECARE, the women's
healthcare division of ETHICON, INC. began marketing INTERGEL Solution in Europe. Sales of INTERGEL Solution in the United States are dependent upon Pre-Market Approval by the FDA.

The
Company's Oral Restorative Division markets a comprehensive line of titanium-based dental implants for tooth replacement therapy. The Oral Restorative Division also manufactures
and markets synthetic bone graft substitute products for the restoration of bone tissue deterioration resulting from periodontal disease and tooth loss. The Oral Restorative Division also markets
other products for the regeneration of bone and soft tissue. The Division's products are marketed in the United States through the Company's direct sales force; in Italy through the Company's
subsidiary, Lifecore Biomedical SpA, in Germany through the Company's subsidiary, Lifecore Biomedical GmbH, in Scandinavia through a joint venture, Lifecore Biomedical AB, and in other countries
through distributors.

Results of Operations

Year ended June 30, 2000 compared with year ended June 30, 1999

|                        |                            | Hyaluronan Division |            | Oral Restorative Division |   | Consolidated
|----------------------- | -------------------------- | ------------------- | ---------- | ------------------------- | - | ------------
|
|Net sales               |                            | $                   | 12,765,000 |                           | $ | 8,190,000   
|Cost of goods sold      |                            |                     | 9,002,000  |                           |   | 3,495,000   
|                        |                            |                     |            |                           |   |             
|Gross profit            |                            |                     | 3,763,000  |                           |   | 4,695,000   
|Operating expenses      |                            |                     |            |                           |   |             
|                        | Research and
development   |                     |            | 3,556,000                 |   |             
|                        | Marketing and sales        |                     |            | 139,000                   |   |             
|                        | General and
administrative |                     |            | 1,514,000                 |   |             
|                        |                            |                     |            |                           |   |             
|                        |                            |                     | 5,209,000  |                           |   | 4,483,000   
|                        |                            |                     |            |                           |   |             
|Operating income (loss) |                            | $                   | (1,446,000 | )                         | $ | 212,000     
|                        |                            |                     |            |                           |   |             

20

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Net Sales.Net sales increased $5,502,000 or 20% in fiscal 2000 from fiscal 1999. Hyaluronan Division sales increased
$4,575,000 or 56% while the Oral Restorative Division sales increased $927,000 or 5%.

The
increase in hyaluronan sales was due to higher sales of its ophthalmic products in fiscal 2000 compared to fiscal 1999. Sales to Alcon were $5,981,000 in fiscal 2000 compared with
$2,740,000 for fiscal 1999. Ophthalmic product sales in fiscal 2000 increased 80% compared to fiscal 1999, primarily from Alcon. Sales to other Hyaluronan Division customers in fiscal 2000 increased
22% compared to fiscal 1999, primarily from increases in veterinary customer sales.

Oral
Restorative sales increased 5% to $20,058,000 in fiscal 2000 from $19,131,000 in fiscal 1999. Sales in the Domestic market increased, while sales to international markets
decreased due to unfavorable economic conditions in many of the foreign locations in which the Company operates. The introduction of the STAGE-1 Single Stage Implant system in the U.S.
market helped to increase sales in fiscal 2000. The STAGE-1 Single Stage Implant System was not introduced outside the U.S. until late in fiscal 2000.

Gross profit.Consolidated gross profit, as a percentage of net sales, decreased to 46% in fiscal 2000 from 61% in
fiscal 1999. The gross profit for the Hyaluronan Division decreased to 29% in fiscal 2000 from 57% in fiscal 1999. Charges for unused capacity, associated with the Company's hyaluronan production as a
result of an unanticipated delay in receiving INTERGEL Solution marketing approval in the U.S. from the FDA, were $3.2 million in fiscal 2000. The Company expects that its Hyaluronan Division
gross margins will continue to be negatively impacted until marketing approval for INTERGEL Solution is achieved. Gross profit for the Oral Restorative Division decreased to 57% in fiscal 2000 from
62% in fiscal 1999. The decrease is the result of higher overhead expenses, mainly associated with the introduction of the STAGE-1 Single Stage Implant System, which was introduced
domestically in September 1999.

Research and development.Research and development expenses increased $656,000 or 18% in fiscal 2000 from fiscal 1999.
The increase resulted principally from increased costs associated with human clinical trials and the regulatory process with the FDA for INTERGEL Solution.

Marketing and sales.Marketing and sales expenses increased by $743,000 or 10% in fiscal 2000 from fiscal 1999. The
increase in expenses occurred principally in the Oral Restorative Division. An increased commitment to training and technical support in the oral restorative market, resulted in customer training,
seminar and trade show expenses being higher in fiscal 2000 compared to fiscal 1999. Marketing expenses for the introduction of the STAGE-1 Single Stage Implant System also contributed to
the increased expense in the current year.

General and administrative.General and administrative expenses increased by $313,000 or 9% in fiscal 2000 from fiscal
1999. Amortization associated with the cost of acquiring the customer list from a former distributor in Spain in April 1999 and higher personnel related costs, including salaries and rising
health insurance costs accounted for the increase.

Other income (expense).Interest expense was higher in fiscal 2000 compared to 1999 mainly from a higher level of
borrowings on the line of credit in fiscal 2000. A lower level of cash available for investments in fiscal 2000 contributed to the decrease in interest income.

21

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Year ended June 30, 1999 compared with year ended June 30, 1998

|                        |                            | Hyaluronan Division |           | Oral Restorative Division |   | Consolidated |          
|----------------------- | -------------------------- | ------------------- | --------- | ------------------------- | - | ------------ | ---------
|
|Net sales               |                            | $                   | 8,190,000 |                           | $ | 9,720,000    |          
|Cost of goods sold      |                            |                     | 3,495,000 |                           |   | 4,637,000    |          
|                        |                            |                     |           |                           |   |              |          
|Gross profit            |                            |                     | 4,695,000 |                           |   | 5,083,000    |          
|Operating expenses      |                            |                     |           |                           |   |              |          
|                        | Research and development   |                     |           | 2,937,000                 |   |              | 4,441,000
|                        | Marketing and sales        |                     |           | 108,000                   |   |              | 187,000  
|                        | General and administrative |                     |           | 1,438,000                 |   |              | 1,373,000
|                        |                            |                     |           |                           |   |              |          
|                        |                            |                     | 4,483,000 |                           |   | 6,001,000    |          
|                        |                            |                     |           |                           |   |              |          
|Operating income (loss) |                            | $                   | 212,000   |                           | $ | (918,000     | )        
|                        |                            |                     |           |                           |   |              |          

Net Sales.Net sales increased $1,751,000 or 7% in fiscal 1999 from fiscal 1998. Hyaluronan Division sales decreased
$1,530,000 while the Oral Restorative Division sales increased $3,281,000 or 21%.

The
decrease in hyaluronan sales was due to lower sales of its ophthalmic products in fiscal 1999 compared to fiscal 1998. Sales to Alcon were $2,740,000 in fiscal 1999 compared with
$4,761,000 for fiscal 1998. The decrease in ophthalmic product sales was partially offset by a 39% increase in sales to other Hyaluronan Division customers in fiscal 1999 compared to fiscal 1998.

Oral
Restorative sales increased 21% to $19,131,000 in fiscal 1999 from $15,850,000 in fiscal 1998. The increase primarily reflects the continued market acceptance of the Company's
implant products which increased by 18% and the expanded product offerings in the tissue regeneration product line which increased 40% in fiscal 1999 from fiscal 1998.

Gross profit.Consolidated gross profit, as a percentage of net sales, increased to 61% in fiscal 1999 from 57% in
fiscal 1998. Hyaluronan Division gross profit increased to 57% in fiscal 1999 from 52% in fiscal 1998. The increase resulted from the expanded utilization of the Company's aseptic and hyaluronan
production capacity. Oral Restorative Division gross profit was 62% in fiscal 1999 and 60% in fiscal 1998. The increase in the gross profit was principally from spreading fixed expenses over increased
oral restorative product sales and a slight change in the product mix to higher margin implants.

Research and development.Research and development expenses decreased $1,383,000 or 28% in fiscal 1999 from fiscal
1998. The decrease in fiscal 1999 was principally due to timing of costs associated with human clinical trials on INTERGEL Solution as the study enrollment ended for the laparotomy trial, but
continues for the laparoscopy trial.

Marketing and sales.Marketing and sales expenses increased by $275,000 or 4% in fiscal 1999 from fiscal 1998. The
increase in expenses occurred in the Oral Restorative Division. The increase in fiscal 1999 was due to higher compensation costs for additional sales and marketing personnel, higher sales commissions
on an increased sales base and increased seminar expenses.

General and administrative.General and administrative expenses increased by $189,000 or 6% in fiscal 1999 from fiscal
1998. The increase resulted from higher personnel related costs, including salaries and rising health insurance costs.

22

---

Other income (expense).Interest expense was higher in fiscal 1999 compared to 1998 mainly from the capitalization of
interest in conjunction with the facility expansion project in fiscal 1998 of $691,000 and from interest expense on the usage of the line of credit.

For
information regarding the Company's international sales and identifiable assets of each of its two business segments, see Note J to Consolidated Financial Statements.

Liquidity and Capital Resources

Inventories consist mainly of finished hyaluronan powder and oral restorative products and related raw materials. The portion of finished hyaluronan inventory
that is not expected to be consumed within the next twelve months is classified as long-term. The finished hyaluronan inventory is maintained in a frozen state and has a shelf life in
excess of five years. Total inventory decreased slightly in fiscal 2000 as the Company shut down production of hyaluronan powder and INTERGEL Solution after the January 2000 FDA Advisory Panel
meeting. Inventory increased $6,074,000 or 39% in fiscal 1999 from
fiscal 1998 principally due to building of hyaluronan inventory levels in anticipation of the demand for INTERGEL Solution.

While
the Company had positive cash flow from operations in fiscal 2000, the Company had significant operating cash flow deficits in fiscal years 1999 and 1998. As the Hyaluronan
Division's production levels increase, its related production efficiencies will increase. However, charges for unused capacity associated with the Company's hyaluronan production have negatively
impacted operating results in the fiscal 2000. These charges are a result of an unanticipated delay in receiving INTERGEL Solution marketing approval in the U.S. from the FDA. The Company expects that
its Hyaluronan Division gross margins will continue to be negatively impacted until marketing approval for INTERGEL Solution is achieved. Also, marketing and sales expenses for the oral restorative
products are expected to continue at a high level, and personnel costs have increased. The ongoing research, development and PMA process costs for INTERGEL Solution will continue for the foreseeable
future.

In
March 2000, the Company issued an aggregate of 118,238 shares of common stock as payment for a $1,200,000 note payable, plus interest to Bridger Biomed, Inc. under
the formula described in the note. Under the terms of the note payable entered into in May 1997, the Company had the right to choose whether it would pay the note in cash or the Company's
common stock. The recipients of the shares exercised their right to have the shares registered for sale. A Registration Statement on Form S-3 was filed and declared effective by the
Securities and Exchange Commission in March 2000.

The
loan agreement between the Company and the holder of the industrial development revenue bonds issued to finance the Company's Chaska, Minnesota facility was amended in
June 2000 to waive the fixed charge coverage ratio and the cash flow coverage ratio through June 30, 2001. With respect to certain of these covenants, the Company may be required to
obtain further waivers for fiscal 2002. There can be no assurance that future waivers will be granted to the Company.

The
Company has an agreement with a bank for a $5,000,000 line of credit. The agreement allows for advances against eligible accounts receivable and inventories, subject to a
borrowing base certificate. Interest is accrued at the prime rate, which was 9.50% and 7.75% at June 30, 2000 and 1999, respectively. The agreement has a maturity date of December 28,
2001. At June 30, 2000 there was no outstanding balance under this line of credit. At June 30, 1999, the Company there was $1,883,000 outstanding under this line of credit. The terms of
the agreement require the Company to comply with various financial covenants including minimum net worth, capital expenditure limitations and an interest coverage ratio. At June 30, 2000, the
Company was in compliance with all covenants.

During
fiscal 1998 and 1997, the Company expanded its manufacturing and distribution capabilities at its Chaska, Minnesota location. The expansion included building and equipment
expenditures for warehouse and distribution capabilities and to scale-up aseptic-packaging facilities for finished products.

23

---

The expansion totaled approximately $19 million and was completed in June 1998. The expansion was funded from the proceeds of investment maturities. This expansion provides future
capacity, but increases the level of fixed charges to be absorbed by operations.

The
Company's ability to generate positive cash flow from operations and achieve ongoing profitability is dependent upon the continued expansion of revenue from its hyaluronan and
oral restorative businesses. Growth in the Hyaluronan Division is unpredictable due to the complex governmental regulatory environment for new medical products and the early stage of certain of these
markets. Similarly, expansion of the Company's Oral Restorative Division sales is also dependent upon increased revenue from new and existing customers, as well as successfully competing in a more
mature market. With the completion of the facility expansion, the Company expects its cash generated from anticipated operations and the availability of the line of credit to satisfy cash flow needs
in the near term. No assurance can be given that the Company will attain and maintain positive cash flow before its capital resources are exhausted. While the Company's capital resources appear
adequate today, the Company may seek additional financing in the future. If additional financing is necessary, no assurance can be given that such financing will be available and, if available, will
be on terms favorable to the Company and its shareholders.

Cautionary Statement

Statements included in this Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this
Form 10-K, in the Letter to Shareholders contained in the Annual Report to Shareholders, in future filings by the Company with the Securities and Exchange Commission and in the
Company's press releases and oral statements made with the approval of authorized executive officers, if the statements are not historical or current facts, should be considered "forward-looking
statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include future product development plans and timing,
the results of clinical trials, FDA clearances and the related timing of such, the potential size of the markets for the Company's products, future product introductions, future capital needs and the
Company's ability to successfully negotiate acceptable agreements with its corporate partners, including a new supply agreement with Alcon and Bausch and Lomb. These statements are subject to certain
risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of the date made. The following
important factors, among others, in some cases have affected and in the future could affect the Company's actual results and could cause its actual financial performance to differ materially from that
expressed in any forward-looking statement: (i) uncertainty of successful development of the INTERGEL Solution, including the necessary PMA from the FDA, and of other new hyaluronan products;
(ii) the Company's reliance on corporate partners to develop new products on a timely basis and to market the Company's existing and new hyaluronan products effectively; (iii) possible
limitations on the Company's ability to meet anticipated significant commercial demand for INTERGEL Solution on a timely basis; (iv) the uncertainty of the possible outcome of the litigation
with The Straumann Company regarding the STAGE-1 Single Stage Implant System, (v) intense competition in the markets for the Company's principal products and (vi) other
factors discussed in the risk factors filed as Exhibit 99 to this Form 10-K. The foregoing list should not be construed as exhaustive, and the Company disclaims any
obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated
events.

24

---

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

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

Receivables
from sales to foreign customers are denominated in U.S. Dollars. Transactions at the Company's foreign subsidiaries, Lifecore Biomedical SpA and Lifecore Biomedical GmbH,
are in Italian Lira and Deutsche Marks, respectively. The Company has historically had minimal exposure to changes in foreign currency exchange rates, and as such, has not used derivative financial
instruments to manage foreign currency fluctuation risk.

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

Item 8. Financial Statements and Supplementary Data

The consolidated financial statements are listed under Item 14 of this report.

Summarized
unaudited quarterly financial data for 2000 and 1999 is as follows:

|                         |                                                                  | Quarter |  
|------------------------ | ---------------------------------------------------------------- | ------- | -
|
|Year ended June 30, 2000 |                                                                  |         |  
|                         | Net sales                                                        |         | $
|                         | Gross profit                                                     |         |  
|                         | Net income (loss)                                                |         |  
|                         | Net income (loss) per share                                      |         |  
|                         |                                                                  | Basic   |  
|                         |                                                                  | Diluted |  
|                         | Weighted average common and common equivalent shares outstanding |         |  
|                         |                                                                  | Basic   |  
|                         |                                                                  | Diluted |  
|Year ended June 30, 1999 |                                                                  |         |  
|                         | Net sales                                                        |         | $
|                         | Gross profit                                                     |         |  
|                         | Net income (loss)                                                |         |  
|                         | Net income (loss) per share                                      |         |  
|                         |                                                                  | Basic   |  
|                         |                                                                  | Diluted |  
|                         | Weighted average common and common equivalent shares outstanding |         |  
|                         |                                                                  | Basic   |  
|                         |                                                                  | Diluted |  

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

25

---

## 

PART III

Item 10. Directors and Executive Officers of the Registrant

Information concerning director nominees is set forth in the sections entitled "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's Proxy Statement for its 2000 Annual Meeting of Shareholders to be held November 16, 2000, which is incorporated herein by reference. See also "Executive Officers of
the Registrant" in Item 1 above.

Item 11. Executive Compensation

Information concerning executive compensation is set forth in the section entitled "Executive Compensation" in the Company's Proxy Statement for its 2000
Annual Meeting of Shareholders which is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Security ownership of certain owners and management is set forth in the section entitled "Security Ownership of Certain Beneficial Owners and Management" in
the Company's Proxy Statement for its 2000 Annual Meeting of Shareholders which is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

Not Applicable.

26

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PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K



|   |  |                                                                                          |  | Form 10-K
Page Reference
|-- |  | ---------------------------------------------------------------------------------------- |  | ------------------------
|   |  | Report of Independent Certified Public Accountants                                       |  | F-1                     
|   |  | Consolidated Balance SheetsJune 30, 2000 and 1999                                       |  | F-2                     
|   |  | Consolidated Statements of Operationsyears ended June 30, 2000, 1999 and 1998           |  | F-4                     
|   |  | Consolidated Statements of Cash Flowsyears ended June 30, 2000, 1999 and 1998           |  | F-5                     
|   |  | Consolidated Statements of Shareholders' Equityyears ended June 30, 2000, 1999 and 1998 |  | F-6                     
|   |  | Notes to Consolidated Financial Statements                                               |  | F-7 through F-17        
|2. |  | Consolidated Financial Statement Schedules                                               |  |                         
|   |  | Schedule IIValuation and Qualifying Accounts                                            |  | S-1                     



None



|     |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1  |  | Stock Purchase Agreement between ISS and Lifecore dated July 28, 1993 (includes $2 million 5% Promissory Note dated July 28, 1993 as Exhibit A and Security Agreement as Exhibit B) (Pursuant to Rule 24b-2, certain portions
of this Exhibit have been deleted and filed separately with the Commission) (incorporated by reference to Exhibit 2.1 to Form 8-K dated July 8, 1993)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3.1  |  | Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 19(a) to Amendment No. 1 on Form 8, dated July 13, 1988, to Form 10-Q for the quarter ended December 31, 1987), as amended by Amendment
No. 2 (incorporated by reference to Exhibit 3.1 to Form 10-K for the year ended June 30, 1997)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|3.2  |  | Amended Bylaws, (incorporated by reference to Exhibit 3.2 to Form 10-K/A for the year ended June 30, 1995)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3.3  |  | Form of Rights Agreement, dated as of May 23, 1996, between the Company and Norwest Bank Minnesota, National Association (incorporated by reference to Exhibit 1 to the Company's Form 8-A Registration Statement dated May
31, 1996)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.1  |  | Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to 1987 S-2 Registration Statement [File No. 33-12970])                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.1 |  | Loan Agreement dated as of September 1, 1990 between the City of Chaska and the Company (incorporated by reference from Exhibit 4.2 to the Registrant's Form 10-K for the year ended June 30, 1990, as amended on Form 8
dated October 12, 1990) as amended on June 10, 1991 and July 24, 1991 (incorporated by reference from Exhibit 10.2 to the Registrant's Amendment No. 1 to Form 1991 S-2 Registration Statement [File No. 33-41291]) as amended on August 3, 1992
(incorporated by reference to Exhibit 10.1 to Form 10-K for the year ended June 30, 1992) as amended on July 28, 1994 (incorporated by reference to Exhibit 10.1 to Form 10-K for the year ended June 30, 1994), as amended on July 27, 1995 (incorporated
by reference to Exhibit 10.1 to Form 10-K for the year ended June 30, 1995), as amended on July 8, 1996, (incorporated by reference to Exhibit 10.1 to Form 10-K for the year ended June 30, 1996), as amended on July 1, 1997 (incorporated by reference
to Exhibit 10.1 to Form 10-K for the year ended June 30, 1997), as amended on June 5, 1998, (incorporated by reference to Exhibit 10.1 to Form 10-K for the year ended June 30, 1998), as amended on June 10, 1999, (incorporated by reference to Exhibit
10.1 to Form 10-K for the year ended June 30, 1999), as amended on June 8,2000, filed herewith

27

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|10.2   |  | Trust Indenture dated as of September 1, 1990 from the City of Chaska to Norwest Bank Minnesota, N.A., as Trustee (incorporated by reference from Exhibit 4.3 to the Registrant's Form 10-K for the year ended June 30, 1990,
as amended on Form 8 dated October 12, 1990)                                                                                                                                                                                                                                             
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.3   |  | Combination Mortgage, Security Agreement and Fixture Financing Statement dated as of September 1, 1990 from the Company to Norwest Bank Minnesota, N.A., as Trustee (incorporated by reference from Exhibit 4.4 to the
Registrant's Form 10-K for the year ended June 30, 1990, as amended on Form 8 dated October 12, 1990)                                                                                                                                                                                           
|10.4   |  | Contract for Private Redevelopment dated as of September 1, 1990 between the Company and Chaska Economic Development  Authority (incorporated by reference from Exhibit 4.5 to the Registrant's Form 10-K for the year ended
June 30, 1990, as amended on Form 8 dated October 12, 1990)                                                                                                                                                                                                                               
|10.5   |  | Hyaluronan Purchase Agreement dated March 28, 1990 between the Company and Alcon (incorporated by reference to Exhibit 10 to Form 8-K dated April 10, 1990, as amended on Form 8 dated May 23, 1990) as amended on July 17,
1992, (Certain information has been deleted from this exhibit and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2) (incorporated by reference to Exhibit 10.5 to Form 10-K
for the year ended June 30, 1992)
|10.6*  |  | Employment Agreement dated June 10, 1991 with James W. Bracke (incorporated by reference to Exhibit 10.11 to 1991 S-2 Registration Statement [File No. 33-41291]), as amended by letter agreement dated on August 14, 1995
(incorporated by reference to Exhibit 10.6 to Form 10-K for the year ended June 30, 1995), as amended by letter agreement dated November 14, 1996 (incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended December 31, 1997)                                          
|10.7   |  | Form of Indemnification Agreement entered into between the Company and directors and officers (incorporated by reference to Exhibit 10.7 to Form 10-K for the year ended June 30, 1995)                                                                                                                                                                                                                                                                                                                                
|10.8*  |  | 1987 Stock Option Plan (incorporated by reference to Exhibit 4(a) to S-8 Registration Statement [File No. 33-26065])                                                                                                                                                                                                                                                                                                                                                                                                   
|10.9*  |  | 1987 Employee Stock Purchase Savings Plan (incorporated by reference to Exhibit 4(a) to S-8 Registration Statement [File No. 33-19288])                                                                                                                                                                                                                                                                                                                                                                                
|10.10* |  | 1990 Employee Stock Purchase Savings Plan (incorporated by reference to Exhibit 4(a) to S-8 Registration Statement [File No. 33-32984])                                                                                                                                                                                                                                                                                                                                                                                
|10.11* |  | 1990 Stock Plan (incorporated by reference to Exhibit 4(a) to S-8 Registration Statement [File No. 33-38914]) as amended by Amendment No. 1 (incorporated by reference to Exhibit 10.13 to Form 10-K for the year ended June
30, 1994), as amended by Amendment No. 2 (incorporated by reference to Exhibit 10.11 to Form 10-K for the year ended June 30, 1997)                                                                                                                                                       

28

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|10.12  |  | Conveyance, License, Development and Supply Agreement dated August 8, 1994 between Lifecore Biomedical, Inc. and ETHICON, INC. (pursuant to Rule 24b-2, certain portions of this Exhibit have been omitted and filed
separately with the Commission) (incorporated by reference to Exhibit 10.14 to Form 10-K for the year ended June 30, 1994)                                                  
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13* |  | 1996 Stock Option Plan (incorporated by reference to Exhibit 4.1 to S-8 Registration Statement [File No. 333-18515])                                                                                                                                                                                                                                                                             
|10.14  |  | Amendment No. 2 to Hyaluronan Purchase Agreement dated December 4, 1992 between Lifecore Biomedical, Inc. and Alcon Surgical,  Inc. (pursuant to Rule 24b-2, certain portions of this Exhibit have been omitted and filed
separately with the Commission) (incorporated by reference to Exhibit 28 to Form 8-K dated December 4, 1992)                                                           
|10.15  |  | Amendment No. 3 to Hyaluronan Purchase Agreement dated May 12, 1993 between Lifecore Biomedical, Inc. and Alcon Surgical, Inc. (pursuant to Rule 24b-2, certain portions of this Exhibit have been omitted and filed
separately with the Commission) (incorporated by reference to Exhibit 10.18 to Form 10-K for the year ended June 30, 1993 as amended on Form 10-K/A dated December 15, 1994)
|10.16  |  | Letter Agreement dated October 28, 1992 between the Company and Bio-Interfaces, Inc. (incorporated by reference to Exhibit 28.1 to Form 8-K dated October 5, 1992)                                                                                                                                                                                                                               
|10.17  |  | Stock Purchase Agreement dated August 8, 1994 between Lifecore Biomedical, Inc. and Johnson and Johnson Development Corporation, (incorporated by reference to Exhibit 10.20 to Form 10-K for the year ended June 30, 1994)                                                                                                                                                                      
|10.18  |  | Amendment No. 4 to Hyaluronan Purchase Agreement dated November 29, 1994, between Lifecore Biomedical, Inc. and Alcon Laboratories, Inc. (pursuant to Rule 24b-2, certain portions of this Exhibit have been omitted and
filed separately with the Commission) (incorporated by reference to Exhibit 10.21 to Form 10-Q for the quarter ended December 31, 1994)                                 
|10.19  |  | Supply Agreement dated December 7, 1994 between Lifecore Biomedical, Inc. and IOLAB Corporation (now Bausch & Lomb Surgical) (pursuant to Rule 24b-2, certain portions of this Exhibit have been omitted and filed
separately with the Commission) (incorporated by reference to Exhibit 10.20 to Form 10-K for the year ended June 30, 1995)                                                    
|10.20  |  | Credit and Security Agreement, dated December 28, 1998, between the U.S. Bank National Association and the Company, (incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended December 31, 1998)                                                                                                                                                                             
|10.21  |  | Amendment No. 1 to Credit and Security Agreement dated February 7, 2000 between U.S. Bank National Association and the Company, filed herewith                                                                                                                                                                                                                                                   
|10.22  |  | Amendment No. 2 to Credit and Security Agreement dated July 21, 2000 between U.S. Bank National Association and the Company, filed herewith                                                                                                                                                                                                                                                      
|23.1   |  | Consent of Grant Thornton LLP                                                                                                                                                                                                                                                                                                                                                                    
|27     |  | Financial Data Schedule                                                                                                                                                                                                                                                                                                                                                                          
|99     |  | Risk Factors                                                                                                                                                                                                                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                  

---

29

---



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.

|                          |  | LIFECORE BIOMEDICAL, INC.
|------------------------- |  | -------------------------
|Dated: September 14, 2000 |  | By:                      

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 capacities and on
the dates indicated.

|Dated: September 14, 2000 |  | By: |  | /s/DENNIS J. ALLINGHAMDennis J. Allingham Executive Vice President and Chief Financial Officer (principal financial officer)     
|------------------------- |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------
|Dated: September 14, 2000 |  | By: |  | /s/JAMES W. BRACKEJames W. Bracke, Ph.D. President, Chief Executive Officer (principal executive officer), Secretary and
Director
|Dated: September 14, 2000 |  | By: |  | /s/ORWIN L. CARTEROrwin L. Carter Director                                                                                       
|Dated: September 14, 2000 |  | By: |  | /s/JOAN L. GARDNERJoan L. Gardner Director                                                                                       
|Dated: September 14, 2000 |  | By: |  | Thomas H. Garrett Director                                                                                                       
|                          |  |     |  |                                                                                                                                  

30

---

|Dated: September 14, 2000 |  | By: |  | /s/JOHN C. HEINMILLERJohn C. Heinmiller Director                           
|------------------------- |  | --- |  | ---------------------------------------------------------------------------
|Dated: September 14, 2000 |  | By: |  | /s/RICHARD W. PERKINSRichard W. Perkins Director                           
|Dated: September 14, 2000 |  | By: |  | /s/MARK T. SELLNOWMark T. Sellnow Controller (principal accounting officer)
|                          |  |     |  |                                                                            

31

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(This page has been left blank intentionally.)

32

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Shareholders and Board of Directors
  Lifecore Biomedical, Inc.

We
have audited the accompanying consolidated balance sheets of Lifecore Biomedical, Inc. (a Minnesota corporation) and subsidiaries as of June 30, 2000 and 1999, and
the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 2000. 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Lifecore Biomedical, Inc. and
subsidiaries as of June 30, 2000 and 1999, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended June 30,
2000, in conformity with accounting principles generally accepted in the United States of America.

We
have also audited Schedule II of Lifecore Biomedical, Inc. and subsidiaries for each of the three years in the period ended June 30, 2000. In our opinion, this
schedule presents fairly, in all material respects, the information required to be set forth therein.



Minneapolis, Minnesota
July 26, 2000

F-1

---

Lifecore Biomedical, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

June 30,

|                                      |                                      | 2000                 |            | 1999        |           
|------------------------------------- | ------------------------------------ | -------------------- | ---------- | ----------- | ----------
|                                      |                                      |                      |            |             |           
|ASSETS                                |                                     
|CURRENT ASSETS                        |                                      |                      |            |             |           
|                                      | Cash and cash equivalents            |                      | $          | 1,101,000   |           
|                                      | Accounts receivable, less allowances |                      |            | 5,296,000   |           
|                                      | Inventories                          |                      |            | 12,290,000  |           
|                                      | Prepaid expenses                     |                      |            | 733,000     |           
|                                      |                                      |                      |            |             |           
|                                      |                                      | Total current assets |            |             | 19,420,000
|PROPERTY, PLANT AND EQUIPMENTAT COST |                                      |                      |            |             |           
|                                      | Land                                 |                      |            | 249,000     |           
|                                      | Building                             |                      |            | 23,921,000  |           
|                                      | Equipment                            |                      |            | 14,783,000  |           
|                                      | Land and building improvements       |                      |            | 3,381,000   |           
|                                      |                                      |                      |            |             |           
|                                      |                                      |                      | 42,334,000 |             |           
|                                      | Less accumulated depreciation        |                      |            | (11,982,000 | )         
|                                      |                                      |                      |            |             |           
|                                      |                                      |                      | 30,352,000 |             |           
|OTHER ASSETS                          |                                      |                      |            |             |           
|                                      | Intangibles                          |                      |            | 5,286,000   |           
|                                      | Security deposits                    |                      |            | 847,000     |           
|                                      | Inventories                          |                      |            | 9,368,000   |           
|                                      | Other                                |                      |            | 515,000     |           
|                                      |                                      |                      |            |             |           
|                                      |                                      |                      | 16,016,000 |             |           
|                                      |                                      |                      |            |             |           
|                                      |                                      | $                    | 65,788,000 |             | $         
|                                      |                                      |                      |            |             |           

F-2

---

Lifecore Biomedical, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

June 30,

|                                     |                                                                                                                                                     | 2000                      |            | 1999        |          
|------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ---------- | ----------- | ---------
|                                     |                                                                                                                                                     |                           |            |             |          
|LIABILITIES AND SHAREHOLDERS' EQUITY |                                                                                                                                                    
|CURRENT LIABILITIES                  |                                                                                                                                                     |                           |            |             |          
|                                     | Current maturities of long-term obligations                                                                                                         |                           | $          | 243,000     |          
|                                     | Advance on line of credit                                                                                                                           |                           |            |            |          
|                                     | Accounts payable                                                                                                                                    |                           |            | 2,230,000   |          
|                                     | Accrued compensation                                                                                                                                |                           |            | 768,000     |          
|                                     | Accrued expenses                                                                                                                                    |                           |            | 347,000     |          
|                                     | Customers' deposits                                                                                                                                 |                           |            | 302,000     |          
|                                     |                                                                                                                                                     |                           |            |             |          
|                                     |                                                                                                                                                     | Total current liabilities |            |             | 3,890,000
|LONG-TERM OBLIGATIONS                |                                                                                                                                                     |                           | 6,477,000  |             |          
|COMMITMENTS AND CONTINGENCIES        |                                                                                                                                                     |                           |           |             |          
|SHAREHOLDERS' EQUITY                 |                                                                                                                                                     |                           |            |             |          
|                                     | Preferred stockauthorized, 25,000,000 shares of $1.00 stated value; none issued                                                                    |                           |            |            |          
|                                     | Preferred stock, Series A Junior Participatingauthorized, 500,000 shares of $1.00 par value; none issued                                           |                           |            |            |          
|                                     | Common stockauthorized, 50,000,000 shares of $.01 stated value; issued and outstanding, 12,606,124 and 12,416,729 shares at June 30, 2000 and 1999 |                           |            | 126,000     |          
|                                     | Additional paid-in capital                                                                                                                          |                           |            | 87,226,000  |          
|                                     | Accumulated deficit                                                                                                                                 |                           |            | (31,931,000 | )        
|                                     |                                                                                                                                                     |                           |            |             |          
|                                     |                                                                                                                                                     |                           | 55,421,000 |             |          
|                                     |                                                                                                                                                     |                           |            |             |          
|                                     |                                                                                                                                                     | $                         | 65,788,000 |             | $        
|                                     |                                                                                                                                                     |                           |            |             |          

The
accompanying notes are an integral part of these statements.

F-3

---

Lifecore Biomedical, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended June 30,

|                                                                 |                            | 2000                    |            | 1999       |          | 1998       |           
|---------------------------------------------------------------- | -------------------------- | ----------------------- | ---------- | ---------- | -------- | ---------- | ----------
|Net sales                                                        |                            | $                       | 32,823,000 |            | $        | 27,321,000 |           
|Cost of goods sold                                               |                            |                         | 17,618,000 |            |          | 10,768,000 |           
|                                                                 |                            |                         |            |            |          |            |           
|                                                                 | Gross profit               |                         |            | 15,205,000 |          |            | 16,553,000
|Operating expenses                                               |                            |                         |            |            |          |            |           
|                                                                 | Research and development   |                         |            | 4,213,000  |          |            | 3,557,000 
|                                                                 | Marketing and sales        |                         |            | 7,907,000  |          |            | 7,164,000 
|                                                                 | General and administrative |                         |            | 3,847,000  |          |            | 3,534,000 
|                                                                 |                            |                         |            |            |          |            |           
|                                                                 |                            |                         | 15,967,000 |            |          | 14,255,000 |           
|                                                                 |                            |                         |            |            |          |            |           
|                                                                 |                            | Operating income (loss) |            |            | (762,000 | )          |           
|Other income (expense)                                           |                            |                         |            |            |          |            |           
|                                                                 | Interest income            |                         |            | 86,000     |          |            | 190,000   
|                                                                 | Interest expense           |                         |            | (876,000   | )        |            | (912,000  
|                                                                 | Other                      |                         |            | (47,000    | )        |            |          
|                                                                 |                            |                         |            |            |          |            |           
|                                                                 |                            |                         | (837,000   | )          |          | (722,000   | )         
|                                                                 |                            |                         |            |            |          |            |           
|NET INCOME (LOSS)                                                |                            | $                       | (1,599,000 | )          | $        | 1,576,000  |           
|                                                                 |                            |                         |            |            |          |            |           
|Net income (loss) per common share                               |                            |                         |            |            |          |            |           
|                                                                 |                            |                         | Basic      |            | $        | (.13       | )         
|                                                                 |                            |                         |            |            |          |            |           
|                                                                 |                            |                         | Diluted    |            | $        | (.13       | )         
|                                                                 |                            |                         |            |            |          |            |           
|Weighted average common and common equivalent shares outstanding |                            |                         |            |            |          |            |           
|                                                                 |                            |                         | Basic      |            |          | 12,488,687 |           
|                                                                 |                            |                         |            |            |          |            |           
|                                                                 |                            |                         | Diluted    |            |          | 12,488,687 |           
|                                                                 |                            |                         |            |            |          |            |           

The
accompanying notes are an integral part of these statements.

F-4

---

Lifecore Biomedical, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended June 30,

|                                                                                                   |                                                     | 2000                |            | 1999       |           | 1998       |           
|-------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ------------------- | ---------- | ---------- | --------- | ---------- | ----------
|Cash flows from operating activities:                                                              |                                                     |                     |            |            |           |            |           
|Net income (loss)                                                                                  |                                                     | $                   | (1,599,000 | )          | $         | 1,576,000  |           
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |                                                     |                     |            |            |           |            |           
|                                                                                                   | Depreciation and amortization                       |                     |            | 3,301,000  |           |            | 3,104,000 
|                                                                                                   | Allowance for doubtful accounts                     |                     |            | (186,000   | )         |            | 26,000    
|                                                                                                   | Loss on sale of property, plant and equipment       |                     |            | 14,000     |           |            |          
|                                                                                                   | Changes in operating assets and liabilities         |                     |            |            |           |            |           
|                                                                                                   |                                                     | Accounts receivable |            |            | 1,619,000 |            |           
|                                                                                                   |                                                     | Inventories         |            |            | 109,000   |            |           
|                                                                                                   |                                                     | Prepaid expenses    |            |            | (241,000  | )          |           
|                                                                                                   |                                                     | Accounts payable    |            |            | 617,000   |            |           
|                                                                                                   |                                                     | Accrued liabilities |            |            | (503,000  | )          |           
|                                                                                                   |                                                     | Customers' deposits |            |            | 302,000   |            |           
|                                                                                                   |                                                     |                     |            |            |           |            |           
|Net cash provided by (used in) operating activities                                                |                                                     |                     | 3,433,000  |            |           | (5,808,000 | )         
|Cash flows from investing activities:                                                              |                                                     |                     |            |            |           |            |           
|                                                                                                   | Purchases of property, plant and equipment          |                     |            | (1,001,000 | )         |            | (1,610,000
|                                                                                                   | Proceeds from sale of property, plant and equipment |                     |            | 15,000     |           |            |          
|                                                                                                   | Purchases of intangibles                            |                     |            | (33,000    | )         |            | (97,000   
|                                                                                                   | Purchases of investments                            |                     |            |           |           |            | (2,485,000
|                                                                                                   | Maturities of investments                           |                     |            |           |           |            | 6,438,000 
|                                                                                                   | Decrease (increase) in security deposits            |                     |            | (6,000     | )         |            | 7,000     
|                                                                                                   | Decrease (increase) in other assets                 |                     |            | (69,000    | )         |            | 126,000   
|                                                                                                   |                                                     |                     |            |            |           |            |           
|Net cash provided by (used in) investing activities                                                |                                                     |                     | (1,094,000 | )          |           | 2,379,000  |           
|Cash flows from financing activities:                                                              |                                                     |                     |            |            |           |            |           
|                                                                                                   | Payments of long-term obligations                   |                     |            | (258,000   | )         |            | (133,000  
|                                                                                                   | Advance (payments) on line of credit                |                     |            | (1,883,000 | )         |            | 1,883,000 
|                                                                                                   | Proceeds from stock options exercised               |                     |            | 359,000    |           |            | 131,000   
|                                                                                                   |                                                     |                     |            |            |           |            |           
|Net cash provided by (used in) financing activities                                                |                                                     |                     | (1,782,000 | )          |           | 1,881,000  |           
|                                                                                                   |                                                     |                     |            |            |           |            |           
|Net increase (decrease) in cash and cash equivalents                                               |                                                     |                     | 557,000    |            |           | (1,548,000 | )         
|Cash and cash equivalents at beginning of year                                                     |                                                     |                     | 544,000    |            |           | 2,092,000  |           
|                                                                                                   |                                                     |                     |            |            |           |            |           
|Cash and cash equivalents at end of year                                                           |                                                     | $                   | 1,101,000  |            | $         | 544,000    |           
|                                                                                                   |                                                     |                     |            |            |           |            |           
|Supplemental disclosure of cash flow information:                                                  |                                                     |                     |            |            |           |            |           
|                                                                                                   | Cash paid during the year for:                      |                     |            |            |           |            |           
|                                                                                                   |                                                     | Interest            |            | $          | 940,000   |            | $         

The
accompanying notes are an integral part of these statements.

F-5

---

Lifecore Biomedical, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

|                          |                                                                                                                | Common Stock |         |   |         |       |  
|------------------------- | -------------------------------------------------------------------------------------------------------------- | ------------ | ------- | - | ------- | ----- | -
|
|Balances at July 1, 1997  |                                                                                                                | 12,222,722   |         | $ | 122,000 |       | $
|                          | Exercise of stock options and employee stock purchase savings plan, net of 1,419 shares surrendered in payment |              | 98,987  |   |         | 1,000 |  
|                          | Net loss for the year ended June 30, 1998                                                                      |              |        |   |         |      |  
|                          |                                                                                                                |              |         |   |         |       |  
|Balances at June 30, 1998 |                                                                                                                | 12,321,709   |         |   | 123,000 |       |  
|                          | Exercise of stock options and employee stock purchase savings plan                                             |              | 66,607  |   |         | 1,000 |  
|                          | Issuance of common stock issued as payment of debt                                                             |              | 28,413  |   |         |      |  
|                          | Net income for the year ended June 30, 1999                                                                    |              |        |   |         |      |  
|                          |                                                                                                                |              |         |   |         |       |  
|Balances at June 30, 1999 |                                                                                                                | 12,416,729   |         |   | 124,000 |       |  
|                          | Exercise of stock options and employee stock purchase savings plan, net of 4,000 shares surrendered in payment |              | 71,157  |   |         | 1,000 |  
|                          | Issuance of common stock issued as payment of debt                                                             |              | 118,238 |   |         | 1,000 |  
|                          | Net income for the year ended June 30, 2000                                                                    |              |        |   |         |      |  
|                          |                                                                                                                |              |         |   |         |       |  
|Balances at June 30, 2000 |                                                                                                                | 12,606,124   |         | $ | 126,000 |       | $
|                          |                                                                                                                |              |         |   |         |       |  

The
accompanying notes are an integral part of these statements.

F-6

---

## 

Lifecore Biomedical, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Lifecore Biomedical, Inc. (the "Company"), manufactures biomaterials and surgical devices for use in various surgical markets and provides specialized
contract aseptic manufacturing services through its two divisions, the Hyaluronan Division and the Oral Restorative Division. The Company's manufacturing facility is located in Chaska, Minnesota. The
Hyaluronan Division markets its products through OEM and contract manufacturing alliances in the fields of general surgery, ophthalmology, veterinary and wound management. The Oral Restorative
Division markets its products through direct sales in the United States, Italy and Germany and through distributors in other foreign countries.

In
preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

A
summary of significant accounting policies consistently applied in the preparation of the financial statements follows:

1.ConsolidationThe consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries, Implant Support Systems, Inc., Lifecore Biomedical SpA and Lifecore Biomedical GmbH. All intercompany balances and transactions have been eliminated in consolidation.

2.Cash and Cash EquivalentsThe Company considers all highly liquid temporary investments with
original maturities of three months or less to be cash equivalents. At June 30, 2000 and 1999, principally all of the Company's cash and cash equivalents were invested in a money market fund.

3.Accounts ReceivableThe Company extends credit to customers in the normal course of business, but
generally does not require collateral or any other security to support amounts due. Management performs on-going credit evaluations of its customers. The Company's customers are located
primarily throughout the United States, Europe, and South America. Accounts receivable balances from customers located in Europe and South America were 28% and 32% of total receivables at
June 30, 2000 and 1999. The Company maintains allowances for potential credit losses, which were $186,000 and $372,000 at June 30, 2000 and 1999.

4.InventoriesInventories are stated at the lower of cost (first-in, first-out
method) or market. Inventories consist mainly of finished hyaluronan powder, aseptic units and oral restorative products and related raw materials. The portion of finished hyaluronan powder inventory
not expected to be consumed within the next twelve months is classified as a long-term asset. The finished hyaluronan inventory is maintained in a frozen state and has a shelf life in
excess of five years. Inventories consist of the following:

As of June 30,2000

1999Raw materials

$
3,833,000

$
3,847,000Work-in-process


255,000


185,000Finished goods


17,570,000


17,735,000$
21,658,000

$
21,767,000


F-7

---

5.DepreciationDepreciation is provided in amounts sufficient to charge the cost of depreciable assets
to operations over their estimated service lives principally on a straight-line method for financial reporting purposes and on straight-line and accelerated methods for income
tax reporting purposes. Depreciation
expense was approximately $2,603,000, $2,519,000 and $1,465,000 for the years ended June 30, 2000, 1999 and 1998. Lives used in straight-line depreciation for financial reporting
purposes are as follows:

Number of
yearsBuilding

18-25Equipment

3-15Land and building improvements

18


6.IntangiblesIntangibles consist primarily of the cost of the technology and regulatory rights
related to the SUSTAIN Dental Implant System product line acquired in May 1992, the goodwill related to the July 1993 acquisition of Implant Support Systems, Inc., the cost of the
technology and regulatory rights related to the TefGen Regenerative Membrane product line acquired in May 1997 and the cost of acquiring the customer list from a former distributor in Spain in
April 1999.

On
an ongoing basis, the Company reviews the valuation and amortization of intangibles to determine possible impairment by comparing the carrying value to projected undiscounted
future cash flows of the related assets. The cost of the technology and regulatory rights and the goodwill are being amortized on the straight-line method over 15 years, their
estimated useful lives. The cost of the customer list is being amortized on the straight-line method over 5 years. Accumulated amortization of intangibles was $3,644,000 and
$2,946,000 at June 30, 2000 and 1999.

7.Other AssetsIncluded within other assets are costs incurred to register patents and trademarks,
which are capitalized as incurred. Amortization of these costs commences when the related patent or trademark is granted. The costs are amortized over the estimated useful life of the patent or
trademark, not to exceed 17 years. Patents and trademarks consist of the following:

As of June 30,2000

1999Patents and trademarks

$
333,000

$
300,000Less accumulated amortization


(144,000
)

(126,000
)$
189,000

$
174,000


8.Revenue Recognition and Product WarrantyThe Company recognizes revenue when product is shipped or
otherwise accepted by the customer. Under the terms of a contract covering sales of ophthalmic hyaluronan, the Company's product is under warranty against non-compliance with product
specifications. A provision is made for the estimated cost of replacing or further processing any product not complying with the warranted product specifications.

9.Net Income (Loss) Per Common ShareThe Company's basic net income (loss) per share amounts have been
computed by dividing net income (loss) by the weighted average number of outstanding common shares. The Company's diluted net income (loss) per share is computed by dividing net income (loss) by the
weighted average number of outstanding common shares and common

F-8

---

share equivalents relating to stock options, when dilutive. For the fiscal years ended June 30, 1999 and 1998, 110,059 and 299,571 shares of common stock equivalents were included in the
computation of diluted net income per share. For the fiscal year ended June 30, 2000, the common share equivalents that would have been included in the computation of diluted net income per
share were 177,558, had net income been achieved.

Options
to purchase 1,480,836, 1,359,943 and 283,125 shares of common stock with a weighted average exercise price of $16.52, $16.53 and $20.03 were outstanding at June 30,
2000, 1999, and 1998, but were excluded from the computation of common share equivalents because their exercise prices were greater than the average market price of the common shares.

NOTE BACQUISITION OF TEFGEN REGENERATIVE MEMBRANE PRODUCT LINE

In May 1997, the Company acquired the technology and regulatory rights in the TefGen membrane product line from Bridger Biomed, Inc. As
consideration for the $2,400,000 acquisition price, the Company paid $800,000 in cash and issued a 6% note payable for $1,600,000 (see Note D). The agreement contained the option for the
Company to satisfy the principal payments in cash or the Company's common stock. The Company exercised its option to make the July 1998 principal payment of $400,000 plus interest in the form
of the Company's common stock, and accordingly, 28,413 shares
of common stock were issued in July 1998 under the formula described in the note. The remaining $1,200,000 principal payment plus interest was paid in March 2000 through the issuance of
118,238 shares of common stock under the formula described in the note. The note was secured by the purchased assets. The cost of the technology and regulatory rights is being amortized on a
straight-line basis over 15 years.

NOTE CLINE OF CREDIT

The Company has an agreement with a bank for a $5,000,000 line of credit. The agreement allows for advances against eligible accounts receivable and
inventories, subject to a borrowing base certificate. Interest is accrued at the prime rate which was 9.50% and 7.75% at June 30, 2000, and 1999, respectively. The agreement has a maturity date
of December 28, 2001. At June 30, 2000 there was no balance outstanding under this line of credit with $1,883,000 outstanding at June 30, 1999. The terms of the agreement require
the Company to comply with various financial covenants including minimum net worth, capital expenditure limitations and an interest coverage ratio. At June 30, 2000, the Company was in
compliance with all covenants.

F-9

---

NOTE DLONG-TERM OBLIGATIONS

Long-term obligations consist of the following:

As of June 30,2000

1999Industrial development revenue bonds

$
6,479,000

$
6,579,000Notes payable


205,000


1,520,000Other


36,000


79,0006,720,000


8,178,000Less current maturities


(243,000
)

(1,458,000
)$
6,477,000

$
6,720,000


Industrial Development Revenue Bonds

In 1990, the Company completed a $7,000,000 transaction to finance its manufacturing and administrative facility through the issuance of 30-year
industrial development revenue bonds by the municipality where the facility is located. The bonds are collateralized by a first mortgage on the facility and bear interest at 10.25%. The Company is
required to make debt service payments on the bonds of approximately $775,000 per year through 2021. The payments are required to be made monthly to a sinking fund. At June 30, 2000 and 1999,
the Company had approximately $700,000 on deposit with the
bond trustee to cover the reserve fund requirement. The Company has the right to redeem the bonds commencing September 1, 1998 upon the payment of the outstanding principal balance plus accrued
interest and a premium. The premium is 6% of the principal amount during the year commencing September 1, 2000 and declines during subsequent years.

The
terms of the loan agreement require the Company to comply with various financial covenants including minimum current ratio, fixed charges coverage and cash flow coverage
requirements and maximum debt to net worth limitation. The fixed charges coverage and cash flow coverage requirements have been waived by the bondholder through fiscal 2001. The debt to net worth
ratio covenant has the effect of restricting the payment of cash dividends or repurchases of common stock.

Notes Payable

In May 1997, the Company issued a note payable for $1,600,000 as part of the consideration paid to the seller of the TefGen Regenerative Membrane
product line (see Note B).

In
April 1999, the Company issued a non-interest bearing note payable in the amount of $375,000 to a former distributor in exchange for a customer list. A payment
of $125,000 was made in March 2000. Payments of $125,000 are due in March 2001 and 2002. The Company is using an effective interest rate of 8% to impute interest on the note payable.

F-10

---

The aggregate minimum annual principal payments of long-term obligations for the years ending June 30 are as follows:

2000

$
243,0002001


228,0002002


135,0002003


145,0002004


165,000Thereafter


5,804,000$
6,720,000


During
the year ended June 30, 1998 the Company capitalized $691,000 of interest expense in conjunction with the facility expansion at its Chaska, Minnesota location.

NOTE ECUSTOMERS' DEPOSITS

In December 1999, the Company received a $5,000,000 cash advance from Alcon Laboratories, Inc. ("Alcon") against future contract purchases. As
security for the cash advance, the Company granted Alcon a right to accelerate delivery of certain finished hyaluronan inventory limited to the amount that could be purchased by the outstanding cash
advance based upon the contract price. At June 30, 2000, $302,000 of the cash advance remains outstanding.

NOTE FINCOME TAXES

Deferred tax assets and liabilities represent the tax effects, based on current tax law, of future deductible or taxable amounts attributable to events that
have been recognized in the financial statements. Deferred tax assets (liabilities) consist of the following at June 30:

|                                                  |                                 | 2000 |             | 1999       |  
|------------------------------------------------- | ------------------------------- | ---- | ----------- | ---------- | -
|Deferred tax assets                               |                                 |      |             |            |  
|                                                  | Net operating loss carryforward |      | $           | 9,768,000  |  
|                                                  | Tax credit carryforward         |      |             | 428,000    |  
|                                                  | Inventories                     |      |             | 2,071,000  |  
|                                                  | Other                           |      |             | 250,000    |  
|                                                  |                                 |      |             |            |  
|                                                  | Total deferred tax assets       |      |             | 12,517,000 |  
|Deferred tax liabilities                          |                                 |      |             |            |  
|                                                  | Depreciation                    |      |             | (1,059,000 | )
|                                                  | Customer list                   |      |             | (164,000   | )
|                                                  |                                 |      |             |            |  
|                                                  | Total deferred tax liabilities  |      |             | (1,223,000 | )
|                                                  |                                 |      |             |            |  
|Net deferred tax asset before valuation allowance |                                 |      | 11,294,000  |            |  
|Valuation allowance                               |                                 |      | (11,294,000 | )          |  
|                                                  |                                 |      |             |            |  
|Net deferred tax asset                            |                                 | $    |            |            | $
|                                                  |                                 |      |             |            |  

F-11

---

At June 30, 2000, the Company had net operating loss carryforwards of approximately $23,100,000 for tax reporting purposes, which expire as follows:

2001

$
1,641,0002005 - 2018


21,459,000


The
Company also has general business credit carryforwards of approximately $254,000, which expire in 2000 through 2014.

Differences
between income tax expense (benefit) and amounts derived by applying the statutory federal income tax rate to income (loss) before income taxes are as follows for fiscal
years ending June 30:

2000

1999

1998U.S. federal statutory rate

34.0
%
34.0
%
(34.0
)%Change in valuation allowance

(34.0
)
(34.0
)
34.0






NOTE GSHAREHOLDERS' EQUITY

Stock Option Plans

The Company has three stock option plans. In November 1987, the shareholders adopted the 1987 Stock Plan (the "1987 Plan") to provide for options to be
granted to certain eligible salaried employees
and non-employee members of the Board of Directors. A total of 300,000 shares of common stock are reserved for issuance under the 1987 Plan. In November 1990, the shareholders
adopted the 1990 Stock Plan (the "1990 Plan") to provide for options to be granted to certain eligible employees, non-employee members of the Board of Directors and other
non-employee persons as defined in the 1990 Plan. In November 1993, the 1990 Plan was amended to provide for a total of 1,000,000 shares of common stock reserved for issuance under
the 1990 Plan. In November 1996, the shareholders adopted the 1996 Stock Plan (the "1996 Plan") to provide for options to be granted to certain eligible employees, non-employee
members of the Board of Directors and other non-employee persons as defined in the 1996 Plan. A total of 3,000,000 shares of common stock are reserved for issuance under the 1996 Plan.
Options will be granted under all plans at exercise prices that are determined by a committee as appointed by the Board of Directors. Options granted to date under all plans have been at fair market
value. Each grant awarded specifies the period for which the options are exercisable and provides that the options shall expire at the end of such period.

F-12

---

Option transactions under the 1987, 1990 and 1996 Stock Plans during the three years ended June 30, 2000 are summarized as follows:

Number of
Shares

Weighted Average
Exercise PriceOutstanding at July 1, 1997

1,449,281

$
13.63Granted

334,000


19.24Exercised

(89,225
)

9.24Canceled

(53,000
)

15.98Outstanding at June 30, 1998

1,641,056


14.83Granted

332,000


9.23Exercised

(61,680
)

4.88Canceled

(48,375
)

15.78Outstanding at June 30, 1999

1,863,001


14.12Granted

416,000


13.13Exercised

(60,857
)

7.06Canceled

(66,750
)

13.96Outstanding at June 30, 2000

2,151,394

$
14.03


Number of
Shares

Weighted Average
Exercise PriceOptions exercisable at June 30:2000

1,258,517

$
14.181999

998,668


13.791998

762,723


12.28


The
following tables summarizes information concerning currently outstanding and exercisable stock options:

Options Outstanding

Range of
Exercise Prices

Number
Outstanding

Weighted Average Remaining Contractual Life

Weighted Average
Exercise Price$2.63 - 3.94

37,483

2.0 years

$
3.393.95 - 5.91

49,400

3.7 years


5.405.92 - 8.86

265,625

7.4 years


8.258.87 - 13.29

399,300

6.4 years


10.3713.30 - 19.93

1,294,461

6.7 years


16.3919.94 - 24.00

105,125

6.2 years


21.382,151,394


F-13

---

Options Exercisable

Range of
Exercise Prices

Number
Exercisable

Weighted Average
Exercise Price$2.63 - 3.94

37,483

$
3.393.95 - 5.91

49,400


5.405.92 - 8.86

102,748


7.808.87 - 13.29

230,925


10.5613.30 - 19.93

787,086


16.6919.94 - 24.00

50,875


21.291,258,517


The
weighted average fair value of options granted in 2000, 1999 and 1998 was $10.70, $6.10 and $12.61 per share. The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 2000, 1999 and 1998: no dividend yield; risk-free rate of return of 6%;
volatility of 98.7%, 66.4% and 66.2%;
and an average term of 6.0 years, 6.0 years and 6.0 years. The Company's 1999 proforma net income and basic net income per share would have been $199,000 and $.02 and the 2000 and
1998 proforma net loss and basic net loss per share would have been $3,324,000 and $1,559,000 or $.27 and $.13 per share had the fair value method been used for valuing options granted during 1999,
2000 and 1998. These effects may not be representative of the future effects of applying the fair value method.

Employee Stock Purchase Savings Plan

The 1990 Employee Stock Purchase Savings Plan ("ESPSP") provides for the purchase by eligible employees of Company common stock at a price equal to 85% of the
market price on either the anniversary date of such plan's commencement or the termination date of the plan, whichever is lower. Participants may authorize payroll deductions up to 10% of their base
salary during the plan year to purchase the stock. Since inception of the ESPSP a total of 117,139 shares have been issued, including 14,050 shares for approximately $115,000 in 2000, 4,227 shares for
approximately $37,000 in 1999 and 10,931 shares for approximately $168,000 during 1998. At June 30, 2000, the Company had 32,861 shares reserved for future issuance under the ESPSP.

Shareholder Rights Plan

In May 1996 the Board of Directors unanimously adopted a shareholder rights plan designed to ensure that all of the Company's shareholders receive fair
and equal treatment in the event of any proposal to acquire the Company. The Board declared a distribution of one Right for each share of common stock outstanding on June 15, 1996. Each Right
entitles the holder to purchase 1/100th of a share of a new series of Junior Participating Preferred Stock of Lifecore at an initial exercise price of $110.00. Initially, the Rights will be attached
to the common stock and will not be exercisable. They become exercisable only following the acquisition by a person or group, without the prior consent of the Company's Board
of Directors, of 15 percent or more of the Company's voting stock, or following the announcement of a tender offer or exchange offer to acquire an interest of 15 percent or more.

F-14

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In the event that the Rights become exercisable, each Right will entitle the holder to purchase, at the exercise price, common stock with a market value equal to twice the exercise
price and, should the Company be acquired, each Right would entitle the holder to purchase, at the exercise price, common stock of the acquiring company with a market value equal to twice the exercise
price. Rights that are owned by the acquiring person would become void. In certain specified instances, the Company may redeem the Rights. If not redeemed, they would expire on June 15, 2006.

NOTE HCOMMITMENTS AND CONTINGENCIES

Royalty Agreements

The Company has entered into agreements that provide for royalty payments based on a percentage of net sales of certain products. Royalty expense under these
agreements was $176,000, $256,000 and $191,000 for the years ended June 30, 2000, 1999 and 1998.

Severance Agreements

The Company has an agreement with each officer that provides severance pay benefits if there is a change in control of the Company (as defined) and the officer
is involuntarily terminated (as defined). The maximum contingent liability under these agreements at June 30, 2000 is approximately $1,350,000.

NOTE IEMPLOYEE BENEFIT PLAN

The Company has a 401(k) profit sharing plan for eligible employees. The Company, at the discretion of the Board of Directors, may set a matching percentage
that is proportionate to the amount of the employees' elective contributions each year. During the year ended June 30, 2000, the Board of
Directors authorized a company matching contribution to the plan of $60,877. During the years ended June 30, 1999 and 1998, there were no Company contributions to the plan.

NOTE JSEGMENT INFORMATION

Financial Accounting Standards Board Statement No. 131 "Disclosures about Segments of an Enterprise and Related Information" requires the Company to
disclose financial and other information about its business segments, their products and services, geographic areas, major customers, revenues, profits, assets, and other information.

F-15

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Lifecore Biomedical, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE JSEGMENT INFORMATION (Continued)

The Company operates two business segments. The Hyaluronan Division manufactures, markets and sells products containing hyaluronan and provides contract
aseptic packaging services. The Oral Restorative Division produces and markets various oral restorative products in the area of implant dentistry. Currently, products containing hyaluronan are sold
primarily to customers pursuant to supply agreements. Sales to Alcon under such agreements were 18%, 10% and 19% of total sales in 2000, 1999 and 1998. The Company's Oral Restorative Division markets
products directly to clinicians and dental laboratories in the United States, Italy and Germany and primarily through distributorship arrangements in other foreign locations. Sales to customers
located principally in Europe and South America accounted for 37%, 36% and 35% of total Company sales during the years ended June 30, 2000, 1999 and 1998. The operations of the Company's
Italian subsidiary, Lifecore Biomedical SpA,
and the Company's German subsidiary, Lifecore Biomedical GmbH have not been material to the consolidated financial statements.

Segment
information for the Company is as follows:

|                                      |                           | Years ended June 30, |           
|------------------------------------- | ------------------------- | -------------------- | ----------
|
|Net sales                             |                           |                      |           
|                                      | Hyaluronan products       |                      | $         
|                                      | Oral restorative products |                      |           
|                                      |                           |                      |           
|                                      |                           | $                    | 32,823,000
|                                      |                           |                      |           
|Income (loss) from operations         |                           |                      |           
|                                      | Hyaluronan products       |                      | $         
|                                      | Oral restorative products |                      |           
|                                      |                           |                      |           
|                                      |                           | $                    | (762,000  
|                                      |                           |                      |           
|Capital expenditures                  |                           |                      |           
|                                      | Hyaluronan products       |                      | $         
|                                      | Oral restorative products |                      |           
|                                      |                           |                      |           
|                                      |                           | $                    | 1,001,000 
|                                      |                           |                      |           
|Depreciation and amortization expense |                           |                      |           
|                                      | Hyaluronan products       |                      | $         
|                                      | Oral restorative products |                      |           
|                                      |                           |                      |           
|                                      |                           | $                    | 3,301,000 
|                                      |                           |                      |           

Years ended June 30,2000

1999Identifiable assetsHyaluronan products

$
50,003,000

$
48,279,000Oral restorative products


14,736,000


19,975,000General corporate


1,049,000


543,000$
65,788,000

$
68,797,000


F-16

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NOTE KAGREEMENTS

Lifecore and ETHICON have entered into a Conveyance, License, Development and Supply Agreement (the "ETHICON Agreement"). Additionally, Lifecore, ETHICON and
JJDC, a subsidiary of Johnson & Johnson, have entered into a Stock Purchase Agreement.

Under
the terms of the ETHICON Agreement, ETHICON transferred to Lifecore its ownership in certain technology related to research and development previously conducted on the Company's
sodium hyaluronan material. The technology transferred to Lifecore includes written technical documents related to ETHICON's research and development of a product to inhibit the formation of
postsurgical adhesions. These documents include product specifications, methods and techniques, technology, know-how and certain patent applications. Lifecore has assumed responsibility
for continuing the anti-adhesion development project including conducting human clinical trials on INTERGEL Solution, a second generation hyaluronan-based product. Lifecore
has granted ETHICON exclusive worldwide marketing rights through 2008 to the products developed by Lifecore within defined fields of use.

Under
the terms of the Stock Purchase Agreement, JJDC purchased 757,396 unregistered shares of Lifecore common stock for total consideration of $4.0 million consisting of
$2.6 million cash and $1.4 million conversion of a customer deposit from ETHICON held by Lifecore. Lifecore granted JJDC registration rights for these shares.

The
Company has made and continues to make a significant investment in the development and testing of INTERGEL Adhesion Prevention Solution, a product designed to reduce the incidence
of postsurgical adhesions. The Company submitted an application for FDA Pre-Market Approval ("PMA") in March 1999, which was accepted by the FDA in May 1999 for expedited
review. In January 2000, an advisory panel to the FDA recommended to the FDA that INTERGEL Solution not be approved for use in the United States. After consulting with the FDA, the Company
prepared and submitted an amendment to the existing PMA in June 2000 to address concerns raised by the advisory panel. However, even if the Company receives approval from the FDA, there can be
no assurance that it will
receive market acceptance. Failure to achieve significant sales of the product could have a material adverse effect on future prospects for the Company's operations.

NOTE LLEGAL PROCEEDINGS

The Company is subject to various legal proceedings in the normal course of business. Management believes that these proceedings will not have a material
adverse effect on the consolidated financial statements.

NOTE MRECLASSIFICATIONS

Certain 1999 amounts have been reclassified to conform to the 2000 presentation.

F-17

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## 

Lifecore Biomedical, Inc. and Subsidiaries

SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

|                         |                               |  |   | Additions |  |   |         | 
|------------------------ | ----------------------------- |  | - | --------- |  | - | ------- | 
|
|
|
|
|Year ended June 30, 2000 |                               |  |   |           |  |   |         | 
|                         | Accounts receivable allowance |  | $ | 372,000   |  | $ | 110,000 | 
|Year ended June 30, 1999 |                               |  |   |           |  |   |         | 
|                         | Accounts receivable allowance |  |   | 346,000   |  |   | 63,000  | 
|Year ended June 30, 1998 |                               |  |   |           |  |   |         | 
|                         | Accounts receivable allowance |  |   | 286,000   |  |   | 63,000  | 

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