<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                                Washington, DC

                                   Form 10-Q

(Mark One)

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

               For the quarterly period ended September 30, 2000
                                              ------------------

                                      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:  0-28748
                                               ---------

                          CLOSURE MEDICAL CORPORATION
      -------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

       Delaware                                 56-1959623
-----------------------                     -------------------
   (State or other                           (I.R.S. Employer
     jurisdiction                           Identification No.)
 of incorporation or
    organization)


   5250 Greens Dairy Road, Raleigh, North Carolina           27616
--------------------------------------------------------------------------------
      (Address of principal executive offices)             (Zip Code)

                                (919) 876-7800
                            -----------------------
             (Registrant's telephone number, including area code)


     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.
            X
     Yes _______  No _______

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

              Class                            Outstanding at November 7, 2000
              -----                            -------------------------------

Common Stock, par value $0.01 per share                  13,413,491
<PAGE>

                          CLOSURE MEDICAL CORPORATION

                                     INDEX


                                                            Page Number
                                                            -----------

PART I:  FINANCIAL INFORMATION

         Item 1.  Financial Statements

         Balance Sheets as of September 30, 2000 (unaudited)
          and December 31, 1999...............................   3

         Statements of Operations (unaudited) for the three
          months ended September 30, 2000 and 1999 and for the
          nine months ended September 30, 2000 and 1999.......   4

         Statements of Cash Flows (unaudited) for the nine
          months ended September 30, 2000 and 1999............   5

         Notes to Condensed Financial Statements (unaudited)..   6

         Item 2.  Management's Discussion and Analysis of
                  Financial Condition and Results of
                  Operations..................................   8

         Item 3.  Quantitative and Qualitative Disclosure
                  about Market Risk...........................  12


PART II: OTHER INFORMATION

         Item 6.  Exhibits and Reports on Form 8-K............  13


                                       2

<PAGE>

                        PART I - FINANCIAL INFORMATION


ITEM 1.   FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                          CLOSURE MEDICAL CORPORATION
                                BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                               SEPTEMBER 30,           DECEMBER 31,
                                                                                   2000                   1999
                                                                                   ----                   ----
                                                                               (UNAUDITED)
<S>                                                                    <C>                               <C>
ASSETS
Cash and cash equivalents                                                  $          180            $        508
Short-term investments                                                              7,919                   9,299
Restricted investments                                                              1,588                   1,515
Accounts receivable, net                                                            1,381                     732
Inventories                                                                           730                     591
Prepaid expenses                                                                      131                     326
                                                                           --------------            ------------
   Total current assets                                                            11,929                  12,971

Restricted investments                                                              1,294                   1,292
Furniture, fixtures and equipment, net                                              6,983                   7,351
Intangible assets, net                                                              1,234                     897
                                                                           --------------            ------------
   Total assets                                                            $       21,440            $     22,511
                                                                           ==============            ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable                                                           $        1,281            $      1,110
Accrued expenses                                                                    1,366                     794
Deferred revenue                                                                      227                     443
Capital lease obligations                                                             311                     279
Current portion of long-term debt                                                     600                     600
                                                                           --------------            ------------
   Total current liabilities                                                        3,785                   3,226
Deferred revenue                                                                      505                     505
Capital lease obligations less current portion                                        417                     655
Long-term debt less current portion                                                 1,036                   1,500
                                                                           --------------            ------------
   Total liabilities                                                                5,743                   5,886
                                                                           --------------            ------------
Commitments and Contingencies                                                           -                       -

Preferred Stock, $.01 par value.  Authorized 2,000 shares; none
   issued or outstanding                                                                -                       -
Common Stock, $.01 par value.  Authorized 35,000 shares;
   issued and outstanding 13,411 and 13,347 shares, respectively                      134                     133
Additional paid-in capital                                                         47,443                  46,940
Accumulated deficit                                                               (31,880)                (30,375)
Deferred compensation on stock options                                                  -                     (73)
                                                                           --------------            ------------
  Total stockholders' equity                                                       15,697                  16,625
                                                                           --------------            ------------
  Total liabilities and stockholders' equity                               $       21,440            $     22,511
                                                                           ==============            ============


                       The accompanying notes are an integral part of these condensed financial statements.
</TABLE>

                                       3
<PAGE>

                          CLOSURE MEDICAL CORPORATION
                           STATEMENTS OF OPERATIONS
                                  (Unaudited)
                     (In thousands, except per share data)


<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED                                NINE MONTHS ENDED
                                              SEPTEMBER 30,        SEPTEMBER 30,             SEPTEMBER 30,           SEPTEMBER 30,
                                                  2000                 1999                      2000                    1999
                                                  ----                 ----                      ----                    ----
<S>                                           <C>                  <C>                       <C>                      <C>
Product sales                                    $ 3,565              $ 2,732                   $ 9,302                 $10,826
Cost of products sold                                950                1,093                     2,746                   3,789
                                                 -------              -------                   -------                 -------
      Gross profit                                 2,615                1,639                     6,556                   7,037
                                                 -------              -------                   -------                 -------
Research, development and regulatory affairs
 expenses                                          1,439                1,633                     4,505                   5,083
General and administrative expenses                1,544                1,341                     3,925                   4,099
                                                 -------              -------                   -------                 -------
      Total operating expenses                     2,983                2,974                     8,430                   9,182
                                                 -------              -------                   -------                 -------
Income (loss) from operations                       (368)              (1,335)                   (1,874)                 (2,145)
Interest expense                                     (59)                 (84)                     (180)                   (270)
Investment and interest income                       184                  215                       549                     661
                                                 -------              -------                   -------                 -------
Net income (loss)                                $  (243)             $(1,204)                  $(1,505)                $(1,754)
                                                 =======              =======                   =======                 =======
Shares used in computation of net income (loss)
    per common share:
    Basic                                         13,407               13,333                    13,380                  13,317
                                                 =======              =======                   =======                 =======
    Diluted                                       13,407               13,333                    13,380                  13,317
                                                 =======              =======                   =======                 =======
Net income (loss) per common share:
    Basic                                        $ (0.02)             $ (0.09)                  $ (0.11)                $ (0.13)
                                                 =======              =======                   =======                 =======
    Diluted                                      $ (0.02)             $ (0.09)                  $ (0.11)                $ (0.13)
                                                 =======              =======                   =======                 =======
</TABLE>

   The accompanying notes are an integral part of these condensed financial
                                  statements.

                                       4
<PAGE>

                          CLOSURE MEDICAL CORPORATION
                           STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                                (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                    NINE MONTHS ENDED
                                                              SEPTEMBER 30,      SEPTEMBER 30,
                                                                 2000                1999
                                                                 ----                ----
<S>                                                         <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                      $  (1,505)       $  (1,754)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization expense                               696              705
Amortization of deferred compensation on stock options               73              228
Net loss on disposals of fixed assets                                12              303
Change in accounts receivable                                      (649)              48
Change in inventories                                              (139)             475
Change in prepaid expenses                                          195             (144)
Change in accounts payable and accrued expenses                     743             (965)
Change in deferred revenue                                         (216)            (625)
                                                              ---------        ---------
Net cash provided (used) by operating activities                   (790)          (1,729)
                                                              ---------        ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of furniture, fixtures and equipment                     (329)          (1,042)
Investment in intangible assets                                    (348)            (258)
Purchases of investments                                         (4,377)          (4,495)
Proceeds from the sale of investments                             5,682            7,700
                                                              ---------        ---------
Net cash provided (used) by investing activities                    628            1,905
                                                              ---------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt                                                  (464)            (400)
Net proceeds from exercise of stock options                         504              538
Payments under capital lease obligations                           (206)            (181)
                                                              ---------        ---------
Net cash provided (used) by financing activities                   (166)             (43)
                                                              ---------        ---------
Increase (decrease) in cash and cash equivalents                   (328)             133
Cash and cash equivalents at beginning of period                    508              824
                                                              ---------        ---------
Cash and cash equivalents at end of period                    $     180        $     957
                                                              =========        =========

                       The accompanying notes are an integral part of these condensed financial statements.
</TABLE>

                                       5
<PAGE>

                          CLOSURE MEDICAL CORPORATION
                    CONDENSED NOTES TO FINANCIAL STATEMENTS
                                  (Unaudited)

1.  Organization and Operations

Closure Medical Corporation ("Closure" or the "Company") develops, manufactures
and commercializes medical tissue adhesive products based on its proprietary
cyanoacrylate technology for use in wound closure in humans and animals.

On September 30, 1996, the Company sold 2,550,000 shares of Common Stock in its
initial public offering ("IPO").  On April 2, 1997, the Company completed a
follow-on public offering selling 1,025,000 shares of Common Stock.  The net
proceeds from the IPO and follow-on public offering of approximately $17.9
million and $12.0 million, respectively, have been and will continue to be used
primarily for capital expenditures related to office space and manufacturing
facilities, laboratories, research and development, including clinical trials,
working capital and general corporate purposes.

2.  Significant Accounting Policies

The significant accounting policies followed by the Company for interim
financial reporting are consistent with the accounting policies followed for
annual financial reporting.  These unaudited financial statements have been
prepared in accordance with Rule 10-01 of Regulation S-X, and in management's
opinion, all adjustments of a normal recurring nature necessary for a fair
presentation have been included.  Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements and should be read in conjunction with the
financial statements and notes thereto for the year ended December 31, 1999
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999.

The results of operations for the three and nine month periods ended September
30, 2000 are not necessarily indicative of the results to be expected for the
full year ending December 31, 2000.

Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), was issued in June 1998.  SFAS
133, as amended by SFAS 137, is effective for financial statements for fiscal
years beginning after June 15, 2000.  The Company will adopt SFAS 133 on or
before the effective date.  It is not anticipated that this standard will have a
material impact on the results of operations or financial position of the
Company.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements,"("SAB 101"),
which provides guidance on the recognition, presentation, and disclosures of
revenue in financial statements filed with the SEC. SAB 101, as amended by SAB
101A and SAB 101B, outlines the basic criteria that must be met to recognize
revenue and provides guidance for disclosures related to revenue recognition
policies. SAB 101B delays the implementation date of SAB 101 until no later than
the fourth fiscal quarter of fiscal years beginning after December 15, 1999.
Upon adoption of SAB 101 in the fourth quarter of fiscal 2000, the Company
estimates that it will record a cumulative adjustment of approximately
$2,656,000 related to license and product development revenues received under
the 1996 supply and distribution agreement with Ethicon Inc., a subsidiary of
Johnson & Johnson. SAB 101 requires that these revenues be recorded as deferred
revenue and recognized over the Company's remaining commitment period through
the first quarter of 2004.

3.  Taxes

No federal or state income tax provision has been provided for income tax
purposes, as the Company does not expect to have a tax liability for the year
ending December 31, 2000.  Additionally, the deferred tax asset that might be
recorded as a result of net operating losses under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," has been offset by
a related valuation allowance because realization of the asset is not likely.
Accordingly, no benefit has been recorded.

                                       6
<PAGE>

                          CLOSURE MEDICAL CORPORATION
                    CONDENSED NOTES TO FINANCIAL STATEMENTS
                                  (Unaudited)


4.  Inventories

Inventories consisted of the following (in thousands):

                                      September 30,   December 31,
                                          2000           1999
                                          ----           ----

Packaging                                $ 181           $148
Raw materials                               69             45
Work-in-process                            354            283
Finished goods                             126            115
                                         -----           ----
                                         $ 730           $591
                                         =====           ====

5.  Net Income (Loss) Per Share

Basic net income (loss) per common share is computed using the weighted average
number of shares of common stock outstanding during the period.

Diluted net income (loss) per common share is computed using the weighted
average number of shares of common and common equivalent shares outstanding
during the period.  Common equivalent shares consist of stock options using the
treasury stock method and are excluded from the computation if their effect is
antidilutive.

                                       7
<PAGE>

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

CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION ACT OF 1995

The following discussion should be read in conjunction with the unaudited
financial statements and notes thereto included in Part I--Item 1 of this Form
10-Q and the audited financial statements and notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations for the
year ended December 31, 1999 contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999.

This report and the documents incorporated by reference herein contain "forward-
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended and Section 21E of the Securities Exchange Act of 1934, as
amended.  When used in this report and the documents incorporated herein by
reference, the words "anticipate," "believe," "estimate," and similar
expressions are generally intended to identify forward-looking statements.
These forward-looking statements include, among others, the statements in
Management's Discussion and Analysis about the following:

 .  the Company's expectations with respect to increases in operating expenses;

 .  expectations with respect to increases in research and development and
   general and administrative expenses in order to develop new products,
   manufacture commercial quantities of products and fund additional clinical
   trials;

 .  expectations with respect to the development, manufacturing and approval of
   new products;

 .  expectations with respect to incurring additional capital expenditures to
   expand its manufacturing capabilities;

 .  expectations with respect to generating revenue or becoming profitable on a
   sustained basis;

 .  the Company's ability to enter into additional marketing agreements and the
   ability of its existing marketing partners to successfully commercialize
   products incorporating the Company's technologies;

 .  the sufficiency of the Company's existing cash and cash equivalents and
   investments to finance its capital requirements for 12 months;

 .  expected losses in 2000 and subsequent years; and

 .  expectations with respect to future capital requirements.

There are important factors that could cause actual results to differ materially
from those expressed or implied by such forward-looking statements including,
but not limited to, the following:

 .  a decline in the level of demand for the Company's products;

 .  developments by competitors;

 .  the Company's inability to obtain regulatory clearances;

 .  general economic conditions and specifically, conditions in the health care
   industry;

 .  the Company's ability to protect its proprietary products, know-how and
   manufacturing processes;

                                       8
<PAGE>

 .  the Company's inability to obtain adequate supply of raw materials;

 .  the failure to enter into definitive marketing agreements;

 .  unanticipated cash requirements to support current operations or research and
   development; and

 .  the Company's ability to attract and retain key personnel.

These and other risks and uncertainties affecting the Company are discussed in
greater detail in this report and in other filings by the Company with the
Securities and Exchange Commission.

OVERVIEW

Since its inception in May 1990, the Company has been developing, manufacturing
and commercializing medical tissue adhesive products for use in wound closure in
humans and animals. The Company's products are based on its proprietary
cyanoacrylate technology, and a substantial portion of the Company's historical
expenses have consisted of research and development and clinical trial expenses.
Through September 25, 1996, the effective date of the Company's initial public
offering, the Company had funded its operations with cash borrowed from
Sharpoint Development Corporation ("Sharpoint"), sales of Octyldent(R) and
Nexaband(R) products, and license and product development revenues from
marketing partners. On September 30, 1996, the Company completed its initial
public offering, issuing 2,550,000 shares of Common Stock and generating net
proceeds of approximately $17.9 million. On April 2, 1997, the Company completed
a follow-on public offering, issuing 1,025,000 shares of Common Stock and
generating net proceeds of approximately $12.0 million. The Company has also
funded its operations through sales of DERMABOND(R) Topical Skin Adhesive
("DERMABOND(R) adhesive") after the product received its CE Mark and U.S. Food
and Drug Administration ("FDA") approval in August 1997 and August 1998,
respectively.

The Company has been unprofitable since its inception and has incurred net
losses in each year, including a net loss of approximately $2.5 million for the
year ended December 31, 1999. The Company anticipates that its recurring
operating expenses will increase for the next several years, as it expects its
research and development and general and administrative expenses to increase in
order to develop new products, manufacture commercial quantities of products and
fund additional clinical trials. The Company also expects to incur additional
capital expenditures to expand its manufacturing capabilities. The Company
expects to incur a loss in 2000 and may incur losses in subsequent years,
although the amount of future net losses and time required by the Company to
reach profitability are highly uncertain. The Company's ability to generate
significant revenue and become profitable will depend on its success in
commercializing DERMABOND(R) adhesive, expanding its manufacturing capabilities,
developing new products, entering into additional marketing agreements and on
the ability of its marketing partners to successfully commercialize products
incorporating the Company's technologies. The Company may never generate
significant revenue or become profitable on a sustained basis, if at all.

On August 28, 1998, the Company was granted approval from the FDA of its
premarket approval application to market DERMABOND(R) adhesive in the United
States. DERMABOND(R) adhesive, which is used to replace sutures, staples and
adhesive strips for closing certain topical incisions and lacerations, is the
first such product to be approved by the FDA for the U.S. market. In March 1996,
Closure licensed exclusive worldwide marketing and distribution rights for
DERMABOND(R) adhesive to Ethicon, Inc. ("Ethicon"), a subsidiary of Johnson &
Johnson. In August 1997, Closure received CE Mark approval allowing the Company
to ship DERMABOND(R) adhesive to Ethicon to support its launch in European Union
countries. DERMABOND(R) adhesive is currently marketed by Ethicon in the U.S.
and approximately 35 countries outside the U.S., including Japan.

                                       9
<PAGE>

On July 27, 1999, the Company was awarded its first United States Patent
relevant to DERMABOND(R) adhesive. The invention covered in this patent
capitalizes on the ability of the Company's adhesive technology to be
manipulated in a manner that enhances product performance by controlling the
setting time and extending the shelf-life of the material. The award of the
patent increases royalty revenue on sales of DERMABOND(R) adhesive in the United
States under the supply and distribution agreement with Ethicon.

On September 2, 1999, the Company received clearance from the FDA to market
SOOTHE-N-SEAL(TM) canker sore relief in the United States. SOOTHE-N-SEAL(TM)
adhesive, which is used to provide relief of pain associated with oral ulcers,
is the first such product to be approved by the FDA for the over-the-counter
United States consumer market. The Company is currently in discussions for a
marketing distribution agreement for SOOTHE-N-SEAL(TM) adhesive.

The Company has developed LIQUIDERM(TM) liquid adhesive bandage for the
treatment of minor cuts and abrasions. The results of the preclinical studies,
performed in July and August 1999, for the liquid adhesive bandage indicated
that the product compared favorably to air-dried wounds and wounds covered with
commercial adhesive bandages. As a result of this preclinical study, the Company
conducted a definitive multi-center, 162-patient study which was completed in
June 2000. In the multi-center study, LIQUIDERM(TM) liquid adhesive bandage was
found to: (i) stay on wounds better and longer than traditional adhesive
bandages, (ii) seal wounds from dirt and germs, (iii) minimize pain better than
adhesive bandages, (iv) stop bleeding of minor cuts and abrasions, and (v)
require only one application per treatment. The Company will seek marketing
clearance for LIQUIDERM(TM) adhesive through submission of a 510(k) premarket
notification which was filed August 1, 2000 with the FDA. The Company is
currently in discussions for a marketing distribution agreement for
LIQUIDERM(TM) adhesive.

RESULTS OF OPERATIONS

Product sales were $3.6 million for the three months ended September 30, 2000,
compared to $2.7 million for the three months ended September 30, 1999. The
increase in third quarter revenues was primarily a result of increased sales of
DERMABOND(R) adhesive. For the nine months ended September 30, 2000, product
sales were $9.3 million compared to $10.8 million for the same period of 1999.
The decrease in revenues from the 1999 period reflects pipeline fill for an
operating room launch during the first half of 1999 of DERMABOND(R) adhesive by
Ethicon.

Cost of products sold was $950,000 for the three months ended September 30, 2000
compared to $1.1 million for the same period of 1999. Cost of products sold as a
percentage of product sales decreased to 27% for the three months ended
September 30, 2000 compared to 40% during the same period of 1999. This decrease
is primarily related to a reduction in manufacturing expenses, increased product
yields and increased plant utilization. For the nine months ended September 30,
2000, cost of products sold was $2.7 million compared to $3.8 million for the
same period of 1999. Cost of products sold as a percentage of product sales
decreased to 30% in the nine months ended September 30, 2000, compared to 35%
during the same period of 1999. Although DERMABOND(R) adhesive unit sales
decreased during the nine month period ended September 30, 2000, compared to the
same period in 1999, an increased gross margin percentage for the 2000 period
was achieved primarily as a result of significant reductions in manufacturing
expenses and an increase in product yields.

Operating expenses were $3.0 million for the three months ended September 30,
2000 and September 30, 1999. Although operating expenses remained constant from
quarter to quarter, research, development and regulatory affairs expenses
decreased by $194,000 whereas general and administrative expenses increased by
$203,000. The decrease in research, development and regulatory affairs was
primarily attributable to less clinical trial expenses and outside professional
services during the 1999 period as opposed to an increase in general and
administrative expenses which was due to non-recurring professional services
during the 2000 period. For the nine months ended September 30, 2000 and
September 30, 1999, operating expenses were $8.4 million and $9.2 million,
respectively. The decrease was primarily attributable to a decline in outside
professional services for research and development and the reduction of
personnel.

                                       10
<PAGE>

Although the Company experienced decreased expenses related to research and
development, it expects these expenses will increase in the future as the
Company expands its pipeline and related development efforts and clinical trials
for potential new products.

Interest expense was $59,000 for the three months ended September 30, 2000,
compared to $84,000 for the three months ended September 30, 1999. For the nine
months ended September 30, 2000 and September 30, 1999, interest expense was
$180,000 and $270,000, respectively. This decrease was primarily the result of
the continued reduction of the Company's term loan balance and capital lease
obligations through monthly principal payments.

Investment and interest income was $184,000 for the three months ended September
30, 2000, compared to $215,000 for the same period of 1999. For the nine months
ended September 30, 2000 and September 30, 1999, investment and interest income
was $549,000 and $661,000, respectively. This decrease was primarily attributed
to interest earned from lower average cash and investment balances.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations to date primarily through the sale of
equity securities, borrowings from Sharpoint and other lenders, license and
product development revenues and product sales. Through September 30, 2000, the
Company has raised approximately $30.0 million from equity financings. During
1997 and 1998, the Company entered into and received approximately $4.5 million
from a new lease line and term loan. In May 1999, the term loan principal
balance of $2.5 million was refinanced under similar terms of the original
agreement for an additional 24 months. In May 2000, the Company renewed for a
period of one year its $3.0 million line of credit for working capital purposes.
As of September 30, 2000, there were no borrowings against the line of credit.

At September 30, 2000, net working capital was approximately $8.1 million versus
net working capital of $9.7 million available at December 31, 1999. This
decrease was primarily attributable to cash and cash equivalents used to fund
the Company's operations as well as cash used for the repayments of its term
loan and capital lease obligations. At September 30, 2000, the Company's cash
and cash equivalents and investments were $11.0 million compared to $12.6
million at December 31, 1999. The Company had $2.4 million in debt and capital
lease obligations at September 30, 2000, reflecting a $670,000 decrease over the
December 31, 1999 debt and capital lease obligations. These decreases represent
monthly principal payments on these obligations.

Net cash provided by investing activities was $628,000 for the nine months ended
September 30, 2000 compared to $1.9 million for the same period in 1999. During
the nine months ended September 30, 2000 and September 30, 1999, cash was
provided by the sale of investments offset by purchases of investments and other
long-term assets.

Net cash used by financing activities was $166,000 and $43,000 for the nine
months ended September 30, 2000 and September 30, 1999, respectively.  The
Company's primary financing activities during the nine months ended September
30, 2000 and September 30, 1999 were the repayments of its term loan and capital
lease obligations offset by employee stock option exercises.

The Company believes that existing cash and cash equivalents and investments,
which totaled approximately $11.0 million at September 30, 2000, will be
sufficient to finance its capital requirements for 12 months. In May 2000, the
Company renewed for a period of one year its $3.0 million line of credit for
working capital purposes. The Company expects to incur a loss in 2000 and may
incur losses in subsequent years, although the amount of future net losses and
time required by the Company to reach profitability are highly uncertain. The
Company anticipates that its recurring operating expenses will increase for the
next several years, as it expects its research and development and general and
administrative expenses to increase in order to develop new products,
manufacture commercial quantities of products and fund additional clinical
trials. The Company also expects to incur additional capital expenditures to
expand its manufacturing capabilities.

                                       11
<PAGE>

The Company's future capital requirements, however, will depend on numerous
factors, including (i) the Company's ability to manufacture and successfully
commercialize its lead product, DERMABOND(R) adhesive, (ii) the progress of its
research and product development programs for future nonabsorbable and
absorbable products, including clinical studies, (iii) the effectiveness of
product commercialization activities and marketing agreements for the Company's
future products, including additional scale-up of manufacturing capability in
anticipation of product commercialization and development and progress of sales
and marketing efforts, (iv) the ability of the Company to maintain existing
marketing agreements, including its agreement with Ethicon for DERMABOND(R)
adhesive, and establish and maintain new marketing agreements, (v) the costs
involved in preparing, filing, prosecuting, defending and enforcing intellectual
property rights and complying with regulatory requirements, (vi) the effect of
competing technological and market developments, (vii) timely receipt of
regulatory clearances and approvals and (viii) general economic conditions. The
Company may be required to seek additional capital to finance its operations in
the future. If the Company's currently available funds and internally generated
cash flow are not sufficient to satisfy its financing needs, the Company will be
required to seek additional funding through bank borrowings and additional
public or private sales of its securities, including equity securities, or
through other arrangements with marketing partners. Other than the Company's
equipment financing line of credit, term loan, and working capital line of
credit, the Company has no credit facility or other committed sources of
capital. There can be no assurance that additional funds, if required, will be
available to the Company on favorable terms, if at all.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

INTEREST RATE SENSITIVITY

The Company is subject to interest rate risk on its investment portfolio which
consists primarily of high quality short-term money market funds, commercial
paper and corporate bonds with an average maturity of less than one year. The
Company mitigates default risk by investing in what it believes are safe and
high credit quality securities and by monitoring the credit rating of investment
issuers. The portfolio includes only marketable securities with active secondary
or resale markets to ensure portfolio liquidity and there are limitations
regarding average and individual duration of investments. These available-for-
sale securities are subject to interest rate risk and will decrease in value if
market interest rates increase. At September 30, 2000, the Company's total
portfolio consisted of approximately $11.0 million of investments, the majority
of which had average maturities within one year. Additionally, the Company
generally has the ability to hold fixed income investments to maturity.
Therefore, the Company does not expect its results of operations or cash flows
to be materially affected due to a sudden change in interest rates.

FOREIGN CURRENCY EXCHANGE RISK

The Company's international sales and related royalties of DERMABOND(R) adhesive
are based on sales in foreign currencies, but payable in U.S. dollars, and thus
may be adversely affected by fluctuations in currency exchange rates.
Additionally, fluctuations in currency exchange rates may adversely affect
demand for the Company's products by increasing the price of the Company's
products in the currency of the countries in which the products are sold.

                                       12
<PAGE>

                           PART II-OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a) Exhibits.

             27    Financial Data Schedule.

         (b) Reports on Form 8-K.
             None.

                                       13
<PAGE>

                                 SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                        CLOSURE MEDICAL CORPORATION



Date: November 14, 2000                 By: /s/ ROBERT V. TONI
                                           -----------------------------------
                                           Robert V. Toni
                                           President and Chief Executive Officer



Date: November 14, 2000                 By: /s/ BENNY WARD
                                            -----------------------------
                                            Benny Ward
                                            Vice President and Chief Financial
                                             Officer



<PAGE>

                                 EXHIBIT INDEX


EXHIBIT
NUMBER  DESCRIPTION
------  -----------

  27    Financial Data Schedule.