<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X]  QUARTERLY report pursuant to Section 13 OR 15(d) of the Securities Exchange
     Act of 1934 For the quarter ended DECEMBER 31, 1999,

                                       OR

[ ]  Transition report pursuant to Section 13 OR 15(d) of the Securities
     Exchange Act of 1934 For the transition period from_____________ to
     _______________

                        Commission file number: 000-24103

                           COHESION TECHNOLOGIES, INC.
             (Exact Name of Registrant as Specified in Its Charter)

        DELAWARE                                               94-3274368
     (State or Other                                        (I.R.S. Employer
     Jurisdiction of                                      Identification No.)
    Incorporation or
      Organization)

                      2500 FABER PLACE, PALO ALTO, CA 94303
          (Address of Principal Executive Offices, including Zip Code)

       Registrant's telephone number, including area code: (650) 320-5500

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

           Securities registered pursuant to Section 12(g) of the Act:
                          COMMON STOCK, $.001 PAR VALUE


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 month (or 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

As of January 31, 2000, Registrant had 8,866,640 shares of Common Stock
outstanding, exclusive of 515,100 shares held by the Registrant as treasury
stock.

<PAGE>   2

                           Cohesion Technologies, INC.

                                    Form 10-Q

                                      INDEX

<TABLE>
<CAPTION>
PART I.        Financial Information                                           Page No.
------------------------------------                                           --------
<S>                                                                                <C>
Item 1.     Financial Statements:

               Condensed Consolidated Balance Sheets -
               December 31, 1999 and June 30, 1999                                  3

               Condensed Consolidated Statements of Operations -
               Three and six months ended December 31, 1999 and 1998                4

               Condensed Consolidated Statements of Cash Flows -
               Six months ended December 31, 1999 and 1998                          5

               Notes to Condensed Consolidated Financial Statements              6-10

Item 2.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations                                 11-17

Item 3.     Quantitative and Qualitative Disclosures about Market Risk             18


PART II.       Other Information

Item 6.     Exhibits and Reports on Form 8-K                                       19

Signatures                                                                         20
</TABLE>


                                       2
<PAGE>   3

                          PART I. FINANCIAL INFORMATION

ITEM 2.   FINANCIAL STATEMENTS

                           COHESION TECHNOLOGIES, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,     JUNE 30,
                                                                                           1999           1999*
                                                                                       ------------     --------
<S>                                                                                      <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents .......................................................      $ 19,168       $  4,239
  Accounts receivable, net ........................................................           514            895
  Inventories .....................................................................           922            976
  Other current assets ............................................................         2,441          2,142
                                                                                         --------       --------
         Total current assets .....................................................        23,045          8,252

Property and equipment, net .......................................................         6,720          6,705
Investment in Boston Scientific Corporation .......................................        20,261         41,632
Other investments and assets ......................................................        18,846         14,930
                                                                                         --------       --------
                                                                                         $ 68,872       $ 71,519
                                                                                         ========       ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable ................................................................      $  1,041       $  1,035
  Accrued compensation ............................................................         1,136          1,172
  Accrued liabilities .............................................................         2,909          4,133
  Income taxes payable ............................................................         5,759            953
  Obligation under capital lease ..................................................           733             --
                                                                                         --------       --------
         Total current liabilities ................................................        11,578          7,293

Long-term liabilities:
  Obligation under capital lease ..................................................         3,039             --
  Deferred income taxes ...........................................................        11,029         18,985
                                                                                         --------       --------
         Total long-term liabilities ..............................................        14,068         18,985

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.001 par value, authorized: 5,000,000 shares,
    issued and outstanding: no shares at December 31, 1999 and June 30, 1999 ......            --             --
  Common stock, $.001 par value, authorized: 15,000,000 shares;
    issued, December 31, 1999 - 9,207,572 shares; June 30, 1999 - 8,953,167 shares;
    outstanding,  December 31, 1999 - 8,692,472 shares;  June 30, 1999 - 8,438,067
    shares ........................................................................             9              9
  Additional paid-in capital ......................................................        16,410         15,193
  Retained earnings (since August 19, 1998) .......................................        14,076          5,705
  Accumulated other comprehensive income ..........................................        14,705         26,308
  Treasury stock, at cost, 515,100 shares at December 31, 1999 and
      June 30, 1999 ...............................................................        (1,974)        (1,974)
                                                                                         --------       --------
         Total stockholders' equity ...............................................        43,226         45,241
                                                                                         --------       --------
                                                                                         $ 68,872       $ 71,519
                                                                                         ========       ========
</TABLE>

The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.

* Amounts derived from audited financial statements at the date indicated.


                                       3
<PAGE>   4

                           COHESION TECHNOLOGIES, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED         SIX MONTHS ENDED
                                                                  DECEMBER 31,              DECEMBER 31,
                                                             ---------------------     ---------------------
                                                               1999         1998         1999         1998
                                                             --------     --------     --------     --------
<S>                                                          <C>          <C>          <C>          <C>
Revenue -- product sales ................................    $    503     $    828     $    947     $  1,223

Costs and expenses:
  Cost of sales,  including  manufacturing start-up costs         899          412        1,568          595
  Research and development ..............................       2,915        3,470        6,160        7,459
  Selling, general and administrative ...................       1,694        1,531        3,579        3,219
  Compensation expense related to
       cancelled stock options ..........................         442          635          891        2,447
                                                             --------     --------     --------     --------
          Total costs and expenses ......................       5,950        6,048       12,198       13,720
                                                             --------     --------     --------     --------

Loss from operations ....................................      (5,447)      (5,220)     (11,251)     (12,497)

Other income (expense):
  Gain on sale of investments ...........................      12,322        4,353       25,021       13,971
  Interest income .......................................         176           10          269           67
  Interest expense ......................................         (89)          --          (89)          --
                                                             --------     --------     --------     --------

Income (loss) before provision for income taxes .........       6,962         (857)      13,950        1,541
Provision (benefit) for income taxes ....................       2,785         (391)       5,580          616
                                                             --------     --------     --------     --------

Net income (loss) .......................................    $  4,177     $   (466)    $  8,370     $    925
                                                             ========     ========     ========     ========


Earnings (loss) per common share - basic ................    $    .49     $   (.05)    $    .99     $    .11
                                                             ========     ========     ========     ========


Earnings (loss) per common share assuming dilution ......    $    .47     $   (.05)    $    .95     $    .11
                                                             ========     ========     ========     ========


Weighted average shares outstanding - basic .............       8,546        8,580        8,469        8,709
                                                             ========     ========     ========     ========

Weighted average shares outstanding assuming
       dilution .........................................       8,982        8,580        8,772        8,709
                                                             ========     ========     ========     ========
</TABLE>


The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.


                                       4
<PAGE>   5

                           COHESION TECHNOLOGIES, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                               SIX MONTHS ENDED
                                                                 DECEMBER 31,
                                                            ---------------------
                                                              1999         1998
                                                            --------     --------
<S>                                                         <C>          <C>
Cash flows from operating activities:
  Net income ...........................................    $  8,370     $    925

  Adjustments to reconcile net income
     to net cash used in operating activities:
     Depreciation and amortization .....................         752          553
     Gain on investments ...............................     (25,021)     (13,971)
     Decrease (increase) in assets:
       Accounts receivable .............................         381         (139)
       Inventories .....................................          54         (536)
       Other ...........................................         455         (747)
     Increase (decrease) in liabilities:
       Accounts payable, accrued liabilities and other .      (1,253)       1,535
       Income taxes payable ............................       4,805          ---
                                                            --------     --------
     Net cash used in operating activities .............     (11,457)     (12,380)
                                                            --------     --------

Cash flows from investing activities:
  Proceeds from sales of Boston Scientific
     Corporation stock .................................      12,614       13,221
  Proceeds from sale-leaseback of manufacturing facility       4,188           --
  Proceeds from sale of other investments ..............      10,993          533
  Purchase of investments ..............................      (4,260)          --
  Proceeds on maturity of equity collar, net ...........       2,574        1,081
  Proceeds from maturities of short-term investments ...          --        1,016
  Expenditures for property and equipment ..............        (524)      (2,403)
                                                            --------     --------
     Net cash provided by investing activities .........      25,585       13,448
                                                            --------     --------

Cash flows from financing activities:
  Proceeds from exercise of stock options and
     from employee stock purchase plan .................       1,217           96
  Payment of capital lease obligation ..................        (416)          --
  Proceeds from short-term borrowings, net .............          --        1,000
  Treasury stock purchases .............................          --       (1,802)
                                                            --------     --------
     Net cash provided by (used in) financing activities         801         (706)
                                                            --------     --------

Net increase in cash and cash equivalents ..............      14,929          362
Cash and cash equivalents at beginning of period .......       4,239          591
                                                            --------     --------

Cash and cash equivalents at end of period .............    $ 19,168     $    953
                                                            ========     ========
</TABLE>

The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.


                                       5
<PAGE>   6

                           COHESION TECHNOLOGIES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Basis of Presentation

   The condensed consolidated balance sheet as of December 31, 1999, the
condensed consolidated statements of operations for the three and six months
ended December 31, 1999 and 1998, and the condensed consolidated statements of
cash flows for the six months ended December 31, 1999 and 1998, have been
prepared by the Company and are unaudited. In the opinion of management, all
necessary adjustments (which include only normal recurring adjustments) have
been made to present fairly the financial position, results of operations, and
cash flows at December 31, 1999 and for all periods presented. Interim results
are not necessarily indicative of results for a full fiscal year. The
consolidated balance sheet as of June 30, 1999 has been derived from the audited
consolidated financial statements at that date.

   Certain amounts in the financial statements for the prior fiscal period have
been reclassified to conform with the current year presentation. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These condensed consolidated financial statements should
be read in conjunction with the audited consolidated financial statements and
notes included in the Company's Annual Report on Form 10-K for the year ended
June 30, 1999.

2. INVENTORIES

   Inventories are valued at the lower of cost, determined on a standard cost
basis which approximates average cost, or market.

   Inventories comprise the following:



<TABLE>
<CAPTION>
                                                DECEMBER 31,     JUNE 30,
                                                   1999            1999
                                                   ----            ----
                                                      (IN THOUSANDS)
<S>                                               <C>             <C>
    Raw materials.............................    $   209         $   158
    Work-in-process...........................        442             737
    Finished goods............................        271              81
                                                  -------         -------
                                                  $   922         $   976
                                                  =======         =======
</TABLE>


                                       6
<PAGE>   7

3. EQUITY INVESTMENTS

   The following is a summary of the aggregate estimated fair value, gross
unrealized gains and cost of the Company's investments in common stock:

<TABLE>
<CAPTION>
                                            DECEMBER 31,      JUNE 30,
                                                1999            1999
                                              -------         -------
                                                   (IN THOUSANDS)
<S>                                           <C>             <C>
BOSTON SCIENTIFIC CORPORATION
Cost......................................    $ 1,569         $ 2,229
Gross unrealized gains....................     14,306          43,056
                                              -------         -------
                                               15,875          45,285
Fair value of equity collar...............      4,386          (3,653)
                                              -------         --------
Estimated fair value......................    $20,261         $41,632
                                              =======         =======

OTHER INVESTMENTS
Cost......................................    $ 8,323         $10,253
Gross unrealized gains....................      6,097           3,516
                                              -------         -------
Estimated fair value......................    $14,420         $13,769
                                              =======         =======

Total estimated fair value................    $34,681         $55,401
                                              =======         =======
</TABLE>



   The Company determines the appropriate classification of marketable
securities at the time of purchase and re-evaluates such designation as of each
balance sheet date. All of the Company's investments in equity securities are
classified as available-for-sale.

   To hedge against fluctuations in the market value of a portion of the Boston
Scientific common stock, the Company entered into costless collar instruments
that expire quarterly through May 2001 and will require settlement in cash. At
December 31, 1999, 450,000 shares were hedged under these collars. The put and
call options are collateralized by shares of Boston Scientific common stock held
by the Company.


                                       7
<PAGE>   8

4. EARNINGS PER SHARE

   Under Statement of Financial Accounting Standards No. 128, Earnings Per Share
("SFAS 128"), basic earnings per share ("EPS") is calculated using the weighted
average number of common shares outstanding for the period. The computation of
diluted EPS includes the effects of stock options, warrants and convertible
preferred stock, if such effect is dilutive. Options that had an exercise price
greater than their market price during the three and six months ended December
31, 1999 and 1998 were excluded, as their inclusion would have been
anti-dilutive. Below is a reconciliation between the basic and diluted weighted
average common and common-equivalent shares for the three and six months ended
December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                  THREE MONTHS ENDED    SIX MONTHS ENDED
                                      DECEMBER 31,        DECEMBER 31,
                                    ---------------     ---------------
                                    1999      1998      1999      1998
                                    -----     -----     -----     -----
<S>                                 <C>       <C>       <C>        <C>
Basic (weighted average common
  shares outstanding) .........     8,546     8,580     8,469      8709

Weighted average common stock
  options outstanding .........       436        --       303        --
                                    -----     -----     -----     -----

Diluted weighted average shares
  outstanding .................     8,982     8,580     8,772     8,709
                                    =====     =====     =====     =====
</TABLE>


5. CAPITAL LEASE OBLIGATION

   The Company entered into a lease agreement that covers manufacturing
equipment and leasehold improvements. The lease finances expenditures up to $5.0
million in aggregate and has a term of 48 months with a one-year extension
option or a single cash payment of 20% of the lease line utilized. Rental
payments are based on a monthly equivalent rental payment factor of the lease
line utilized. Equipment and certain investments collateralize the lease.

   The following is a schedule of future minimum lease payments as of December
31, 1999:

<TABLE>
<CAPTION>
                                                                  (IN THOUSANDS)
<S>                                                                    <C>
Period Ending December 31,
                          2000 ..............................          $  791
                          2001 ..............................           1,050
                          2002 ..............................           1,050
                          2003 ..............................           1,475
                                                                       ------
        Total future minimum lease payments .................           4,366

        Less: Amount representing interest ..................            (594)
                                                                       ------

        Present value of net minimum lease payments .........           3,772

        Current portion of capital lease obligation .........             733
                                                                       ------

        Long-term portion of capital lease obligation .......          $3,039
                                                                       ======
</TABLE>


                                       8
<PAGE>   9

6. STOCKHOLDERS' EQUITY

   Cohesion Corporation Stock Options

   In September 1998, the Company's Board of Directors approved a program to
cancel options to purchase shares of the common stock of Cohesion Corporation.
In connection with such program, the Company offered to pay each holder of these
canceled options a per share amount equal to the excess of $16.70 over the
exercise price of the canceled option. The Company will make this option payment
ratably over the original vesting period of the canceled option so long as the
former holder thereof remains an employee or consultant of the Company. The
Company recorded $442,000 and $891,000 of compensation expense related to these
canceled options during the three and six months ended December 31, 1999,
respectively. The Company expects to record an additional $1.1 million through
2001.

7. COMPREHENSIVE INCOME

   The components of comprehensive income (loss), net of related income tax, for
the three and six months ended December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                   THREE MONTHS ENDED              SIX MONTHS ENDED
                                       DECEMBER 31,                  DECEMBER 31,
                                 -----------------------       -----------------------
                                   1999           1998           1999           1998
                                 --------       --------       --------       --------
<S>                              <C>            <C>            <C>            <C>
Net income (loss) .............  $  4,177       $   (466)      $  8,370       $    925

Change in unrealized gains
  on securities ...............    (4,047)        (3,799)       (11,603)       (13,560)
                                 --------       --------       --------       --------

Comprehensive income (loss) ...  $   (130)      $ (4,265)      $ (3,233)      $(12,635)
                                 ========       ========       ========       ========
</TABLE>


8. SEGMENT INFORMATION

   The Company develops proprietary surgical products, including bioresorbable
hemostatic devices and biosealants for tissue repair and regeneration. The
Company operates in two segments: 1) a surgical business and 2) an orthopedic
business. In February 1999, the Company formed a new subsidiary, NeuColl, Inc.,
to commercialize its products in the orthopedics field, which include Collagraft
and NeuVisc. Both segments report to the Chief Executive Officer ("CEO") of
Cohesion who allocates resources to each business. The CEO has been identified
as the Chief Operating Decision Maker as defined by SFAS 131.

   Information on reportable segments for the three and six months ended
December 31, 1999 is as follows (Information for the three and six months ended
December 31, 1998 is not available):

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED
                                              DECEMBER 31, 1999
                                             ------------------

                                                (IN THOUSANDS)

                                      SURGICAL     ORTHOPEDIC        TOTAL
                                      --------     ----------       --------
<S>                                   <C>            <C>            <C>
        Revenue - product sales ...   $   182        $   321        $   503
        Loss from operations ......   $(4,978)       $  (469)       $(5,447)
</TABLE>


                                       9
<PAGE>   10

<TABLE>
<CAPTION>
                                                      SIX MONTHS ENDED
                                                      DECEMBER 31, 1999
                                                      -----------------

                                                        (IN THOUSANDS)

                                           SURGICAL       ORTHOPEDIC         TOTAL
                                           --------        --------        --------
<S>                                        <C>             <C>             <C>
        Revenue - product sales ........   $    297        $    650        $    947
        Loss from operations ...........   $(10,203)       $ (1,048)       $(11,251)

        Total assets at December 31,
          1999 .........................   $ 67,945        $    927        $ 68,872
</TABLE>



9. STATEMENTS OF CASH FLOWS

   Supplemental disclosure of cash flow information (in thousands):

<TABLE>
<CAPTION>
                                              SIX MONTHS ENDED
                                                DECEMBER 31,
                                           --------      -------
                                             1999         1998
                                           --------      -------
<S>                                        <C>           <C>
Cash paid during the period for:
  Interest                                 $175,000      $    --
  Income taxes                             $495,000      $    --
</TABLE>


                                       10
<PAGE>   11

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

   The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and notes thereto. Certain statements in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are forward-looking. The forward-looking statements contained herein
are based on current expectations and entail various risks and uncertainties
that could cause actual results to differ materially from those expressed in
such forward-looking statements. These risks include, but are not limited to,
(i) significant unforeseen delays in the regulatory approval process, (ii)
determination by the FDA or foreign regulatory bodies that our clinical data
does not support the safety and efficacy of our products and (iii) competitive
products and technology. For a more detailed discussion on other business risks
see "Additional Factors That Might Affect Future Results of Operations."

   Cohesion is focused on developing and commercializing proprietary surgical
products, including bioresorbable hemostatic devices and biosealants for tissue
repair and regeneration, to increase the effectiveness of minimally invasive
surgeries. CoStasis Surgical Hemostat, our lead hemostatic product, is designed
for use in cardiovascular, orthopedic and general surgery indications. We
received a CE Mark for CoStasis in September 1998 and commenced sales and
distribution of the product in Europe beginning in February 1999. We completed a
pivotal clinical trial in the U.S. during fiscal 1999, and filed a PMA
application with the FDA in June 1999. In November 1999, we announced an
agreement with U.S. Surgical for the marketing and distribution of CoStasis. The
U.S. Surgical territories include the U.S., European Union, Eastern Europe,
Latin America, Middle East, Australia, New Zealand, and India. We also initiated
an expanded clinical study in Europe in fiscal 1999 for CoSeal(TM) Surgical
Sealant, our lead biosealant product designed for sealing arterial and venous
grafts. In December 1999, we filed for a CE mark for CoSeal in Europe and filed
an IDE with the FDA to begin clinical studies in the U.S. We believe that our
surgical products will provide several distinct advantages over currently
available technologies, including ease of preparation and use, novel delivery
systems, improved safety profiles and clinical effectiveness. Cohesion also
sells Collagraft implant, an orthopedic product, through its subsidiary,
NeuColl, Inc., and has research and development programs in other orthopedic
areas and in recombinant human collagen and thrombin. Our products and programs
are based on a platform of proprietary technologies centered around collagen and
hydrophilic polymers that quickly polymerize in-vivo and bind to tissue.

   Cohesion was organized in June 1997 as a Delaware corporation and wholly
owned subsidiary of Collagen Aesthetics, Inc., formerly known as Collagen
Corporation (recently acquired by Inamed Corporation). During fiscal 1998,
Collagen proceeded to separate its Aesthetic Technologies Group and its Collagen
Technologies Group into two independent, publicly-traded companies. Effective
January 1, 1998, Collagen contributed its research and development programs for
hemostatic devices, biosealants, orthopedics products and programs, adhesion
barriers and recombinant human collagen and thrombin and other related
businesses of CTG to Cohesion. Collagen also contributed various equity
investments to Cohesion, including all of its holdings in Boston Scientific
Corporation. On August 18, 1998, Collagen distributed as a dividend to its
stockholders, one share of Cohesion's Common Stock for each share of Collagen
common stock outstanding. Cohesion and Collagen entered into various agreements
to provide for an orderly transition of matters and to govern certain ongoing
matters between the two entities and provide a mechanism for transitioning
license, supply, distribution, research and development, tax, service and other
agreements in connection with the distribution of Cohesion's common stock.


                                       11
<PAGE>   12

RESULTS OF OPERATIONS

Three and Six Months Ended December 31, 1999 and 1998

   Revenues were $503,000 and $945,000 for the three and six months ended
December 31, 1999, respectively, compared to $828,000 and $1.2 million for the
same periods in the prior year. Sales of Collagraft for the three and six months
ended December 31, 1999 were $322,000 and $650,000, respectively. Collagraft
sales for the comparable prior year periods were $689,000 and $965,000. The
decreases from the prior year are primarily due to timing of shipments to
Zimmer, NeuColl's distribution partner in the U.S. and Asia. We expect revenues
to be higher in fiscal 2000 due to CoStasis milestone payments from the
agreement with U.S. Surgical, a full-year of CoStasis sales in Europe and
slightly higher sales of Collagraft due to increased end-market sales by Zimmer
and from sales by NeuColl in certain European countries. A number of
uncertainties exist surrounding the marketing and distribution of our products
where the primary means of distribution is through third party firms, such as
U.S. Surgical and Zimmer. Our business and financial results could be adversely
affected in the event a third party firm is unable to market the product
effectively, anticipate customer demand accurately, or effectively manage
industry-wide pricing and cost containment pressures in health care.

   Cost of sales as a percentage of sales was 165% and 49% for the six months
ended December 31, 1999 and 1998, respectively. The increase in cost of sales as
a percentage of sales was primarily due to manufacturing startup costs for the
CoStasis product, which is expected to continue through fiscal 2000.

   Research and development expenses were $2.9 million and $6.2 million for the
three and six months ended December 31, 1999, respectively, compared to $3.5
million and $7.5 million for the same prior year periods. The decrease in R&D
spending was due primarily to higher clinical trial costs in fiscal 1999 and
lower spending in the recombinant programs in the current fiscal year. R&D
expense reflects reimbursement from Collagen for the recombinant human collagen
program in accordance with the intercompany agreements entered into between
Cohesion and Collagen. We expect R&D spending in fiscal 2000 to be at slightly
lower levels than fiscal 1999.

   Selling, general and administrative expenses were $1.7 million and $3.6
million during the three and six months ended December 31, 1999, respectively,
compared to $1.5 million and $3.2 million for the same periods in the prior
fiscal year. The increase in SG&A expenses is due primarily to increased
marketing costs associated with the launch of CoStasis in Europe, and is
expected to continue through the current fiscal year. Future levels of SG&A
spending will depend on various factors, including the level of product sales
and how future products are distributed throughout the world.

   During the six months ended December 31, 1999 and 1998, Cohesion recorded
$891,000 and $2.4 million, respectively of compensation expense in connection
with the cancellation of the remaining stock options of Cohesion Corporation. In
September 1998, our board of directors approved a program to cancel options to
purchase shares of the common stock of Cohesion Corporation. In connection with
this cancellation, Cohesion offered to pay each holder of canceled options a per
share amount equal to the excess of $16.70 over the exercise price of the
canceled option. Cohesion will make this option payment ratably over the
original vesting period of the canceled option so long as the former holder
thereof remains an employee or consultant of Cohesion. We expect to record an
additional $1.1 million of compensation expense with respect to the cash-out of
canceled options, which will be recognized during fiscal 2000 through 2001.

   Gains on sales of investments were $12.3 million and $25.0 million for the
three and six months ended December 31, 1999, respectively. The gains in the
current fiscal quarter were primarily from the sale of common stock of Medarex,
Inc. The timing and number of additional shares of Boston Scientific and other
equity investments sold will depend on market conditions and our anticipated
cash needs.


                                       12
<PAGE>   13

   Interest income was $176,000 and $269,000 for the three and six months ended
December 31, 1999, respectively, compared to $10,000 and $67,000 for the same
periods in the prior year. The increase is due to higher average cash and cash
equivalents balances.

   Interest expense was $89,000 for the three and six months ended December 31,
1999, respectively. Interest expense related to the obligation under capital
lease.

   Cohesion's effective tax rate for the six months ended December 31, 1999 and
1998 was 40%.

SEGMENT INFORMATION

    Cohesion operates in two segments: 1) our surgical business and 2) our
orthopedics business. Our surgical segment develops proprietary surgical
products, including bioresorbable hemostatic devices and biosealants, such as
CoStasis and CoSeal, for tissue repair and regeneration. During fiscal 1999,
Cohesion formed a new company, NeuColl, Inc., in order to commercialize products
in the orthopedics field, which include Collagraft(R) and NeuVisc(TM), a
collagen-based intra-articular implant for the treatment of osteoarthritis. For
a discussion of Collagraft sales, see revenue discussion in "- Results of
Operations."

LIQUIDITY AND CAPITAL RESOURCES

   At December 31, 1999, cash and investments were $53.8 million. Net cash used
in operating activities was $11.5 million for six months ended December 31,
1999. For the six months ended December 31, 1999, cash provided by investing
activities of $25.6 million was primarily related to proceeds of approximately
$12.6 million from the sale of Boston Scientific common stock, proceeds of
approximately $13.6 million from the sale of other investments and maturity of
our equity collars, and proceeds of $4.2 million from the sale-leaseback of our
manufacturing facility improvements and equipment. The investment proceeds were
offset by $4.2 million for the purchase of investments and $524,000 for capital
expenditures. We anticipate capital expenditures to be approximately $2.0
million in fiscal 2000.

   Our principal sources of liquidity include our investment in Boston
Scientific common stock, cash, cash equivalents and other investments. Cohesion
anticipates that stock sales will be made from time to time, with the objective
of generating cash for, among other things, further investments in both current
and new affiliate companies. We may defer sales of Boston Scientific common
stock or other investments for tax planning purposes or other reasons, although
decisions concerning prospective Boston Scientific common stock sales will also
be affected by the then-current market price of Boston Scientific common stock.

   In September 1998, our Board of Directors approved a stock repurchase program
to buy back up to 1.0 million shares of common stock at a price of up to $4.25
per share. As of December 31, 1999, we had repurchased 515,100 shares of common
stock under this program.

   In September 1998, our Board of Directors approved a program to cancel
options to purchase shares of the common stock of Cohesion Corporation. In
connection with such program, Cohesion offered to pay each holder of canceled
options a per share amount equal to the excess of $16.70 over the exercise price
of the canceled option. Cohesion will make this option payment ratably over the
original vesting period of the canceled option so long as the holder thereof
remains an employee or consultant of Cohesion. We recorded $891,000 of
compensation expense related to these canceled options during the six months
ended December 31, 1999 and expect to records an additional $1.1 million through
2001.


                                       13
<PAGE>   14

   We believe that our current sources of liquidity should be adequate to fund
our anticipated capital requirements through at least the next two years.
However, during this period and thereafter, we may require additional financing.
Our capital requirements will depend on numerous factors, including the progress
of our clinical research and product development programs, the extent to which
we enter into collaborative relationships with third parties and the scope of
our obligations in such relationships, the receipt of, and the time required to
obtain, regulatory clearances and approvals, the resources required to protect
our intellectual property and other factors. We cannot accurately predict the
timing and amount of such capital requirements. Additional financing may not be
available to us on acceptable terms, if at all.

   During fiscal 1999, we formed a new company, NeuColl, Inc., in order to
commercialize products in the orthopedics field, which include Collagraft and
NeuVisc(TM), a collagen-based intra-articular implant. In connection with the
formation, Cohesion granted NeuColl an exclusive license to certain patents
relating to collagen and polymer technology for orthopedic applications.
Cohesion provided the initial funding for NeuColl; however, in February 2000,
NeuColl received additional funding of $2.0 million from a third-party reducing
Cohesion's ownership in NeuColl to approximately 60%. An additional $2.0 million
of financing may be received by March 2000.

YEAR 2000

   The Year 2000 issue refers to problems that computer programs may have in
determining the correct century; for example, time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could cause a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar business activity. Cohesion
had developed a plan to address potential exposures related to the Year 2000
issue and had taken reasonable steps to ensure that its systems, software and
equipment involving date-related information will continue to function properly
after December 31, 1999. Our plan to address the Year 2000 issue involved the
following phases: 1) inventory and risk assessment, 2) remediation, 3) testing,
and 4) full compliance and/or creation of contingency plans. Our plan also
encompassed compliance with regulatory guidelines on the Year 2000 issue.

   We have completed our assessment of information technology business systems,
product, operating equipment, and third-party interfaces, including suppliers.
To date, we have not identified any significant problems. With respect to
third-party interfaces, Cohesion has and will continue to evaluate the Year 2000
readiness of those third parties.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

   For a more complete discussion of other risks and uncertainties involving the
Company's business, see "Business - Government Regulations" and "Business -
Competition" in the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1999.

Cohesion has a history of operating losses and anticipates continued operating
losses

   Prior to July 1, 1998, our historical results of operations reflect the
historical operations of the transferred businesses contributed by Collagen to
Cohesion. The financial statements, prior to July 1, 1998, may not necessarily
reflect the results of operations, financial position and cash flows of the
transferred businesses had Cohesion been operated as an independent entity
during the periods presented. The transferred businesses incurred operating
losses in each of the past five years, including operating losses of $24.9
million, $31.5 million and $16.4 million in fiscal 1999, 1998 and 1997,
respectively. Cohesion's operating losses have resulted primarily from expenses
incurred in


                                       14
<PAGE>   15

connection with research and development activities, including preclinical and
clinical trials, development of manufacturing processes and general and
administrative expenses, and we expect that such expenses will continue to
increase for the foreseeable future. While we had sales of Collagraft bone
products of $1.9 million, $1.5 million and $1.9 million for the years ended June
30, 1999, 1998 and 1997, respectively, we do not expect such sales to increase
substantially in the future. Such sales at their present levels do not
contribute, in a material way, to our operating profitability. Cohesion's
ability to achieve and sustain operating profitability is highly dependent upon
obtaining in a timely and efficient fashion, regulatory approval for and
successfully commercializing its products in development, particularly CoStasis
Surgical Hemostat and CoSeal Surgical Sealant and developing sales and marketing
capabilities for its products, both in Europe, the United States and other
markets. There can be no assurance that we will obtain required regulatory
approvals in a timely fashion, if at all, or successfully develop, manufacture,
commercialize and market products or that we will ever record significant
product revenues or achieve operating profitability.

We must develop and commercialize our products to generate revenues

   Except for Collagraft, our line of collagen-based research material products,
and CoStasis in Europe, all of our products are in research or preclinical or
clinical development. We have not received marketing approval for any of our
products from the FDA. The development and commercialization of new products are
highly uncertain, as is the timing associated with these activities. Among other
things, potential products that may appear to be promising may not reach the
market for a number of reasons, including the possibilities that the potential
products will be found to be ineffective or to cause harmful side effects during
preclinical testing or clinical trials, will fail to receive necessary
regulatory approvals, will be difficult to manufacture on a commercial scale,
will be uneconomical, will fail to achieve market acceptance or will be
precluded from commercialization by the proprietary rights of third parties. We
cannot assure you that any of our development programs will be successfully
completed, that clinical trials will generate anticipated results or will
commence or be completed as planned. Additionally, we cannot assure you that we
will be able to obtain CE Mark in Europe, on a timely basis, if at all, or that
any PMA application will be accepted or ultimately approved by the FDA on a
timely basis, if at all, or that any products for which approval is obtained
will be commercially successful. If any of our development programs are not
successfully completed in a timely fashion, required regulatory approvals are
not obtained in a timely fashion, or products for which approvals are obtained
are not commercially successful, our business, financial condition and results
of operations will be materially and adversely affected.

Cohesion operates in an intensely competitive environment

   Cohesion competes with many domestic and foreign medical device,
pharmaceutical and biopharmaceutical companies and organizations across each of
its product categories and areas in which it is conducting research and
development activities. In the hemostatic and biosealant areas, we believe in
the United States that we will face strong competition from existing
methodologies for controlling bleeding and sealing wounds resulting from
surgery, such as hemostatic powders and sponges, collagen-based hemostats and
traditional sutures and staples marketed by companies such as Johnson & Johnson,
United States Surgical Corporation, American Home Products Corporation and
Haemacure Corporation. In addition, a fibrin sealant product is currently being
marketed by Baxter Healthcare Corporation. Cohesion faces competition from more
recent products and technologies, such as those developed by Focal, Inc. and
Fusion Medical Technologies, Inc. Outside of the United States, other
competitive products currently being marketed include fibrin sealants and
another class of sealants, cyanoacrylates, which sold in Europe and the Pacific
Rim countries by Immuno AG, Centeon L.L.C. and Cryolife. In the United States,
there are several fibrin sealants under development including those by the
American Red Cross, Convatec, a subsidiary of the Bristol-Myers Squibb Company,
Haemacure Corporation and V.I. Technologies, Inc. (Vitex). In addition to
conventional fibrin sealants, there are a number of other products in late-stage
development using either collagen or polymer technologies, made by Focal and
Fusion, as well as cyanoacrylates. In the orthopedics area,


                                       15
<PAGE>   16

NeuColl's Collagraft bone graft products face competition from synthetic bone
graft substitutes from Interpore International, Inc., Osteotech, Inc and GenSci
Regeneration Laboratories, Inc. Additionally, several companies and institutions
are engaged in the development of collagen-based materials, techniques,
procedures and products for use in medical applications Cohesion anticipates
addressing with its current and proposed products and research programs.

   Many of these companies and organizations have or will have substantially
greater financial, technological, research and development, regulatory and
clinical, marketing and sales and personnel resources than Cohesion. They may
also have greater experience in developing products, conducting clinical trials,
obtaining regulatory approvals, and manufacturing and marketing such products.
They may also develop alternative technologies and products that are more
effective, easier to use or more economical than those which have been or are
being developed by Cohesion or that render our technology and products obsolete
and non-competitive. Recently developed technologies or procedures are, or may
in the future be, the basis of competitive products. There can be no assurance
that our current competitors or other parties will not succeed in developing
alternative technologies and products that are more effective, easier to use or
more economical than those which have been or are being developed by Cohesion or
that would render our technology and products obsolete and uncompetitive. In
such an event, Cohesion's business, financial condition and results of
operations would be materially and adversely affected. Competitors may also
obtain approval or clearance by the FDA or foreign regulatory approval
organizations, achieve product commercialization or obtain patent protection
earlier than Cohesion. Additionally, there can be no assurance that any
marketing or other strategic partners that Cohesion may engage will not pursue
parallel development of technologies or products relating to or competitive with
our planned product portfolio. Also, to the extent Cohesion commences
manufacturing activities, we will also face competition with respect to
manufacturing efficiency and marketing capabilities, areas in which we currently
have limited experience. Failure to successfully address the foregoing factors
and circumstances could have a material adverse impact on Cohesion, its
financial condition and results of operations.

The market may not accept our products

   CoStasis Surgical Hemostat is a device designed to control diffuse capillary
and small vein bleeding, and CoSeal Surgical Sealant is a device designed to
seal arterial and venous grafts. There can be no assurance that either of these
products will gain commercial acceptance among physicians, patients and health
care payors, even if necessary international and U.S. marketing approvals are
obtained. We believe that recommendations and endorsements by physicians will be
essential for market acceptance of its surgical products, and there can be no
assurance that any such recommendations or endorsements will be obtained. We
believe that surgeons will not use our products unless they determine, based on
clinical data and other factors, that the products are an effective means of
controlling bleeding and sealing anastomoses and sites of incision, and that the
clinical benefits to the patient and cost savings achieved through use of these
systems outweigh their cost. Acceptance among physicians may also depend upon
our ability to train surgeons and other potential users of our products in the
application of sprayable surgical products, which they typically have not used,
and the willingness of such users to learn these new techniques. Additional
factors in achieving market acceptance may include our ability to address
competition from U.S. and international medical device, pharmaceutical and
biopharmaceutical companies, to develop a marketing and sales force, to form
strategic partnerships and to manufacture price- and cost-effective products.
Failure of our products to achieve significant market acceptance will have a
material adverse effect on our business, financial condition and results of
operations.

We have limited marketing and sales capabilities

   Cohesion currently has limited experience in marketing and selling its
products under development and does not have a significant marketing and sales
staff. In order to achieve commercial success for any product approved by the
FDA, if any, we must either develop a marketing and sales force or enter


                                       16
<PAGE>   17

into arrangements with third parties to market and sell our products. If we
develop our own marketing and sales capabilities, we will be competing with
other companies that currently have experienced and well-funded marketing and
sales operations. To the extent that Cohesion enters into co-promotion or other
marketing and sales arrangements with other companies, any revenues we receive
will be dependent on the efforts of others, and there can be no assurance that
such efforts will be successful. Failure to develop a sales and marketing force
or enter into arrangements with other companies will reduce our ability to
generate revenues.

We depend on the sale of Boston Scientific stock to fund operations

   In connection with our spin-off from Collagen, Collagen transferred to
Cohesion, effective January 1, 1998, all of its equity interest in Boston
Scientific. Cohesion has implemented a "protect" strategy based on purchases of
put options and sales of call options in combination, commonly known as an
"equity collar," covering the substantial majority of its Boston Scientific
holdings. While the strategy is designed to minimize downside risk of loss
should the stock price decline below approximately $31.00 and allow for limited
upside participation should the stock price rise above approximately $49.00,
there can be no assurance that we will be able to sell any of the remaining
unhedged shares of Boston Scientific common stock at attractive prices if, when
and as needed. The market price of Boston Scientific common stock is highly
volatile and, as a medical device manufacturer, we believe that Boston
Scientific is subject to a number of the same factors affecting its operations
as Cohesion, as well as additional factors not applicable to Cohesion.


                                       17
<PAGE>   18

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   Cohesion is exposed to financial market risks, including changes to interest
rates and equity security prices. To mitigate these risks, Cohesion utilizes
derivative financial instruments. Cohesion does not utilize derivative financial
instruments for speculative or trading purposes.

INTEREST RATE RISK

   The primary objective of Cohesion's debt investment portfolio is to preserve
principal. Cohesion invests in debt instruments that meet high credit quality
standards and limits the amount of credit exposure to any one issue, issuer, or
type of instrument. Cohesion also limits the maturity of debt investments to 400
days or less. As of December 31, 1999, Cohesion held approximately $14.9 million
of interest rate sensitive investments in debt securities, respectively. A
hypothetical 1% increase in interest rates would result in a decrease in the
fair value of investments in debt securities of less than $20,000 as of December
31, 1999. This estimate is based on sensitivity analyses performed on Cohesion's
financial positions at December 31, 1999. Actual results may differ materially.

EQUITY SECURITY PRICE RISK

   Cohesion is exposed to equity security price risks on investments in Boston
Scientific common stock and equity instruments of other biotechnology or
biomedical device companies. To hedge against fluctuations in the market value
of the Boston Scientific common stock, Cohesion entered into costless collar
instruments that expire quarterly through May 2001 and will require settlement
in cash. At December 31, 1999, 450,000 shares held by Cohesion were hedged using
these collars. The costless collar instruments are collateralized by shares of
Boston Scientific common stock held by Cohesion. Certain investments that are
restricted are carried at cost until the restrictions have lapsed.

<TABLE>
<CAPTION>
                                                 FAIR VALUE AT
                    EQUITY INVESTMENTS         DECEMBER 31, 1999
                    --------------------------------------------
                                                  (IN THOUSANDS)
<S>                                                      <C>
                    Boston Scientific                    $15,875
                    Equity collar                          4,386
                    Innovasive                             6,620
                    Pharming                               7,800
                                                         -------
                        Total portfolio                  $34,681
                                                         =======
</TABLE>


                                       18
<PAGE>   19

                           PART II. OTHER INFORMATION

                           COHESION TECHNOLOGIES, INC.

Item 6.  Exhibits and Reports on Form 8-K

          A. Exhibits

             Exhibit 10.1*   License and distributorship agreement between
                             Cohesion Technologies, Inc. and United States
                             Surgical, a division of Tyco Healthcare Group LP
                             dated November 22, 1999

             Exhibit 27.1    Financial Data Schedule

         B.  Reports on Form 8-K

             None

         * Cohesion Technologies, Inc. has requested confidential treatment for
         certain portions of this exhibit.


                                       19
<PAGE>   20

                                   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.

                                         COHESION TECHNOLOGIES, INC.



Dated: February 14, 2000                 s/   Sharon Kokubun
                                         -------------------------------
                                         Sharon Kokubun
                                         Vice President, Financial Operations
                                         (Principal Accounting Officer)


                                       20
<PAGE>   21

                           COHESION TECHNOLOGIES, INC.

     FORM 10-Q QUARTERLY REPORT FOR THE THREE MONTHS ENDED DECEMBER 31, 1999


                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
                                                                               Sequentially
  Exhibit                                                                        Numbered
  Number                                  Exhibit                                  Page
-------------------------------------------------------------------------------------------
<S>         <C>
   10.1*    License and distributorship agreement between Cohesion Technologies,
            Inc. and United States Surgical, a division of Tyco Healthcare Group
            LP dated November 22, 1999

   27.1     Financial Data Schedule (EDGAR version only)
</TABLE>









* Cohesion Technologies, Inc. has requested confidential treatment for certain
portions of this exhibit

                                       21