FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(x) QUARTERLY REPORT PURSUANT TOUNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996March 31, 1997 Commission File Number 0-21104
CRYOLIFE, INC.
(Exact name of registrantRegistrant as specified in its charter)
---------
Florida 59-2417093
(State or other jurisdiction (I.R.S.Other Jurisdiction(I.R.S. Employer
of incorporation or organization)Identification No.)
2211 New Market Parkway, Suite 142
Marietta,1655 Roberts Boulevard, NW
Kennesaw, Georgia 3006730144
(Address of principal executive offices)
(zip code)
(770) 952-1660419-3355
(Registrant's telephone number, including area code)
Not Applicable (Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant: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 ----- -----____
The number of shares of common stock, par value $0.01 per share, outstanding on
November 5, 1996 was 9,573,382.at
May 12, 1997 is 9,595,000.
Part I - FINANCIAL INFORMATION
Item 1. Financial statements
CRYOLIFE, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
(Unaudited) (Unaudited)
Revenues:
Cryopreservation $ 10,137,550 $ 7,878,183 $ 28,016,480 $21,447,252
Research grants, licenses, lease
and interest revenue 273,074 469,076 525,846 734,633
-------------------------- ----------------------------
10,410,624 8,347,259 28,542,326 22,181,885
Costs and expenses:
Preservation 3,563,200 3,159,805 9,731,419 8,280,740
General, administrative and marketing 4,238,862 3,480,462 12,045,891 9,453,953
Research & development 615,315 651,183 2,005,833 2,005,217
Interest expense 39,268 1,308 39,269 3,929
-------------------------- ----------------------------
8,456,645 7,292,758 23,822,412 19,743,839
-------------------------- ----------------------------
Income before income taxes 1,953,979 1,054,501 4,719,914 2,438,046
Income tax expense 692,550 369,176 1,687,524 803,212
-------------------------- ----------------------------
Net income $ 1,261,429 $ 685,325 $ 3,032,390 $1,634,834
========================== ============================
Earnings per share of common stock $ 0.13 $ 0.07 $ 0.31 $ 0.17
==========================CRYOLIFE, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
1997 1996
---- ----
(Unaudited)
Revenues:
Cryopreservation and products $ 10,383,000 $ 8,260,000
Research grants, licenses, lease,
interest income, and other 30,000 174,000
-----------------------------
10,413,000 8,434,000
Costs and expenses:
Cost of preservation and products 3,426,000 2,879,000
General, administrative and marketing 4,479,000 3,626,000
Research and development 849,000 690,000
Interest expense 132,000 --
-----------------------------
8,886,000 7,195,000
-----------------------------
Income before income taxes 1,527,000 1,239,000
Income tax expense 575,000 457,000
-----------------------------
Net income $ 952,000 $ 782,000
=============================
Earnings per share of common stock $ 0.10 $ 0.08
=============================
Weighted average common and common
equivalent shares outstanding 9,877,000 9,756,000
=============================
Weighted average common and common
equivalent shares outstanding 9,924,796 9,655,742 9,894,014 9,534,584
========================== =============================
See accompanying notes to summary consolidated financial statements.
Item 1. Financial Statements
CRYOLIFE, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
---- ----
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 97,145 $ 166,931
Marketable securities 2,145,688 6,015,158
Receivables (net) 7,707,504 5,369,205
Deferred preservation costs (net) 6,374,252 5,996,201
Inventories (net) 353,427 424,200
Prepaid expenses 583,489 369,594
Deferred income taxes 184,821 --
-----------------------------------
Total current assets 17,446,326 18,341,289
-----------------------------------
Property and equipment (net) 9,651,735 3,279,168
Patents and other intangibles (net) 4,510,903 1,728,262
Other assets 500,288 240,897
-----------------------------------
TOTAL ASSETS $ 32,109,252 $ 23,589,616
===================================
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable $ 1,681,788 $ 1,372,862
Accrued expenses 1,986,771 1,474,365
Accrued compensation 393,998 260,709
Current portion of long term debt 477,859 --
-----------------------------------
Total current liabilities 4,540,416 3,107,936
-----------------------------------
Deferred income taxes -- 16,486
Other long term liabilities 3,582,559 --
-----------------------------------
Total liabilities 8,122,975 3,124,422
-----------------------------------
Shareholders' Equity:
Preferred stock -- --
Common stock (issued 10,105,987 shares in 1996
and 9,974,332 shares in 1995) 101,060 99,744
Additional paid-in capital 17,098,584 16,568,312
Retained earnings 7,006,928 3,974,538
Less: Treasury stock (543,000 shares) (179,625) (179,625)
Unrealized (loss) gain on investments (19,803) 28,092
Notes receivable from shareholders (20,867) (25,867)
-----------------------------------
Total shareholders' equity 23,986,277 20,465,194
-----------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 32,109,252 $ 23,589,616
===================================
CRYOLIFE, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
---- ----
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 192,000 $ 1,370,000
Marketable securities 42,000 43,000
Receivables (net) 8,979,000 8,197,000
Deferred preservation costs 8,545,000 7,178,000
Inventories 1,073,000 260,000
Prepaid expenses 1,740,000 846,000
Deferred income taxes 287,000 287,000
---------------------------
Total current assets 20,858,000 18,181,000
---------------------------
Property and equipment (net) 12,366,000 11,567,000
Goodwill (net) 8,759,000 1,846,000
Other intangibles (net) 5,080,000 3,379,000
---------------------------
TOTAL ASSETS $ 47,063,000 $ 4,973,000
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,194,000 $ 3,696,000
Accrued expenses 1,649,000 934,000
Accrued procurement fees 1,118,000 1,210,000
Accrued compensation 712,000 878,000
Current maturities of debt 496,000 527,000
Income taxes payable 401,000 --
---------------------------
Total current liabilities 6,570,000 7,245,000
---------------------------
Bank line of credit 8,177,000 1,250,000
Long-term debt 6,306,000 1,549,000
---------------------------
Total liabilities 21,053,000 10,044,000
---------------------------
Shareholders' Equity:
Preferred stock -- --
Common stock (issued 10,138,000 shares
in 1997 and 10,110,000 shares in 1996) 101,000 101,000
Additional paid-in capital 17,252,000 17,128,000
Retained earnings 8,854,000 7,902,000
Less: Unrealized gain on investments (1,000) (1,000)
Treasury stock (543,000 shares) (180,000) (180,000)
Notes receivable from shareholders (16,000) (21,000)
---------------------------
Total shareholders' equity 26,010,000 24,929,000
---------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $47,063,000 $34,973,000
===========================
See accompanying notes to summary consolidated financialconsolidate statements.
Item 1. Financial Statements
CRYOLIFE, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
NineThree Months Ended
September 30,March 31,
1997 1996 1995
---- ----
(Unaudited)
Net cash fromflows provided by (used in) operating activities:
Net income $ 3,032,390952,000 $ 1,634,834782,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,006,429 695,661526,000 319,000
Provision for doubtful accounts (81,600) 289,02615,000 15,000
Deferred income taxes (201,307) 128,866
Increase in receivables (1,782,824) (1,528,178)
(Increase) decrease in deferred-- (39,000)
Receivables 163,000 (1,038,000)
Deferred preservation costs and inventories (176,058) 733,422
Increase in prepaid(1,543,000) (35,000)
Prepaid expenses (213,895) (303,610)
Increase in accountsand other assets (837,000) (359,000)
Accounts payable and accrued expenses 661,637 850,478
-----------------------------------(1,535,000) 698,000
----------------------------
Net cash flows provided by (used in) operating activities 2,244,772 2,500,499
-----------------------------------(2,259,000) 343,000
----------------------------
Net cash used inflows provided by (used in) investing activities:
Capital expenditures (7,097,566) (1,138,170)(1,071,000) (499,000)
Other assets (213,000) (394,000)
Cash paid for acquisition, net of cash acquired (721,721)(4,418,000) --
Proceeds from the saleNet sales of marketable securities 5,799,569 409,111
Purchase of marketable securities (1,930,099) (2,881,723)
Increase in other assets (1,663,852) (640,365)
------------------------------------- 1,523,000
----------------------------
Net cash used inflows provided by (used in) investing activities (5,613,669) (4,251,147)
-----------------------------------(5,702,000) 630,000
----------------------------
Net cash flows provided by financing activities:
Proceeds from other longborrowings on revolving term liabilities 2,810,418loan 6,653,000 --
Proceeds from issuance of common stock and
from notes receivable from shareholders 488,693 252,370
-----------------------------------130,000 133,000
----------------------------
Net cash provided by financing activities 3,299,111 252,370
-----------------------------------
Decrease6,783,000 133,000
----------------------------
Increase (decrease) in cash (69,786) (1,498,278)(1,178,000) 1,106,000
Cash and cash equivalents at beginning of period 166,931 2,592,799
-----------------------------------1,370,000 167,000
----------------------------
Cash and cash equivalents at end of period $ 97,145192,000 $ 1,094,521
===================================1,273,000
============================
Supplemental cash flow information
Non-cash investing and financing activities:
Fair valuesvalue of assets acquired $ 645,0951,768,000 --
Cost in excess of assets acquired 1,619,6108,541,000 --
Liabilities assumed (292,984)(891,000) --
NotesDebt issued for assets acquired (1,250,000)(5,000,000) --
-----------------------------------
Total----------------------------
Net cash paid for acquisition $ 721,7214,418,000 --
===============================================================
See accompanying notes to summary consolidated financial statements.
CRYOLIFE, INC. AND SUBSIDIARIES
NOTES TO SUMMARY CONSOLIDATED FINANCIAL STATEMENTS
NoteNOTE 1 - Basis of PresentationBASIS OF PRESENTATION
The accompanying unaudited, summarycondensed, consolidated financial statements have
been prepared in accordance with (i) generally accepted accounting principles
for interim financial information, and (ii) the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for fair
presentation have been included. Operating results for the three and nine months ended
September
30, 1996March 31, 1997 are not necessarily indicative of the results that may be
expected for the year endedending December 31, 1996. Notes 2,3 and 4 below cover certain events
occurring after the latest fiscal year end.1997. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's Form 10-K for the year ended December 31, 1995.
Note1996.
NOTE 2 - Shareholders' equityACQUISITION OF IDEAS FOR MEDICINE
On March 5, 1997, the Company acquired the stock of Ideas for Medicine, Inc.
(IFM) of Clearwater, Florida, a medical device company specializing in the
manufacture and distribution of single use cardiovascular products, for
consideration of approximately $4.5 million in cash and approximately $5 million
in convertible debentures plus related expenses. The cash portion of the
purchase price was financed by borrowings under the Company's Revolving Term
Loan Agreement. The acquisition has been accounted for as a purchase. Based on
the preliminary allocation of the purchase price, the Company's unaudited pro
forma results of operations for the three months ended March 31, 1997 and March
31, 1996, assuming the consummation of the purchase and issuance of the
convertible debentures as of January 1, 1997 and 1996, respectively, are as
follows:
Three Months Ended March 31
1997 1996
---- ----
Net sales $11,626,000 $10,115,000
Net income $983,000 $643,000
Net income per common share
Primary $0.10 $0.07
NOTE 3 - INVENTORY
Inventory consists of the following:
March 31, December 31,
1997 1996
---- ----
Raw materials $ 250,000 $ --
Work in process 130,000 --
Finished goods 693,000 260,000
---------- -------
$1,073,000 $260,000
========== ========
NOTE 4 - EARNINGS PER SHARE
On May 16, 1996 the Board of Directors declared a two for onetwo-for-one stock split,
effected in the form of a stock dividend, payable on June 28, 1996 to
shareholders of record on June 7, 1996. All share and per share information in
the accompanying financial statements have been adjusted to reflect such split.
Note 3 - Revolver/Term Loan Agreement
On August 30, 1996In February 1997, the Company executed a revolving term loan agreement with a
bankFinancial Accounting Standards Board issued Statement No.
128, Earnings per Share, which permits the Companyis required to borrow up to $10,000,000 at either the bank's
prime rate of interest or adjusted Libor, as defined, plus an applicable Libor
margin. This credit agreement contains certain restrictive convenants including,
but not limited to, maintenance of certain financial ratios and a minimum
tangible net worth requirement. The credit agreement is secured by substantially
all of the Company's assets, excluding intellectual property.
Note 4 - Acquisition
On September 12, 1996 the Company acquired the assets of United Cryopreservation
Foundation, Inc. ("UCFI"), a processor and distributor of cryopreserved human
heart valves and saphenous vein for transplant. Under the terms of the
acquisition,be adopted on December 31, 1997.
At that time, the Company will pay $2,000,000 over a five year periodbe required to change the method currently used
to compute earnings per share and assumed
certain obligationsto restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
UCFI.stock options will be excluded. The impact of Statement 128 on the acquisition on operationscalculation
of primary and fully diluted earnings per share for the three monthsquarters ended September 30,March 31,
1997 and 1996 wasis not significant.material.
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Revenues were $10.4 million and $28.5for the three months ended March 31, 1997, a 24%
increase compared to $8.4 million for the three and nine months
ended September 30, 1996, respectively, compared to $8.3 million and $22.2
million for the corresponding periodssame period in 1995.1996. Revenues increased 25% and 29% for the
three and nine months ended September 30, 1996, respectively, comparedMarch 31, 1997 included $554,000 attributable to the
corresponding periods in 1995. Theseacquisiton of IFM. The remaining revenue increases wereare primarily dueattributable to
greatera 15% increase in the number of allograft shipments resulting from increased demand.an increase
in demand, and a general cryopreservation fee increase in January 1997.
Revenues from human heart valve preservation increased 25%18% to $7.1$6.5 million for
the three months ended September 30, 1996March 31, 1997 from $5.7$5.6 million for the three months
ended September 30, 1995,March 31, 1996, representing 68%62% and 69%66%, respectively, of total revenues
respectively. For the nine months ended September 30, revenues from human heart
valve preservation increased 26% to $19.2 millionduring such periods. Shipments rose 17% for 1996 from $15.2 million
for 1995, representing 67% and 68% of total revenues, respectively. Third
quarter revenues increased due to a 31% increase in tissue shipments resulting
from an increase in demand in the third quarter of 1996 compared to the third
quarter of 1995. Nine month revenues increased due to a 31% increase in tissue
shipments resulting from an increase in demand in the first nine months of 1996
compared to 1995.
Revenues from the sale of porcine valves increased 109% to $71,000 for the three
months ended September 30, 1996 from $34,000 for the three months ended
September 30, 1995, representing 1% and less than 1% of total revenues,
respectively. For the nine months ended September 30, revenues from the sale of
porcine valves increased 77% to $302,000 for 1996 from $171,000 for 1995,
representing 1% of total revenues for both periods. Three month revenues
increased due to a 6% increase in shipments resulting from an increase in demand
in the first three months of 19961997
compared to 1995. Nine month revenues
increased due to a 50% increasethe same period in shipments resulting from an increase in
demand in the first nine months of 1996 compared to 1995.1996.
Revenues from vein preservation increased 22%44% to $2.2$2.6 million for the three
months ended September 30, 1996March 31, 1997 from $1.8 million for the three months ended September 30, 1995,March
31, 1996, representing 21%25% and 22%21%, respectively, of total revenues respectively.
Forfor those
periods. Vein shipments increased 43% for the ninefirst three months of 1997
compared to the same period in 1996.
Revenues from orthopaedic preservation decreased 8% to $693,000 for the three
months ended September 30, revenuesMarch 31, 1997 from vein preservation
increased 20% to $6.1 million$755,000 for the three months ended March 31,
1996, from $5.1 million for 1995, representing 21%7% and 23%9%, respectively, of total revenues respectively. Third quarter revenues increasedfor those periods.
Orthopaedic shipments decreased 13% for the first three months of 1997 compared
to the same period in 1996 due to limited availibility of tissue in 1997 as
compared to 1996.
Other revenues decreased 83% to $30,000 for the three months ended March 31,
1997 from $174,000 for the three months ended March 31, 1996. Other revenues in
1996 included research grant awards totalling $113,000, compared to $28,000 for
the corresponding period in 1997. Interest income totaled $61,000 in 1996.
Cost of preservation and products aggregated $3.4 million for the three months
ended March 31, 1997, representing 33% of total revenues, compared to $2.9
million for the three months ended March 31, 1996, representing 34% of total
revenues. Cost of preservation and products as a 27%percentage of revenues
decreased 1% for first quarter 1997 compared to first quarter 1996. The decrease
relates to the general cryopreservation fee increase in tissue shipmentsand efficiencies resulting
from an increase in demand
in the third quarter of 1996 compared to the third quarter of 1995. Nine month
revenues increased due to a 20% increase in tissue shipments resulting fromunits processed, partially offset by an increase in demand incosts
associated with the first nine months of 1996 compared to 1995.
Revenues from orthopaedic tissue preservation increased 133% to $775,000 for the
three months ended September 30, 1996 from $332,000 for the three months ended
September 30, 1995, representing 7% and 4% of total revenues respectively. For
the nine months ended September 30, revenues from orthopaedic tissue
preservation increased 147% to $2.4 million for 1996 from $970,000 for 1995,
representing 8% and 4% of total revenues, respectively. Third quarter revenues
increased due to a 218% increase in tissue shipments resulting from an increase
in demand in the third quarter of 1996 compared to the third quarter of 1995.
Nine month revenues increased due to a 233% increase in tissue shipments
resulting from an increase in demand in the first nine months of 1996 compared
to 1995.
Other revenues were $273,000 for the three months ended September 30, 1996
compared to $469,000 for the three months ended September 30, 1995, representing
3% and 6% of total revenues, respectively. For the nine months ended September
30, other revenues were $526,000 for 1996 compared to $735,000 for 1995,
representing 2% and 3% of total revenue, respectively. Other revenues consist
primarily of research grant award revenues and interest income. Research grant
award revenues in 1996 are primarily related to the bioadhesive and synergraft
projects. Interest income decreased for the third quarter of 1996 compared to
third quarter of 1995 due to a decrease in investments. Income from the
termination of the option agreement with Bayer Corporation totaled $88,000, net
of related expenses.
Preservation costs aggregated $3.6 million and $9.7 million, respectively, for
the three and nine months ended September 30, 1996, representing 35% of total
revenues for both periods, compared to $3.2 million and $8.3 million,
respectively, for the three and nine months ended September 30, 1995,
representing 38% and 37% of total revenues, respectively. Preservation costs
increased 13% for third quarter 1996 compared to third quarter 1995 and
increased 18% for the first nine months of 1996 compared to the first nine
months of 1995 due to increased shipments of human allografts.generated by IFM.
General, administrative, and marketing expenses aggregated $4.2increased 25% to $4.5 million and
$12.0 million, respectively,
for the three and nine months ended September 30,March 31, 1997, compared to $3.6 million for the
corresponding period in 1996, representing 40% and 42% of total revenues respectively, compared to $3.5
million and $9.5 million, respectively, for the three and nine months ended
September 30, 1995, representing 42% and 43% of total revenues respectively.in each period.
This increase reflects the general overhead growth trends, including personnel
related expenses, and increased marketing expenses associated with the increase in revenues and the switchresulting from a predominantly independent sales force to a predominantly direct sales force.higher
revenues.
Research and development expenses aggregated $615,000 and $2.0 million,
respectively,were $849,000 for the three and nine months ended September 30,March
31, 1997, compared to $690,000 for the corresponding period in 1996,
representing 6% and 7%8% of total revenues respectively, compared to $651,000for each period. Research and $2.0 million, respectively, for the three and nine months ended September 30,
1995, representing 8% and 9% of total revenues, respectively. R & Ddevelopment
spending relates principally to the Company's focus on its bioadhesives and
the synergraft technology.technologies.
Seasonality
The demand for the Company's human heart valve tissue preservation services is
seasonal, with peak demand generally occurring in the second and third quarters.
Management believes this demand trend for human heart valves is primarily due to
the high number of pediatric surgeries scheduled during the summer months.
Liquidity and Capital Resources
At September 30, 1996March 31, 1997 net working capital was $12.9$14.3 million, compared to $15.1$10.9
million at December 31, 1995,1996, with a current ratio of 3.83.2 to 1 at September 30,
1996.March 31,
1997. Shareholders' equity at September 30, 1996March 31, 1997 was $24.0$26.0 million. The Company's
primary capital requirements arise out of working capital needs, including
receivables and deferred preservation costs, and capital expenditures for facilities
and equipment, primarily the new corporate headquarters.and funding of research and development projects. The increase in
receivables relates toresults from the increase in revenue and tofrom receivables acquired
as a result of the acquisition of IFM. The increase in deferred preservation
costs results from UCFI.an increase in the amount of tissue procured. The increase in
inventory results primarily from the acquisition of IFM. The increase in prepaid
expenses relates primarily to prepaid lab supplies for the bioadhesives facility.insurance premiums. The increase in other
assets relatesresults primarily to the purchase of the Bioglue technology and intangiblesfrom intangible assets recorded in connectionassociated with the purchaseacquisition
of the assets of UCFIIFM. The increasedecrease in accounts payable results from payment of amounts
associated with the constuction of and accrued expenses is due to increased
procurement fees pursuant to an increase in tissue procured, and the increase in
overhead to support the increased revenues. Other long term liabilities relate
to the acquisitionequipping of the Bioglue technology, the acquisition of the assets of
UCFI, and draws on the Company's line of credit. Fixed asset additions of $7.1
million during the first nine months of 1996 related principally to the
construction of the new corporate
headquarters. The Company does not expect to
incur significant additional costs relating toincrease in debt results from borrowing on the completionCompany's
revolving term loan facility and from the issuance of convertible debentures,
both of which are associated with the constructionacquisition of the new corporate headquarters.IFM.
The Company believes that available cash, cash equivalents, and marketable
securities, along with cash generated from operations andalong with the
approximate $1.8 million of remaining borrowing capacity at March 31, 1997 under
the Company's $10 million credit facility will be sufficient to meet its
operating and development needs for the foreseeable future.future, including the $1
million committed for the construction of a new manufacturing/office facility
for IFM, the interest resulting from the convertible debentures issued in
connection with the IFM acquisition and any stock repurchases made under the
Company's potential repurchase of up to 500,000 shares of its Common Stock,
authorized on April 2, 1997.
Forward-Looking Statements
Statements made in this Form 10-Q for the quarter ended September 30, 1996March 31, 1997 that
state the Company's or management's intentions, hopes, beliefs, expectations or
predictions of the future are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. It is important to note
that the Company's actual results could differ materially from those contained
in such forward-looking statements as a result of adverse changes in any of a
number of factors that affect this Company's business, including without
limitation, changes in (1) government regulation of the Company's business, (2)
the Company's competitive position, (3) the availability of tissue for implant,
(4) the status of the Company's products under development, (5) the protection
of the Company's proprietary technology, and (6) the reimbursement of health care
costs by third-party payors.payors and (7) the Company's ability to successfully
integrate the operations of IFM. See the "Business--Risk Factors" section of the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 for a
more detailed discussion of these and other factors which might affect the
Company's future performance.
Item 3. Qualitative and Quantitative Discussion About Market Risk.
Not Applicable.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
NoneOn March 5, 1997 the Company issued a $5 million convertible
debenture and paid $4.5 million in cash to the former IFM
shareholders in connection with the acquisition of all of the
outstanding stock of IFM. The debenture was issued pursuant to
the exemption from registration provided by Section 4(2) of
the Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other information.
None
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibit index can be found below.
Exhibit
Number Description
- ------ -----------
2.1* Sale2.1 Agreement and Plan of Merger dated August 16, 1996 between the Company and
Donald Nixon Ross.
2.2 Asset Purchase Agreementas of March 5, 1997 among the Company and United
Cryopreservation Foundation,Ideas
for Medicine, Inc., United Transplant
Foundation,J. Crayton Pruitt, Sr., M.D., Thomas Benham,
Thomas Alexandris, Tom Judge, Natalie Judge, Helen Wallace, J.
Crayton Pruitt, Jr., M.D., and Johanna Pruitt, and CryoLife, Inc.
and QV, Inc. dated September 11, 1996.And CryoLife Acquisition Corporation. (Incorporated by reference
to Exhibit 2.1 to the Registrant's Current Report on Form 8-K
filed on March 19, 1997.)
3.1 Restated Certificate of Incorporation of the Company, as amended.
(Incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-1 (No. 33-56388).)
3.2 Amendment to Articles of Incorporation of the Company dated
November 29, 1995. (Incorporated by reference to Exhibit 3.2 to
the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995.)
3.3 Amendment to the Company's Articles of Incorporation to increase
the number of authorized shares of common stock from 20 million to
50 million shares and to delete the requirement that all preferred
shares have one vote per share. (Incorporated by Referencereference to
Exhibit 3.3 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996.)
3.4 ByLaws of the Company, as amended. (Incorporated by reference to
Exhibitexhibit 3.2 to the Registrant's Annual Report ofon Form 10-K for the
fiscal year ended December 31, 1993.1995.)
10.1 Noncompetition Agreement and Plan of Merger dated as of March 5, 1997 among Ideas
for Medicine, Inc., J. Crayton Pruitt, Sr., M.D., Thomas Benham,
Thomas Alexandris, Tom Judge, Natalie Judge, Helen Wallace, J.
Crayton Pruitt, Jr., M.D., and Johanna Pruitt, and CryoLife, Inc.
and CryoLife Acquisition Corporation. (Incorporated by reference
to Exhibit 2.1 to the Company's Current Report on Form 8-K, as
filed with the Commission on March 19, 1997.)
10.2 Consulting Agreement dated March 5, 1997 between CryoLife
Acquisition Corporation and J. Crayton Pruitt, Sr., M.D.
10.3 Subordinated Convertible Debenture dated March 5, 1997 between the
Company and United
Cryopreservation Foundation, Inc.J. Crayton Pruitt, Sr., M.D.
10.4 Lease Agreement dated September 11, 1996.
10.2 Noncompetition AgreementMarch 5, 1997 between the Company and United
Transplant Foundation,J.
Crayton Pruitt, Sr., M.D.
10.5 Lease Guaranty dated March 5, 1997 between J. Crayton Pruitt
Family Trust U/T/A and CryoLife, Inc., as Guarantor for CryoLife
Acquisition Corporation.
10.6 Form of Non-Competition Agreement dated September 11, 1996.
10.3 Noncompetition AgreementMarch 5, 1997 between the
Company and QV, Inc.
dated September 11, 1996.
10.4 Revolving\Term Loan Facility between the CompanyJ. Crayton Pruitt, Sr., M.D., Thomas Benham, Thomas
Alexandris, Tom Judge, Natalie Judge, Helen Wallace, J. Crayton
Pruitt, Jr., M.D., and NationsBank N.A., dated August 30, 1996.Johanna Pruitt
434493.1
11.1 Statement re: computation of earnings per share
27.1 Financial Data Schedule
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* The Company has applied for confidential treatment of portions of this
Agreement. Accordingly, portions thereof have been omitted and filed separately
with the Securities and Exchange Commission.
(b) Current Reports on Form 8-K.
None1. The Registrant filed a Current Report on Form 8-K with the
Commission on February 28, 1997 to announce its results of
operations for the year ended December 31, 1996.
2. The Registrant filed a Current Report on Form 8-K with the
Commission on March 19, 1997, as amended by a Current Report
on Form 8-K/A filed on May 15, 1997 with respect to the
purchase of IFM.
434493.1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its benine monthsbehalf by the
undersigned thereunto duly authorized.
CRYOLIFE, INC.
(Registrant)
November 13, 1996May 14, 1997 /s/ EdwinEDWIN B. Cordell, Jr.CORDELL, JR.
- ------------------ -----------------------------------------------------------
DATE EDWIN B. CORDELL, JR.
Vice President and Chief Financial
Officer
(Principal Financial and
Accounting Officer)