SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C.  20549

                              FORM 10-K

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

               For the fiscal year ended June 30, 1997

                                  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 0-23048

                        LINCOLN SNACKS COMPANY
       (Exact name of registrant as specified in its charter)
Delaware                                                            47-0758569
(State of incorporation)                   (I.R.S. Employer Identification No.)

4 High Ridge Park, Stamford  Connecticut                                 06905
(Address of principal executive offices)                             (Zip Code)

     Registrant's telephone number, including area code:  (203) 329-4545

Securities registered pursuant to Section 12(b) of the Act:
                                                      Name of each exchange on
      Title of each class                             which registered  
      -------------------                             ------------------------

             None                                          Not applicable

Securities registered pursuant to Section 12(g) of the Act

                 Common Stock, $.01 par value per share
                                (Title of Class)

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 amendments to
this Form 10-K.  [X]

The aggregate market value of voting stock held by non-affiliates of the
registrant on September 8, 1997, was approximately $3,025,419.  On such date,
the closing price of registrant's common stock was $1.50 per share.  Solely
for the purposes of this calculation, shares beneficially owned by directors,
executive officers and stockholders of the registrant that beneficially own
more than 10% of the registrant's voting stock have been excluded, except
shares with respect to which such directors, officers and 10% beneficial
owners disclaim beneficial ownership.  Such exclusion should not be deemed a
determination or admission by the registrant that such individuals are, in
fact, affiliates of the registrant.

The number of shares of the registrant's Common Stock, $.01 par value,
outstanding on September 8, 1997 was 6,331,790.

               DOCUMENTS INCORPORATED BY REFERENCE:      NONE


This Annual Report on Form 10-K contains, in addition to historical
information, certain forward-looking statements regarding future financial
condition and results of operations.  The words "expect," "estimate,"
"anticipate," "predict," "believe," and similar expressions are intended to
identify forward-looking statements.  Such statements involve certain risks
and uncertainties.  Should one or more of these risks or uncertainties
materialize, actual outcomes may vary materially from those indicated.


                                 PART I

Item 1.  Business

(a)      General Development of Business

         Lincoln Snacks Company ("Lincoln Snacks" or the "Company") is one of
         the leading manufacturers and marketers in the United States and
         Canada of caramelized pre-popped popcorn.  The primary product line
         includes glazed popcorn/nut mixes and sweet glazed popcorn sold under
         the brand names Poppycock (Registered Trademark), Fiddle Faddle 
         (Registered Trademark) and Screaming Yellow Zonkers (Registered 
         Trademark).  In addition, the Company processes, markets and
         distributes nuts.

         The Company was formed in August 1992 by Noel Group, Inc. ("Noel"), a
         publicly held company conducting its principal operations through
         small and medium-sized operating companies in which it holds
         controlling and other significant equity interests, and a management
         team of former executives of Nestle Foods Corporation.  On August 31,
         1992, the Company acquired the business and certain assets of Lincoln
         Snacks Company, a division of Sandoz Nutrition Corporation, an
         indirect subsidiary of the Swiss-based drug, pharmaceutical and
         hospital care company, Sandoz Ltd.  In March 1993, Carousel Nut
         Company, a newly formed wholly owned subsidiary of the Company
         ("Carousel"), acquired the business and certain assets of Carousel
         Nut Products, Inc., a producer and marketer of roasted, dry roasted,
         coated, raw and mixed nuts. In December 1993, Carousel was merged
         with and into the Company, and the operations of Carousel were
         integrated with the Company's plant in Lincoln, Nebraska in the first
         calendar quarter of 1994.

         The Company markets its Poppycock and nut products directly through
         independent brokers to grocery stores, supermarkets, convenience
         stores, drug stores, mass merchandise outlets, warehouse clubs,
         vending channels, military commissaries and other military food
         outlets, and other retailers.  On July 17, 1995, Planters Company, a
         unit of Nabisco, Inc. ("Planters"), began exclusively distributing
         the Company's Fiddle Faddle and Screaming Yellow Zonkers products,
         pursuant to a Distribution Agreement dated June 6, 1995 (the
         Distribution Agreement"), for an initial term which was originally
         scheduled to expire on June 30, 1997 unless renewed for additional
         one year periods.  The Distribution Agreement required Planters to
         purchase an annual minimum number of equivalent cases of Fiddle
         Faddle and Screaming Yellow Zonkers during the initial term.

(b)      Recent Developments

         On February 28, 1997, Lincoln Snacks and Planters entered into an
         amendment to the Distribution Agreement (the "Amendment") which was
         further modified on May 9, 1997 ("Letter Agreement") pursuant to
         which the exclusive distribution arrangement with respect to the
         Company's Fiddle Faddle product was extended for an additional period
         of six months expiring December 31, 1997 at which time the
         distribution arrangement will terminate.  Effective May 1, 1997,
         Planters ceased, and Lincoln Snacks resumed, marketing and
         distributing the Company's Screaming Yellow Zonkers product.

         The Amendment and Letter Agreement requires Planters to purchase a
         specified number of manufactured cases and for Planters to compensate
         the Company for the remaining contract minimums for the twelve month
         period ended June 30, 1997.  The Amendment requires new minimums for
         the six month period ended December 31, 1997 (six month minimums).
         Planters purchased 79% of the original June 30, 1997 contract
         minimums and compensated the Company for the remaining 21%.
         Planters has agreed to compensate the Company in the event that
         Planters fails to purchase the six month minimums by December 31,
         1997.  The Amendment also requires Planters to compensate the
         Company in the event that certain sales levels are not achieved
         during the calendar year ending December 31, 1997.

         In addition, the Amendment eliminates Planters right to terminate
         the contract in the event of a change of control, Planters right of
         first refusal on Poppycock granted in the Distribution Agreement, and
         allows Lincoln Snacks to enter into co-pack arrangements relating to
         ready-to-eat popcorn.  Although the Amendment contains provisions
         designed to effect a smooth transfer of the distribution business
         back to the Company, there can be no assurance as to the long term
         effects of the transition.

         Net sales to Planters for the year ended June 30, 1997 were equal to
         the minimum number of equivalent cases required to be purchased
         during the fiscal year as part of the Amendment.  Sales to Planters
         represented 47% of net sales for the year ended June 30, 1997.

         The foregoing description of the Amendment and Letter Agreement does
         not purport to be complete.  Reference is made to the Amendment and
         the Letter Agreement copies of which are being filed herewith or
         have previously been filed with the Securities and Exchange
         Commission.

         On July 11, 1997 the Company entered into a Trademark License
         Agreement with Nabisco, Inc. pursuant to which Nabisco, Inc. granted
         the Company the right to use the Planters' trademarks in connection
         with the sale and marketing of the Company's Fiddle Faddle product in
         the United States for a period of five years commencing on
         January 1, 1998.

(c)      Financial Information about Industry Segments

         The Company is engaged principally in one line of business: the
         manufacturing, marketing and distribution of pre-popped caramel
         popcorn.

(d)      Narrative Description of Business

         Products

         The Company manufactures and markets three nationally-recognized
         branded products.  Poppycock is a premium priced mixture of nuts and
         popcorn in a deluxe buttery glaze.  Fiddle Faddle is a more
         moderately priced brand of popcorn and peanut clusters with a candied
         glaze; a fat free version of Fiddle Faddle consists of popcorn with a
         caramel glaze.  Screaming Yellow Zonkers is produced by coating
         popcorn clusters with a sweet buttery glaze.  In addition the Company
         processes, markets and distributes nuts.

         Marketing, Sales and Distribution

         Lincoln Snacks' brands are broadly distributed through grocery
         stores, supermarkets, convenience stores, drug stores, mass
         merchandise outlets, warehouse clubs, vending channels, military
         commissaries and other military food outlets, and other retailers.
         Selling responsibilities for Poppycock and the nut products in the
         U.S. are currently handled by four regional business managers located
         strategically across the U.S.  These regional business managers
         manage approximately 80 brokers across the U.S. in all classes of
         trade.  These brokers receive a commission on net sales plus
         incentive payments.  Certain exports and large volume customers are
         handled directly by Lincoln Snacks' personnel.  Pursuant to the
         Amendment, Planters is continuing to exclusively distribute the
         Company's Fiddle Faddle product in the United States until
         December 31, 1997 and Lincoln Snacks resumed the sales and
         distribution of its Screaming Yellow Zonkers product as
         of May 1, 1997. 

         Seasonality

         Sales of Lincoln Snacks' products are seasonal, peaking during the
         third and fourth calendar quarters.  During the fiscal year ended
         June 30, 1997, Planters accounted for 47% of Lincoln Snacks' sales.

         Competition

         Lincoln Snacks' primary products participate in the pre-popped
         caramel popcorn segment of the snack food market.  Poppycock
         competes with other premium quality snack products, while Fiddle
         Faddle and Screaming Yellow Zonkers compete directly with Crunch N'
         Munch (American Home Products Corp., Food Division), Cracker Jack
         (Borden, Inc.) and a number of other regional and local brands.  The
         Company's products also compete indirectly with traditional
         confections and other snack food products.

         Raw Materials and Manufacturing

         Substantially all of the raw materials used in Lincoln Snacks'
         production process are commodity items, including corn syrup, butter,
         margarine, brown and granulated sugar, popcorn, various nuts and
         oils.  These commodities are purchased directly from various
         suppliers.

         The manufacturing facility located in Lincoln, Nebraska includes,
         among other things, continuous process equipment for enrobing popcorn
         and nuts, as well as four distinct high speed filling and packing
         lines for canisters, jars, single serving packs and bag-in-box
         packages.  The manufacturing and packaging equipment is sufficiently
         flexible to allow for the manufacture of other similar product lines
         or packaging formats.  The facility is being operated at an overall
         rate varying from approximately 40% to 75% of capacity depending on
         the season.  Lincoln Snacks' management believes that the facility is
         generally in good repair and does not anticipate capital expenditures
         other than normal maintenance and selected equipment modernization
         programs.

         Trademarks

         Poppycock, Fiddle Faddle and Screaming Yellow Zonkers are registered
         trademarks of Lincoln Snacks.  The Company believes all its
         trademarks enjoy a strong market reputation denoting high product
         quality.

         In addition, pursuant to the Trademark License Agreement, Nabisco
         granted the Company the right, commencing January 1, 1998, to use
         the Planters' trademarks in connection with the sale and marketing of
         the Company's Fiddle Faddle product in the United States for a period
         of five years. 

         Governmental Regulation

         The production, distribution and sale of the Company's products are
         subject to the Federal Food, Drug and Cosmetic Act; the Occupational
         Safety and Health Act; the Lanham Act; various federal environmental
         statutes; and various other federal, state and local statutes
         regulating the production, packaging, sale, safety, advertising,
         ingredients and labeling of such products, including recently adopted
         nutritional labeling requirements with which the Company is
         complying.  Compliance with the above described governmental
         entities and regulations have not had and are not anticipated to have
         a material adverse effect on the Company's capital expenditures,
         earnings or competitive position.

         Employees

         As of June 30, 1997 Lincoln Snacks had 73 full-time employees and no
         part-time employees.  Employment at the Lincoln plant varies
         according to weekly and seasonal production needs, and averaged
         approximately 85 employees during fiscal 1997.  None of Lincoln
         Snacks' work force is unionized.  Lincoln Snacks' management believes
         that Lincoln Snacks' relationship with its employees is good.

(e)      Financial Information about Foreign and Domestic Operations and
         Export Sales

         Foreign operations accounted for less than 10% the Company's sales,
         assets and net income in each of the Company's last three fiscal
         years. 

Item 2.  Properties.

         The Company's principal executive offices are located at 4 High Ridge
         Park, Stamford, Connecticut 06905.  The initial term of the lease on
         this space expires on September 30, 1999.

         Lincoln Snacks manufactures and packages all of its products at its
         owned Lincoln, Nebraska manufacturing facility.  The Lincoln plant,
         constructed in 1968, is a modern 74,000 square foot one-story
         building on a 10.75 acre site in a light industrial area in the city
         of Lincoln.  Approximately 67,000 square feet of the facility is
         dedicated to production with the balance utilized for
         administration.  In October 1996,the Company sold land adjacent to
         its manufacturing facility in Lincoln, Nebraska.  At the same time,
         the Company entered into a ten year lease agreement for 50,000 square
         feet of a new warehouse which has been constructed on the land.  This
         facility accommodates all of Lincoln Snacks' current warehousing
         needs.  The Company's lease on this facility expires in July 2006,
         and there is a five year renewal option beyond 2006.

         The Company believes its properties are sufficient for the current
         and anticipated needs of its business.

Item 3.  Legal Proceedings.

         The Company is not involved in any material pending legal
         proceedings.

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.

         A.   Market Information.

         The shares of Common Stock of the Company are traded on the NASDAQ
         Stock Market (Small Cap) under the symbol "SNAX".  The range of high
         and low reported sales prices for the Common Stock as reported by
         NASDAQ for each full quarterly period within the two most recent
         fiscal years were as follows:


<TABLE>
<CAPTION>
                                               Fiscal Year        Fiscal Year
                                                     Ended              Ended
                                             June 30, 1996      June 30, 1997
         ---------------------------------------------------------------------

                                             High      Low      High      Low
<S>                                         <C>      <C>       <C>      <C>

         First Fiscal Quarter               3 1/4    2 1/4     1 1/2    1 1/8

         Second Fiscal Quarter              2 7/8    1 3/4     1 3/4    1

         Third Fiscal Quarter               1 7/8    1 1/4     1 7/8    1

         Fourth Fiscal Quarter              2 1/8    1 1/4     1 9/16   7/8

</TABLE>

         The public market for Common Stock is limited, and the foregoing
         quotations should not be taken as necessarily reflective of prices
         which might be obtained in actual market transactions or in
         transactions involving substantial numbers of shares.

         B.   Holders.

         On September 8, 1997, as reported by the Company's transfer agent,
         shares of Common Stock were held by 38 persons, based on the number
         of record holders, including several holders who are nominees for
         an undetermined number of beneficial owners.

         C.   Dividends.

         The Company has not declared or paid a cash dividend since its
         inception, and its present policy is to retain any earnings for use
         in its business.  Payment of dividends is dependent upon the earnings
         and financial condition of the Company and other factors which its
         Board of Directors may deem appropriate.  The Company expects to use
         any future earnings in its operations and consequently does not intend
         to pay dividends on its Common Stock in the foreseeable future.  In
         addition, the Company is currently prohibited from declaring or paying
         any cash dividends on its capital stock by the terms of its bank loan
         agreement, as amended.

<PAGE>
Item 6.  Selected Financial Data

<TABLE>
<CAPTION>
                              (In thousands, except per share data)

                               12 Months          6 Months        12 Months       12 Months        12 Months        12 Months
                                   Ended             Ended            Ended           Ended            Ended            Ended
                                 Dec. 31,          June 30,         June 30,        June 30,         June 30,         June 30,
                                    1993              1994             1994            1995             1996             1997
         --------------------------------------------------------------------------------------------------------------------
<S>                            <C>                 <C>              <C>           <C>              <C>              <C>          
         Statement of
         Operations Data:
         Net sales               $28,368           $10,038          $29,497         $27,136          $23,846(F2)      $23,102(F2)
         Gross profit             10,683             2,846           10,320          10,916            6,621(F2)        7,576(F2)
         Income (loss) from
           operations               (678)           (5,273)          (5,003)         (1,082)(F1)         897            1,879
         Net income (loss)
           prior to dividends
           on preferred stock     (1,337)           (5,660)          (5,810)         (1,602)(F1)         511            1,443
         Net income (loss)
           per common share       ($0.34)          ($0.92)          ($1.41)          ($.25)(F1)         $.08             $.23
         Weighted average
           number of shares
           outstanding             3,978             6,123            4,113           6,340            6,335            6,331

<CAPTION>
                                 Dec. 31,                           June 30,        June 30,         June 30,         June 30,
                                    1993                               1994            1995             1996             1997
         --------------------------------------------------------------------------------------------------------------------
<S>                              <C>               <C>             <C>             <C>              <C>              <C>          
         Balance Sheet Data
         Working capital         $(2,371)                          $    327        $   (691)         $  (237)         $ 2,042
           (deficit)
         Total assets             19,492                             16,318          13,850           13,979           13,290
         Total long term debt      3,200                              1,909           1,109              309               --
         Stockholders' equity     (2,299)                             9,354           7,985            8,506            9,949
           (deficit)

<FN>

         (F1)  Amount includes a non-recurring charge of $726,000 (or $.11
              per share) relating to the Distribution Agreement with Planters.

         (F2)  The financial impact of the Distribution Agreement versus
              historical results is reductions in revenue and gross profit
              which are offset by reduced selling, marketing and distribution
              costs.  Reference is made to Management's Discussion and
              Analysis of Financial Condition and Results of Operations.
</FN>
</TABLE>
<PAGE>

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

         Introduction

         The Company's net sales are subject to significant seasonal
         variation.  Consequently, results from operations will fluctuate
         due to these trends.  The Company's business is seasonal due to
         customer buying patterns of Poppycock during the traditional holiday
         season.  As a result, third and fourth calendar quarter sales account
         for a significant portion of the Company's annual sales.

         On July 17, 1995, Planters began exclusively distributing the
         Company's Fiddle Faddle and Screaming Yellow Zonkers products
         pursuant to the Distribution Agreement for an initial term which was
         originally scheduled to expire on June 30, 1997 unless renewed for
         additional one year periods.  The Distribution Agreement required
         Planters to purchase an annual minimum number of equivalent cases of
         Fiddle Faddle and Screaming Yellow Zonkers during the initial term. 

         On February 28, 1997, Lincoln Snacks and Planters entered into the
         Amendment, pursuant to which the exclusive distribution arrangement
         with respect to the Company's Fiddle Faddle product was extended for
         an additional period of six months expiring December 31, 1997 at
         which time the distribution arrangement will terminate.  Effective
         May 1, 1997, Planters ceased, and Lincoln Snacks resumed, marketing
         and distributing the Company's Screaming Yellow Zonkers product. 

         The Amendment and Letter Agreement require Planters to purchase a
         specified number of manufactured cases and for Planters to
         compensate the Company for the remaining contract minimums for the
         twelve month period ended June 30, 1997.  The Amendment requires new
         minimums for the six month period ended December 31, 1997 (six month
         minimums).  Planters purchased 79% of the original June 30, 1997
         contract minimums and compensated the Company for the remaining 21%. 
         Planters has agreed to compensate the Company in the event that
         Planters fails to purchase the six month minimums by December 31,
         1997.  The Amendment also requires Planters to compensate the Company
         in the event that certain sales levels are not achieved during the
         calendar year ending December 31, 1997. 

         In addition, the Amendment eliminates Planters right to terminate the
         contract in the event of a change of control, Planters right of first
         refusal on Poppycock granted in the Distribution Agreement, and
         allows Lincoln Snacks to enter into co-pack arrangements relating to
         ready-to-eat popcorn.  Although the Amendment contains provisions
         designed to effect a smooth transfer of the distribution business
         back  to the Company, there can be no assurance as to the long term
         effects of the transition. 


         Twelve months ended June 30, 1997 versus June 30, 1996

         Net sales decreased 3% or $.7 million to $23.1 million for the
         twelve months ended June 30, 1997 versus $23.8 million in the
         corresponding period of 1996.  Sales to Planters and of the Company's
         other branded product increased for the twelve months period ended
         June 30, 1997 versus the same period in 1996.  Such increases were
         offset by declines in the Company's Nut Division ("Nut Division")
         sales.  Sales to Planters represented 47% and 43% of net sales for
         the twelve months ended June 30, 1997 and June 30, 1996,
         respectively. 

         Gross profit increased 14% or $1 million to $7.6 million for the
         twelve months ended June 30, 1997 versus $6.6 million in the
         corresponding period of 1996.  The gross profit increase is the
         result of increased sales to Planters and of the Company's other
         branded product and increased manufacturing efficiencies.  These
         increases were partially offset by a decrease in Nut Division gross
         profits resulting from declines in sales. 

         Selling, general and administrative expenses remained equal to a year
         ago of $5.7 million for the twelve months ended June 30, 1997.

         The increase in gross profit and the decrease in interest expense,
         resulted in an increase in net income of $.9 million to $1.4 million
         for the twelve months ended June 30, 1997 versus $.5 million in the
         corresponding period in 1996. 


         Twelve months ended June 30, 1996 versus June 30, 1995

         Net sales decreased 12% or $3.3 million to $23.9 million for the
         twelve months ended June 30, 1996 versus $27.1 million in the
         corresponding period of 1995.  Combined case sales of Fiddle Faddle
         and Screaming Yellow Zonkers related to the Distribution Agreement
         were 38% higher than the corresponding period in 1995 while revenue
         dollars declined $2.0 million primarily due to the lower selling
         prices resulting from the Distribution Agreement.  Lincoln Snacks'
         sales, excluding sales relating to the Distribution Agreement,
         decreased 8% or $1.3 million versus the same period in 1995 primarily
         due to a decline in export sales attributable to changing market
         conditions in the Far East and a decrease in liquidation sales. 

         Gross profit decreased $4.3 million to $6.6 million for the twelve
         months ended June 30, 1996 versus $10.9 million in the corresponding
         period of 1995.  Gross profit primarily decreased as a result of
         lower selling prices under the Distribution Agreement.

         Selling, general and administrative expenses decreased $5.6 million
         to $5.7 million in the twelve months ended June 30, 1996 versus $11.3
         million the same period in 1995.  These expenses decreased during
         this period primarily due to cost reductions resulting from the
         Distribution Agreement. 

         The decline in gross profits, more than offset by significantly lower
         selling, general and administrative expenses coupled with a decrease
         in non-recurring charges of $.7 million, resulted in an increase in
         net income of $2.1 million to $.5 million for the twelve months ended
         June 30, 1996 versus a $1.6 million net loss in the corresponding
         period in 1995.


         Twelve months ended June 30, 1995 versus June 30, 1994

         Net sales decreased 8% or $2.4 million to $27.1 million for the
         twelve months ended June 30, 1995 versus $29.5 million in the
         corresponding period of 1994.  Net sales of the Nut Division decreased
         by $1.8 million which is primarily due to the loss of one large Nut
         Division customer (acquired by another company which is not a
         customer of the Nut Division) as well as declines in sales with other
         customers associated with increased competitive pressures.

         Gross profit increased 5.8% or $.6 million to $10.9 million for the
         twelve months ended June 30, 1995 from $10.3 million in the
         corresponding period of 1994.  Gross profits improved as a result
         of reduced factory costs, lower raw material costs, and formula
         refinement.

         Selling, general and administrative expenses decreased 26% or $4.1
         million to $11.3 million in the twelve months ended June 30, 1995
         versus $15.3 million in the same period in 1994.  These expenses
         decreased during this period primarily due to lower freight costs,
         reduced trade and consumer promotional spending, and reduced
         administrative expenses.

         A non-recurring charge of $.7 million is related to the Company's
         Distribution Agreement with Planters for Fiddle Faddle and Screaming
         Yellow Zonkers.  The charge is primarily comprised of a $.5 million
         write-off of the covenant not to compete, a $.1 million severance
         expense relating to a reduction in headcount, and a $.1 million
         write-off of packaging relating to discontinued items.

         The improvement in gross profit and lower selling, general and
         administrative expenses contributed to a net loss decrease of $4.2
         million to $1.6 million for the twelve months ended June 30, 1995
         versus $5.8 million in the corresponding period in 1994.  The net
         loss, excluding the non-recurring charge, is $.9 million for the
         twelve months ended June 30, 1995 versus $5.8 million in the
         corresponding period in 1994.

         Liquidity and Capital Resources

         As of June 30, 1997, the Company had working capital of $2 million
         compared with a working capital deficit of $.2 million at June 30,
         1996, an increase of $2.2 million.  The increase in working capital
         is primarily attributable to a $3.1 million increase in net cash
         provided by operations which was partially offset by term loan
         repayments of $1.1 million. 

         Management continues to focus on increasing product distribution and
         continues to review all operating costs with the objective of
         increasing profitability and ensuring future liquidity.  However,
         there can be no assurance that any of these objectives will be
         achieved in future periods.  Although the Amendment contains
         provisions designed to effect a smooth transfer of the distribution
         business back to the Company, there can be no assurance as to the
         long term effects of the transition. 

         The Company's short-term liquidity is affected by seasonal increases
         in inventory and accounts receivable levels, payment terms in excess
         of 60 days granted in some situations during certain months of the
         year, and seasonality of sales.  Inventory and accounts receivable
         levels increase substantially during the latter part of the third
         calendar quarter and during the remainder of the calendar year.

         The following chart represents the net funds provided by or used in
         operating, financing and investment activities for each period as
         indicated.
<TABLE>
<CAPTION>
                                                             Twelve Months Ended
         ------------------------------------------------------------------------------------
                                                                 (in thousands)
                                                            June 30, 1997      June 30, 1996
         ------------------------------------------------------------------------------------
<S>                                                              <C>                <C>         
         Cash provided by operating activities                     $3,141            $ 1,273
         Cash provided by (used in) investing activities               72               (119)
         Cash used in financing activities                         (1,665)            (1,174)

</TABLE>

         Cash provided by operating activities increased to $3.2 million
         during the twelve months ended June 30, 1997 compared to $1.3 million
         in 1996.  The increase in cash provided by operating activities is
         primarily due to the Company's net profit of $1.4 million and an
         increase in cash receipts due to the timing of sales.  

         Net cash provided by investing activities were $.1 million during the
         twelve months ended June 30, 1997 compared to use of cash of $.1
         million for the twelve months ended June 30, 1996.  Net cash used by
         investing activities as of June 30, 1997 of $.4 million represents
         proceeds from the sale of land and is offset by $.3 million of
         capital expenditures.  Net cash used by investing activities as of
         June 30, 1996 of $.1 million represents capital expenditures. 

         Cash used for financing activities for the twelve months ended
         June 30, 1997 was attributable to term loan repayments of $1.1
         million and revolver repayments of $.6 million.  The proceeds of $.4
         million from the sale of land were used to pay down the term loan and
         revolver.  Cash used for financing activities for the twelve months
         ended June 30, 1996 was attributable to term loan repayments of $.8
         million which were financed by revolver repayments of $.4 million. 

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

         Not Applicable

Item 8.  Financial Statements and Supplementary Data

         The financial information required by Item 8 is included
         elsewhere in this report.  See Part IV, Item 14.

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

         None.

                                     PART III

Item 10. Directors and Executive Officers of the Registrant

<TABLE>
<CAPTION>
         The directors and executive officers of the Company are as follows:

         Name                 Age     Position
         ------------------   ---     ------------------------------------------
<S>                           <C>     <C>
         Karen Brenner         41     Chairman and
                                      Chief Executive Officer; Director(F1)(F3)
         C. Larry Davis        56     Director(F2)(F4)
         Alexander P. Lynch    45     Director(F1)(F3)
         James G. Niven        51     Director(F2)(F4)
         Kristine A. Crabs     34     Vice President - Chief Financial Officer,
                                      Secretary and Treasurer
         R. Scott Kirk         45     President and Chief Operating Officer

<FN>
         (F1)  Member of the Executive Committee.
         (F2)  Member of the Audit Committee.
         (F3)  Member of the Compensation Committee.
         (F4)  Member of the Long Term Equity Incentive Committee.
</FN>
</TABLE>

         No family relationship exists among any of the executive officers
         and directors of the Company.

         Directors hold office until the next annual meeting of shareholders
         of the Company and until their successors have been elected and
         qualified or until their earlier resignation or removal.  Officers
         serve at the discretion of the Board of Directors.

         The following sets forth the principal occupations of each of the
         Company's executive officers and directors during the previous five
         years, as well as the names of any other public or affiliated
         companies or registered investment companies of which they are
         directors.

         Karen Brenner has served as Chairman and Chief Executive Officer
         since June, 1994.  Ms. Brenner has also served as a director of
         Lincoln Snacks since its inception and has served as a director of
         Noel Group, Inc., a company which prior to its adoption of a Plan of
         Complete Liquidation and Distribution in March 1997, conducted its
         principal operations through small and medium-sized operating
         companies (including Lincoln Snacks) in which it holds controlling or
         other significant equity interests, from October 1989 until November
         1991, and as a Vice President of Noel from April 1989 until November
         1991, when she became a Managing Director.  Prior to joining Noel,
         Ms. Brenner was a principal in a management and financial consulting
         business, specializing in managing turnaround situations for venture
         capital and leveraged buyout companies.  In February 1996,
         Ms. Brenner was elected Vice Chairman and a director of Carlyle
         Industries, Inc. (formerly known as Belding Heminway Company, Inc.)
         ("Carlyle").  In May, 1996 she was elected Chairman of the Board and
         in October, 1996 she was elected President and Chief Executive
         Officer.  Carlyle packages and distributes an extensive variety of
         buttons for home sewing and crafts to mass merchandisers, specialty
         stores and independent retailers throughout the United States. 
         Ms. Brenner is a director of On Assignment, Inc., a leading
         nationwide provider of science professionals on temporary
         assignments to laboratories in the biotechnology, environmental,
         chemical, pharmaceutical, food and beverage and petrochemical
         industries, and a director of Motorcar Parts and Accessories, Inc.,
         a leading re-manufacturer and distributor of replacement alternators
         and starters for both import and domestic cars and light trucks.
         Ms. Brenner is currently a member of the Board of Trustees of Prep
         for Prep, a charitable organization dedicated to providing
         preparatory education to disadvantaged children, and a trustee of the
         City Parks Foundation of New York.

         C. Larry Davis has served as a director of Lincoln Snacks since its
         inception.  He is Chairman of the Board, Chief Executive Officer and
         a principal owner of Farmhouse Foods Company.  Mr. Davis has a broad
         food and beverage industry background with over 25 years experience
         at Nestle S.A. (1973-1992) and PepsiCo, Inc. (1967-1973) in both
         domestic and international business operations.  During the period
         from 1984 through 1991, Mr. Davis served as Group Vice President and
         President of the $800 million Nestle Specialty Products Company where
         he was primarily involved in the successful turnaround of
         under-performing businesses, the creation of new business growth
         divisions, and acquisitions and divestitures.  Mr. Davis is also a
         member of the Board of Directors of Cultor Food Science, an
         international manufacturer of unique food and beverage ingredients. 

         Alexander P. Lynch has served as a director of Lincoln Snacks since
         November 1993.  Mr. Lynch has been a partner of The Beacon Group, a
         financial advisory firm, since May 1997.  From January 1995 to April
         1997 he served as Co-President and Co-Chief Executive Officer of The
         Bridgeford Group ("Bridgeford"), a financial advisory firm.  From
         April 1991 to December 1994 he served as a Senior Managing Director
         of Bridgeford.  From 1985 until April 1991, Mr. Lynch was a Managing
         Director of Lehman Brothers, a division of Shearson Lehman Brothers
         Inc.  Mr. Lynch is also a director of Illinois Central Corporation, a
         railroad holding company, and a director of Patina Oil & Gas
         Corporation, an independent oil and gas company engaged in
         exploration and development.

         James G. Niven has served as a director of Lincoln Snacks since
         October 1992.  He is currently a Senior Vice President of Sotheby's,
         and, since 1982, has been a general partner of Pioneer Associates, a
         venture capital investment company.  He is also a director of The
         Lynton Group, Inc., a company engaged in aircraft charter and
         maintenance, Noel Group, Inc., Tatham Offshore, Inc., an independent
         energy company engaged in the development, exploration and production
         of offshore oil and gas reserves, HealthPlan Services Corporation, a
         leading managed healthcare service company, CBT Bancshares, Inc., a
         multi-financial holding company, and an advisory director of Houston
         National Bank, a commercial bank.  He is a member of the Board of
         Managers of Memorial Sloan-Kettering Cancer Center, and a trustee of
         the Museum of Modern Art and the National Center for Learning
         Disabilities, Inc.

         R. Scott Kirk has served as President and Chief Operating Officer
         since August, 1997 and had served as Executive Vice President and
         Chief Operating Officer since May, 1995.  Mr. Kirk had served as
         Vice President-General Manager of Lincoln Snacks since September,
         1992. From 1990 to 1992 Mr. Kirk served as Vice President-Finance and
         Chief Financial Officer of Nestle Dairy Systems, a leader in frozen
         confection novelties.  From 1987 to 1990 he was Business Controller
         and from 1985 to 1987 he was General Credit Manager for Nestle Food
         Corporation, a major manufacturer and marketer in the food industry.
         From 1982 to 1985 he served as Director-Corporate Credit with
         Continental Grain Company, a grain trading merchant.  From 1979 to
         1982 Mr. Kirk served as Assistant Manager of General Credit and from
         1974 to 1979 was Senior Internal Auditor for Amstar Corporation
         (Domino Sugar). 

         Kristine A. Crabs joined Lincoln Snacks in January 1993 as Vice
         President of Finance and Administration, and in July, 1996 was
         promoted to Vice President and Chief Financial Officer.  Prior to
         joining Lincoln Snacks, Ms. Crabs was a Senior Audit Manager with
         KPMG Peat Marwick, specializing in the food and consumer products
         industries. 

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
         requires the Company's officers and directors, and persons who
         own more than ten percent of a registered class of the Company's
         equity securities, to file reports of ownership and changes in
         ownership with the Securities and Exchange Commission and to furnish
         the Company with copies of such reports.

         Based solely on its review of the copies of such forms furnished to
         the Company by such reporting persons during the fiscal year ended
         June 30, 1997, or written representations from such reporting persons
         that no Forms 5 were required for those persons with respect to such
         period, the Company believes that during the fiscal year ended June
         30, 1997 all filing requirements applicable to its officers,
         directors, and greater than ten-percent beneficial owners were
         complied with. 


         Item 11. Executive Compensation

         Summary Compensation Table

         The following table sets forth certain information regarding
         compensation awarded or paid to, or earned by, during each of the
         last three fiscal years, the person who served as the Chairman and
         Chief Executive Officer during the fiscal year ended June 30, 1997,
         and the Company's executive officers (other than the Chairman and
         Chief Executive Officer) who were serving as executive officers at
         June 30, 1997 and whose total salary and bonus during the fiscal
         year ended June 30, 1997 exceeded $100,000 (the "Named Executive
         Officers"). 

<PAGE>
<TABLE>
<CAPTION>
                                                                                             Long Term Compensation
                                                                               ------------------------------------------------

                                              Annual Compensation                    Awards                     Payouts
                                       --------------------------------       -------------------------------------------------

(a)                      (b)           (c)            (d)        (e)           (f)             (g)         (h)         (i)

                                                                 Other
                                                                Annual     Restricted                                All Other
Name and                                                       Compen-          Stock                       LTIP       Compen-
Principal                                            Bonus      sation        Award(s)       Options/    Payouts        sation
Position               Year (F1)     Salary ($)         ($)     ($)(F2)            ($)         SARs(#)        ($)           ($)
-------------------------------------------------------------------------------------------------------------------------------

<S>                    <C>           <C>             <C>        <C>        <C>              <C>          <C>         <C>       
Karen Brenner             1997          50,000          --          --             --       300,000(F3)       --     175,000(F4)
 Chairman and             1996              --          --          --             --         5,000(F5)       --     175,000(F4)
 Chief Executive          1995              --          --          --             --         2,500(F5)       --     175,000(F4)
 Officer

R. Scott Kirk             1997         168,000      45,000          --             --        58,750(F6)       --       3,080(F7)
 President and            1996         160,000      30,000          --             --            --           --       3,200(F7)
 Chief Operating          1995         143,000       4,000          --             --         7,000(F8)       --       2,860(F7)
 Officer

Kristine A. Crabs         1997         115,940      30,000          --             --        17,500(F6)       --       2,319(F9)
 Vice President and       1996         105,400      20,000          --             --            --           --       2,108(F9)
 Chief Financial          1995          95,400       4,000          --             --         5,000(F8)       --       1,908(F9)
 Officer       

<FN>

         (F1) Reference to 1997, 1996 and 1995 herein means each fiscal
              year ending June 30, respectively. 
         (F2) The dollar value of perquisites and other personal benefits
              for each of the Named Executive Officers was less than
              established reporting thresholds. 
         (F3) Awarded on July 18, 1996 and April 29, 1997 pursuant to the
              Company's 1993 Stock Option Plan. 
         (F4) Consists of $175,000 paid by Noel.  Reference is made to
              "Employment Contracts and Termination of Employment and
              Change in Control Arrangements" for a description of Ms.
              Brenner's employment arrangement with Noel. 
         (F5) Awarded to Ms. Brenner pursuant to the Company's Non-Employee
              Directors' Stock Option Plan. 
         (F6) Awarded on July 18, 1996 pursuant to the Company's 1993 Stock
              Option Plan. 
         (F7) Consists of amounts contributed by the Company to Mr. Kirk's
              account under the Company's 401(k) plan.
         (F8) Awarded on December 15, 1994 pursuant to the Company's 1993
              Stock Option Plan. 
         (F9) Consists of amounts contributed by the Company to Ms. Crabs'
              account under the Company's 401(k) plan.

</FN>
</TABLE>
<PAGE>
         Option/SAR Grants During the Fiscal Year Ended June 30, 1997

         The following table sets forth, information regarding individual
         grants of stock options made during the fiscal year ended June 30,
         1997 to each of the Named Executive Officers, and their potential
         realizable values.

<TABLE>
<CAPTION>
                                                                                    Potential Realizable Value at
                                                                                          Assumed Annual Rates of
                                                                                     Stock Price Appreciation for
                        Individual Grants                                                             Option Term
         --------------------------------------------------------------------------   ---------------------------
             (a)               (b)            (c)             (d)            (e)             (f)           (g)
                           Number of       % of Total
                              Shares    Options/SAR's
                          Underlying       Granted to     Exercise or
                       Options/SAR's     Employees in      Base Price    Expiration
             Name            Granted      Fiscal Year           ($/Sh)         Date         5% ($)        10% ($)
         --------------------------------------------------------------------------------------------------------
<S>                       <C>                  <C>             <C>         <C>        <C>            <C>           
         Karen Brenner     150,000(F1)          36.9%           $1.50       7/18/06    $ 51,403(F3)   $215,126(F3)
                           150,000(F2)          36.9%           $1.00       4/29/07    $126,403(F3)   $290,126(F3)

         R. Scott Kirk      58,750(F1)          14.4%           $1.50       7/18/06    $ 20,133(F3)   $ 84,258(F3)

         Kristine A. Crabs  17,500(F1)           4.3%           $1.50       7/18/06    $  5,997(F3)   $ 25,098(F3)

<FN>
             (F1) Granted on July 18, 1996 pursuant to the Company's 1993
                  Stock Option Plan.  The options vest over a 36 month period. 
                  Options become exercisable on each full month following the
                  date of grant. 
             (F2) Granted on April 29, 1997 pursuant to the Company's 1993
                  Stock Option Plan.  The options vest over a 36 month period. 
                  Options become exercisable on each full month following the
                  date of grant. 
             (F3) The assumed rates of annual appreciation are calculated from
                  the date of grant through the assumed expiration date. 
                  Actual gains, if any, on stock option exercises and common
                  stock holdings are dependent on the future performance of
                  the Common Stock and overall stock market conditions. 
                  There can be no assurance that the value reflected in the
                  table will be achieved. 
</FN>
</TABLE>
<PAGE>

         Aggregate Option/SAR Exercises During the Fiscal Year and Fiscal Year
         End Option/SAR Values

         The following table provides information related to options exercised
         by the Named Executive Officers during the fiscal year ended June 30,
         1997 and the number and value of unexercised stock options held by
         the Named Executive Officers at that date.  The Company does not have
         any outstanding stock appreciation rights.

<TABLE>
<CAPTION>
                                                                                             Value of Unexercised
                                                           Number of Unexercised                     In-the-Money
                                                                 options/SARs at                     Options/SARs
                                                              Fiscal Year-End (#)        at Fiscal Year-End(F1)($)
         ------------------------------------------------------------------------      ---------------------------

           (a)              (b)               (c)                  (d)                           (e)
                      Shares Acquired          Value
         Name          on Exercise (#)   Realized ($)   Exercisable   Unexercisable   Exercisable   Unexercisable
         --------------------------------------------------------------------------------------------------------
<S>                             <C>             <C>       <C>             <C>            <C>            <C>            
         Karen Brenner            --              --        280,901         237,499        $9,115         $37,760

         R. Scott Kirk            --              --         30,311          35,439             0               0

         Kristine A. Crabs        --              --         10,778          11,722             0               0

<FN>
             (F1) Based on a closing price of Common Stock on June 30, 1997
                  of $1.3125 per share.
</FN>
</TABLE>

         Compensation of Directors

         Directors of the Company are not paid annual retainers but are
         reimbursed for their out-of-pocket expenses incurred in connection
         with their service as directors, including travel expenses.  Pursuant
         to the Company's Non-Employee Directors' Stock Option Plan, as
         amended, each non-employee director, following initial election to
         the Board, automatically receives an option to purchase 20,000 shares
         of Common Stock at an exercise price equal to the fair market value
         per share on the date of grant, and each non-employee director
         automatically receives an option to purchase 5,000 shares of Common
         Stock immediately following such director's re-election at an
         exercise price equal to the fair market value of a share of Common
         Stock on the date of grant.

         Employment Contracts and Termination of Employment and Change in
         Control Arrangements

         Pursuant to a letter agreement dated March 1, 1996 by and between
         Ms. Brenner and Noel, as amended by letter dated March 21, 1996,
         Ms. Brenner is employed in an executive capacity by Noel for a period
         of two years.  The term may be extended by mutual agreement. 
         Pursuant to the agreement, Ms. Brenner has agreed to perform such
         executive services in connection with Noel and entities in which Noel
         holds interests, including Lincoln Snacks, as shall reasonably be
         assigned to Ms. Brenner by the Board of Directors or Chief Executive
         Officer of Noel.  $175,000 of the salary paid to Ms. Brenner pursuant
         to this agreement is deemed to be paid for services rendered to
         Lincoln Snacks. 

         In addition, as evidenced by a letter agreement dated March 22, 1995
         in consideration for Ms. Brenner agreeing to serve as Chairman and
         Chief Executive Officer, effective June 20, 1994, Noel granted
         Ms. Brenner an option to purchase 200,000 shares of the Company's
         Common Stock held by Noel at a price of $1.50 per share.  Options to
         purchase 166,667 of such shares are currently exercisable.  The
         balance is exercisable on the earlier to occur of (x) the eighth
         anniversary of the date of grant, provided that Ms. Brenner shall
         have continued to serve as Chief Executive Officer continuously
         through such date, and (y) from and after the date the stock price
         reaches $5.00. The vested options will terminate on the fourth
         anniversary of the date Ms. Brenner ceases to so serve as Chief
         Executive Officer or the tenth anniversary of the date of grant
         whichever is earlier.  The shares purchasable by Ms. Brenner
         pursuant to the forgoing options have been registered under the
         Securities Act of 1933, as amended, permitting the resale of such
         shares to the public following exercise of such options by
         Ms. Brenner.

         Compensation Committee Interlocks and Insider Participation

         In February 1993, the Board of Directors formed a Compensation
         Committee, the current members of which are Alexander P. Lynch and
         Karen Brenner.  Except for Ms. Brenner, none of the members of the
         Compensation Committee during the last completed fiscal year was an
         officer or employee of the Company.  In November 1993, the Board of
         Directors formed a Long Term Equity Incentive Committee to administer
         the 1993 Stock Option Plan and the Non-Employee Directors' Stock
         Option Plan, the current members of which are James G. Niven and C.
         Larry Davis.  None of the members of the Long Term Equity Incentive
         Committee during the fiscal year ended June 30, 1997 was an officer
         or employee of the Company.  During the fiscal year ended June 30,
         1997, no executive officer of the Company served as a director or a
         member of the Compensation Committee (or other board committee
         performing equivalent functions) of another entity one of whose
         executive officers served on the Compensation Committee, the Long
         Term Equity Incentive Committee or the Board of Directors of the
         Company.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth certain information as of September
         8, 1997 as to the beneficial ownership of the Common Stock and the
         common stock, par value $.10 per share, of Noel ("Noel Common Stock")
         by (i) each person known by the Company to own beneficially more than
         5% of the issued and outstanding shares of Common Stock, (ii) each
         director, (iii) each of the Named Executive Officers, and (iv) all
         directors and executive officers as a group:
<TABLE>
<CAPTION>
                                             Noel Common Stock                        Lincoln Snacks Common Stock
         -------------------------------------------------------------           --------------------------------
         Name and Address of           Number of           Percentage            Number of             Percentage
         Beneficial Owner               Shares(F1)            Owned(F2)           Shares(F3)              Owned(F4)
         --------------------------------------------------------------------------------------------------------
<S>                                    <C>                 <C>                  <C>                   <C>          
         5% Stockholders

           Noel Group, Inc.                   --                   --            3,769,755                   59.5%
           667 Madison Avenue
           New York, New York 10021

           Lawrence, Kamin, Saunders          --                   --              489,000(F5)                7.7%
           & Uhlenhop on behalf of
           Gofen & Glossberg, Inc.
           208 S. LaSalle St., Suite 1750
           Chicago, IL 60604

         Directors

           Karen Brenner                       0                   --              290,000(F6)                4.5%

           C. Larry Davis                      0                   --               78,000(F7)                1.2%

           Alexander P. Lynch                  0                    *               32,500(F8)                  *

           James G. Niven                 22,223                    *               32,500(F9)                  *

         Named Executive Officers

           Karen Brenner                       0                   --              290,000(F6)                4.5%

           R. Scott Kirk                       0                   --               98,561(F10)               1.6%

           Kristine A. Crabs                   0                   --               33,528(F11)                 *

           All executive officers and     22,223                    *              565,089(F12)               6.5%
           directors as a group
           (includes 6 persons)

             *          Less than 1%
<FN>
            (F1) Unless otherwise indicated, each of the parties listed has 
                 sole voting and investment power over the shares of Noel 
                 Common Stock owned. 
            (F2) Based on 20,611,028 shares of Noel Common Stock issued and
                 outstanding on September 5, 1997. 
            (F3) Unless otherwise indicated, each of the parties listed has 
                 sole voting and investment power over the shares of Common 
                 Stock owned.  The number of shares of Common Stock indicated 
                 includes in each case the number of shares of Common Stock 
                 issuable upon exercise of outstanding stock options, to the 
                 extent that such options are currently exercisable.  For 
                 purposes of this table, options are deemed to be currently 
                 exercisable to the extent that they are exercisable prior 
                 to November 30, 1997. 
            (F4) Based on 6,331,790 shares of Common Stock issued and 
                 outstanding on September 8, 1997.  In addition, treated 
                 as outstanding for the purpose of computing the percentage 
                 ownership of each director or named executive officer and 
                 of all executive officers and directors as a group are 
                 shares of Common Stock issuable to such individual or group 
                 upon exercise of options to purchase Common Stock to the 
                 extent currently exercisable.
            (F5) The information set forth in the table and in this footnote
                 regarding shares beneficially owned by Gofen & Glossberg, Inc.
                 ("Gofen & Glossberg") is based on a Schedule 13G dated 
                 February 12, 1996 filed with the Securities and Exchange 
                 Commission by Gofen & Glossberg.
            (F6) Consists of 9,100 shares held by Ms. Brenner directly, 114,233
                 shares issuable upon exercise of options granted by the 
                 Company, but does not include an additional 204,167 shares 
                 issuable pursuant to options granted by the Company which are 
                 not currently exercisable.  In addition, consists of 166,667 
                 shares issuable upon exercise of the Noel Option, but does not
                 include an additional 33,333 shares issuable pursuant to the 
                 Noel Option which are not currently exercisable.
            (F7) Consists of 25,500 shares held by Mr. Davis directly, 20,000
                 shares held by Mr. Davis' wife as trustee for Mrs. Davis'
                 children, with respect to which shares Mr. Davis disclaims
                 beneficial ownership, and 32,500 shares issuable upon exercise
                 of options granted by the Company.
            (F8) Consists of 32,500 shares issuable upon exercise of options to
                 purchase Common Stock granted by the Company.
            (F9) Consists of 9,100 shares held by Mr. Niven directly and 23,400
                 shares issuable upon exercise of options to purchase Common
                 Stock granted by the Company.
           (F10) Consists of 68,250 shares held by Mr. Kirk directly and 30,311
                 issuable upon exercise of options to purchase Common Stock
                 granted by the Company which are currently exercisable.  The
                 number indicated does not include an additional 35,439 shares
                 issuable pursuant to options granted by the Company which are
                 not currently exercisable.
           (F11) Consists of 22,750 shares held by Ms. Crabs directly and 
                 10,778 shares issuable upon exercise of options to purchase 
                 Common Stock granted by the Company which are currently 
                 exercisable.  The number indicated does not include an 
                 additional 11,722 shares issuable pursuant to options to 
                 purchase Common Stock granted by the Company which are not 
                 currently exercisable.
           (F12) Includes 410,389 shares issuable upon exercise of options
                 granted by the Company and Noel and certain shares with 
                 respect to which beneficial ownership is disclaimed. 
</FN>
</TABLE>
<PAGE>

Item 13. Certain Relationships and Related Transactions

         None.


PART IV

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

         (a)  (1)  Financial Statements

              The financial statements listed in the accompanying Index to
              Financial Statements and Financial Statement Schedules are filed
              as part of this annual report

              (2)  Exhibits. 

              Financial statement schedules are omitted because they are not
              applicable or the required information is shown in the financial
              statements or notes thereto. 

         (b)  Reports on Form 8-K.

              None                           


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.

                                                      LINCOLN SNACKS COMPANY
                                                      (Registrant)


                                                      By: /s/ Karen Brenner
                                                      Karen Brenner
                                                      Chairman of the Board and
                                                      Chief Executive Officer

                                                      Date:  September 15, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

/s/ Karen Brenner                                            September 15, 1997
Karen Brenner
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer); Director

/s/ Kristine A. Crabs                                        September 15, 1997
Kristine A. Crabs
Vice President-Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)

/s/ C. Larry Davis                                           September 15, 1997
C. Larry Davis
Director

/s/ Alexander P. Lynch                                       September 15, 1997
Alexander P. Lynch
Director

/s/ James G. Niven                                           September 15, 1997
James G. Niven
Director




                           LINCOLN SNACKS COMPANY

                           FINANCIAL STATEMENTS
                           AS OF JUNE 30, 1997 AND 1996
                           TOGETHER WITH REPORT OF
                           INDEPENDENT PUBLIC ACCOUNTANTS


                            LINCOLN SNACKS COMPANY


                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Financial Statements:                                                  Page(s)
<S>                                                             <C>
     Report of Independent Public Accountants                             F-1
     Balance Sheets as of June 30, 1997 and 1996                   F-2 to F-3
     Statements of Operations for the Years Ended
        June 30, 1997, 1996 and 1995                                      F-4
     Statements of Changes in Stockholders' Equity
        for the Years Ended June 30, 1997, 1996 and 1995                  F-5
     Statements of Cash Flows for the Years Ended
        June 30, 1997, 1996 and 1995                               F-6 to F-7
     Notes to Financial Statements                                F-8 to F-17
</TABLE>
<PAGE>

                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Lincoln Snacks Company:


We have audited the accompanying balance sheets of Lincoln Snacks Company (a
Delaware corporation) as of June 30, 1997 and 1996, and the related statements
of operations, changes in stockholders' equity, and cash flows for the years
ended June 30, 1997, 1996 and 1995.  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 generally accepted auditing
standards.  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 financial position of Lincoln Snacks Company as of
June 30, 1997 and 1996, and the results of its operations and its cash flows
for the years ended June 30, 1997, 1996 and 1995 in conformity with generally
accepted accounting principles.


                        ARTHUR ANDERSEN LLP

Stamford, Connecticut,
August 12, 1997
<PAGE>
<TABLE>
<CAPTION>
                         LINCOLN SNACKS COMPANY
                             BALANCE SHEETS
                                ASSETS
                         JUNE 30, 1997 AND 1996

                                                                              June 30,           June 30,
                                                                                 1997               1996
--------------------------------------------------------------------------------------------------------
                                ASSETS
<S>                                                                       <C>                <C>         
CURRENT ASSETS:
 Cash                                                                     $ 1,606,357        $    58,538
 Accounts receivable, net of allowances for doubtful accounts
   and cash discounts of $237,778 and $173,524                              1,951,937          2,693,875
 Inventories                                                                1,680,253          2,083,528
 Prepaid and other current assets                                              29,023             90,336
--------------------------------------------------------------------------------------------------------
     Total current assets                                                   5,267,570          4,926,277
--------------------------------------------------------------------------------------------------------

PROPERTY, PLANT AND EQUIPMENT:
 Land                                                                         370,000            610,000
 Building and leasehold improvements                                        1,526,705          1,555,985
 Machinery and equipment                                                    4,800,284          5,210,177
 Construction in process                                                      122,319              8,161
--------------------------------------------------------------------------------------------------------
                                                                            6,819,308          7,384,323
 Less-accumulated depreciation                                             (2,263,689)        (1,975,357)
--------------------------------------------------------------------------------------------------------
                                                                            4,555,619          5,408,966
INTANGIBLE AND OTHER ASSETS, net of accumulated amortization of
 $667,111 and $780,337                                                      3,466,371          3,643,487
--------------------------------------------------------------------------------------------------------
     Total assets                                                         $13,289,560        $13,978,730
========================================================================================================

The accompanying notes to financial statements
  are an integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                         LINCOLN SNACKS COMPANY
                                             BALANCE SHEETS
                                 LIABILITIES AND STOCKHOLDERS' EQUITY
                                         JUNE 30, 1997 AND 1996

                                                                              June 30,           June 30,
                                                                                 1997               1996
--------------------------------------------------------------------------------------------------------
                                 LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                                       <C>                <C>         
CURRENT LIABILITIES:
 Accounts payable                                                         $ 1,357,170        $ 1,830,054
 Accrued expenses                                                           1,178,601          1,116,664
 Accrued trade promotions                                                     675,585            860,180
 Deferred gain-short term (Note 8)                                             13,434                 --
 Current portion of term loan                                                      --            800,004
 Borrowings under revolving line of credit                                         --            556,115
--------------------------------------------------------------------------------------------------------
     Total current liabilities                                              3,224,790          5,163,017
TERM LOAN PAYABLE                                                                  --            309,322
DEFERRED GAIN - LONG TERM (Note 8)                                            115,784                 --
--------------------------------------------------------------------------------------------------------
     Total liabilities                                                      3,340,574          5,472,339
--------------------------------------------------------------------------------------------------------
COMMITMENTS (Notes 7 and 9)
STOCKHOLDERS' EQUITY:
 Common stock, $0.01 par value, 20,000,000 shares authorized,
  6,450,090 outstanding at June 30, 1997 and 1996                              64,501             64,501
 Special stock, $0.01 par value, 300,000 shares authorized, none
  outstanding                                                                      --                 --
 Additional paid-in capital                                                18,010,637         18,010,637
 Accumulated deficit                                                       (8,100,126)        (9,542,721)
--------------------------------------------------------------------------------------------------------
                                                                            9,975,012          8,532,417
 Less - cost of common stock in treasury; 118,300 shares at June 30,
  1997 and 1996                                                               (26,026)           (26,026)
--------------------------------------------------------------------------------------------------------
     Total stockholders' equity                                             9,948,986          8,506,391
--------------------------------------------------------------------------------------------------------
     Total liabilities and stockholders' equity                           $13,289,560        $13,978,730
========================================================================================================

The accompanying notes to financial statements
  are an integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                         LINCOLN SNACKS COMPANY
                                        STATEMENTS OF OPERATIONS
                            FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995

                                                        Year Ended         Year Ended         Year Ended
                                                     June 30, 1997      June 30, 1996      June 30, 1995
--------------------------------------------------------------------------------------------------------
<S>                                                  <C>                <C>                <C>           
NET SALES                                              $23,101,704        $23,845,844        $27,136,404
COST OF SALES                                           15,525,387         17,224,348         16,220,495
--------------------------------------------------------------------------------------------------------
     Gross profit                                        7,576,317          6,621,496         10,915,909
SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                                5,697,404          5,724,777         11,271,544
WRITE DOWN OF FIXED ASSETS (Note 10)                       269,498                 --                 --
NON-RECURRING CHARGE (Note 13)                                  --                 --            726,019
--------------------------------------------------------------------------------------------------------
     Income (loss) from operations                       1,609,415            896,719         (1,081,654)
OTHER:
  Interest expense                                        (126,820)          (356,910)          (519,144)
  Other income (expense), net                                   --                 --             12,415
--------------------------------------------------------------------------------------------------------
    Income (loss) before provision for
     income taxes                                        1,482,595            539,809         (1,588,383)
PROVISION FOR INCOME TAXES                                  40,000             29,000             14,000
--------------------------------------------------------------------------------------------------------
     Net income (loss)                                 $ 1,442,595        $   510,809        $(1,602,383)
========================================================================================================
NET INCOME (LOSS) PER SHARE (Note 2)                   $       .23        $       .08        $      (.25)
========================================================================================================
Weighted average number of shares
  outstanding                                            6,331,790          6,334,757          6,340,890
========================================================================================================

The accompanying notes to financial statements
  are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                   LINCOLN SNACKS COMPANY
                                       STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                      FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995

                                                                      Loans
                                                   Additional    Receivable
                         Common       Special         Paid-in          From      Accumulated    Treasury
                          Stock         Stock         Capital  Stockholders         (Deficit)      Stock
--------------------------------------------------------------------------------------------------------
<S>                     <C>            <C>        <C>                <C>        <C>             <C>      
June 30, 1994           $64,501        $   --     $17,764,746        $   --     $ (8,451,147)   $(24,024)
 Net loss                    --            --              --            --       (1,602,383)         --
 Noel payment under
   tax agreement             --            --         233,000            --               --          --
--------------------------------------------------------------------------------------------------------
June 30, 1995            64,501            --      17,997,746            --      (10,053,530)    (24,024)
 Net income                  --            --              --            --          510,809          --
 Purchase of 9,100
   shares of treasury        --            --              --            --               --      (2,002)
 Noel payment under
   tax agreement             --            --          12,891            --               --          --
--------------------------------------------------------------------------------------------------------
June 30, 1996            64,501            --      18,010,637            --       (9,542,721)    (26,026)
 Net income                  --            --              --            --        1,442,595          --
--------------------------------------------------------------------------------------------------------
June 30, 1997           $64,501        $   --     $18,010,637        $   --     $ (8,100,126)   $(26,026)
========================================================================================================

The accompanying notes to financial statements
  are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                   LINCOLN SNACKS COMPANY
                                                  STATEMENTS OF CASH FLOWS
                                      FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995

                                                        Year Ended         Year Ended         Year Ended
                                                           June 30,           June 30,           June 30,
                                                              1997               1996               1995
--------------------------------------------------------------------------------------------------------
<S>                                                     <C>               <C>                <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss)                                      $1,442,595        $   510,809        $(1,602,383)
 Adjustments to reconcile net income (loss) to net
   cash provided by operating activities:
    Depreciation                                           640,738            636,943            569,565
    Amortization                                           177,116            221,700            627,842
    Write-off of covenant not-to-compete                        --                 --            466,667
    Write down of fixed assets                             269,498                 --             (5,415)
    Provision for doubtful accounts and
      cash discounts, net                                   64,254            (84,439)            33,711
 Changes in assets and liabilities:
    (Increase) decrease in accounts receivable             677,684         (1,087,214)            95,027
    Decrease in inventories                                403,275            279,953          1,157,390
    Decrease in prepaid and other current assets            61,313              8,692             58,582
    (Increase) in other assets                                  --             (6,017)           (33,452)
    Increase (decrease) in accounts payable               (472,885)         1,054,514           (434,188)
    (Decrease) in accrued trade promotions                (184,595)          (140,784)            (5,058)
    Increase (decrease) in accrued expenses                 61,938           (121,396)          (325,536)
--------------------------------------------------------------------------------------------------------
      Net cash provided by operating activities          3,140,931          1,272,761            602,752
--------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Capital expenditures                                     (314,529)          (119,844)          (474,307)
 Proceeds on sale of land                                  369,218                 --                 --
 Proceeds on sale of fixed assets                           17,640                 --                 --
--------------------------------------------------------------------------------------------------------
      Net cash provided by (used in)
        investing activities                                72,329           (119,844)          (474,307)
--------------------------------------------------------------------------------------------------------

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                   LINCOLN SNACKS COMPANY
                                                  STATEMENTS OF CASH FLOWS
                                      FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
                                                        (Continued)

                                                        Year Ended         Year Ended         Year Ended
                                                           June 30,           June 30,           June 30,
                                                              1997               1996               1995
--------------------------------------------------------------------------------------------------------
<S>                                                    <C>                 <C>                <C>        
CASH FLOWS FROM FINANCING ACTIVITIES:
 Borrowings (repayments) under revolver, net           $  (556,115)        $ (385,476)        $  466,010
 (Repayments) under term loan                           (1,109,326)          (800,004)          (800,006)
 Noel payment under tax agreement                               --             12,891            233,000
 Purchase of treasury stock                                     --             (2,002)                --
--------------------------------------------------------------------------------------------------------
    Net cash (used in) financing activities             (1,665,441)        (1,174,591)          (100,996)
--------------------------------------------------------------------------------------------------------
    Net increase (decrease) in cash                      1,547,819            (21,674)            27,449
CASH, beginning of period                                   58,538             80,212             52,763
--------------------------------------------------------------------------------------------------------
CASH, end of period                                    $ 1,606,357         $   58,538         $   80,212
========================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Interest paid                                         $   120,059         $  279,582         $  438,430
========================================================================================================
 Income taxes paid                                     $    21,388         $   22,140         $    6,129
========================================================================================================

The accompanying notes to financial statements
are an integral part of these statements. 
</TABLE>
<PAGE>
                            LINCOLN SNACKS COMPANY

                        NOTES TO FINANCIAL STATEMENTS


(1)   The Company:

      Lincoln Snacks Company ("Lincoln" or the "Company"), formerly Lincoln
      Foods Inc., is a Delaware corporation and is a majority-owned subsidiary
      of Noel Group, Inc. (the "Parent").  Lincoln is engaged in the
      manufacture and marketing of caramelized pre-popped popcorn and glazed
      popcorn/nut mixes primarily throughout the United States and Canada. 
      Sales of the Company's products are subject to seasonal trends with a
      significant portion of sales occurring in the last four months of the
      calendar year.  The Company was formed in August 1992.

      In January 1994, the Company sold 2,472,500 shares of common stock as
      of approximately $9,600,000 from the sale of this stock.  The Company's
      certificate of incorporation authorizes the issuance of special stock
      with such designations, rights and preferences as may be determined from
      time to time by the Board of Directors.

      On July 17, 1995, Planters Company, a unit of Nabisco, Inc.
      ("Planters"), began exclusively distributing the Company's Fiddle
      Faddle and Screaming Yellow Zonkers products (the "Products") pursuant
      to a distribution agreement dated June 6, 1995 (the "Distribution
      Agreement") for an initial term which was originally scheduled to expire
      on June 30, 1997 unless renewed for additional one year periods.  The
      Distribution Agreement required Planters to purchase an annual minimum
      number of equivalent cases of the Products during the initial term.

      On February 28, 1997, the Company and Planters entered into an amendment
      to the Distribution Agreement, which was further modified on May 9, 1997
      (the "Amendment"), pursuant to which the exclusive distribution
      arrangement with respect to the Company's Fiddle Faddle product was
      extended for an additional six month period expiring on December 31,
      1997, at which time the distribution arrangement will terminate. 
      Effective May 1, 1997, Planters ceased, and Lincoln resumed, marketing
      and distributing the Company's Screaming Yellow Zonkers product.  The
      Company does not expect to further extend the term of the Distribution
      Agreement beyond December 31, 1997.

      The Amendment required Planters to purchase a specified number of
      manufactured cases of the Products and for Planters to compensate the
      Company for the remaining contract minimums for the twelve month period
      ended June 30, 1997.  The Amendment requires new minimums for the six
      month period ended December 31, 1997 (six month minimums).  Planters
      purchased 79% of the original June 30, 1997 contract minimums and made a
      cash payment to the Company as compensation for the remaining 21%. 
      Planters has agreed to compensate the Company in the event that Planters
      fails to purchase the six month minimums by December 31, 1997.  The
      Amendment also requires Planters to compensate the Company in the event
      that certain sales levels are not achieved during the calendar year
      ending December 31, 1997.

      The Amendment, among other things, eliminates Planters' right to
      terminate the contract in the event of a change of control, Planters'
      right of first refusal on Poppycock granted in the original contract,
      and allows Lincoln to enter into co-pack arrangements relating to
      ready-to-eat popcorn.

      Although the Amendment contains provisions designed to effect a smooth
      transfer of the distribution business back to the Company, there can be
      no assurance as to the long term effects of the transition. 

      Net sales to Planters for the year ended June 30, 1996 were equal to
      the minimum number of cases required to be purchased during the fiscal
      year as part of the Distribution Agreement.  Sales to Planters
      represented 47% and 43% of net sales for the years ended June 30, 1997
      and 1996 and amounts due from Planters represented 69% and 85% of
      accounts receivable at June 30, 1997 and 1996, respectively.

      On July 11, 1997, the Company entered into a Trademark License Agreement
      with Nabisco, Inc. pursuant to which Nabisco, Inc. granted the Company
      the right to use the Planters trademarks in connection with the sale
      and marketing of the Company's Fiddle Faddle product in the United
      States for a period of five years commencing on January 1, 1998.

(2)   Summary of Significant Accounting Policies:

      Use of estimates --

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

      Revenue recognition --

      Revenue is recognized by the Company when products are shipped and
      title passes to the customer.

      Advertising and promotion --

      Advertising costs are expensed in the period in which the related
      advertisements occur.  The estimated cost of the total ultimate
      redemptions of various coupon programs are expensed immediately at the
      time a coupon program is distributed to the public.

      Inventories --

      Inventories, which include material, labor and manufacturing overhead,
      are stated at the lower of cost (first in, first out) or market
      (net realizable value).

      Property, plant and equipment --

      Property, plant and equipment is stated at cost and is depreciated on
      the straight-line method based upon the estimated useful lives of the
      assets.  The estimated useful lives of assets are as follows:

            Building and leasehold improvements              10-30 years
            Machinery and equipment                           3-10 years
            Furniture and fixtures                            7-10 years

      Expenditures for maintenance and repairs are charged against income as
      incurred.  Significant expenditures for betterments are capitalized. 
      Capital expenditures which are not able to be put into use immediately
      are included in construction in process.  As these programs are
      completed, they are transferred to depreciable assets.

      Intangible assets --

      Intangible assets are carried at cost, less accumulated amortization
      which is calculated on a straight-line basis over the estimated useful
      lives as follows:

            Excess of purchase price over net assets acquired     30 years
            Intellectual property and other                     1-20 years
            Covenant not to compete (see Note 14)	                 4 years

      Impairment of long-lived assets --

      The Company adopted the provisions of SFAS No. 121, "Accounting for the
      Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
      Of" in 1997.  This statement requires that long-lived assets and certain
      identifiable intangibles held and used by an entity be reviewed for
      impairment whenever events or changes in circumstances indicate that the
      carrying amount of an asset may not be recoverable.  In general, this
      statement requires recognition of an impairment loss when the sum of
      undiscounted expected future cash flows is less than the carrying amount
      of such assets.  The measurement for such impairment loss is then based
      on the fair value of the asset.  Adoption of this statement had no
      material effect on the financial statements.

      Net income (loss) per common share --

      Net income (loss) per common share is computed by dividing net income
      available for common stock by the weighted average number of common
      shares outstanding.  Weighted average common shares outstanding
      includes any common equivalent shares calculated for outstanding stock
      options and warrants under the treasury stock method.

      Reclassifications --

      Certain amounts have been reclassified in the prior year statements to
      conform with current year presentation.

(3)   Balance Sheet Components:

      The components of certain balance sheet accounts are as follows:
<TABLE>
<CAPTION>
                                                      1997               1996
      ------------------------------------------------------------------------
      Inventories --
<S>                                             <C>                <C>
        Raw and packaging materials             $1,293,280         $1,616,673
        Finished goods                             386,973            466,855
      ------------------------------------------------------------------------
                                                $1,680,253         $2,083,528
      =========================================================================

      Intangible and other assets --
        Excess of purchase price over 
        net assets acquired                     $3,977,631         $3,977,631
        Intellectual property and other            155,851            446,193
      ------------------------------------------------------------------------
                                                 4,133,482          4,423,824
        Less:  accumulated amortization           (667,111)          (780,337)
      ------------------------------------------------------------------------
        Intangible assets, net                  $3,466,371         $3,643,487
      ==================================================================================================
</TABLE>
<PAGE>

(4)   Income Taxes:

      Lincoln follows the accounting for income taxes required under Statement
      of Financial Accounting Standards No. 109, "Accounting for Income Taxes".

      Upon completion of the registration and sale of stock in January 1994
      the Company became less than 80% owned by its Parent and is no longer
      included in the United States Federal income tax return of its Parent. 

      The following represents a reconciliation of the federal statutory
      income tax rate to the effective income tax rate:
<TABLE>
<CAPTION>
                                                              1997               1996               1995
      --------------------------------------------------------------------------------------------------
<S>                                                    <C>                <C>                <C>          
      Statutory federal income (benefit) tax rate             34.0%              34.0%             (34.0%)
      State income and franchise taxes, net
        of federal benefit                                     1.1                3.6                0.6
      Net loss (benefited) not benefited                     (31.5)              14.6               30.1
      Depreciation and amortization                           (7.7)             (27.5)               3.3
      Write down of fixed assets                               6.2                 --                 --
      Accrued expenses                                        (4.0)             (13.4)              (0.3)
      Other temporary differences                              4.4               (8.4)               0.7
      Non-deductible meals and entertainment                    .2                0.7                0.2
      --------------------------------------------------------------------------------------------------
      Effective income tax rate                                2.7%               3.6%               0.6%
      ==================================================================================================

<CAPTION>
      The principal temporary items comprising the net unrecognized deferred
      income tax asset are as follows:
                                                           June 30,           June 30,           June 30,
                                                              1997               1996               1995
       -------------------------------------------------------------------------------------------------
<S>                                                   <C>                <C>                <C>          
      Net operating loss carryforward, net
        of amount utilized by Parent                   $ 2,428,000        $ 3,079,000        $ 2,259,000
      Depreciation and amortization                       (648,000)          (662,000)          (264,000)
      Accrued expenses not yet deductible                  165,000            476,000            545,000
      All other                                            169,000            192,000            194,000
      --------------------------------------------------------------------------------------------------
      Net deferred tax asset unrecognized                2,114,000          3,085,000          2,734,000
      Less:  valuation reserve                          (2,114,000)        (3,085,000)        (2,734,000)
      --------------------------------------------------------------------------------------------------
      Net deferred tax asset recognized	             $        --        $        --        $        --
      ==================================================================================================

</TABLE>
<PAGE>

      At June 30, 1997, the Company had a net operating loss carryforward
      ("NOL's") for income tax purposes, subject to Internal Revenue Service
      review, of approximately $6,100,000 which expire in 2007 through 2011 if
      not utilized.  The above NOL's include those NOL's generated subsequent
      to deconsolidating from its Parent and approximately $200,000 of
      unutilized NOL's generated by the Company that were included in the
      Parent's tax return prior to deconsolidation in fiscal 1996.  The
      Company has been reimbursed for the portion of the Company's fiscal 1994
      and 1995 NOL's utilized by the Parent prior to deconsolidating.  This
      reimbursement resulted in a payments of $233,000 and $12,891,
      respectively, to the Company, which were recorded by the Company as
      additional paid-in capital.

      Under the United States Internal Revenue Code, future utilization of
      NOL's may be limited when certain ownership changes occur.  As a result,
      future changes in ownership may limit the Company's ability to fully
      utilize its available NOL's.

(5)   Stock Options and Warrants:

      In November 1993, the Company adopted the 1993 Stock Option Plan and
      the Non-Employee Directors' Stock Option Plan.  A total of 550,000
      shares of common stock is reserved for issuance under the 1993 Stock
      Option Plan and 200,000 shares of common stock is reserved for
      issuance under the Non-Employee Directors' Stock Option Plan.  The
      Company has granted options on 500,750 shares and 106,800 shares,
      respectively, through June 30, 1997.  Under both Plans, the option
      exercise price equals the stock's market price on date of grant. 
      The 1993 Stock Option Plan options vest over periods ranging from
      12 to 36 months.  The Non-Employee Director's Stock Option Plan
      options vest immediately upon grant.  All options expire ten years
      from date of grant.  The Company accounts for these plans under APB
      Opinion No. 25, under which no compensation cost has been recognized.

      Under the Non-Employee Directors' Stock Option Plan, each individual
      subsequently elected to the Board of Directors who is not an employee of
      the Company will receive a grant of stock options covering 20,000 shares
      of common stock, with an exercise price equal to the fair market value
      of a share of common stock as of the date of grant.  In addition, each
      non-employee director of the Company will receive a stock option
      covering 5,000 shares of common stock immediately following each Annual
      Meeting of Stockholders of the Company during the ten-year term of the
      Non-Employee Directors' Stock Option Plan, with an exercise price equal
      to the fair market value of a share of common stock as of the date of
      grant.

      In connection with the offering of common stock in January 1994, the
      Company issued to the underwriters warrants to purchase 215,000 shares
      of common stock.  These warrants are exercisable for a period of five
      years beginning in January 1994 at an exercise price of $5.40 per
      share.

      Had compensation cost for these plans been determined consistent with
      Statement of Financial Accounting Standards No. 123 ("SFAS 123"), the
      Company's net income and earnings per share would have been reduced to
      the following pro forma amounts:

<TABLE>
<CAPTION>
                                                      1997               1996
      ------------------------------------------------------------------------
<S>                                            <C>                  <C>
      Net income:
       As reported                              $1,442,595           $510,809
       Pro forma                                 1,300,723            463,410
      Income per share:
       As reported                                    $.23               $.08
       Pro forma                                       .21                .07

</TABLE>

      Because the SFAS 123 method of accounting is not applicable to options
      granted prior to July 1, 1995, the resulting pro forma compensation cost
      may not be representative of that to be expected in future years.

      A summary of the status of the Company's two stock option plans at
      June 30, 1997, 1996 and 1995 and changes during the years then ended is
      presented in the table and narrative below:

<TABLE>
<CAPTION>
                                                       1997               1996               1995
      -------------------------------------------------------------  -----------------  ----------------
                                                           Wtd.Avg.           Wtd.Avg.           Wtd.Avg.
                                                 Shares   Ex.Price   Shares  Ex.Price   Shares  Ex.Price
      --------------------------------------------------------------------------------------------------
<S>                                            <C>          <C>    <C>         <C>    <C>         <C>   
      Outstanding at beginning of year          473,800      $4.35  499,600     $4.59  466,600     $4.91
      Granted                                   437,750       1.32   55,000      2.10   68,500      2.02
      Canceled                                  (75,000)      4.50       --        --       --        --
      Forfeited                                      --         --  (19,000)     3.53       --        --
      Expired                                   (14,000)      4.31  (61,800)     4.50  (35,500)     3.95
      --------------------------------------------------------------------------------------------------
      Outstanding at end of year                822,550       2.73  473,800      4.35  499,600     $4.59
      ==================================================================================================
      Exercisable at end of year                435,940             310,492            275,800
      ==================================================================================================
      Weighted average fair value of
        options granted                           $1.00               $1.58
</TABLE>

<TABLE>
<CAPTION>
      The following table summarizes information about stock options and
      warrants outstanding at June 30, 1997:

                             Options Outstanding                                   Options Exercisable
      ----------------------------------------------------------------        --------------------------
                           Number            Weighted                              Number
                      Outstanding             Average         Weighted        Exercisable       Weighted
      Range of                 at           Remaining          Average                 At        Average
      Exercise            June 30,        Contractual         Exercise            June 30,      Exercise
      Prices                 1997         Life (Years)           Price               1997          Price
      --------------------------------------------------------------------------------------------------
<S>                      <C>                   <C>              <C>              <C>              <C>    
      $1.00  - $1.50      437,750                9.38            $1.32            103,340          $1.46
      $1.75  - $1.875      68,000                7.66             1.81             58,800           1.80
      $2.375 - $2.70       40,000                8.08             2.54             40,000           2.54
      $4.50  - $5.40      276,800                6.55             5.20            233,800           5.16
      --------------------------------------------------------------------------------------------------
      $1.00  - $5.40      822,550                                                 435,940

</TABLE>

      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 1997 and 1996, respectively: 
      risk-free interest rates of 6.92 and 6.74 percent, no expected dividend
      yields, expected lives of ten years and expected volatility of 59%.

(6)   Credit Facility:

      In December 1993, the Company entered into a bank loan agreement, as
      amended, which provides for up to $6 million in revolver borrowings and
      a $1.9 million term loan.  The term loan was fully repaid during the
      year ended June 30, 1997, and there were no amounts outstanding under
      the revolving credit facility at June 30, 1997.  The credit facility is
      available through December 2, 1999.  At that time, any borrowing under
      the credit facility becomes due.

      The facilities require the maintenance of various financial and other
      covenants including, but not limited to, earnings before interest,
      taxes, depreciation and amortization ("EBITDA"), tangible net worth
      and debt coverage.  The financial covenants are to be met on a
      quarterly basis, and the minimum requirements vary by quarter.

      Borrowings under the revolver are limited to a percent of eligible
      receivables and inventory.  The revolving credit facility bears
      interest at a rate equal to the sum of the average monthly
      Eurodollar rate plus 2.0%.  In addition to this rate, the Company
      does have the option to pay interest on the revolving credit facility
      at the Alternate Base Rate, as defined, plus 0.5%.  At June 30, 1997 and
      1996, the interest rate was 8.696% and 8.94%, respectively.  Interest is
      payable monthly.

      The facility requires an annual monitoring fee of $12,000 and an unused
      facility fee of 0.5% on the unused portion of the revolver.  The
      facilities are collateralized by substantially all of the Company's
      assets.

(7)   Commitments:

      In the normal course of business, Lincoln enters into purchase
      commitments with certain of its raw material suppliers generally
      for periods up to one year.  Amounts to be purchased under these
      arrangements are not anticipated to exceed raw material requirements
      or the period to which the commitments apply.  The total remaining
      amount of inventory to be purchased under these commitments as of
      June 30, 1997 is approximately $2,277,000.  These purchase commitments
      expire primarily through December 31, 1997.

(8)   Sale of Land:

      In October 1996, the Company sold land adjacent to its manufacturing
      facility in Lincoln, Nebraska.  At the same time, the Company entered
      into a ten year lease agreement for 50,000 square feet of a new
      warehouse to be constructed on the land.  The proceeds from the sale,
      of $369,218, were used to pay down the Company's term loan.  The sale
      resulted in a net gain of $129,218 which has been deferred, and will be
      recognized as income over the ten year lease term.

(9)   Leases:

      At June 30, 1997, the Company's minimum future rental payments on a
      fiscal year basis under non-cancelable operating leases are as follows:

                      1998                      $   437,000
                      1999                          325,000
                      2000                          266,000
                      2001                          243,000
                      2002 and thereafter         1,445,000

      Rent expense for operating leases amounted to approximately $286,000,
      $283,000 and $338,000 for the years ended June 30, 1997, 1996 and 1995,
      respectively.

(10)  Write Down of Fixed Assets:

      During the year ended June 30, 1997, the Company recorded a write-down
      of $269,498 on certain fixed assets that are no longer used in the
      operations of the Company.

(11)  Related Party Transactions:

      During the years ended June 30, 1997, 1996 and 1995, the Company paid
      legal fees of approximately $72,000, $86,000 and $75,000, respectively,
      to a law firm of which one of its partners is a director of the Parent. 

      A director was paid export brokerage commissions of $9,000 and $42,000
      during the years ended June 30, 1996 and 1995, respectively, and $35,000
      during the year ended June 30, 1995 for consulting services.

      During the years ended June 30, 1996 and 1995, one of the Company's
      executives was paid by the Parent.  Lincoln did not receive any
      allocation of expenses from the Parent for this executive's services.

      During the year ended June 30, 1995, an investment banking firm rendered
      certain financial services to the Company.  A director of the Company is
      Co-President and Co-Chief Executive Officer of this investment banking
      firm.

(12)  Employee Benefit Plans:

      The Company sponsors a defined contribution savings plan (401(k)). 
      Participation in the plan is available to substantially all salaried and
      hourly employees.  Company contributions to the plan are based on a
      percentage (2%) of employee contributions.  During the years ended
      June 30, 1997, 1996 and 1995, Company contributions to the plan totaled
      $46,000, $51,000 and $48,000, respectively.

(13)  Non-recurring Charge Related to Distribution Agreement:

      On June 6, 1995, the Company entered into an exclusive distribution
      agreement with Planters for the sales and distribution rights for the
      Products, see Note 1.

      As a result of this agreement, the Company recorded a non-recurring
      pre-tax charge to operations of $726,019 for estimated costs associated
      with implementing the agreement for the year ended June 30, 1995.  The
      largest portion of this charge represents a $466,667 write-off of the
      unamortized balance of covenant not to compete, as the Company
      determined the net realizable value of the covenant to be
      insignificant.  In addition, the charge was also for estimated
      severance payments and inventory obsolescence costs associated with
      the agreement. 

(14)  Sales Data:

      Export sales --

      During the years ended June 30, 1997, 1996 and 1995, export sales were
      approximately $2,157,000, $2,241,000 and $3,086,000, respectively.

      Significant customer --

      For the years ended June 30, 1997 and 1996, Planters represented
      approximately 47% and 43%, respectively, of net sales. No one customer
      accounted for 10% or more of net sales during the year ended December
      31, 1995.

(15)  Valuation and Qualifying Accounts:
<TABLE>
<CAPTION>

                                        Balance at       Charged to                               Balance
                                         Beginning        Costs and                                at end
      Description                        of Period         Expenses         Deductions          of Period
      --------------------------------------------------------------------------------------------------
<S>                                     <C>               <C>              <C>                  <C>        
      Year ended June 30, 1995,
        allowances for doubtful
        accounts and cash discounts       $224,252         $439,050          $(405,339)          $257,963

      Year ended June 30, 1996,
        allowances for doubtful
        accounts and cash discounts       $257,963         $242,673          $(327,112)          $173,524

      Year ended June 30, 1997,
        allowances for doubtful
        accounts and cash discounts       $173,524         $210,633          $(146,379)          $237,778


</TABLE>

INDEX OF EXHIBITS

Exhibit Title                                                      Exhibit No.

(2)  Plan of acquisition, reorganization, arrangement,
     liquidation or succession; Not Applicable 

(3)  Articles of Incorporation and By-Laws

     (A)  Certificate of Incorporation, as amended and as                    *
          currently in effect (Incorporated by reference to
          Exhibit 3(A), filed by the Company with the Registration
          Statement on Form S-1 (33-71432))

     (B)  By-laws as currently in effect (Incorporated by reference          *
          to Exhibit 3(B) filed by the Company with the Registration
          Statement on Form S-1 (33-71432))

(4)  Instruments defining the rights of security holders, including
     indentures

     (A)  Excerpts from Certificate of Incorporation, as amended,            *
          (Incorporated by reference to Exhibit 4(A) filed by the
          Company with the Registration Statement on Form S-1
          (33-71432))

     (B)  Excerpts from By-Laws, as amended, (Incorporated by                *
          reference to Exhibit 4(B) filed by the Company with the
          Registration Statement on Form S-1 (33-71432))

(9)  Voting Trust Agreement; Not Applicable

(10) Material Contracts

     (A)  Trademark Licensing Agreement for the United States dated      10(A)
          July 11, 1997 between Lincoln Snacks Company and Nabisco
          Brands Company. 

     (B)  Letter Agreement dated May 9, 1997 between Lincoln Snacks      10(B)
          Company and Planters Company.  

     (C)  Letter dated January 22, 1997 between Lincoln Snacks Company       *
          and Planters Company relating to extension of period for
          notification of non-renewal (Incorporated by reference
          to Exhibit 10(a) filed by the Company with the Quarterly
          Report on Form 10-Q for the quarter ended December 31, 1996)

     (D)  Agreement for Sale and Purchase of Real Estate dated October       *
          10, 1996 between Lincoln Snacks Company and Donald W.
          Linscott (Incorporated by reference to Exhibit 10(b) filed
          by the Company with the Quarterly Report on Form 10-Q for
          the quarter ended December 31, 1996)

     (E)  Amendment to the Distribution Agreement dated February 28,         *
          1997 between Lincoln Snacks Company and Planters Company
          relating to extension of the Distribution Agreement until
          December 31, 1997 (Incorporated by reference to Exhibit 10(c)
          filed by the Company with the Quarterly Report on Form 10-Q
          for the quarter ended March 31, 1997)

(11) Statement of computation of per share earnings:  Not required
     because the relevant computations can be clearly determined from
     the material contained in the financial statements included herein

(12) Statement re computation of ratios; Not applicable

(13) Annual report to security holders, Form 10-Q or quarterly report
     to security holders; Not applicable

(16) Letter re change in certifying accountant; Not Applicable

(18) Letter re change in accounting principles; Not Applicable

(21) Subsidiaries of Registrant; Not Applicable

(22) Published report regarding matters submitted to vote of
     security holders; Not Applicable

(23) Consents of Experts and Counsel

     (A)  Consent of Arthur Andersen, LLP                                  23A

(24) Power of Attorney;  Not Applicable

(27) Financial Data Schedule                                                27

(99) Additional Exhibits; Not Applicable


          *  Incorporated by reference